130 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements

For the financial year ended 31 December 2022

1 GENERAL INFORMATION

FBD Holdings plc is an Irish registered public limited company. The registration number of the company is 135882. The

address of the registered office is FBD House, Bluebell, Dublin 12, Ireland. FBD is one of Ireland’s largest property and casualty

insurers, looking after the insurance needs of farmers, businesses and retail customers. Established in the 1960s by farmers

for farmers, FBD has built on those roots in agriculture to become a leading general insurer serving the needs of its direct

agricultural, business and retail customers throughout Ireland. It has a network of 34 branches nationwide.

2 GOING CONCERN

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the

Group have adequate resources to continue in operational existence for the foreseeable future being a period of not less than

12 months from the date of this report.

In making this assessment the Directors considered up to date solvency, liquidity and profitability projections for the Group.

The basis of this assessment was the Budget 2023 and projections for 2024 which reflect the latest assumptions used by the

business. The economic environment may impact on premiums including potential reductions in exposures, new business and

retention levels. Expense assumptions can change depending on the level of premiums as discretionary spend and resources

are adjusted. There were a number of scenario projections run as part of the ORSA process as well as a number of more

extreme stress events and in all scenarios the Group’s capital ratio remained in excess of the Solvency Capital Requirement

and in compliance with liquidity policies.

The Directors considered the liquidity requirements of the business to ensure it is projected to have cash resources available to

pay claims and other expenditure as they fall due. The business is expected to have adequate cash resources available to

support business requirements as well as claims in relation to public house Business Interruption as they fall due. In addition

the Group has a highly liquid investment portfolio with over 50% of the portfolio invested in corporate and sovereign bonds

with a minimum A- rating.

On the basis of the projections for the Group, the Directors are satisfied that there are no material uncertainties which cast

significant doubt on the ability of the Group or Company to continue as a going concern over the period of assessment being

not less than 12 months from the date of this report. Therefore the Directors continue to adopt the going concern basis of

accounting in preparing the financial statements.

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PREPARATION

The Group and Company financial statements have been prepared in accordance with International Financial Reporting

Standards (“IFRSs”) adopted by the European Union and therefore the Group financial statements comply with Article 4 of the

EU IAS Regulation. The Group and Company financial statements are prepared in compliance with the Companies Acts 2014.

CONSIDERATION OF CLIMATE CHANGE

In preparing the financial statements the Directors have considered the impact of climate change, particularly in the context

of the risks identified in the TCFD disclosure on pages 34 to 46 this year. There has been no material impact identified on the

financial reporting estimates and judgements. In particular, the Directors have considered the impact of climate change in

respect of the following areas:

● Viability assessment of the Group and future cash flow forecasts;

● Cash flow forecasts included in the impairment testing on page 149; and

● Valuation of the investment property on page 163 and property held for own use on pages 160 to 161.

The Directors are aware of the ever-changing risks attached to climate change and will regularly assess these risks against

estimates and judgements made in preparation of the Group’s financial statements.

131

Strategic Report Environmental, Social & Governance Financial Statements Other Information

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”)

Standards adopted during the period

In the current year, the Group has applied amendments to IFRSs issued by the International Accounting Standards Board

(IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2022, unless otherwise stated.

● Reference to the Conceptual Framework (Amendments to IFRS 3)

● Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)

● Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

● Annual Improvements to IFRS Standards 2018 - 2020

The amendments of these standards has not had a material impact on the financial statements of the Group.

Standards and Interpretations not yet effective
IFRS 17	Insurance Contracts
	1
IFRS 9	Financial Instruments
	2

1
	Effective for annual periods beginning on or after 1 January 2023, with earlier application permitted.
2
	Consolidated financial statements only. Effective for annual periods beginning on or after 1 January 2023, with earlier application
	permitted.

Estimated quantitative impact of the adoption of IFRS 17 ‘Insurance Contracts’ and IFRS 9 ‘Financial Instruments’

The impact to shareholder’s equity will mainly be driven by the introduction of discounting claims reserves as well as the

introduction of the risk adjustment calculation as an allowance for uncertainty about the amount and timing of cash flows that

arises from non-financial risk as the insurance contract is fulfilled. The risk adjustment under IFRS 17 replaces the margin for

uncertainty currently in existence under IFRS 4. Based on assessments to date, the total adjustment after tax to the Group’s total

equity on the application of IFRS 17 and IFRS 9 is currently estimated to be an increase of approximately €7.9m at 1 January 2022

with the discounting impact becoming significantly more prevalent throughout the 2022 transitional period in line with the rising

interest rate environment. Any future reserve releases will reflect the impacts of discounting and risk adjustment.

Estimated increase (reduction) in the Group’s total equity:

	1 January 2022
	€m
Adjustments due to the adoption of IFRS 17:
Re-measurement of non-life insurance contracts under IFRS 17	9.4
Adjustments due to adoption of IFRS 9:
Impairment of financial assets	(0.4)
Deferred taxation impact	(1.1)
Estimated impact of adoption of IFRS 17 and IFRS 9 after tax	7.9

The assessment above is preliminary as not all of the transitional work has been finalised. The actual impact of adopting IFRS

17 and IFRS 9 may change because:

a. Although the build phase of the programme is substantially completed, the Group has not finalised the testing and

assessment of controls over new technology and infrastructure and reporting processes;

b. The new accounting policies, assumptions, judgements and estimation techniques applied are subject to change until the

Group finalises its first financial statements under the new standards.

The Group will restate 2022 comparative information on adoption.

132 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

IFRS 17

Nature of change

IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and

supersedes IFRS 4 Insurance Contracts.

The core of IFRS 17 is the general model, supplemented by a specific adaption for contracts with direct participation features (the

variable fee approach) and a simplified approach (the premium allocation approach) mainly for short-duration contracts. The main

features of the new measurement model for insurance contracts are, as follows: an estimate of the present value of future net cash

flows incorporating a risk adjustment for non-financial risk and re-measured at each reporting period (the fulfilment cash flows) and a

contractual service margin representing the unearned profit of the insurance contracts relating to the future service to be provided

under the contracts. The carrying amount of a group of insurance contracts at the end of each reporting period shall be the sum of

the ‘liability for remaining coverage’ (‘LRC’) comprising the fulfilment cash flows related to future service allocated to the group at

that date, and the ‘liability for incurred claims’ (LIC), comprising the fulfilment cash flows related to past service allocated to the

group at that date.

IFRS 17 requires a company to determine the level of aggregation for applying its requirements. Portfolios comprise groups of

contracts with similar risks which are managed together. Portfolios are required to be further divided based on expected profitability

at inception into three categories: onerous contracts, contracts with no significant risk of becoming onerous, and the remainder. A

group of contracts that is onerous on initial recognition results in a loss being recognised immediately in the statement of financial

performance for the entire net cash outflow therefore the carrying amount of the insurance liability for the group is equal to the

fulfilment cash flows and the contractual service margin is nil. Under the Premium Allocation Approach (PAA) it is assumed no

contracts in the portfolio are onerous at initial recognition unless facts and circumstances indicate otherwise. IFRS 17 also requires

that no group for level of aggregation purposes, may contain contracts issued more than one year apart.

Impact

Classification and measurement

The adoption of IFRS 17 is not expected to change the classification of the Group’s insurance contracts. The Group expects to be able

to apply the simplified premium allocation approach to all material insurance and reinsurance contract groups. The measurement

principles of the PAA differ from the ‘earned premium approach’ used by the Group under IFRS 4 in the following key areas:

● IFRS 17 requires a company to determine the level of aggregation for applying its requirements. FBD manages insurance

contracts issued by product lines, where each product line includes contracts that are subject to similar risks. All insurance

contracts within a product line represent a portfolio of contracts. Each portfolio is further disaggregated into groups of contracts

that are issued within a calendar year (annual cohorts) and are (i) contracts that are onerous at initial recognition; (ii) contracts

that at initial recognition have no significant possibility of becoming onerous subsequently; or (iii) a group of remaining contracts.

● The Premium Allocation Approach under IFRS 17 is in line with the Group’s current earnings methodology which means that

gross earned premium is expected to be materially unchanged under IFRS 17 however ‘Insurance Revenue’ will now include

interest on instalment premiums.

● Measurement of the liability for incurred claims, (previously claims outstanding and incurred but not reported claims) is

determined on a discounted probability-weighted expected value basis and includes an explicit risk adjustment for non-financial

risk. The liability for incurred claims includes the Group’s obligation to pay other incurred insurance expenses.

● Under IFRS 17 the Group’s contribution to the Motor Insurers’ Insolvency Compensation Fund and the Motor Insurers’ Bureau of

Ireland levy are not considered part of the cash flows within the boundary of the underlying contracts and are presented

separately from the ‘Insurance service result’ within the profit or loss.

● IFRS 17 requires that non-attributable expenses are presented separately from the ‘Insurance service result’ within the profit or

loss.

● In accordance with IFRS 17 reinsurance contracts held are presented separately from the expenses or income from insurance

contracts issued. Re-instatement premiums contingent on claims on the underlying contracts are treated as part of the claims

that are expected to be reimbursed under the reinsurance contracts held and were previously included within ‘Net premium

earned’ under IFRS 4. Similarly, ceded commission not contingent on claims on the underlying contracts are treated as a

reduction in the premiums to be paid to the reinsurer and were previously included within ‘Other underwriting expenses’ under

IFRS 4.

133

Strategic Report Environmental, Social & Governance Financial Statements Other Information

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

● A liability or asset relating to expected premiums or claims outside the boundary of the insurance contract is not

recognised. Such amounts relate to future insurance contracts.

Summary of Key Accounting Choices under IFRS 17

	IFRS 17 Options	Planned approach
Premium Allocation
Approach (PAA)
Eligibility
	Subject to specified criteria, the PAA can be
	adopted as a simplified approach to the IFRS
	17 general model.
		FBD is eligible to apply the
		Premium Allocation Approach
		based on the fact that in general the
		insurance contracts issued have a
		duration of 12 months or less.
			IFRS 17.53
Insurance acquisition
cash flows for
insurance contracts
issued
	Where the coverage period of all contracts
	within a group is no longer than one year,
	insurance acquisition cash flows can either
	be expensed as incurred, or allocated, using
	a systematic and rational method, to groups
	of insurance contracts (including future
	groups containing insurance contracts that
	are expected to arise from renewals) and
	then amortised over the coverage period of
	the related group. For groups containing
	contracts longer than one year then
	insurance acquisition cash flows must be
	allocated to related groups of insurance
	contracts and amortised over the coverage
	period of the related group.
		For all groups, insurance
		acquisition cash flows will be
		allocated to related groups of
		insurance contracts and amortised
		over the coverage period of the
		related group. This will avoid timing
		mismatches between revenue
		earnings patterns and the
		recognition of the associated
		expenses.
			IFRS 17.59 (a)
			IFRS 17.28A,
			IFRS 17.B35A
Liability for
Remaining Coverage
(LFRC) adjusted for
financial risk and
time value of money
	Where there is no significant financing
	component in relation to the LFRC, or where
	the time between providing each part of the
	services and the related premium due date is
	no more than a year, an entity is not required
	to make an adjustment for accretion of
	interest on the LFRC.
		No allowance for interest accretion
		will be made as the premiums are
		received within one year of the
		coverage period.
			IFRS 17.56
Liability for incurred
claims (LFIC)
adjusted for the time
value of money
	Where claims are expected to be paid within
	a year of the date that the claim is incurred,
	it is not required to adjust these amounts for
	the time value of money.
		FBD will discount cash flows when
		calculating the Liability for Incurred
		Claims as the claims are typically
		open for longer than a 12 month
		duration.
			IFRS 17.59 (b)
Insurance finance
income and expense
	There is an option to disaggregate part of the
	movement in the LFIC resulting from
	changes in discount rates and present this in
	Other comprehensive income.
		The impact on LFIC from changes in
		discount rates will be captured
		within the OCI, in line with the
		accounting for assets backing the
		relevant product lines.
			IFRS 17.88

134 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Key Judgements and estimates

In applying IFRS 17 measurement requirements, the following inputs and methods were used that include significant

estimates.

Discount rates

The Group is required to discount future cash flows as the weighted time to settlement is greater than one year from the date

the claim occurred. This requirement to allow for the time value of money is a change from the current practice where no

allowance for the time value of money is made in the calculation of the claims liabilities.

The Group will determine the risk free discount rate using a bottom-up approach. The Group will use the Euro denominated

EIOPA prescribed rates under Solvency II. The EIOPA EUR spot rates are derived from market observable EUR swap rates for

durations one to twenty years.

The Group will adjust the EIOPA prescribed curve with an illiquidity premium.

Estimates of future cash flows to fulfil insurance contracts

The Group estimates insurance liabilities in relation to claims incurred for gross and reinsurance contracts using actuarial

methods. Estimates are performed on an accident year basis with further allocation to annual cohorts in proportion to the

gross or reinsurance premiums earned by the respective cohort of contracts in a given accident year.

In estimating future cash flows, the Group will incorporate, in an unbiased way, all reasonable and supporting information

that is available without undue cost or effort at the reporting date. This information includes both internal information and

external historical data about claims and other experience, updated to reflect current expectations of future events.

Cash flows are within the contract boundary if they arise from substantive rights and obligations that exist during the reporting

period in which the Group can compel the policyholder to pay premiums or has a substantive obligation to provide services. A

substantive obligation to provide service ends when the Group has the practical ability to reassess the risks of the particular

policyholder and can set a price or level of benefits that fully reflects those reassessed risks.

When estimating future cash flows, the Group will take into account current expectations of future events that might affect

those cash flows. Cash flows within the boundary of a contract are those that relate directly to the fulfilment of the contract,

including those that the Group has discretion over the amount or timing. These include payments to (or on behalf of)

policyholders, insurance acquisition cash flows and other costs that are incurred in fulfilling contracts. The Group performs

regular expense studies and uses judgement to determine the extent to which fixed and variable overheads are directly

attributable to fulfilling insurance contracts.

Methods used to measure the risk adjustment for non-financial risk

The risk adjustment for non-financial risk is the compensation that is required for bearing the uncertainty about the amount

and timing of cash flows that arises from non-financial risk as the insurance contract is fulfilled. Because the risk adjustment

represents compensation for uncertainty, estimates are made on the degree of diversification benefits and expected

favourable and unfavourable outcomes in a way that reflects the Group’s degree of risk aversion. The Group estimates an

adjustment for non-financial risk separately from all other estimates.

The risk adjustment is calculated at the entity level and then allocated down to each group of contracts in accordance with

their risk profiles. A confidence level approach is used to derive the overall risk adjustment for non-financial risk. FBD intend to

target a risk adjustment within a range between the 75th and 80th percentiles. At year-end 2021, the risk adjustment is at the

80th percentile.

As the Group are using the PAA method, a Risk Adjustment is only required for the LIC and not the LRC (unless there is an

onerous group).

