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FBD Holdings plc. 2008 Preliminary Results. 2008 Preliminary Results. Forward Looking Statements. - PowerPoint PPT Presentation
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1
FBD Holdings plc
2008 Preliminary Results
March 2009
22
Forward Looking Statements
This presentation contains certain forward-looking statements. Actual results may differ materially from those projected or implied in such forward-looking statements. Such forward-looking information involves risks and uncertainties that could affect expected results.
2008 Preliminary Results
33
2008 Highlights
Operational
Growth in Market Share Premium rates hardening Cost improvements and claims
initiatives Internet developments Realignment of local offices
Financial
Solid trading performance Adjusted operating profit of €65.8m Operating contributions from all
divisions Continued de-risking of balance sheet Loss net of valuation adjustments
2008 Preliminary Results
FBD will benefit from positive operating leverage as prices rise
4
Continuing Growth in Market Share
Market share up from 11.3% to 11.6% Sustainable growth from core markets Increasing Dublin penetration Eighth consecutive year of growth Third largest non-life insurer in Ireland Market share growth validates rate
increases Underwriting discipline maintained Excellent result in competitive market
Market GWP down 7.5% FBD Average premium up 0.3% FBD policy volume down 5.7% FBD GWP down 5.5% 650,000 policies at 31/12/08
Growing market share, profitably
2008 Preliminary Results
Premium Income FBD v Irish Market
3,0003,2003,4003,6003,8004,0004,2004,400
2002 2003 2004 2005 2006 2007 2008
Year
250
350
450
Irish Market
FBD
Premium by Category - 2008
14%
20%
19%21%
26%
HOUSES COMMERCIAL OTHER FARMS AGRI
OTHER MOTOR CARS
55
Market Shares Gross Written Premium – 2008 Provisional
11.6
0%
11.9
0%
5.20
%
8%
10%10.4
0%
11.2
0%
11.3
0%
12.2
0%
19.9
0%
5.0%
10.4%
5.0%
12.8%
11.1%
8.7%
11.7%
8.2%
5.7%
10.3%
20.7%
12.0%
10.7%
11.6%
9.7%
7.8%
4.8%
12.4%
8.7%
9.3%
21.1%
12.3%
8.8% 10.2%
10.7%
13.2%
14.1%
21.8%
9.0%
7.1%
14.9%
9.4%
8.7%
21.7%
13.3%
6.4%
Others(14)AIGEagle StarAXAR.S.A.AllianzFBDQuinnHibernian
2008200720062005200420032002
Total Market 2008 -€3,333m: 2007 -€3,604m: 2006 - €3,822m: 2005 - €3,841m: 2004 - €3,933m : 2003 - €4,239m: 2002 - €3,955mFBD Premium 2008- €386m: 2007 - €408m: 2006 - €407m: 2005 - €389m: 2004 - €351m: 2003 - €369m: 2002 - €326m
2008 Preliminary Results
6
Premium PricingSource: Dept of Env, Heritage + Local Goc, IIF + INCA Ireland
€400
€500
€600
€700
€800
€900
€1,000
€1,100
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Gross Written Premium per Vehicle
Graph: Irish Industry Private Motor Insurance Pricing YOY
-20
-15
-10
-5
0
5
10
% Ch
ange
YOY
Private Motor Vehicle
Graph: Irish Industry House Insurance Pricing YOY
-15
-10
-5
0
5
10
15
20
% Ch
ange
YOY
Home Policies
Market rates hardening since late 2008
Covers wider / insured values higher Claims costs increasing FBD will benefit from positive
operating leverage as prices rise
Turning Point in Insurance Cycle
2008 Preliminary Results
7
Claims Trends
Loss Ratio
50%
60%
70%
80%
90%
100%
2002 2003 2004 2005 2006 2007 2008
Year
Claims ratio up from 68.2% to 79.1% Unusual weather events in August
2008 Higher property related claims –
persistent poor weather Risk of increase in “recessionary”
claims
• Claims initiatives• Increased resources to counter fraud• Continuing innovation in technology
and process to improve settlement costs
We aim to achieve early and cost effective settlements while providing our customers with a professional claims service that can realise competitive
advantage through reduced premiums
Loss Ratio
FBD 2002 - 2008
2008 Preliminary Results
8
Distribution Platform ChangingMotor Insurance
100%
27%40% 33%
0%
40%
80%
Sales Office Telephone SupportCentre
Internet
Distribution ChannelFeb-07 Feb-09
• FBD.ie• NoNonsense.ie• Broker Initiatives• Metro Markets
In response to changing customer behaviour sales offices will focus on Agri & commercial business
Personal lines by phone or internet Mullingar support centre investment
completed
Enhancing our business platform and operating capacity to extend our reach by meeting customers needs, cost effectively
2008 Preliminary Results
Sales Office Realignment
47
34
0
10
20
30
40
50
Current Proposed
99
