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Interim Management Statement

29th Apr 2008 12:00

FBD Holdings PLC29 April 2008 INTERIM MANAGEMENT STATEMENT FBD Holdings plc ("FBD" or the "Company") is issuing the following InterimManagement Statement in accordance with the reporting requirements of theTransparency (Directive 2004/109/EC) Regulations, 2007 which will be read by theChairman at the Company's Annual General Meeting to be held in Dublin at 12.00noon today. REVIEW OF 2007 I am very pleased to report that 2007 was another year of significant progressfor the FBD Group and one in which our continuing commitment to optimisingreturns to shareholders was further demonstrated. Operating profit for the year amounted to €235.5 million. This benefited fromreleases from claims reserves of €107.6 million consequent to the revision ofthe Group's claims reserving policy. This revision was implemented by your Boardin light of the improvement in the claims environment as a result of reformsundertaken in recent years including legislative changes, the introduction ofpenalty points and PIAB. The reserve release contributed €94.2 million to profitafter taxation and we are proposing to distribute this to shareholders by way ofa special dividend. Following changes made in the 2008 Irish Finance Actaffecting the taxation treatment of dividends to corporate shareholders, theboard is considering the most tax effective manner of distributing this amountto all shareholders before finalising the timing of the payment. Gross written premiums amounted to €408 million, up 0.2% in a highly competitivemarketplace. Premium income in the Irish insurance market fell, in total, by5.8%. FBD's market share grew to 11.3% from 10.7% in the prior year. This wasthe seventh consecutive year in which we increased our market share. We continued to strengthen our organisation and to invest in our people whilemaintaining a low expense ratio relative to our competitors.. Our platform forcost-efficient growth was also underpinned during the year with the speedyestablishment of our Support Centre in Mullingar. This facility has expanded ourcapacity for personal lines insurance sales and has further enhanced ourcustomer service levels. Our hotel and leisure property businesses in Ireland and Spain and our financialservices activities delivered results which were ahead of budget and the prioryear in what were particularly challenging markets. Continued Delivery to Shareholders 2007 was another year of continued delivery and release of value to ourshareholders: • In June 2007 FBD made a special distribution of €176 million of capital to shareholders equating to €5.00 per share. This represented capital which was deemed by your Board to be surplus to the capital required to enable the Group fulfill its ambitious development plans; • During the year FBD purchased over 1.9 million of our own shares, in the process returning a further €53 million to shareholders. The 2007 payouts bring the total for capital repatriations to shareholders since March 2005 to €496 million; • The final dividend for 2007 which is recommended by the Board of 52 cent per share will bring the total for the year to 79.5 cent, an increase of 15% on the prior year. This brings the six year compound annual growth rate for the ordinary dividend to 26.4%; • The average total shareholder return in the past five years has been 48%. GROUP PERFORMANCE DURING 2008 TO DATE Underwriting Price reductions have been a continuous feature of the Irish insurance marketfor the past five years arising from both reforms in the claims environment andfrom competition. These reductions have continued into 2008. The sustainabilityof such pricing is questionable and we believe that the current market premiumfor certain products does not provide an adequate return for capital.Consequently, we expect the downward price trend in the market to be reversed.In January of this year we implemented a range of single digit price increaseson specific products where rate changes were warranted. We are keeping thepricing environment under constant review. Gross premiums written continue to bein line with the corresponding period in 2007. In the year to date reported personal injury incidence levels are similar to2007. However our Property claims experience is somewhat worse than anticipated. In February of 2008 the Group launched a new car insurance brand "No Nonsense"Car Insurance in conjunction with Ryanair which is available through theInternet only. The building of this brand in the Irish marketplace is underway.Results to date have been encouraging. Non-Underwriting The challenging market conditions which prevailed during 2007 in our leisure andproperty development businesses in Ireland and Spain and our financial servicesbusinesses have continued into the current year. The continuing turbulence and consequent downturn in financial markets during2008 has had an impact on the performance of the capital fund. The capital fundhas now been converted entirely to cash. Profit before taxation The downturn in financial markets referred to above has also had an impact onShort Term Fluctuations in Investment Return in the year to date, andconsequently on profit before taxation. This was greatly mitigated by theGroup's decision to reduce its exposure to equities during 2007. OUTLOOK Underwriting Indications are that premium rates will harden during the remainder of the year.Our recent investment in people and infrastructure leaves us well positioned totake advantage of such market conditions. Significant new