To determine the risk adjustment for non-financial risk for reinsurance contracts, the Group will apply these techniques both

gross and net of reinsurance and derive the amount of risk transferred to the reinsurer as the difference between the two

results.

135

Strategic Report Environmental, Social & Governance Financial Statements Other Information

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Presentation

Key impacts on the presentation of the financial statements are outlined below.

● In the statement of financial position, the Group is required to present separately the carrying amount of groups of

insurance contracts issued that are assets, groups of insurance contracts issued that are liabilities, groups of reinsurance

contracts held that are assets and groups of reinsurance contracts held that are liabilities.

● No separate asset will be recognised for deferred acquisition costs or premium receivables. Instead, qualifying insurance

acquisition cash flows and premium receivables are subsumed into the insurance liability for remaining coverage. Similarly

transactional tax levies on insurance premium written and liabilities owing to reinsurers are subsumed into the fulfilment

cash flows.

● The total amount recognised in the statement of profit or loss and other comprehensive income will be disaggregated into

an insurance service result, comprising insurance revenue and insurance service expense, and insurance finance income

or expenses.

● The Group does not intend to disaggregate the change in risk adjustment for non-financial risk between a financial and

non-financial portion and will include the entire change as part of the insurance service result.

● Income or expenses from reinsurance contracts held will be presented separately from the expenses or income from

insurance contracts issued.

● The Group will apply the Fully Retrospective approach on the adoption of IFRS 17, with the exception of using the modified

retrospective approach for the choice of initial recognition yield curves for underwriting years 2015 and prior.

Simplified P&L key elements:

IFRS 4 Profit:		IFRS 17 Profit:
Income	Net earned premium
	Net investment return
	Other income
		Insurance service result	Insurance revenue
			Insurance service expenses
			Reinsurance result
Expenses	Net claims and benefits
	Other Underwriting expenses
	Other expenditure
		Net investment result	Net investment return
			Net insurance finance expenses
		Other result	Other income and expenditure

KPIs

The calculation of KPIs used under IFRS 4 will change assuming the same KPIs are reported.

● ‘Gross earned premium’ and ‘Gross written premium’ numbers are expected to be materially unaffected although they are

no longer presented on the face of the statement of profit or loss. ‘Gross earned premium’ is comparable to ‘Insurance

Revenue’ however ‘Insurance Revenue’ will now include interest on instalment premiums.

● ‘Net earned premium’ will no longer be presented.

● Discounting cash flows when calculating the Liability for Incurred Claims will alter the timing of profit emergence but not

the overall level of profit. Consequently there will be an impact on transition on shareholders’ funds, NAV and ROE.

● The impact of introducing the new measurement model for claims will flow through to insurance service expenses.

● Locked-in accident year rates used for discounting in P&L, changes in discount rates will be recognised in OCI limiting

volatility in P&L.

● Non-attributable expenses are included within ‘Other result’ as opposed to expenses under IFRS 4, however,

wnon-attributable expenses are expected to be included within the numerator when calculating the expense ratio.

● For the expense ratio; using Insurance Revenue as the bottom-line instead of net earned premium as well as ceded

commission not contingent on claims on the underlying contracts being treated as a reduction in the ceded premiums will

result in a lower expense ratio.

● For the loss ratio; the favourable impact of using Insurance revenue as a bottom-line instead of net earned premium is

expected to be offset by the reinsurance result being included in the top-line. Current service discounting costs are

expected to lower the Loss ratio in a positive interest rate environment.

136 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

● FBD will calculate the combined operating ratio as the total of: (Insurance service expenses plus the net expenses from

reinsurance contracts held plus non-attributable expenses (incl. MIBI)), divided by Insurance Revenue.

● FBD measures and calculates capital using the Standard Formula. The calculation of the Solvency II Capital Requirement

(SCR) will not be impacted on adoption of IFRS 17.

IFRS 9

Nature of change

IFRS 9 has been issued to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’ (IAS 39).

Financial assets within the scope of IFRS 9 are required to be classified as being measured, subsequent to initial recognition, at

amortised cost (AC), fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). The

assessment of how an asset should be classified is dependent on both the overall objective of the business model within which

the asset is held and whether the contractual terms of the financial asset give rise to, on specified dates, cash flows that are

solely payments of principal and interest (SPPI). IFRS 9 introduces a new forward-looking impairment model based on

expected credit losses (ECL) rather than incurred losses. The accounting for financial liabilities will remain largely consistent

with that applied under IAS 39, except for recognition of changes in own credit risk in other comprehensive income for certain

liabilities designated at fair value through profit or loss.

Effective date of the change

IFRS 4 permits an insurance company that meets the criteria a temporary exemption from applying IFRS 9 and to continue to

apply IAS 39. The Group meets the criteria and has elected to defer the application of IFRS 9 to the reporting period beginning

on 1 January 2023, alongside IFRS 17 Insurance Contracts.

Impact

Classification and measurement of financial assets under IFRS 9 is not expected to result in any significant changes for the

Group. Below sets out the qualitative and quantitative impacts for the Group on transition to IFRS 9.

● Collective investment scheme assets held for trading are required to be classified as ‘Fair value through Profit or Loss’

(FVTPL) under IFRS 9. This is no different to current reporting under IAS 39 whereby assets are measured at fair value and

all dividend income and other gains and/or losses are recognised in profit or loss.

● The Group’s quoted debt securities as at the opening balance sheet of the comparative period (i.e. 1 January 2022) pass the

SPPI and are classified as FVOCI as they are held within a business model whose objective is achieved by both collecting

contractual cash flows and selling financial assets. FVOCI is different to current reporting mainly in that there is a new

requirement under IFRS 9 to recognise a loss allowance for expected credit losses in the income statement. Accumulated

gains or losses on FVOCI investments are reclassified to the profit and loss account on liquidation similar to the current

reporting treatment however recycling to the income statement is net of the expected credit losses under IFRS 9. The

investments would be measured at fair value similar to current reporting.

● Unquoted debt securities previously classified as ‘Available for sale’ under IAS 39 are classified as FVTPL under IFRS 9 as

they do pass the SPPI test. This is different to current reporting as all income and other gains and/or losses are recognised

in profit or loss. Mark to market gains and/or losses on ‘Available for sale’ assets under IAS 39 are recognised in Other

Comprehensive Income.

● FBD intend to restate comparative information on the initial application of IFRS 9 and will apply the classification overlay

approach with the amendment to the transition requirements in IFRS 17 issued by the IASB at the end of 2021.

● To reflect the differences between IFRS 9 and IAS 39, IFRS 7 Financial Instruments: Disclosures was also amended. The

Group will apply the amended disclosure requirements of IFRS 7, together with IFRS 9, for the year beginning 1 January

2023. Changes include transition disclosures as well as qualitative and quantitative information about the ECL

calculations.

137

Strategic Report Environmental, Social & Governance Financial Statements Other Information

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

● The measurement of impairment losses under IFRS 9 across relevant financial assets requires judgement, in particular, for

the estimation of the amount and timing of future cash flows when determining impairment losses and the assessment of

a significant increase in credit risk. These estimates are driven by the outcome of modelled ECL scenarios and the relevant

inputs used.

The table below shows the impact of classification and measurement in accordance with IFRS 9 as at the opening balance

sheet of the comparative period (i.e. 1 January 2022)

Financial Assets	Original
	measurement
	(IAS 39)
		Revised
		measurement
		(IFRS 9)
			Carrying
			amount under
			IAS 39
			€’000
				Reclassification
				€’000
					Re-measurement
					€’000
						Carrying
						amount under
						IFRS 9
						€’000
Quoted debt
securities
1
	AFS	FVOCI	892,495	-	-	892,495
Cash and cash
equivalents
	AC	AC	164,479	6,497
				2
					-	170,976
Collective
investment
schemes
	HFT	FVTPL	137,547	-	-	137,547
Receivables	AC	AC	58,047	(41,749)
				2
					(388)	15,910
Unquoted
investments
	AFS	FVTPL	1,220	-	-	1,220
Loans	AC	AC	577	-	(17)	560
Deposits with
banks
	AC	AC	-	-	-	-

1

In accordance with the requirements of IFRS 9 the recognition and measurement of a loss allowance for financial assets that are

measured at fair value through other comprehensive income shall be recognised in other comprehensive income and shall not reduce

the carrying amount of the financial asset in the statement of financial position. As at the opening balance sheet of the comparative

period (i.e. 1 January 2022) an expected credit loss of €754,000 is expected to be recognised and reflected directly in the FVOCI reserve.

2

Insurance and reinsurance contract receivables and payable (outstanding cheques) are included within Insurance/Reinsurance

contract asset/liabilities under IFRS 17.

Financial
liabilities
	Original
	measurement
	(IAS 39)
		Revised
		measurement
		(IFRS 9)
			Carrying
			amount under
			IAS 39 €’000
				Reclassification
				€’000
					Re-measurement
					€’000
						Carrying
						amount under
						IFRS 9
						€’000
Subordinated
debt
	AC	AC	49,603	-	-	49,603
Payables	AC	AC	41,657	-	-	41,657

ACCOUNTING POLICIES

The principal accounting policies adopted by the Board are detailed below. All accounting policies are applicable to the

consolidated and Company financial statements unless stated otherwise.

A) ACCOUNTING CONVENTION

The consolidated and Company financial statements are prepared under the historical cost convention as modified by the

revaluation of property, investments held for trading, available for sale investments and investment property, which are

measured at fair value.

138 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

B) BASIS OF CONSOLIDATION

The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings to 31

December. Control is achieved when the Company:

● has power over the investee;

● is exposed, or has rights, to variable returns from its involvement with the investee; and

● has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to

one or more of the elements of control listed above.

When the Company has less than a majority of the voting rights of an investee, it has power over an investee when the voting

rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company

considers all the relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are

sufficient to give it power, including:

● the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

● potential voting rights held by the Company, other vote holders or other parties;

● rights arising from other contractual arrangements; and

● any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct

the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’

meetings.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company

loses control of the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the

non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the

non-controlling interests even if this results in the non-controlling interests having a deficit balance.

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

Changes in the Group’s ownership interests in subsidiaries that do not result in a loss of control over the subsidiaries are

accounted for as equity transactions. The carrying amount of the Group’s interests and the non-controlling interests are

adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the

non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity

and attributed to the owners of the Company.

The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured as the

aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments

issued by the Group in exchange for control of the acquiree. Any transaction costs incurred are expensed in the period in which

they occur. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition

under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups), that

are classified as held for sale in accordance with IFRS 5, Non Current Assets Held for Sale and Discontinued Operations, which are

recognised and measured at fair value less costs of sale.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the

business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent

liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets,

liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the

Consolidated Income Statement.

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

B) BASIS OF CONSOLIDATION (continued)

When the Group loses control of a subsidiary, the profit or loss on the sale is calculated as the difference between (i) the

aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying

amount of the assets (including goodwill), less liabilities of the subsidiary and any non-controlling interests. Amounts

previously recognised in the Consolidated Statement of Comprehensive Income in relation to the subsidiary are accounted for

(i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the

relevant assets or liabilities are disposed of. The fair value of any investment retained in the former subsidiary at the date when

control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments:

Recognition and Measurement or, when applicable, costs on initial recognition of an investment in an associate or jointly

controlled entity.

C) INVESTMENTS IN SUBSIDIARIES (Company only)

Investments in subsidiaries are accounted for at cost less accumulated impairment losses. The Company reviews whether

there is any indication of impairment at each reporting date. Impairment testing involves comparing the carrying amount of

the investment to its recoverable amount. The recoverable amount is higher of the investments fair value of its value in use. If

impairment occurs, this loss is recognised in the income statement.

Dividend income from investments in subsidiaries is recognised when the Company’s right to receive has been established.

D) REVENUE RECOGNITION

Revenue is measured at the fair value of the consideration received or receivable and represents gross premiums written,

broking commissions, fees, other commissions, interest and dividends receivable, rents receivable, net of discounts, levies,

VAT and other sales related taxes.

Revenue from insurance contracts is accounted for in accordance with accounting policy (E).

Interest income is accrued on a time basis with reference to the principal outstanding at the effective interest rate applicable.

Broking commission is recognised as the Group satisfies its performance obligations. The Group’s performance obligation in

relation to broking commissions is satisfied at the point in time when the underlying policy has been contractually agreed

between the insured and the provider. The transaction price is the expected commission income receivable by the Group for

the satisfaction of this performance obligation. The transaction price includes a variable consideration estimation on the basis

that elements of commissions receivable are dependent on the outcome of future events, namely the underlying policies sold

remaining in force, and are paid in future periods. Thus an expected level of lapses is applied to policies sold in order to

calculate an appropriate commission receivable in relation to the satisfaction of the performance obligation. Variable

consideration is only recognised to the extent that it is highly probable that a significant reversal of revenue would not occur.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Rental income is recognised on a straight-line basis over the period of the lease.

E) INSURANCE CONTRACTS

(i) Premiums written

Premiums written relate to contracts entered into during the accounting period, together with any difference between

booked premiums for prior years and those previously accrued, and include estimates of premiums due. Premiums

written exclude taxes and duties levied on premiums.

Premium rebates relate to elements of premium written returned to policyholders as a result of agreed reductions in risk

exposure. The earnings impact of premium rebates is recognised over the period of reduced risk exposure.

(ii) Unearned premiums

Unearned premiums are those portions of premium income written in the year that relate to insurance cover after the

year end. Unearned premiums are computed on a 365th of premium written. At 31 December each year, an assessment

is made of whether the provision for unearned premiums is adequate as set out in accounting policy E (iv) below.

140 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

E) INSURANCE CONTRACTS (continued)

(iii) Deferred acquisition costs

Deferred acquisition costs represent the proportion of acquisition costs, net of reinsurance, that are attributable to the

unearned premiums. Acquisition costs comprise the direct and indirect costs of obtaining and processing new insurance

business. These costs are recognised as a deferred acquisition cost asset and amortised on the same basis as the related

premiums are earned, and are tested for impairment at 31 December each year.

(iv) Unexpired risks

At 31 December each year, an assessment is made of whether the provision for unearned premiums is adequate.

Provision for unexpired risks is made where the expected claims, related expenses and deferred acquisition costs are

expected to exceed unearned premiums, after taking account of future investment income. At each reporting date, the

Group reviews its unexpired risks and carries out a liability adequacy test for any overall excess of expected claims and

deferred acquisition costs over unearned premiums, using the current estimates of future cash flows under its contracts

after taking account of the investment return expected to arise on assets. If these estimates show that the carrying

amount of its insurance liabilities (less related deferred acquisition costs) is insufficient in light of the estimated future

cash flows, the deficiency is recognised in the Income Statement by setting up a provision in the Statement of Financial

Position.

(v) Claims incurred

Claims incurred comprise the cost of all insurance claims occurring during the year, whether reported or not, and any

adjustments to claims outstanding from previous years.