2008 Highlights – Non Underwriting
La Cala Lower property sales Focus on costs / special offers / new markets
Sunset Excellent performance Another record year
Tower Oversupply in the market We are outperforming competitors
Financial Services Contribution from FBD Brokers maintained FBD Life refocused on pension and protection products
Capital Fund Converted to cash
2008 Preliminary Results
Solid result in difficult trading conditions
Protecting Competitiveness Cost Savings Special offers Developing new markets Access to FBD database
1010
Financial Highlights Solid trading performance -
€65.8m
Lower Long term return
Loss net of valuation adjustments
Continued de-risking of balance sheet
Strong capital base
Final dividend of 10c per share
Positive claims run-off
2008 Preliminary Results
• Total assets of €1,278m• Three times minimum statutory
solvency• Prudent reserving policy
Well placed financially for growth
Underwriting Asset Allocation
46%
20%
7%
5%
2%
4%16%
Gilts
Cash
Loans
Property
Land & Buildings
Equities
Other
11
Income Statement 2008
€000s
2007
€000s
Gross written premiums 385,638 407,953
Net earned premiums 343,075 350,321
Net claims incurred (271,205) (239,054)
Net operating expenses (58,470) (51,928)
Adjusted Underwriting Result 13,400 59,339
Loss Ratio 79.1% 68.2%
Net Expense Ratio 17.0% 14.8%
Combined Ratio 96.1% 83.1%
Gross Written Premium
€300,000
€320,000
€340,000
€360,000
€380,000
€400,000
€420,000
2002 2003 2004 2005 2006 2007 2008
Year
€0
00
s
Positive operating leverage as prices rise
2008 Preliminary Results
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
2007 2008
Underwriting Net Expense Ratio
Net Expense Ratio
5.0%
9.0%
13.0%
17.0%
21.0%
25.0%
29.0%
2002 2003 2004 2005 2006 2007 2008
Year
FBD
Market
1212
2008
€000s
2007
€000s
Underwriting Result 13,400
59,339
Longer term investment return 43,930
53,369
Non underwriting operating income
8,453 15,175
Adjusted operating profit 65,783
127,883
Adjusted operating profit
by activity:
Insurance underwriting 57,330
112,708
Non-underwriting
- Property/leisure 5,991
16,101
- Financial services/other 3,329
5,882
- Capital fund (867) 8,453 (6,808) 15,175
65,783
127,883
Income Statement (contd)
2008 Preliminary Results
Profitable at all points in the cycle
Adjusted Operating Profit
€0
€50,000
€100,000
€150,000
€200,000
2002 2003 2004 2005 2006 2007 2008
Year
€000
s
Operating Profit by Activity
87%
8% 5%
Insurance Underwriting
Property / Leisure
Financial Services/Other
1313
2008 2007
€000s €000s
Adjusted operating profit 65,783 127,883
Fluctuation in investment return (92,307) (69,253)
Restructuring costs (7,609) -
Change of reserving policy - 107,627
Finance costs (4,474) (4,089)
(Loss) profit before tax (38,607) 162,168
Income tax credit/(expense) 5,607 (22,093)
(Loss) profit for the year (33,000) 140,075
Income Statement (contd)
2008 Preliminary Results
Valuation adjustments of €126.5m
Profit/ loss before tax
-€50,000
€50,000
€150,000
€250,000
€350,000
2002 2003 2004 2005 2006 2007 2008
Year
€000
s
Fluctuation in Investment Return
-100,000
-80,000
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
80,000
2001 2002 2003 2004 2005 2006 2007 2008
Fluctuation inInvestmentReturn
1414
Underwriting Business – Asset Allocation
2008 2007
€m % €m %
German government gilts 466 45% 482 42%
Deposits and cash 207 20% 94 8%
Loans and accrued interest 71 7% 85 7%
Investment properties 53 5% 83 7%
Own land and buildings 24 2% 33 3%
Quoted equities and corporate bonds 38 4% 163 15%
Other 169 16% 210 18%
100%1,028 100% 1,150
2008 Preliminary Results
Three times minimum statutory solvency requirements
1515
Group Assets – Valuation Adjustments2008 Preliminary Results
Properties independently valued by professional external valuers
At start
of year
€m
At end
of year
€m
Total Adjustments
€m %
German government gilts 482.2 466.3 - -
Hotel and golf resorts 192.4 167.0 (25.1) (13%)
Quoted equities and corporate bonds 181.6 38.0 (46.1) (25%)
Deposits and cash 108.6 218.8 - -
Loans and accrued interest 85.2 70.5 (15.7) (18%)
Investment properties 83.0 52.5 (30.5) (37%)
Inventories 65.7 62.4 - -
Insurance own land and buildings 32.8 24.3 (9.1) (28%)
Other 155.5 178.0 - -
Total 1,387.0 1,277.8 (126.5) (9%)
Adjustments made in income statement (92.3)
Adjustments made directly to reserves (34.2)
Total valuation adjustments (126.5)
16
Prior
Years 2001 2002 2003 2004 2005 2006 2007 2008 Total