e-commerce developments and other initiatives to extend ourcustomer reach and engagement are well advanced and we are confident that theywill enhance our sales potential and our customer service levels. Theseinitiatives will ensure that we maintain our competitive cost advantage into thefuture and leave us well geared to deal with changing market conditions. We have capacity for further growth in our local offices with the introductionof the Support Centre in Mullingar. Larger urban centres will provide additionalopportunities and we have increased staff numbers to capitalise on these. A newinitiative through the broker channel in Dublin and Cork is also in place. Non-Underwriting In our leisure and property development businesses in Ireland and Spain and ourfinancial services businesses in Ireland, Management remains focused on deliveryof both new marketing and sales initiatives and operational cost efficiencies toensure that these businesses meet their targets for the year. CORPORATE Update on Eureko Approach On 7 April 2008 the Board confirmed that it had received a preliminary approachfrom Eureko B.V and, after due consideration, had concluded that the approachwas unclear, appeared to differentiate among shareholders and was highlyconditional. On 28 April 2008 the Board confirmed that it had received further correspondencefrom Eureko B.V. The Board reiterated that it had not received an offer or anintention to make an offer. The Board advised that having considered all aspectsof the approach in conjunction with the Board's financial advisers, GoldmanSachs International and Goodbody Corporate Finance, the Board had concluded thatthe approach was entirely without merit and that accordingly the Board hadrejected this approach. Yesterday, 29 April 2008 we noted the decision of Eureko B.V. to withdraw itsapproach. I have to say that I am not surprised at their decision given that ourconsidered analysis of their approach failed to identify any commercial,strategic or financial logic in their proposal and consequently would not havebeen in the interests of shareholders. Returns to Shareholders I have outlined above the returns which FBD has continued to deliver toshareholders. These demonstrate the ongoing commitment of your Board toefficient capital management. They also reaffirm that the utilisation of capitalgenerated by the Group will be determined in the light of the capital needsassociated with the Group's development plans and in a manner consistent withmaximising returns to shareholders. BOARD CHANGES DURING THE PAST YEAR Philip Fitzsimons It is with a deep sense of sadness that we mark the passing of our ChiefExecutive, Philip Fitzsimons, who died suddenly on 20 April just past. On behalf of the Board, Management, Staff and shareholders of FBD, I extenddeepest sympathy to Philip's wife Paula and his five children. Philip was adevoted family man and is a huge loss to them. All of us in FBD know that Philip's contribution to the company has beenoutstanding. He devoted his entire career to building FBD into one of Ireland'smost successful enterprises. The energy, passion and vision he demonstratedover 37 years will be missed by all of us. His unwavering integrity was aninspiration to everyone associated with FBD. During his time as Chief Executive there have been unparalleled shareholderreturns. FBD's share of the Irish market grew from 8.2% to 11.3% over thisperiod while policy numbers grew by 55%. A truly remarkable performance by anystandard. Having worked closely with Philip over many years it was clear that his style ofleadership by example and personal pride in the company was infectious and drewthe very best out of everyone who worked with him. Through his vision andconstant drive for further growth and improvement he has left FBD in great shapeand well positioned for the future. Joe Rea I must sadly also refer to the death in June of last year of an esteemed Boardmember, Mr. Joe Rea. Joe, a former President of the Irish Farmers' Associationserved on the Board of FBD for many years and supported the Group's developmentwith enormous vigour and commitment. Sean Dorgan Sean Dorgan, former Chief Executive of IDA Ireland, was co-opted to the Board inDecember last. I welcome Sean as a Director and look forward to the contributionwhich he will, I have no doubt, make in the years ahead. Andrew Langford - Interim Chief Executive Your Board has appointed Andrew Langford as Interim Chief Executive. Andrew is aChartered Accountant and has been with the Group for 12 years. He was appointedto the Board in 2003 as Group Finance Director. We are fortunate to have anexecutive of Andrew's calibre to lead us through this challenging period. CONCLUSION In conclusion I extend my sincerest thanks to my fellow Board members, to theManagement and Staff for their efforts and dedication in delivering anotherexcellent performance for the Group. With the talent, dedication and loyaltythroughout FBD I am confident that the Group will continue to developsuccessfully. We have clear strategies for continued growth and we have astrengthened platform and organisation in place to deliver on them. For Reference TelephoneFBDAndrew Langford, Interim Chief Executive +353 1 409 3208Adrian Taheny, Director of Marketing and Sales Murray ConsultantsJoe Murray +353 1 4980 300Joe Heron ENDS FBD Holdings plc FBD House Bluebell Dublin 12 Ireland Registered in Dublin, Ireland Registered Number 135882 This information is provided by RNS The company news service from the London Stock Exchange

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