Full provision, net of reinsurance recoveries, is made at the reporting date for the estimated cost of claims incurred but

not settled, including claims incurred but not yet reported and expenses to be incurred after the reporting date in settling

those claims. The Group takes all reasonable steps to ensure that it has appropriate information regarding notified claims

and uses this information when estimating the cost of those claims. Claims reserves are not discounted.

The Group uses estimation techniques, based on statistical analysis of past experience, to calculate the estimated cost of

claims outstanding at the year end. It is assumed that the development pattern of the current claims will be consistent

with previous experience. Allowance is made, however, for any changes or uncertainties that may cause the cost of

unsettled claims to increase or reduce. These changes or uncertainties may arise from issues such as the effects of

inflation, changes in the mix of business or the legal environment.

Receivables arising out of direct insurance operations are measured at initial recognition at fair value and are

subsequently measured at amortised cost, after recognising any impairment loss to reflect estimated irrecoverable

amounts.

(vi) Reinsurance

Premiums payable in respect of reinsurance ceded, are recognised in the period in which the reinsurance contract is

entered into and include estimates where the amounts are not determined at the reporting date. Premiums are

expensed over the period of the reinsurance contract, calculated principally on a daily pro rata basis.

A reinsurance asset (reinsurers’ share of claims outstanding and provision for unearned premium) is recognised to reflect

the amount estimated to be recoverable under the reinsurance contracts in respect of the outstanding claims reported

under insurance liabilities. The amount recoverable from reinsurers is initially valued on the same basis as the underlying

claims provision.

The amount recoverable is reduced when there is an event arising after the initial recognition that provides objective

evidence that the Group may not receive all amounts due under the contract and the event has a reliably measurable

impact on the expected amount that will be recoverable from the reinsurer.

The reinsurers’ share of each unexpired risk provision is recognised on the same basis.

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

F) OTHER PROVISIONS

Other provisions are recognised when the Group has a present obligation (legal or constructive) as a result of past events,

when it is probable that an outflow of resources will be required to settle the obligation, and when the provision can be reliably

estimated. Provisions are not recognised for future operating losses.

Provisions are measured at management’s best estimate, at the balance sheet date, of the expenditure required to settle the

obligation.

G) PROPERTY, PLANT AND EQUIPMENT

(i) Property

Property held for own use in the supply of services or for administrative purposes is stated at revalued amounts, being

the fair value at the date of revaluation which is determined by professional valuers, less subsequent depreciation for

buildings. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially

from that which would be determined using fair values at the reporting date. Any revaluation increase arising on the

revaluation of such property is recognised in other comprehensive income and credited to the revaluation reserve within

equity, except to the extent that it reverses a revaluation decrease for the same asset previously recognised. A decrease

on revaluation is charged as an expense to the Income Statement to the extent that it exceeds the balance, if any, held in

the revaluation reserve relating to previous revaluation of that asset.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales

proceeds and the carrying amount of the asset and is recognised in the Income Statement and any associated revaluation

surplus is transferred to retained earnings.

(ii) Computer equipment and fixtures and fittings

Computer equipment and fixtures and fittings are stated at cost less accumulated depreciation and accumulated

impairment losses.

(iii) Depreciation

Depreciation is provided in respect of computer equipment and fixtures and fittings, and is calculated in order to write off

the cost or valuation of the assets over their expected useful lives on a straight line basis over a three to ten year period.

Depreciation on assets under development commences when the assets are ready for their intended use.

Buildings are depreciated to their residual value over the useful economic life of the building, on a straight line basis.

Land is not depreciated.

The assets’ residual values, useful lives and methods of depreciation are reviewed at least each financial year end and

adjusted if appropriate.

The estimated useful lives of property, plant and equipment are as follows:

Buildings: 30 years

Computer equipment: 3-5 years

Fixtures and fittings: 10 years

H) POLICY ADMINISTRATION SYSTEM

The policy administration system is stated at cost less accumulated amortisation and accumulated impairment losses.

Amortisation is provided in respect of the policy administration system and is calculated in order to write off the costs incurred

to date, over its expected useful life which is determined to be 3.5 years on a straight line basis.

I) INTANGIBLE ASSETS

Intangible assets are stated at cost less accumulated amortisation and less any accumulated impairment losses. Intangible

assets comprise computer software and these assets are amortised on a straight line basis over a five year period.

142 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

J) INVESTMENT PROPERTY

Investment property, which is property held to earn rentals and/or for capital appreciation, is recognised initially at cost and

stated at fair value at the reporting date being the value determined by qualified independent professional valuers. Gains or

losses arising from changes in the fair value are recognised in the Income Statement for the period in which they arise.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use

and no future economic benefits are expected. Any gain or loss arising on derecognition of the property (calculated as the

difference between the net disposal proceeds and the carrying amount of the asset) is included in the Income Statement for

the period in which the property is derecognised.

K) FINANCIAL INSTRUMENTS

Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Group becomes a party

to the contractual provisions of the instrument.

The Group derecognises a financial asset only when the contractual rights to the cash flows of the asset expire, or when it

transfers the financial asset and substantially all the risks and rewards of the ownership of the asset to another entity. If the

Group neither transfers nor retains substantially all the risk and rewards of ownership and continues to control the transferred

asset, the Group recognises its retained interest in the asset and an associated liability to the extent of its continuing

involvement in the financial asset. If the Group retains substantially all the risks and rewards of ownership of a transferred

financial asset, the Group continues to recognise the financial asset.

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they

expire.

(i) Investments held for trading at fair value

Investments held for trading are stated at fair value and include quoted shares, quoted debt securities and collective

investment schemes. They are recognised on a trade date basis at fair value and are revalued at subsequent reporting

dates at fair value, using the closing bid price, with gains and losses being included in the Income Statement in the period

in which they arise.

Investments are held for trading if:

● they have been acquired principally for the purpose of selling in the near future; or

● they are part of an identified portfolio of financial instruments that the Group manages together and have a recent

actual pattern of short-term profit-making; or

● they are derivatives that are not designated and effective as hedging instruments.

Investments other than investments held for trading may be designated at FVTPL (fair value through profit or loss) upon

initial recognition if:

● such designation eliminates or significantly reduces a measurement or recognition inconsistency that would

otherwise arise; or

● the investment forms part of a group of investments or financial liabilities or both, which is managed and its

performance is evaluated on a fair value basis, in accordance with the Group’s documented Investment Policy.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in the

Income Statement. The net gain or loss recognised in the Consolidated Income Statement incorporates any dividend or

interest earned on the financial asset and is included in the ‘net investment return’ line item in the Income Statement.

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

K) FINANCIAL INSTRUMENTS (continued)

(ii) Available for sale investments

Available for sale investments include quoted debt securities and unquoted investments, and are stated at fair value

where fair value can be reliably measured. Fair value is calculated using closing bid prices. They are recognised on a trade

date basis at fair value, and are subsequently revalued at each reporting date to fair value, with gains and losses being

included directly in the Statement of Comprehensive Income until the investment is disposed of or determined to be

impaired, at which time the cumulative gain or loss previously recognised in the Statement of Comprehensive Income, is

included in the Income Statement for the year.

(iii) Loans

Loans are recognised on a trade date basis at fair value plus transaction costs and are subsequently measured at

amortised cost using the effective interest rate method. When it is not possible to estimate reliably the cash flows or the

expected life of a loan, the projected cash flows over the full term of the loan are used to determine fair value.

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest

income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash

receipts through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying

amount at initial recognition.

(iv) Other receivables

Amounts arising out of direct insurance operations and other debtors are measured at initial recognition at fair value and

are subsequently measured at amortised cost, after recognising any impairment loss to reflect estimated irrecoverable

amounts.

Other receivables (Company only)

Other debtors are measured at initial recognition at fair value and are subsequently measured at amortised cost less

expected credit losses. Expected credit losses is a forward looking measure of impairment calculated on a probability of

credit losses basis.

(v) Deposits with banks

Term deposits with banks comprise cash held for the purpose of investment. Demand deposits with banks are held for

operating purposes and included in cash and cash equivalents. Deposits with banks are valued at amortised cost.

(vi) Subordinated debt

Subordinated debt issued by the Group comprise callable dated deferrable subordinated notes.

The financial liability is initially recognised at fair value of the subordinated notes net of costs. Subsequent to initial

recognition, the subordinated debt is measured at amortised cost using the effective interest rate method.

Interest and amortisation relating to the financial liability is recognised in the Income Statement.

Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (Amendments to IFRS 4)

The Group applies the temporary exemption from IFRS 9 Financial Instruments, as defined in the amendment “Applying

IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts – IFRS 4 amendments” issued by the IASB in September

2016, in its consolidated financial statements. This amendment allows an entity to defer the implementation of IFRS 9 if

its activities are predominantly connected with insurance. As a result, the Group will continue to apply IAS 39, Financial

Instruments: Recognition and Measurement in its consolidated financial statements until the reporting period beginning

on 1 January 2023.

144 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

K) FINANCIAL INSTRUMENTS (continued)

(vi) Subordinated debt (continued)

During 2018 the Group performed an assessment of the amendments and reached the conclusion that its activities were

predominantly connected with insurance as at 31 December 2015. The Group’s percentage of its gross liabilities from

contracts within the scope of IFRS 4 relative to its total liabilities at 31 December 2015 was 94.5% which is in excess of

the 90% threshold required by IFRS 4. There has been no significant change to the activities of the Group requiring

reassessment of the use of the temporary exemption from IFRS 9 to 31 December 2022.

IFRS 9 financial instruments deferral disclosures, as defined in IFRS 4, are included in note 37.

L) LEASES

(i) The Group as Lessor

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial

direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset

and recognised on a straight-line basis over the operating lease term.

(ii) The Group as Lessee

A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a

period of time in exchange for consideration’.

To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:

● the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by

being identified at the time the asset is made available to the Group;

● the Group has the right to obtain substantially all of the economic benefits from use of the identified asset

throughout the period of use, considering its rights within the defined scope of the contract the Group has the right to

direct the use of the identified asset throughout the period of use; and

● The Group assess whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period

of use.

Measurement and recognition of leases as a lessee

At lease commencement date, the lease liability is measured at the present value of the remaining lease payments,

discounted using the Group’s incremental borrowing rate. The right of use asset is recognised as an amount equal to the

lease liability, adjusted for amount of any prepaid or accrued lease payments relating to the lease.

The Group depreciates the right of use assets on a straight-line basis from the lease commencement date to the earlier of

the end of the useful life of the right of use asset or the end of the lease term. The Group also assesses the right of use

assets for impairment when such indicators exist.

Lease payments included in the measurement of the lease liability are made up of fixed payments, variable payments

based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from

options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments

made and increased for interest. It is re-measured to reflect any reassessment or modification, or if there are changes in

in-substance fixed payments.

M) CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash on hand, demand deposits and money market funds with maturities of 3 months or

less held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. Deposits

with banks and cash and cash equivalents are valued at amortised cost. The money market funds are valued at fair value

through profit and loss. .

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

N) TAXATION

Income tax expense or credit represents the sum of income tax currently payable and deferred income tax. Income tax

currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the

Consolidated Income Statement because it excludes items of income or expense that are taxable or deductible in other years

and further excludes items that are not taxable or deductible. The Group’s liability for income tax is calculated using rates that

have been enacted or substantively enacted at the reporting date. Income tax is recognised in the Income Statement except to

the extent that it relates to items recognised directly in equity.

Deferred income tax is provided, using the liability method, on all differences between the carrying amounts of assets and

liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income tax assets and

liabilities are measured at the tax rates that are expected to apply in the year when the asset is expected to be realised or the

liability to be settled.

Deferred tax assets are recognised for all deductible differences, carry forward of unused tax credits and unused tax losses, to

the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the

carry forward of unused tax credits and unused tax losses can be utilised. The carrying amount of deferred income tax assets is

reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit would be

available to allow all or part of the deferred income tax asset to be utilised.

Deferred taxation liabilities are recognised for taxable temporary differences arising on investments in subsidiaries except

where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences

will not reverse in the foreseeable future.

Deferred taxation assets and liabilities are offset when there is a legally enforceable right to set off current taxation assets

against current taxation liabilities and when they relate to income taxes levied by the same taxation authority and the Group

intends to settle on a net basis.

O) RETIREMENT BENEFITS

The Group provides either defined benefit or defined contribution retirement benefit schemes for the majority of its

employees.

(i) Defined benefit scheme

A full actuarial valuation of the scheme is undertaken every three years and is updated annually to reflect current

conditions in the intervening periods for the purposes of preparing the financial statements.

The liability or asset recognised in the Statement of Financial Position in respect of defined benefit

pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of

plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit

method. The present value of the defined benefit obligation is determined by discounting the estimated future cash

outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits

will be paid, and that have terms approximating to the terms of the related obligation. In countries where there is no

deep market in such bonds, the market rates on government bonds are used.

The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and

the fair value of plan assets. This cost is included in employee benefit expense in the Income Statement.

Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are

recognised in the period in which they occur, directly in other comprehensive income. They are included in retained

earnings in the Statement of Changes in Equity and in the Statement of Financial Position.

Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are

recognised immediately in the Income Statement as past service costs.

146 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

O) RETIREMENT BENEFITS (continued)

(ii) Defined contribution schemes

Costs arising in respect of the Group’s defined contribution retirement benefit schemes are charged to the Income

Statement in line with the service received.

P) CURRENCY

For the purpose of the consolidated financial statements, the results and financial position of each Group company are

expressed in Euro, which is the functional currency of the Company, and the presentation currency for the consolidated

financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional

currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each

Statement of Financial Position date, monetary assets and liabilities that are denominated in foreign currencies are

retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign

currencies are translated at the rates prevailing at the date when the fair value was determined.

On consolidation, the assets and liabilities of the Group’s non Euro-zone operations are translated at exchange rates prevailing

on the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange

rates fluctuate significantly, in which case the exchange rates at the date of transactions are used. Exchange differences that

are classified as equity are transferred to the translation reserve. Such translation differences are recognised as income or

expense in the period in which the operation is disposed.

Q) SHARE-BASED PAYMENTS AND LONG TERM INCENTIVE PLANS

The Group operates a long-term incentive plan based on non-market vesting conditions. The fair value of the non-market

based awarded shares is determined with reference to the share price of the Group at the date of grant. The cost is expensed in

the Income Statement over the vesting period at the conclusion of which the employees become unconditionally entitled to

the shares once performance conditions are met. The corresponding amount to the expense is credited to a separate reserve

in the Statement of Financial Position. At each period end, the Group reviews its estimate of the number of shares that it

expects to vest and any adjustment relating to current and past vesting periods is brought to the Income Statement. The share

awards are all equity settled.

R) TREASURY SHARES

Where any group company purchases the Company’s equity share capital, the consideration paid is shown as a deduction from

ordinary shareholders’ equity. Consideration received on the subsequent sale or issue of treasury shares is credited to ordinary

shareholders’ equity. Treasury shares are excluded when calculating earnings per share.