€ms €ms €ms €ms €ms €ms €ms €ms €ms €ms
Estimate of cumulative claims:
At end of underwriting year - 205 290 262 329 330 394 340 384
One year later - 201 222 225 277 278 306 316
Two years later - 198 209 206 256 243 299 -
Three years later - 182 199 185 224 230 - -
Four years later - 168 174 166 215 - - -
Five years later - 163 166 157 - - - -
Six Years Later 158 158 - - - - -
Seven Years Later 156
Estimate of cumulative claims 1,135 156 158 157 215 230 299 316 384 3,050
Cumulative payments (1,114) (140) (146) (135) (173) (162) (208) (188) (159) (2,424)
Claims outstanding 21 15 13 21 43 68 92 128 225 626
2008 Run-off 8 3 7 9 8 13 7 24 - 80
Gross Claims Run-off2008 Preliminary Results
Validates Reserve Release in 2007
17
Dividend Policy
FBD is committed to a robust capital position and well-managed balance sheet
Given market uncertainty it is appropriate to be prudent at this time
Recommended final 2008 dividend of 10c
Total 2008 dividend of 40.25c
25% payout ratio, same as 2007
Dividend
79.5
40.25
0
20
40
60
80
100
2007 2008
Year
Cen
ts
Committed to progressive dividend policy
• Repatriations since 2005 of €546m• Special distribution of €1.50 in October 2008
2008 Preliminary Results
Dividend Payout Ratio
0%
5%
10%
15%
20%
25%
30%
2003 2004 2005 2006 2007 2008
1818
Outlook : Underwriting A period of unprecedented economic volatility
FBD’s underwriting business, by it’s defensive nature, will be cushioned
Premium rates hardening
Further premium increases in market necessitated because: Premiums have reduced too far Increase in claims costs - weather and property Severe weather in January 2009 Lower investment returns
2008 Preliminary Results
FBD well positioned to benefit from hardening market
1919
Outlook : Non Underwriting Leisure/Leisure Property Development
Market conditions will continue to be challenging Marketing/sales initiatives to counter market conditions Management focused on operational efficiencies
La Cala Land Sale Parallel planning procedure initiated If successful, substantial proportion will be delivered Dependent on local authorities
Financial Services FBD Brokers will benefit from hardening market Focus on pension and protection products in FBD Life Consolidate customer relationships
2008 Preliminary Results
Difficult environment, but focus on maintaining profitability
20
Proposition
Robust underwriting business Positive operating leverage as prices rise Appropriate plans, people and infrastructure Growing market share, profitably Quality portfolio of property & leisure
businesses
Strong capital base and balance sheet Prudent reserving policy Continued de-risking of balance sheet
Well positioned To benefit from hardening market To deliver long-term profitable growth To produce superior returns for shareholders
2008 Preliminary Results
21
FBD Holdings plc
2008 Preliminary ResultsQUESTIONS?
A.March 2009
2222
Balance Sheet - Assets31/12/08 31/12/07
Property & Equipment €000s €000s
Hotels/golf 167,088 192,352
Property – own use 24,335 32,806
Fixtures & Fittings 17,236 208,659 18,186 243,344
Investments
Property 52,538 83,019
Financial 768,420 823,151
Reinsurers’ share of technical provisions 58,994 50,483
Other receivables/DAC’s 91,092 85,705
Other Assets
Development land 30,806 30,781
Work-in-Progress 31,578 34,964
Cash 35,713 98,097 35,618 101,363
Total Assets 1,277,800 1,387,065
2008 Preliminary Results
2323
Balance Sheet - Liabilities
Equity
31/12/08
€000s
31/12/07
€000s
Share Capital 21,409 21,277
Reserves 214,031 362,312
Shareholders’ funds – equity interests
235,410 383,589
Preference Shareholders 2,923 2,923
Minority Interests 4,151 5,689
Total equity 242,484 392,201
Liabilities
Technical provisions
- Unearned premiums 188,017
199,074
- Claims 626,188
814,205 612,852 811,926
Deferred tax 15,062 27,738
Creditors
- Loans 110,968
60,406
- Other 95,081 206,049 94,794 155,200
Total Liabilities 1,277,800 1,387,065
2008 Preliminary Results
2424
Cash Flow Statement2008
€000s2007
€000s
Net cash from operating activities 26,315 121,263
From investing activities 1,949 179,790
Used in financing activities (27,099) (303,085)
Net increase (decrease) in cash and cash equivalents 1,165 (2,032)
Cash and cash equivalents at the beginning of the period 35,618 37,423
Effect of foreign exchange rate changes (1,070) 227
Cash and cash equivalents at the end of the period 35,713 35,618
2008 Preliminary Results