S) IMPAIRMENT OF ASSETS

(i) Impairment of tangible and intangible assets

At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine

whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the

recoverable amount of the asset is estimated to determine the extent of the impairment loss, if any. Where the asset

does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of

the cash generating unit to which the asset belongs.

The recoverable amount is the higher of the fair value less costs to sell and value in use. In assessing value in use, the

estimated future cash flows attributable to the asset (or cash-generating unit) are discounted to their present value using

a pre-taxation discount rate that reflects current market assessments of the time value of money and the risks specific to

the asset for which the estimates of future cash flows have not been adjusted.

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

S) IMPAIRMENT OF ASSETS (continued)

(i) Impairment of tangible and intangible assets (continued)

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the

carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is

recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the

impairment loss is treated as a revaluation decrease.

Where a revaluation loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to

the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying

amount that would have been determined had no revaluation loss been recognised for the asset (or cash-generating unit)

in prior years. A reversal of a revaluation loss, other than in relation to goodwill, is recognised as income immediately,

unless the relevant asset is carried at a revalued amount, in which case the reversal of the revaluation loss is treated as a

revaluation increase.

(ii) Impairment of financial assets

Financial assets, other than those at FVTPL (fair value through profit or loss), are assessed for indicators of impairment at

each reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more

events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the investment

have been impacted. For listed and unlisted equity investments classified as Available for Sale (“AFS”), a significant or

prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

● significant financial difficulty of the issuer or counterparty; or

● default or delinquency in interest or principal payments; or

● it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired

individually are, in addition, assessed for impairment on a collective basis.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s

carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original

effective interest rate.

The carrying amount of a financial asset is directly reduced by the impairment loss for all financial assets.

When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in the

Statement of Comprehensive Income are reclassified to the Income Statement in the period.

With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases

and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously

recognised impairment loss is reversed through the Income Statement, to the extent that the carrying amount of the

investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the

impairment not been recognised.

In respect of AFS equity securities, impairment losses previously recognised in the Consolidated Income Statement are

not reversed through the Income Statement. Any increase in fair value subsequent to an impairment loss is recognised in

the Statement of Comprehensive Income.

148 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

T) OTHER FINANCIAL SERVICES INCOME

Other financial services income comprises interest on instalment premiums which is recognised on an effective interest

method and other financial services income as detailed in accounting policy (D).

U) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

The principal accounting policies adopted by the Group are set out on pages 130 to 150. In the application of these accounting

policies, the Directors are required to make judgements, estimates and assumptions about the carrying amount of assets and

liabilities that are not readily apparent from other sources. The key source of judgement and estimation in the preparation of

the financial statements are detailed below. The judgements and estimates and associated assumptions are based on

historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The judgements and estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

judgements and estimates are recognised in the period in which the judgement or estimate is revised if the revision affects only

that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the critical judgements and estimates that the Directors have made in the process of applying the Group’s

accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

Critical accounting estimates and judgements in applying accounting policies

In the application of the Group’s accounting policies, the Directors are required to make judgements, estimates and

assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The key

judgements and the key sources of estimation uncertainty that have the most significant effect on the amounts recognised in

the financial statements are detailed below. The estimates and associated assumptions are based on historical experience and

other factors that are considered to be relevant. The estimates and underlying assumptions are reviewed on an ongoing basis

and actual results may differ from these estimates.

Claims provisions

Claims provisions represent the estimation of the cost of claims outstanding under insurance contracts written. Actuarial

techniques, based on statistical analysis of past experience, are used to calculate the estimated cost of claims outstanding at

the period end.

Also included in the estimation of outstanding claims are factors such as the potential for inflation and the potential impact of

the Personal Injuries Guidelines. Provisions for more recent claims make use of techniques that incorporate expected loss

ratios and average claims cost (adjusted for inflation) and frequency methods. The average claims cost and frequency methods

are particularly relevant when calculating the ultimate cost of claims for the 2022 accident year.

FBD have agreed settlements with two of the four publicans in the Business Interruption Test Case. A reasoned ruling is due in

the second quarter of 2023 from the Judge which is anticipated will provide certainty in respect of outstanding issues and assist

in reaching an agreement with the remaining two publicans. Should the ruling provide this clarity, this will enable payment of

the balance of the claims due to publicans in 2023.

FBD has now received information from almost 700 public house policyholders in order to assess the claims and has been

making interim payments based on these assessments. The continued increase in data provides more certainty in respect to a

number of assumptions underlying the best estimate of the Business Interruption losses and will improve as the particulars of

more claims are received.

The calculations are particularly sensitive to the estimation of the ultimate cost of claims for the particular classes of business

and the estimation of future claims handling costs. Actual claims experience may differ from the assumptions on which the

actuarial best estimate is based and the cost of settling individual claims may exceed that assumed.

As a result of the uncertainties noted, the Group sets provisions at a margin above the actuarial best estimate, inclusive of an

amount specifically allocated to the Business Interruption estimate.

149

Strategic Report Environmental, Social & Governance Financial Statements Other Information

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

U) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

(continued)

Reinsurance assets

The Group spends substantial sums to purchase reinsurance protection from third parties and substantial claims recoveries

from these reinsurers are included in the Statement of Financial Position at the reporting date. A reinsurance asset (reinsurers’

share of claims outstanding and provision for unearned premium) is recognised to reflect the amount estimated to be

recoverable under the reinsurance contracts in respect of the outstanding claims reported under insurance liabilities. The

amount recoverable from reinsurers is initially valued on the same basis as the underlying claims provision. The amount

recoverable is reduced when there is an event arising after the initial recognition that provides objective evidence that the

Group may not receive all amounts due under the contract and the event has a reliably measurable impact on the expected

amount that will be recoverable from the reinsurer.

To minimise default exposure, the Group’s policy is that all reinsurers should have a credit rating of A- or better or have

provided alternative satisfactory security.

The actual amount recovered from reinsurers is sensitive to the same uncertainties as the underlying claims. To the extent

that the underlying claim settles at a lower or higher amount than that assumed this will have a direct influence on the

associated reinsurance asset.

The uncertainty in respect of the reinsurance asset for Business Interruption has reduced considerably as the application of the

reinsurance contract has been agreed with reinsurers for the expected impacted layers of the catastrophe program.

Uncertainties in impairment testing

As at the reporting date it was noted that the market capitalisation, that is the quoted share price multiplied by the number of

ordinary shares in issue, was lower than the Shareholders’ Funds as per the Consolidated Statement of Financial Position.

There are a large number of factors driven by market conditions that can influence the market capitalisation of a company

which include but are not limited to factors such as shares being traded less frequently. The market capitalisation being below

net assets is considered to be an external indicator of impairment and creates a necessity to make a formal estimate of

recoverable amount to test whether any actual impairment exists. For tangible and intangible assets, the recoverable amount

of an asset is the higher of its value in use or its fair value less costs to sell.

In the case of the Property, Plant and Equipment (excluding Owner Occupied Property which is held at revalued amount),

policy administration system, Intangible Assets and Right of Use Assets there is no reliable estimate of the price at which an

orderly transaction to sell the assets would take place and there are no direct cash-flows expected from the individual assets.

These assets are an integral part of the FBD General Insurance business, therefore, the smallest group of assets that can be

classified as a cash generating unit is the FBD General Insurance business.

The Value in Use cash flow projections are based on the budget 2023 figures and the five year strategic projections approved by

the Board in quarter four 2022. The 2028 figures are extrapolated assuming the performance in 2028 is in line with 2027. The

time period of six years used in the cash flow projections is less than the weighted average remaining useful life of the assets in

the FBD General Insurance business being assessed. This projection and plan refresh represent management’s best estimate

of future underwriting profits and fee income for FBD.

General Insurance business projections factors in both past experience as well as expected future outcomes relative to market

data and the strategy adopted by the Board. The underlying assumptions of these forecasts include average premium, number

of policies written, claims frequency, claims severity, weather experience, commission rates, fee income charges and

expenses. The average growth rate used for 2023 is 6% followed by a 2% growth rate for 2024-2027. The growth rate is

assumed to be flat for later years. Future cash flows are discounted using an estimated weighted average cost of capital

(WACC) of 10.2% which is considered a reasonable estimate following the recent increase in risk free rates

150 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

U) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

(continued)

Sensitivity analysis was performed on the projections to allow for possible variations in the amount of the future cash flows and

potential discount rate changes. The sensitivities include climate change scenarios run for the ORSA modelling, delayed

benefits from the Judicial Council Guidelines, additional inflation in claims settlements, reduced growth rates and positive

impacts of new initiatives.

The level of headroom has increased year on year, and in all scenarios run, the value in use of the cash generating unit

exceeded the carrying value of the assets, demonstrating that no reasonably possible change in key assumptions would result

in an impairment of the assets. The largest reduction in the level of headroom was from a climate change scenario.

4 SEGMENTAL INFORMATION

(a) Operating segments

The principal activities of the Group are underwriting of general insurance business and financial services.

For management purposes, the Group is organised in two operating segments - underwriting and financial services. These two

segments are the basis upon which information is reported to the chief operating decision maker, the Group Chief Executive,

for the purpose of resource allocation and assessment of segmental performance. Discrete financial information is prepared

and reviewed on a regular basis for these two segments.

The following is an analysis of the Group’s revenue and results by reportable segments.

2022	Underwriting
		Financial
		services	Total
	€000s	€000s	€000s
Revenue	398,410	7,985	406,395
Investment return	(10,413)	—	(10,413)
Finance costs	(2,559)	—	(2,559)
Profit before taxation	72,423	1,300	73,723
Income taxation charge	(8,621)	(648)	(9,269)
Profit after taxation	63,802	652	64,454
Other information
Capital additions	7,026	—	7,026
Impairment of other assets	(1,290)	—	(1,290)
Depreciation/amortisation	13,239	—	13,239
Statement of Financial Position
Segment assets	1,446,056	26,935	1,472,991
Segment liabilities	1,040,565	6,715	1,047,280

Included above in the current period is a net non-cash impairment charge relating to property held for own use and revaluation

loss relating to investment property of €1,290,000 (2021: revaluation loss of €59,000).

151

Strategic Report Environmental, Social & Governance Financial Statements Other Information

4 SEGMENTAL INFORMATION (continued)

(a) Operating segments (continued)

2021	Underwriting
		Financial
		services	Total
	€000s	€000s	€000s
Revenue	379,356	7,305	386,661
Investment return	15,679	—	15,679
Finance costs	(2,545)	—	(2,545)
Profit before taxation	109,268	1,167	110,435
Income taxation charge	(13,017)	(1,009)	(14,026)
Profit after taxation	96,251	158	96,409
Other information
Capital additions	8,545	—	8,545
Impairment of other assets	(59)	—	(59)
Depreciation/amortisation	(18,012)	—	(18,012)
Statement of Financial Position
Segment assets	1,556,680	23,328	1,580,008
Segment liabilities	1,098,654	6,049	1,104,703

The accounting policies of the reportable segments are the same as the Group accounting policies. Segment profit represents

the profit earned by each segment. Central administration costs and Directors’ salaries are allocated based on actual activity.

Income taxation is a direct cost of each segment.

In monitoring segment performance and allocating resources between segments:

● All assets are allocated to reportable segments. Assets used jointly by reportable segments are allocated on the basis of

activity by each reportable segment; and

● All liabilities are allocated to reportable segments. Liabilities for which reportable segments are jointly liable are allocated

in proportion to segment assets.

152 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

4 SEGMENTAL INFORMATION (continued)

(a) Operating segments (continued)

An analysis of the Group’s revenue by product is as follows:

	2022	2021
	€000s	€000s
Direct insurance – motor	182,117	182,233
Direct insurance – fire and other damage to property	119,680	109,402
Direct insurance – liability	75,601	69,387
Direct insurance – interest and other revenue	15,521	13,028
Direct insurance – other	5,491	5,306
Financial services income - revenue from contracts with customers	3,173	2,930
Financial services income - other financial services revenue	4,812	4,375
Total revenue	406,395	386,661

The Group’s customer base is diverse and it has no reliance on any major customer. Insurance risk is not concentrated on any

one area or on any one line of business.

See below written premiums, earned premiums, incurred claims including claims handling expense, and other underwriting

expenses split by product lines within the underwriting segment.

		2022			2021
	Gross	Ceded	Net	Gross	Ceded	Net
	€000s	€000s	€000s	€000s	€000s	€000s
(i) Written premiums
Motor	182,117	(17,317)	164,800	182,233	(16,596)	165,637
Fire and other damage to property	119,680	(16,464)	103,216	109,402	(10,453)	98,949
Liability	75,601	(5,811)	69,790	69,387	(5,222)	64,165
Miscellaneous	5,491	(424)	5,067	5,306	(381)	4,925
	382,889	(40,016)	342,873	366,328	(32,652)	333,676

Included in the gross premium written balance of €382,889,000 (2021: €366,328,000) are premium rebate provision releases

of -€466,000 (2021: rebate provisions of €3,347,000) relating to reduced insurance exposure as a result of Covid-19

restrictions.

153

Strategic Report Environmental, Social & Governance Financial Statements Other Information

4 SEGMENTAL INFORMATION (continued)

(a) Operating segments (continued)

		2022			2021
	Gross	Ceded	Net	Gross	Ceded	Net
	€000s	€000s	€000s	€000s	€000s	€000s
(ii) Earned premiums
Motor	181,421	(17,208)	164,213	184,724	(15,955)	168,769
Fire and other damage to property	114,237	(16,347)	97,890	107,144	(10,416)	96,728
Liability	74,613	(5,811)	68,802	69,105	(5,222)	63,883
Miscellaneous	5,373	(424)	4,949	5,248	(381)	4,867
	375,644	(39,790)	335,854	366,221	(31,974)	334,247

		2022			2021
	Gross	Ceded	Net	Gross	Ceded	Net
	€000s	€000s	€000s	€000s	€000s	€000s
(iii) Incurred claims including
claims handling expenses
Motor	65,868	2,650	68,518	73,868	(3,455)	70,413
Fire and other damage to property	49,376	(483)	48,893	96,637	(79,003)	17,634
Liability	23,124	852	23,976	32,163	(2,034)	30,129
Miscellaneous	4,315	105	4,420	5,419	(57)	5,362
	142,683	3,124	145,807	208,087	(84,549)	123,538

Net claims and benefits of €145,807,000 includes positive prior year reserve development of €48,300,000. The increase from

prior year is due to higher frequency and inflationary impacts in Motor Damage and Property claims. Positive prior year reserve

development came from attritional reserve development, large claims releases and a reduction in the Business Interruption

reserve.

		2022			2021
	Gross	Ceded	Net	Gross	Ceded	Net
	€000s	€000s	€000s	€000s	€000s	€000s
(iv) Other underwriting expenses
Motor	47,703	(2,407)	45,296	48,370	(2,253)	46,117
Fire and other damage to property	31,348	(1,332)	30,016	29,038	(1,084)	27,954
Liability	19,802	(546)	19,256	18,417	(488)	17,929
Miscellaneous	1,438	(44)	1,394	1,408	(39)	1,369
	100,291	(4,329)	95,962	97,233	(3,864)	93,369

(b) Geographical segments

The Group’s operations are located in Ireland.

154 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

4 SEGMENTAL INFORMATION (continued)

(c) Underwriting result

	2022	2022	2021	2021
	€000s	€000s	€000s	€000s
Earned premiums, net of reinsurance
Gross premium written	382,889		366,328
Reinsurance premiums	(40,016)		(32,652)
Net premium written	342,873		333,676
Change in provision for unearned premium
Gross amount	(7,245)		(107)
Reinsurers’ share	226		678
Change in net provision for unearned premium	(7,019)		571
Net premium earned		335,854		334,247
Claims paid, net of recoveries from reinsurers
Claims paid:
Gross amount	(188,333)		(188,338)
Reinsurers’ share	55,277		12,060
Claims paid, net of recoveries from reinsurers	(133,056)		(176,278)
Change in provision for claims
Gross amount	59,972		(6,340)
Reinsurers’ share	(58,401)		72,489
Change in insurance liabilities, net of reinsurance	1,571		66,149
Claims handling expenses	(14,322)		(13,409)
Net claims and benefits		(145,807)		(123,538)
Movement in other provisions		(8,403)		(22,143)
Management expenses	(96,021)		(92,308)
Deferred acquisition costs	3,061		1,380
Gross management expenses	(92,960)		(90,928)
Reinsurers share of expenses	4,329		3,864
Broker commissions payable	(7,331)		(6,305)
Net operating expenses		(95,962)		(93,369)
Underwriting result		85,682		95,197

155

Strategic Report Environmental, Social & Governance Financial Statements Other Information

4 SEGMENTAL INFORMATION (continued)

(c) Underwriting result (continued)

The Group’s Reinsurance Policy dictates that all of the Group’s reinsurers must have a credit rating of A- or better, or provide

alternative satisfactory security. The impact of buying reinsurance was a charge to the Consolidated Income Statement of

€38,583,000 (2021: credit of €56,024,000).

(d) Underwriting management expenses

	2022	2021
	€000s	€000s
Employee benefit expense	51,881	46,410
Rent, rates, insurance and maintenance	6,598	6,016
Depreciation	2,348	3,121
Amortisation	10,891	14,891
Other	24,303	21,870
Total underwriting management expenses	96,021	92,308

(e) Financial services and other costs

	2022	2021
	€000s	€000s
Employee benefit expense	3,816	3,398
Rent, rates, insurance and maintenance	627	615
Other	2,242	2,125
Total financial services and other costs	6,685	6,138

5 NET INVESTMENT RETURN

	2022	2021
	€000s	€000s
Actual return
Interest and similar income	10,988	8,607
Net income from investment properties	193	543
Realised movements on investments	(2,179)	7,918
Dividend income	12	13
Revaluation of investment properties	(1,003)	(996)
Unrealised movements on financial investments	(18,424)	(406)
Total investment return	(10,413)	15,679
By classification of investment
Cash & cash equivalents/Deposits with banks	68	(386)
Investments held for trading	(14,772)	10,422
Investment properties	(807)	130
Available for sale investments	5,098	5,513
Total investment return	(10,413)	15,679

156 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

6 PROFIT BEFORE TAXATION

	2022	2021
	€000s	€000s
Profit before taxation has been stated after charging:
Depreciation and amortisation	13,239	18,012

The remuneration of the Directors is disclosed in the audited section of the Report on Directors’ Remuneration on pages 89 to

106. These disclosures form an integral part of the financial statements.

7 INFORMATION RELATING TO AUDITORS’ REMUNERATION

An analysis of fees payable to the statutory audit firm is as follows:

	2022		2021
	Company	Group	Company	Group
	€000s	€000s	€000s	€000s
Description of service
Audit of statutory financial statements	138	574	69	429
Other assurance services	—	133	—	121
Total auditors remuneration	138	707	69	550

Fees payable by the Company are included with the fees payable by the Group in each category.

In 2022 and 2021, other assurance services relate to Solvency II audit which are prescribed under legislation or regulation, the

audit of the defined contribution pension scheme and MIBI certificate.

8 STAFF COSTS AND NUMBERS

The average number of persons employed by the Group was as follows:

	2022	2021
	No.	No.
Underwriting	906	894
Financial services	27	25
Total	933	919

	2022	2021
The aggregate employee benefit expense was as follows:	€000s	€000s
Wages and salaries	53,808	47,583
Social welfare costs	5,654	4,983
Pension costs	4,188	4,494
Share based payments	2,681	2,650
Total employee benefit expense	66,331	59,710

157

Strategic Report Environmental, Social & Governance Financial Statements Other Information

9 LEASES

Leases held are property leases for office space for the Group’s branches and leases for computer equipment. The Group holds

a number of property leases with remaining terms ranging from one to twenty-two years. None of the Group’s leases have

options for extensions or to purchase. There are no contingent rents payable and all lease payments are fixed and at market

rates. Additional information on the Group’s leases is detailed below:

Right of use assets

	2022	2021
	€000s	€000s
Balance at 1 January	5,078	5,635
Additions	—	233
Depreciation charge for the year	(788)	(790)
Balance at 31 December	4,290	5,078

Lease liabilities

	2022	2021
Maturity analysis - contractual undiscounted cash flows	€000s	€000s
Less than one year	(955)	(961)
One to five years	(2,830)	(3,279)
More than five years	(1,824)	(2,278)
Total undiscounted lease liabilities at 31 December	(5,609)	(6,518)

Contractual discounted cash flows
Current	(807)	(806)
Non - current	(3,793)	(4,543)
Lease liabilities included in the statement of financial position at 31 December	(4,600)	(5,349)

	2022	2021
Amounts recognised in profit or loss	€000s	€000s
Depreciation charge on right of use assets (included in Other underwriting expenses)	(788)	(790)
Interest on lease liabilities (included in Other underwriting expenses)	(216)	(236)
Expenses related to short-term leases (included in Other underwriting expenses)	(50)	(50)
Income from sub-leasing right of use assets (included in Other financial services income)	79	79

Total cash outflows recognised in the period in relation to leases were €965,000 (2021: €962,000).

158 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

10 INCOME TAXATION CHARGE

	2022	2021
	€000s	€000s
Irish corporation taxation charge	(8,654)	(14,149)
Adjustments in respect of prior financial years	83	17
Current taxation charge	(8,571)	(14,132)
Deferred taxation (charge)/credit	(698)	106
Income taxation charge	(9,269)	(14,026)

The taxation charge in the Consolidated Income Statement is higher (2021: higher) than the standard rate of corporation

taxation in Ireland. The differences are explained below:

	2022	2021
	€000s	€000s
Profit before taxation	73,723	110,435
Corporation taxation charge at standard rate of 12.5% (2021: 12.5%)	9,215	13,804
Effects of:
Non-taxable income/unrealised gains/losses or expenses not deductible for tax
purposes	24	(159)
Higher rates of taxation on other income	113	101
Adjustments in respect of prior years	(83)	280
Income taxation charge	9,269	14,026
Taxation as a percentage of profit before taxation	12.6%	12.7%

In addition to the amount charged to the Consolidated Income Statement, the following taxation amounts have been

recognised directly in the Consolidated Statement of Comprehensive Income:

	2022	2021
	€000s	€000s
Deferred taxation on:
Actuarial movement on retirement benefit obligations	284	(35)
Property held for own use revaluation	(2)	(230)
Movement on available for sale investments	11,268	1,525
Total income taxation credit recognised directly in the Consolidated Statement of
Comprehensive Income	11,550	1,260

11 PROFIT FOR THE YEAR (COMPANY ONLY)

The Company’s profit for the financial year determined in accordance with IFRS, as adopted by the European Union, is

€36,974,000 (2021 loss: €35,000). The Company’s other comprehensive loss for the financial year is €326,000 (2021 other

comprehensive loss: €10,000).

In accordance with section 304 of the Companies Act 2014 the Company is availing of the exemption from presenting its

individual Income Statement to the AGM and from filing it with the Registrar of Companies.

159

Strategic Report Environmental, Social & Governance Financial Statements Other Information

12 EARNINGS PER €0.60 ORDINARY SHARE

The calculation of the basic and diluted earnings per share attributable to the ordinary shareholders is based on the following

data:

	2022	2021
Earnings	€000s	€000s
Profit for the year for the purpose of basic earnings per share	64,172	96,127
Profit for the year for the purpose of diluted earnings per share	64,172	96,127

	2022	2021
Number of shares	No.	No.
Weighted average number of ordinary shares for the purpose of basic earnings
per share (excludes treasury shares)	35,507,806	35,138,959
Weighted average number of ordinary shares for the purpose of diluted earnings
per share (excludes treasury shares)	36,424,983	35,930,762
	Cent	Cent
Basic earnings per share	181	274
Diluted earnings per share	176	268

The ‘A’ ordinary shares of €0.01 each that are in issue have no impact on the earnings per share calculation. See note 21 for a

description of the ‘A’ ordinary shares.

The below table reconciles the profit attributable to the parent entity for the year to the amounts used as the numerators in

calculating basic and diluted earnings per share for the year and the comparative year including the individual effect of each

class of instruments that affects earnings per share:

	2022	2021
	€000s	€000s
Profit attributable to the parent entity for the year	64,454	96,409
2022 dividend of 8.4 cent (2021: 8.4 cent) per share on 14% non-cumulative
preference shares of €0.60 each	(113)	(113)
2022 dividend of 4.8 cent (2021: 4.8 cent) per share on 8% non-cumulative
preference shares of €0.60 each	(169)	(169)
Profit for the year for the purpose of calculating basic and diluted earnings	64,172	96,127

The below table reconciles the weighted average number of ordinary shares used as the denominator in calculating basic

earnings per share to the weighted average number of ordinary shares used as the denominator in calculating diluted earnings

per share including the individual effect of each class of instruments that affects earnings per share:

	2022	2021
	No.	No.
Weighted average number of ordinary shares for the purposes of calculating basic
earnings per share	35,507,806	35,138,959
Potential vesting of share based payments	917,177	791,803
Weighted average number of ordinary shares for the purposes of calculating diluted
earnings per share	36,424,983	35,930,762

160 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

13 PROPERTY, PLANT AND EQUIPMENT

	Property held
	for own use
		Computer
		Equipment
			Fixtures &
			Fittings	Total
	€000s	€000s	€000s	€000s
Cost or valuation
At 1 January 2021	24,224	99,188	24,839	148,251
Additions	—	187	961	1,148
Assets under development	—	125	—	125
At 31 December 2021	24,224	99,500	25,800	149,524
Additions	—	309	744	1,053
Assets under development	—	235	—	235
At 31 December 2022	24,224	100,044	26,544	150,812
Comprising:
At cost	—	100,044	26,544	126,588
At valuation	24,224	—	—	24,224
At 31 December 2022	24,224	100,044	26,544	150,812

	Property held
	for own use
		Computer
		Equipment
			Fixtures &
			Fittings	Total
Accumulated depreciation and revaluation	€000s	€000s	€000s	€000s
At 1 January 2021	8,659	94,027	20,480	123,166
Depreciation charge for the year	116	2,235	770	3,121
Revaluation through the income statement	(937)	—	—	(937)
Revaluation through the statement of
comprehensive income	(4)	—	—	(4)
At 31 December 2021	7,834	96,262	21,250	125,346
Depreciation charge for the year	124	1,460	854	2,438
Impairment through the income statement	287	—	—	287
Revaluation through the statement of
comprehensive income	(5)	—	—	(5)
At 31 December 2022	8,240	97,722	22,104	128,066
Carrying amount
At 31 December 2022	15,984	2,321	4,440	22,745
At 31 December 2021	16,390	3,238	4,550	24,178

161

Strategic Report Environmental, Social & Governance Financial Statements Other Information

13 PROPERTY, PLANT AND EQUIPMENT (continued)

Property held for own use

Properties held for own use at 31 December 2022 and 2021 were valued at fair value which is determined by independent

external professional surveyors CB Richard Ellis, Valuation Surveyors. CB Richard Ellis confirm that the properties have been

valued in accordance with RICS Valuation – Global Standards 2017 (Red Book) incorporating the IVSC International Valuation

Standards issued June 2017.

In carrying out the valuation of the properties, CB Richard Ellis have considered the impact of sustainability factors on the

properties, including physical/climate risk.

The valuation report states that the valuations have been prepared on the basis of “Market Value” which is defined in the report

as “the estimated amount for which an asset or liability should exchange on valuation date between a willing buyer and a willing seller

in an arm’s-length transaction, after proper marketing where the parties had each acted knowledgeably, prudently and without

compulsion”. The report also states that the market value “has been primarily derived using comparable recent market transactions

on arm’s length terms”.

The Directors believe that the market value, determined by independent professional valuers is not materially different to fair

value.

Had the property been carried at historical cost less accumulated depreciation and accumulated revaluation losses, their

carrying amount would have been as follows:

	2022	2021
	€000s	€000s
Property held for own use	14,123	14,235

Fair value hierarchy disclosures required by IFRS13 Fair Value Measurement have been included in note 17, Financial

Instruments and Fair Value Measurement.

14 POLICY ADMINISTRATION SYSTEM

The most significant investment by the Group in recent years is in its underwriting policy administration system. The Group’s

policy administration system, TIA, is the principal operating and core technology platform of the business.

	Policy Admin
	System
Cost	€000s
At 1 January 2021	62,587
Additions	4,685
At 1 January 2022	67,272
Additions	4,566
At 31 December 2022	71,838

162 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

14 POLICY ADMINISTRATION SYSTEM (continued)

Accumulated amortisation	€000s
At 1 January 2021	25,866
Amortisation charge for the year*	13,424
At 1 January 2022	39,290
Amortisation charge for the year*	8,865
At 31 December 2022	48,155
Carrying amount
At 31 December 2022	23,683
At 31 December 2021	27,982

*During the annual review of the useful economic life of the policy administration system, the useful life of items of the system developed

in the earlier years of the project have been re-estimated, this has resulted in accelerated amortisation of €2,460,000 in 2022 (2021:

€5,884,000).

The additions to the policy administration system in 2022 are split 76% internally generated assets and 24% externally

generated assets (2021: 74% internally generated assets and 26% externally generated assets).

The amortisation charge for the year is included in ‘Other underwriting expenses’ in the Consolidated Income Statement.

15 INTANGIBLE ASSETS

Cost:
	Computer
	Software
	€000s
At 1 January 2021	5,927
Additions	2,712
Assets under development	2,686
At 31 December 2021	11,325
Additions	1,407
Assets under development	5,580
At 31 December 2022	18,312
Accumulated amortisation:
At 1 January 2021	827
Amortisation charge for the year	1,467
At 31 December 2021	2,294
Amortisation charge for the year	1,936
At 31 December 2022	4,230
Carrying amount
At 31 December 2022	14,082
At 31 December 2021	9,031

163

Strategic Report Environmental, Social & Governance Financial Statements Other Information

15 INTANGIBLE ASSETS (continued)

The additions during 2022 to Intangible Assets are split 36% internally generated assets and 64% externally generated assets

(2021: 28% internally generated assets and 72% externally generated assets).

Assets under development at 31 December 2022 relate to investment in digital and cloud based applications. These assets are

expected to be operational in Q2 2023.

The amortisation charge for the year is included in ‘Other underwriting expenses’ in the Consolidated Income Statement.

16 INVESTMENT PROPERTY

	2022	2021
Fair value of investment property	€000s	€000s
At 1 January	16,055	17,051
Net gains or losses from fair value adjustments	(1,003)	(996)
At 31 December	15,052	16,055

Investment property includes a commercial rental property in Dublin City Centre and an immaterial holding of agricultural

land in the United Kingdom.

The investment property held for rental in Ireland was valued at fair value at 31 December 2022 and at 31 December 2021 by

independent external professional valuers, CB Richard Ellis, Valuation Surveyors. The valuation was prepared in accordance

with RICS Valuation – Global Standards 2017 (Red Book) incorporating the IVSC International Valuation Standards issued June

2017. The valuers confirm that they have sufficient current local and national knowledge of the particular property market

involved and have the skills and understanding to undertake the valuations competently.

In carrying out the valuation of the properties, CB Richard Ellis have considered the impact of sustainability factors on the

properties, including physical/climate risk.

The valuation statement received from the external professional valuers state that the valuations have been prepared on the

basis of “Market Value” which they define as “the estimated amount for which a property should exchange on the date of valuation

between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted

knowledgeably, prudently and without compulsion”.

The Directors believe that market value, determined by independent external professional valuers, is not materially different

to the fair value.

There was a net decrease in the fair value in 2022 of €1,003,000 (2021 decrease: €996,000).

The rental income earned by the Group from its investment properties amounted to €722,493 (2021: €1,044,104). Direct

operating costs associated with investment properties amounted to €573,730 (2021: €501,099).

The historical cost of investment property is as follows:

	2022	2021
	€000s	€000s
Historical cost at 1 January	22,053	22,053
Refurbishment costs	—	—
Disposal of investment property	—	—
Historical cost at 31 December	22,053	22,053

164 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

16 INVESTMENT PROPERTY (continued)

	2022	2021
Maturity analysis - undiscounted non-cancellable operating lease receivables	€000s	€000s
Less than one year	579	733
One to five years	2,315	2,315
More than five years	1,254	1,833
Maturity analysis - undiscounted non-cancellable operating lease receivables	4,148	4,881

Fair value hierarchy disclosures required by IFRS13 Fair Value Measurement have been included in note 17, Financial

Instruments and Fair Value Measurement.

17. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT

(a) Financial Instruments

	2022	2021
	€000s	€000s
Financial Assets
At Amortised Cost:
Deposits with banks	10,000	—
Cash and cash equivalents	105,793	164,479
Loans	580	577
Other receivables	58,307	58,047
At fair value:
Available for sale investments	834,994	893,715
Investments held for trading	132,965	137,547
Cash and cash equivalents	56,605	—
Financial Liabilities
At Amortised Cost:
Payables	46,327	41,657
Subordinated debt (note 26)	49,662	49,603
Lease liabilities	4,600	5,349

165

Strategic Report Environmental, Social & Governance Financial Statements Other Information

17. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT (continued)

(b) Fair value measurement

The following table compares the carrying value of financial instruments not held at fair value with the fair value of those

assets and liabilities:

	2022
	Fair value
	€000s
		2022
		Carrying value
		€000s
Assets
Loans	696	580
Liabilities
Subordinated debt	46,129	49,662

	2021
	Fair value
	€000s
		2021
		Carrying value
		€000s
Assets
Loans	693	577
Liabilities
Subordinated debt	54,341	49,603

The exemption from disclosing the fair value of short term receivables has been availed of.

Certain assets and liabilities are measured in the Statement of Financial Position at fair value using a fair value hierarchy of

valuation inputs. The following table provides an analysis of assets and liabilities that are measured subsequent to initial

recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

Level 1 Fair value measurements derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Available for sale investments – quoted debt securities are fair valued using latest available closing bid price.

Collective investment schemes, held for trading (Level 1) are valued using the latest available closing NAV of the

fund.

Level 2 Fair value measurements derived from inputs other than quoted prices included within Level 1 that are observable

for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 Fair value measurements derived from valuation techniques that include inputs for the asset or liability that are not

based on observable market data (unobservable inputs). Valuation techniques used are outlined below;

● Collective investment schemes held for trading (Infrastructure and Senior Private Debt funds) are valued using the

most up-to-date valuations calculated by the fund administrator allowing for any additional investments made up

until year end.

● AFS unquoted investments securities are classified as Level 3 as they are not traded in an active market. Various

valuation techniques are used to derive the value of the underlying assets such as adjusting the net asset valuation

and determining the valuation for suitable listed proxy assets.

● Investment property and property held for own use were fair valued by independent external professional valuers

at year end. Group occupied properties have been valued on a vacant possession basis applying hypothetical

10-year leases and assumptions of void and rent free periods, market rents, capital yields and purchase costs

which are derived from comparable transactions and adjusted for property specific factors as determined by the

valuer. Group investment properties have been valued using the investment method based on the long leasehold

interest in the subject property, the contracted values of existing tenancies, assumptions of void and rent free

periods and market rents for vacant lots, and capital yields and purchase costs which are derived from comparable

transactions and adjusted for property specific factors as determined by the valuer. Please refer to note 13 and

note 16 for further details.

166 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

17. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT (continued)

(b) Fair value measurement (continued)

	Level 1	Level 2	Level 3	Total
2022	€000s	€000s	€000s	€000s
Assets
Investment property	—	—	15,052	15,052
Property held for own use	—	—	15,984	15,984
Financial assets
Cash and cash equivalents	56,605	—	—	56,605
Investments held for trading – collective
investment schemes	105,419	—	27,546	132,965
AFS investments - quoted debt securities	833,865	—	—	833,865
AFS investments - unquoted investments	—	—	1,129	1,129
Total assets	995,889	—	59,711	1,055,600
Total liabilities	—	—	—	—

	Level 1	Level 2	Level 3	Total
2021	€000s	€000s	€000s	€000s
Assets
Investment property	—	—	16,055	16,055
Property held for own use	—	—	16,390	16,390
Financial assets
Investments held for trading – collective
investment schemes	123,661	—	13,886	137,547
AFS investments - quoted debt securities	892,495	—	—	892,495
AFS investments - unquoted investments	—	—	1,220	1,220
Total assets	1,016,156	—	47,551	1,063,707
Total liabilities	—	—	—	—

167

Strategic Report Environmental, Social & Governance Financial Statements Other Information

17. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT (continued)

(b) Fair value measurement (continued)

A reconciliation of Level 3 fair value measurement of financial assets is shown in the table below:

	2022	2021
	€000s	€000s
At 1 January	47,551	42,159
Transfers-in	—	—
Additions	12,349	4,522
Disposals	—	(544)
Revaluation/(impairment)	(62)	1,531
Unrealised loss recognised in the Consolidated Income Statement	(127)	(117)
At 31 December	59,711	47,551

The Directors review the inputs to assess fair value measurement at least annually to determine the appropriate level to be

disclosed. A sensitivity analysis of the Level 3 assets is completed in note 36(f).

18 DEFERRED ACQUISITION COSTS

The movements in deferred acquisition costs during the financial year were:

	2022	2021
	€000s	€000s
At 1 January	35,458	34,079
Additions	77,194	71,302
Recognised in the Consolidated Income Statement	(74,132)	(69,923)
At 31 December	38,520	35,458

All deferred acquisition costs are expected to be recovered within one year from 31 December 2022.

19 OTHER RECEIVABLES

	2022	2021
	€000s	€000s
Policyholders	40,906	39,645
Intermediaries	5,132	5,107
Other debtors	6,006	7,088
Accrued interest and rent	182	—
Prepayments and accrued income	6,081	6,207
Total other receivables	58,307	58,047

The Directors have performed an impairment review of the receivables arising out of direct insurance operations and no

objective evidence came to their attention that an impairment exists. There is no significant concentration of risk in

receivables arising out of direct insurance operations or any other activities.

The Directors consider that the carrying amount of receivables is approximate to their fair value. All receivables are due within

one year and none are past due.

168 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

20 CASH AND CASH EQUIVALENTS

	2022	2021
	€000s	€000s
Short term deposits	80,661	151,023
Money market fund	56,605	—
Cash in hand	25,132	13,456
Total cash and cash equivalents	162,398	164,479

21 CALLED UP SHARE CAPITAL PRESENTED AS EQUITY

		2022	2021
	Number	€000s	€000s
(i) Ordinary shares of €0.60 each
Authorised:
At the beginning and the end of the year	51,326,000	30,796	30,796
Issued and fully paid:
At the beginning of the year	35,461,206	21,277	21,277
Issued during the year	290,078	174	—
At the end of the year	35,751,284	21,451	21,277
(ii) ‘A’ Ordinary shares of €0.01 each
Authorised:
At the beginning and the end of the year	120,000,000	1,200	1,200
Issued and fully paid:
At the beginning and the end of the year	13,169,428	132	132
Total – issued and fully paid		21,583	21,409

The ‘A’ ordinary shares of €0.01 each are non-voting. They are non-transferable except only to the Company. Other than a right

to a return of paid up capital of €0.01 per ‘A’ ordinary share in the event of a winding up, the ‘A’ ordinary shares have no right to

participate in the capital or the profits of the Company.

The holders of the two classes of non-cumulative preference shares rank ahead of the two classes of ordinary shares in the

event of a winding up (see note 23). Before any dividend can be declared on the ordinary shares of €0.60 each, the dividend on

the non-cumulative preference shares must firstly be declared or paid.

The number of ordinary shares of €0.60 each held as treasury shares at the beginning of the year (and the maximum number

held during the year) was 164,005 (2021: 408,744). No ordinary shares were re-issued from treasury shares during the year

under the FBD Performance Plan. The number of ordinary shares of €0.60 each held as treasury shares at the end of the year

was 164,005 (2021: 164,005). This represented 0.5% (2021: 0.5%) of the shares of this class in issue and had a nominal value

of €98,403 (2021: €98,403). There were no ordinary shares of €0.60 each purchased by the Company during the year.

The weighted average number of ordinary shares of €0.60 each in the earnings per share calculation has been reduced by the

number of such shares held in treasury.

All issued shares have been fully paid.

169

Strategic Report Environmental, Social & Governance Financial Statements Other Information

22 CAPITAL RESERVES

(a) GROUP

	Share
	premium
		Capital
		conversion
		reserve
			Capital
			redemption
			reserve
				Share-based
				payment
				reserve	Total
	€000s	€000s	€000s	€000s	€000s
Balance at 1 January 2021	5,540	1,627	4,426	13,163	24,756
Recognition of share-based payments	—	—	—	2,650	2,650
Balance at 31 December 2021	5,540	1,627	4,426	15,813	27,406
Issue of ordinary shares*	2,669	—	—	(2,564)	105
Recognition of share-based payments	—	—	—	2,681	2,681
Balance at 31 December 2022	8,209	1,627	4,426	15,930	30,192

(b) COMPANY

	Share
	premium
		Capital
		conversion
		reserve
			Capital
			redemption
			reserve
				Share-based
				payment
				reserve	Total
	€000s	€000s	€000s	€000s	€000s
Balance at 1 January 2021	5,540	1,627	4,426	13,163	24,756
Recognition of share-based payments	—	—	—	2,650	2,650
Balance at 31 December 2021	5,540	1,627	4,426	15,813	27,406
Issue of ordinary shares*	2,669	—	—	(2,564)	105
Recognition of share-based payments	—	—	—	2,681	2,681
Balance at 31 December 2022	8,209	1,627	4,426	15,930	30,192

*In April 2022 new ordinary shares were allotted to employees of FBD Holdings plc as part of the performance share awards scheme in

2019. A total of 290,078 ordinary shares were issued at a nominal value of €0.60 each. The adjustment to ordinary share capital was

€174,000. The movement on the capital reserves of €105,000 relates to the share premium reserve movement of €2,669,000 net of

share based payments reserve movement of €2,564,000. The adjustment to retained earnings was €279,000.

The capital conversion reserve arose on the redenomination of Company’s ordinary shares, 14% non-cumulative preference

shares and 8% non-cumulative preference shares of IR£0.50 each into ordinary shares, 14% non-cumulative preference

shares and 8% non-cumulative preference shares of 63.4869 cent. Each such share was then renominalised to an ordinary or

a non-cumulative preference share of €0.60, an amount equal to the reduction in the issued share capital being transferred to

the capital conversion reserve fund.

Capital redemption reserve arose on the buyback and cancellation of issued share capital.

Share-based payment reserve arose on the recognition of share-based payments.

170 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

23 PREFERENCE SHARE CAPITAL

		2022	2021
	Number	€000s	€000s
Authorised:
At the beginning and the end of the year
14% Non-cumulative preference shares of €0.60 each	1,340,000	804	804
8% Non-cumulative preference shares of €0.60 each	12,750,000	7,650	7,650
		8,454	8,454
Issued and fully paid:
At the beginning and the end of the year
14% Non-cumulative preference shares of €0.60 each	1,340,000	804	804
8% Non-cumulative preference shares of €0.60 each	3,532,292	2,119	2,119
		2,923	2,923

The rights attaching to each class of share capital are set out in the Company’s Articles of Association. In the event of the

Company being wound up, the holders of the 14% non-cumulative preference shares rank ahead of the holders of the 8%

non-cumulative preference shares, who in turn, rank ahead of the holders of both the ‘A’ ordinary shares of €0.01 each and the

holders of the ordinary shares of €0.60 each.

171

Strategic Report Environmental, Social & Governance Financial Statements Other Information

24 CLAIMS OUTSTANDING

(a) Gross Claims Outstanding 2022

	Prior
	years	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	Total
	€000s	€000s	€000s	€000s	€000s	€000s	€000s	€000s	€000s	€000s	€000s	€000s
Estimate of cumulative claims:
At end of underwriting year
		245,007	307,517	302,581	253,962	247,145	252,435	219,244	371,639	231,182	229,063
One year later
		236,839	342,422	304,108	235,972	223,322	235,902	198,195	382,653	205,077	—
Two years later
		266,183	344,123	326,052	220,376	205,505	212,647	171,925	350,970	—	—
Three years later
		260,580	333,544	318,467	206,578	196,235	205,963	165,867	—	—	—
Four years later
		257,859	326,714	288,395	192,022	192,624	197,649	—	—	—	—
Five years later
		244,922	318,943	275,014	190,739	184,485	—	—	—	—	—
Six years later
		243,163	312,800	272,800	188,484	—	—	—	—	—	—
Seven years later
		237,930	309,499	262,201	—	—	—	—	—	—	—
Eight years later
		235,748	307,778	—	—	—	—	—	—	—	—
Nine years later
		232,776	—	—	—	—	—	—	—	—	—
Ten years later
		—	—	—	—	—	—	—	—	—	—
Estimate of cumulative claims
		232,776	307,778	262,201	188,484	184,485	197,649	165,867	350,970	205,077	229,063
Cumulative payments
		(226,849)	(285,909)	(225,724)	(158,303)	(143,726)	(137,608)	(101,411)	(154,050)	(106,456)	(72,182)
Claims outstanding at
31 December 2022:
	28,652	5,927	21,869	36,477	30,181	40,759	60,041	64,456	196,920	98,621	156,881	740,784
Claims outstanding at
31 December 2021:
	34,749	11,371	27,383	56,974	37,663	56,834	78,619	79,506	252,057	165,600	—	800,756
Movement during year
	(6,097)	(5,444)	(5,514)	(20,497)	(7,482)	(16,075)	(18,578)	(15,050)	(55,137)	(66,979)	156,881	(59,972)

172 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

24 CLAIMS OUTSTANDING (continued)

(b) Net Claims Outstanding 2022

	Prior
	years	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	Total
	€000s	€000s	€000s	€000s	€000s	€000s	€000s	€000s	€000s	€000s	€000s	€000s
Estimate of cumulative claims:
At end of underwriting year
		228,819	256,663	270,279	228,107	212,750	228,501	206,343	265,748	196,617	171,745
One year later
		217,098	292,223	274,000	219,905	199,086	216,210	192,984	226,319	172,847	—
Two years later
		243,373	295,223	284,636	205,320	186,058	203,584	168,282	255,204	—	—
Three years later
		237,733	290,243	275,909	190,732	180,938	199,302	162,122	—	—	—
Four years later
		233,750	283,929	262,801	184,554	177,332	187,195	—	—	—	—
Five years later
		226,331	275,559	256,358	182,570	170,189	—	—	—	—	—
Six years later
		224,386	271,945	253,755	179,666	—	—	—	—	—	—
Seven years later
		221,848	267,236	244,210	—	—	—	—	—	—	—
Eight years later
		219,272	265,036	—	—	—	—	—	—	—	—
Nine years later
		216,014	—	—	—	—	—	—	—	—	—
Ten years later
		—	—	—	—	—	—	—	—	—	—
Estimate of cumulative claims
		216,014	265,036	244,210	179,666	170,189	187,195	162,122	255,204	172,847	171,745
Cumulative payments
		(209,932)	(243,654)	(209,508)	(148,735)	(134,714)	(132,672)	(101,420)	(152,574)	(85,596)	(28,527)
Claims outstanding at
31 December 2022
	27,040	6,082	21,382	34,702	30,931	35,475	54,523	60,702	102,630	87,251	143,218	603,936
Claims outstanding at
31 December 2021
	32,318	11,815	27,417	54,144	39,063	50,463	76,835	75,854	96,285	141,313	—	605,507
Movement during the year
	(5,278)	(5,733)	(6,035)	(19,442)	(8,132)	(14,988)	(22,312)	(15,152)	6,345	(54,062)	143,218	(1,571)

173

Strategic Report Environmental, Social & Governance Financial Statements Other Information

24 CLAIMS OUTSTANDING (continued)

(b) Net Claims Outstanding 2022 (continued)

Full provision, net of reinsurance recoveries, is made at the reporting date for the estimated cost of claims incurred but not

settled, including claims incurred but not yet reported and expenses to be incurred after the reporting date in settling those

claims. The Group takes all reasonable steps to ensure that it has appropriate information regarding notified claims and uses

this information when estimating the cost of those claims.

The Group uses estimation techniques, based on statistical analysis of past experience, to calculate the estimated cost of

claims outstanding at the year end. It is assumed that the development pattern of the current claims will be consistent with

previous experience. Allowance is made, however, for any changes or uncertainties that may cause the cost of unsettled

claims to increase or reduce. These changes or uncertainties may arise from issues such as the effects of inflation, changes in

the mix of business or the legal environment.

At each reporting date, liability adequacy tests are performed to ensure the adequacy of the insurance liabilities. In performing

these tests, current best estimates of future cash flows and claims handling and administration expenses are used. Any

deficiency is immediately recognised in the Consolidated Income Statement.

Details regarding the Business Interruption claims provision and reinsurance assets are included in note 3 (U).

(c) Reconciliation of claims outstanding

	Gross	Net
	€000s	€000s
Balance at 1 January 2021	794,416	671,656
Change in provision for claims	6,340	(66,149)
Balance at 31 December 2021	800,756	605,507
Change in provision for claims	(59,972)	(1,571)
Balance at 31 December 2022	740,784	603,936

(d) Reconciliation of provision for unearned premium

The following changes have occurred in the provision for unearned premium during the year:

	2022	2021
	€000s	€000s
Balance at 1 January	184,648	184,541
Net premium written	342,873	333,676
Net premium earned	(335,854)	(334,247)
Changes in provision for unearned premium – reinsurers’ share	226	678
Provision for unearned premium at 31 December	191,893	184,648

174 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

24 CLAIMS OUTSTANDING (continued)

(e) Reconciliation of reinsurance assets

	Claims
	outstanding
		Unearned
		premium
		reserve
	€000s	€000s
Balance at 1 January 2021	122,760	1,033
Movement during year	72,489	678
Balance at 31 December 2021	195,249	1,711
Movement during year	(58,401)	226
Balance at 31 December 2022	136,848	1,937

25 OTHER PROVISIONS

	Consequential
	Payments
		Premium
		Rebates
			MIICF
			Contribution	MIBI Levy	Total
	€000s	€000s	€000s	€000s	€000s
Balance at 1 January 2021	—	2,027	3,609	6,431	12,067
Provided in the year*	13,153	3,347	3,645	5,345	25,490
Net amounts paid	(11,208)	(4,153)	(3,609)	(5,095)	(24,065)
Balance at 31 December 2021	1,945	1,221	3,645	6,681	13,492
Provided in the year*	10	(466)	3,642	4,751	7,937
Net amounts paid	(689)	(243)	(3,645)	(5,237)	(9,814)
Balance at 31 December 2022	1,266	512	3,642	6,195	11,615

*Premium rebates of -€466,000 (2021: €3,347,000) are included in Gross premium written in the Consolidated Income Statement.

Consequential Payments, MIICF and MIBI amounts of €8,403,000 (2021: €22,143,000) are included in Movement in other provisions

in the Consolidated Income Statement.

Consequential Payments

This is the best estimate of the Consequential Payments provision in respect of the Financial Services and Pensions

Ombudsman decisions during 2021. The Board approved a consequential payment provision in line with the Central Bank of

Ireland Business Interruption Insurance Supervisory Framework following decisions from the Financial Services and Pensions

Ombudsman in respect of Business Interruption customer complaints. In 2022, €689,000 had been settled (2021:

€11,208,000) and there is a remaining provision of €1,266,000 at the end of 2022.

Premium Rebates

FBD committed to rebating Motor policy premiums and certain elements of Commercial policy premiums to reflect the

changing claims environment and enforced restrictions as a result of the Covid-19 pandemic. There was a release of premium

rebates of €466,000 in the year (2021: provision of €3,347,000). There is a remaining provision of €512,000 at the end of

2022.

MIICF Contribution

The Group’s contribution to the Motor Insurers’ Insolvency Compensation Fund “MIICF” for 2022 is based on 2% of its Motor

Gross Written Premium. Payment is expected to be made in the first half of 2023.

175

Strategic Report Environmental, Social & Governance Financial Statements Other Information

25 OTHER PROVISIONS (continued)

MIBI Levy

The Group’s share of the Motor Insurers’ Bureau of Ireland “MIBI” levy for 2022 is based on its estimated market share in the

current year at the Statement of Financial Position date. Payments of the total amount provided is paid in equal instalments

throughout the year.

26 SUBORDINATED DEBT

	2022	2021
	€000s	€000s
Balance at 1 January	49,603	49,544
Amortised during the year	59	59
Balance at 31 December	49,662	49,603

The amount relates to €50,000,000 Callable Dated Deferrable Subordinated Notes due in 2028. The coupon rate on the notes

is 5%. Finance costs recognised in the Consolidated Income Statement total €2,559,000 in 2022 (2021: €2,545,000). Finance

costs are made up of interest costs associated with the subordinated notes totalling €2,500,000 (2021: €2,500,000) which

were incurred and recognised in the year, amortisation in the year of €59,000 (2021: €59,000) and adjusted for accrued

amounts at each year end, €nil in 2022 (€2021: -14,000).

27 RETIREMENT BENEFIT SURPLUS

Defined Contribution Pension

The Group operates a defined contribution retirement benefit plans for qualifying employees who opt to join. The assets of the

plans are held separately from those of the Group in funds under the control of Trustees. The Group recognised an expense of

€3,937,874 (2021: €4,146,739) relating to these pension schemes during the year ended 31 December 2022.

Defined Benefit Pension

The Group also operates a legacy funded defined benefit retirement pension scheme for certain qualifying employees. This

scheme was closed to new members in 2005 and closed to future accrual in 2015. The defined benefit pension scheme is

administered by a separate Trustee Company that is legally separated from the entity. The Trustee Company, who is

responsible for ensuring compliance with the Pensions Act 1990 and other relevant legislation, is composed of an independent

Trustee and representatives from both the employers and current and former employees. The Trustees are required by law and

by its Articles of Association to act in the interest of the fund and of all relevant stakeholders in the scheme, i.e. deferred

members, retirees and employers. They are responsible for the investment policy with regard to the assets of the scheme.

Under the defined benefit pension scheme, qualifying members are entitled to retirement benefits of 1/60th of final salary for

each year of service on attainment of a retirement age of 65. A full actuarial valuation of the defined benefit pension scheme

was carried out as at 1 July 2022. This valuation was carried out using the projected unit credit method. The minimum funding

standard was updated to 31 December 2022 by the schemes’ independent and qualified actuary. This confirms that the

Scheme continues to satisfy the minimum funding standard. The next full actuarial valuation of the scheme is expected to be

completed no later than as at 1 July 2025.

The long-term investment objective of the Trustees and the Group is to limit the risk of the assets failing to meet the liabilities

of the scheme over the long term, and to maximise returns consistent with an acceptable level of risk so as to control the

long-term costs of the scheme. To meet these objectives, the scheme’s assets are primarily invested in bonds with a smaller

level of investment in diversified growth funds and property. These reflect the current long-term asset allocation ranges,

having regard to the structure of liabilities within the scheme. The scheme typically exposes the Group to actuarial risks such

as: investment risk, interest rate risk and longevity risk.

176 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

27 RETIREMENT BENEFIT SURPLUS (continued)

(a) Assumptions used to calculate scheme liabilities

	2022	2021
	%	%
Inflation rate	2.40	1.90
Pension payment increase	0.00	0.00
Discount rate	3.60	1.10

(b) Mortality Assumptions

	2022	2021
	Years	Years
The average life expectancy of current and future retirees used in the scheme at age 65
is as follows:
Male	23.3	21.9
Female	25.4	24.3

When taking into account members who have not yet retired and those who are currently in receipt of pensions, the weighted

average duration of the expected benefit payments from the scheme is circa 15 years.

As required by IAS 19 disclosures; the discount rate is set by reference to yields available at 31 December 2022 on high quality

corporate bonds having regard to the duration of the schemes liabilities. The actual return on the scheme assets for the year

was a loss of €21,824,000 (2021: loss of €4,165,000).

(c) Consolidated Income Statement

	2022	2021
	€000s	€000s
Charged to Consolidated Income Statement:
Service cost: employer’s part of current service cost	371	402
Net interest credit	(121)	(54)
Charge to Consolidated Income Statement	250	348

Charges to the Consolidated Income Statement have been included in other underwriting expenses and financial services and

other costs.

177

Strategic Report Environmental, Social & Governance Financial Statements Other Information

27 RETIREMENT BENEFIT SURPLUS (continued)

(d) Analysis of amount recognised in Group Statement of Comprehensive Income

	2022	2021
	€000s	€000s
Remeasurements in the year due to:
– Changes in financial assumptions	(22,480)	(5,484)
– Changes in demographic assumptions	1,492	—
– Experience adjustments on benefit obligations	386	520
Actual return less interest on scheme assets	22,874	4,684
Total amount recognised in OCI before taxation	2,272	(280)
Deferred taxation debit	284	35
Actuarial gain net of deferred taxation	2,556	(245)

(e) History of experience gains and losses

	2022	2021	2020	2019	2018
	€000s	€000s	€000s	€000s	€000s
Present value of defined benefit obligations	62,671	86,693	94,927	93,958	83,434
Fair value of plan assets	71,170	97,594	105,776	102,681	96,378
Net pension asset	(8,499)	(10,901)	(10,849)	(8,723)	(12,944)
Experience (losses)/gains on scheme liabilities	(386)	(520)	1,031	(1,120)	999
Total amount recognised in OCI before taxation	(2,272)	280	2,326	(4,236)	3,232

The cumulative charge to the Consolidated Statement of Comprehensive Income is €104,472,000 (2021: €102,200,000).

(f) Assets in scheme at market value

	2022	2021
	€000s	€000s
Managed bond funds - fair value at quoted prices	50,816	77,510
Managed unit trust funds - fair value at quoted prices	4,852	5,177
Managed infrastructure fund - fair value at unquoted prices	6,883	5,917
Managed dividend growth fund - fair value at quoted prices	4,319	4,844
Managed opportunities fund - fair value at quoted prices	2,473	2,777
Cash deposits and other - at amortised cost	1,827	1,369
Scheme assets	71,170	97,594
Actuarial value of liabilities	(62,671)	(86,693)
Net pension surplus	8,499	10,901

The assets are part of unitised funds which have a broad geographical and industry type spread with no significant

concentration in any one geographical or industry type.

178 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

27 RETIREMENT BENEFIT SURPLUS (continued)

(g) Movement in net surplus during the year

	2022	2021
	€000s	€000s
Net surplus in scheme at 1 January	10,901	10,849
Current service cost	(371)	(402)
Employer contributions	120	120
Interest on scheme liabilities	(929)	(465)
Interest on scheme assets	1,050	519
Total amount recognised in OCI before taxation	(2,272)	280
Net surplus at 31 December	8,499	10,901

(h) Movement on assets and liabilities

	2022	2021
	€000s	€000s
Assets
Assets in scheme at 1 January	97,594	105,776
Actual return less interest on scheme assets	(22,874)	(4,684)
Employer contributions	120	120
Interest on scheme assets	1,050	519
Benefits paid	(4,720)	(4,137)
Assets in scheme at 31 December	71,170	97,594
Liabilities
Liabilities in scheme at 1 January	86,693	94,927
Experience gains and losses on scheme liabilities	386	520
Changes in financial assumptions	(22,480)	(5,484)
Changes in demographic assumptions	1,492	–
Current service cost	371	402
Interest on scheme liabilities	929	465
Benefits paid	(4,720)	(4,137)
Liabilities in scheme at 31 December	62,671	86,693

The sensitivities regarding the principal assumptions used to measure the scheme liabilities are as follows:

● A 1% increase in the discount rate would reduce the value of the scheme liabilities by €7.0 million. A 1% reduction in the

discount rate would increase the value of the scheme liabilities by €8.7 million.

● A 1% increase in inflation would increase the value of the scheme liabilities by €2.0 million.

● A 1% reduction in inflation would reduce the value of the scheme liabilities by €1.7 million.

● The effect of assuming all members of the scheme will live one year longer would increase the scheme’s liabilities by

€1.8 million.

● The current best estimate of 2023 contributions to be made by the Group to the pension fund is €0.2million

(2022: €0.1million).

179

Strategic Report Environmental, Social & Governance Financial Statements Other Information

28 DEFERRED TAXATION

	Retirement
	benefit
	surplus
		Unrealised
		gains on
		investments
		& loans
			Revaluation
			surplus on
			investment
			properties
				Losses
				carried
				forward
					Other
					timing
					differences	Total
	€000s	€000s	€000s	€000s	€000s	€000s
At 1 January 2021	1,360	2,208	1,387	(827)	(1)	4,127
Debited/(credited) to the
Consolidated Statement of
Comprehensive Income	35	(1,525)	—	—	230	(1,260)
(Credited)/debited to the
Consolidated Income
Statement	(32)	—	—	417	(491)	(106)
At 31 December 2021	1,363	683	1,387	(410)	(262)	2,761
Debited/(credited) to the
Consolidated Statement of
Comprehensive Income	(284)	(11,268)	—	—	2	(11,550)
(Credited)/debited to the
Consolidated Income
Statement	(18)	—	—	81	635	698
At 31 December 2022	1,061	(10,585)	1,387	(329)	375	(8,091)

A deferred taxation asset of €329,000 (2021: €410,000) has been recognised in respect of losses carried forward. The

Directors have considered and are satisfied that the deferred taxation asset will be fully recoverable against future taxable

profits.

29 PAYABLES

(a) GROUP

	2022	2021
	€000s	€000s
Amounts falling due within one year:
Payables and accruals	38,788	30,218
PAYE/PRSI	1,681	1,654
Payables arising out of direct insurance operations	5,858	9,785
Total payables	46,327	41,657

(b) COMPANY

	2022	2021
	€000s	€000s
Amounts falling due within one year:
Payables and accruals	2,579	2,354
Total payables	2,579	2,354

180 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

30 DIVIDENDS

	2022	2021
	€000s	€000s
Paid during year:
2021 dividend of 8.4 cent (2020: 0.0 cent) per share on 14% non-cumulative
preference shares of €0.60 each	113	—
2021 dividend of 4.8 cent (2020: 0.0 cent) per share on 8% non-cumulative
preference shares of €0.60 each	169	—
2021 final dividend of 100.0 cent (2020: 0.0 cent) per share on ordinary shares of
€0.60 each	35,588	—
Total dividends paid	35,870	—

	2022	2021
	€000s	€000s
Proposed:
2022 dividend of 8.4 cent (2021: 8.4 cent) per share on 14% non-cumulative
preference shares of €0.60 each	113	113
2022 dividend of 4.8 cent (2021: 4.8 cent) per share on 8% non-cumulative
preference shares of €0.60 each	169	169
2022 final dividend of 100.0 cent (2021: 100.0 cent) per share on ordinary
shares of €0.60 each	35,588	35,297
Total dividends proposed	35,870	35,579

The proposed dividend excludes any amounts due on outstanding share awards as at 31 December 2022 that are due to vest in

April 2023 and is subject to approval by shareholders at the Annual General Meeting to be held on 11 May 2023. The proposed

dividend has not been included as a liability in the Consolidated Statement of Financial Position as at 31 December 2022.

31 PRINCIPAL SUBSIDIARIES

(a) Subsidiaries	Nature of Operations	% Owned
FBD Insurance plc	General insurance underwriter	100%
FBD Insurance Group Limited	General insurance, life assurance, investment
	services and pensions broker
		100%
FBD Corporate Services Limited	Employee services company	100%

The Registered Office of each of the above subsidiaries is at FBD House, Bluebell, Dublin 12.

All shareholdings are in the form of ordinary shares.

The financial year end for the Group’s principal subsidiaries is 31 December.

The Group has carried out an impairment assessment of the parent company’s investment in subsidiaries which indicated that

no impairment of this asset was required.

FBD Holdings plc is an Irish registered public limited company. The Company’s ordinary shares of €0.60 each are listed on

Euronext Dublin and the UK Listing Authority and are traded on both Euronext Dublin and London Stock Exchange.

All individual subsidiary’s financial statements are prepared in accordance with FRS 102, the financial reporting standard

applicable in the UK and Republic of Ireland with the exception of FBD Insurance plc whose financial statements are prepared

in accordance with International Financial Reporting Standards (“IFRSs”) adopted by the European Union, in preparation for

the adoption of IFRS 17 Insurance Contracts from 1 January 2023 by the Group.

181

Strategic Report Environmental, Social & Governance Financial Statements Other Information

32 CAPITAL COMMITMENTS

There are no capital commitments at the financial year end (2021: €nil).

33 CONTINGENT LIABILITIES AND CONTINGENT ASSETS

There were no contingent liabilities or contingent assets at either 31 December 2022 or 31 December 2021.

34 SHARE-BASED PAYMENTS

FBD Group Performance Share Plan

Conditional awards of ordinary shares are made under the FBD Group Performance Share Plan (“LTIP”). The LTIP was last

approved by the shareholders of FBD Holdings plc at the 2018 AGM. Conditional awards are solely based on non-market

conditions. The extent to which the non-market conditions have been met and any award (or part of an award) has therefore

vested will be determined in due course by the Remuneration Committee of the Board of FBD Holdings plc. Further detail on

the LTIP is available within the Report on Directors’ Remuneration on pages 89 to 106.

Accounting charge for share based payments

Grant date
	Number
	outstanding
	at 1 January
	2022
		Granted
		during
		year	Dividends	Outperformance
					Forfeited
					during
					year
						Vested
						during
						year
							Number
							outstanding
							at 31
							December
							2022
								Performance
								Period
									Earliest
									vesting
									date
25.03.2019 LTIP
	227,479	—	14,080	55,200	(6,681)	(290,078)	—	2019-2021	Mar-22
24.04.2020 LTIP
	315,622	—	—	—	(9,299)	—	306,323	2020-2022	Apr-23
25.03.2021 LTIP
	368,544	—	—	—	(8,242)	—	360,302	2021-2023	Mar-24
06.04.2022 LTIP
	—	252,639	—	—	—	—	252,639	2022-2024	Mar-25
Total
	911,645	252,639	14,080	55,200	(24,222)	(290,078)	919,264

Grant date
	Vesting
	period
	(years)
		Number
		outstanding at
		31 December
		2022
			% of shares
			expected
			to vest
				Share price
				at grant
				date
					Fair value
					of share
					award at
					grant date	2022	2021
			%	€	€	€000s	€000s
23.08.2018 LTIP	3	—	125%	10.80	10.80	—	565
25.03.2019 LTIP	3	—	125%	8.79	8.79	112	961
24.04.2020 LTIP	3	306,323	83%	6.12	6.12	1,037	378
25.03.2021 LTIP	3	360,302	83%	6.89	6.89	827	746
06.04.2022 LTIP	3	252,639	93%	9.90	9.90	705	—
Total		919,264				2,681	2,650

During the financial year 290,078 shares of the March 2019 award vested, with a value of €2,843,000.

The Directors estimate 83% of the April 2020 awards will vest, 83% of the March 2021 awards will vest and 93% of the April

2022 awards will vest.

182 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

35 TRANSACTIONS WITH RELATED PARTIES

Farmer Business Developments plc and FBD Trust Company Ltd have a substantial shareholding in the Group at 31 December

2022. Details of their shareholdings and related party transactions are set out in the Report of the Directors on page 66.

Both companies have subordinated debt investment in the Group. Farmer Business Developments holds a €21.0m investment

and FBD Trust Ltd holds a €12.0m investment. During 2022 interest payments of €1.1m and €0.6m were made to Farmer

Business Developments and FBD Trust respectively. Please refer to note 26 for further details.

At 31 December 2022 the intercompany balances with other subsidiaries was €5,867,000 (2021: €3,739,000).

For the purposes of the disclosure requirements of IAS 24, the term “key management personnel” (i.e. those persons having

authority and responsibility for planning, directing and controlling the activities of the Group) comprises the Board of Directors

and Company Secretary of FBD Holdings plc and the Group’s primary subsidiary, FBD Insurance plc and the members of the

Executive Management Team.

The remuneration of key management personnel (“KMP”) during the year was as follows:

	2022	2021
	€000s	€000s
Short term employee benefits
1
	4,730	4,131
Post-employment benefits	275	262
Share based payments	1,386	1,346
Charge to the Consolidated Income Statement	6,391	5,739

1

Short term benefits include fees to Non-Executive Directors, salaries and other short-term benefits to all key management personnel.

Full disclosure in relation to the 2022 and 2021 compensation entitlements and share awards of the Board of Directors is

provided in the Report on Directors’ Remuneration.

At 31 December 2022 KMP had loans to the value of €19,085 with the Group (December 2021: €18,000). KMP loans with the

Group did not exceed these values at any stage during the year.

In common with all shareholders, Directors received payments/distributions related to their holdings of shares in the

Company during the year, amounting in total to €49,939 (2021: €nil).

36 FINANCIAL RISK MANAGEMENT

(a) Capital Management Risk

The Group is committed to managing its capital to ensure it is adequately capitalised at all times and to maximise returns to

shareholders. The capital of the Group comprises of issued capital, reserves and retained earnings as detailed in notes 21 to

23. The Group has an Investment Committee, a Pricing & Underwriting Committee, a Capital Management Forum, an Audit

Committee, a Reserving Committee and Board and Executive Risk Committees, all of which assist the Board in the

identification and management of exposures and capital.

The Group maintained its capital position and complied with all regulatory solvency margin requirements throughout both the

year under review and the prior year. In 2022, the Group maintained its Solvency Capital Requirement (SCR) coverage above

its target range of 150-170% of SCR.

An experienced Actuarial team is in place with policies and procedures to ensure that Technical Provisions are calculated in an

appropriate manner and represent a best estimate. Technical Provisions are internally peer reviewed every quarter, audited

once a year and subject to external peer review every two years.

An approved Reinsurance Programme is in place to minimise the solvency impact of Catastrophe events to the Group.

183

Strategic Report Environmental, Social & Governance Financial Statements Other Information

36 FINANCIAL RISK MANAGEMENT (continued)

(a) Capital Management Risk (continued)

The annual ORSA provides a comprehensive view and understanding of the risks to which the Group is exposed or could face in

the future and how they translate into capital needs or alternatively require mitigation actions.

The Chief Financial Officer is responsible for consideration of the implications for the capital position as part of the strategic

planning process and key strategic decision-making and for ensuring appropriate action is taken as approved by the Board/

Chief Executive Officer/relevant committee.

On at least an annual basis, a target range for its SCR Ratio, developed as part of the annual planning/budgeting process, is

approved by the Board as part of the Risk Appetite Statements in the Risk Appetite Framework.

The Group also devotes considerable resources to managing its relationships with the providers of capital within the capital

markets, for example, existing and potential shareholders, financial institutions, stockbrokers and corporate finance houses.

(b) Liquidity risk

The Group is exposed to daily calls on its cash resources, mainly for claims payments. The Group manages liquidity risk by

continuously monitoring forecast and actual cash flows and ensuring that the maturity profile of its financial assets is well

matched to the maturity profile of its liabilities and maintaining a minimum cash amount available on short term access at all

times.

The following tables provide an analysis of assets and liabilities into their relevant maturity groups based on the remaining

period to contractual maturity. The contracted value below is the undiscounted cash flow.

	Carrying
	value
	total
		Contracted
		Value
			Cashflow
			within
			1 year
				Cashflow
				1-5 years
					Cashflow
					after
					5 years
Assets – 2022	€000s	€000s	€000s	€000s	€000s
Available for sale investments	834,994	961,566	132,461	634,652	194,453
Investments held for trading	132,965	132,965	105,419	—	27,546
Deposits	10,000	10,020	10	10,010	—
Reinsurance assets	138,785	138,785	84,390	48,087	6,308
Loans and receivables	58,887	58,886	58,886	—	—
Cash and cash equivalents	162,398	162,398	162,398	—	—
Total	1,338,029	1,464,620	543,564	692,749	228,307
Liabilities – 2022
Insurance contract liabilities	932,677	932,677	405,808	442,253	84,616
Payables	46,327	46,327	46,327	—	—
Other provisions	11,615	11,615	11,615	—	—
Subordinated bond*	49,662	65,000	2,500	10,000	52,500
Total	1,040,281	1,055,619	466,250	452,253	137,116

*See note 26

184 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

36 FINANCIAL RISK MANAGEMENT (continued)

(b) Liquidity risk (continued)

	Carrying
	value
	total
		Contracted
		Value
			Cashflow
			within
			1 year
				Cashflow
				1-5 years
					Cashflow
					after
					5 years
Assets – 2021	€000s	€000s	€000s	€000s	€000s
Available for sale investments	893,715	904,983	186,080	490,641	228,262
Investments held for trading	137,547	137,547	123,661	—	13,886
Reinsurance assets	196,960	196,960	124,363	66,604	5,993
Loans and receivables	58,624	58,624	58,624	—	—
Cash and cash equivalents	164,479	164,479	164,479	—	—
Total	1,451,325	1,462,593	657,207	557,245	248,141
Liabilities – 2021
Insurance contract liabilities	985,404	985,404	422,486	473,404	89,514
Payables	41,657	41,657	41,657	—	—
Other provisions	13,492	13,492	13,492	—	—
Subordinated bond*	49,603	67,500	2,500	10,000	55,000
Total	1,090,156	1,108,053	480,135	483,404	144,514

*See note 26

(c) Market risk

The Group has invested in term deposits, listed debt securities, investment property and externally managed collective

investment schemes which provide exposure to a broad range of asset classes. These investments are subject to market risk,

whereby the value of the investments may fluctuate as a result of changes in market prices, changes in market interest rates or

changes in the foreign exchange rates of the currency in which the investments are denominated. The extent of the exposure

to market risk is managed by the formulation of, and adherence to, an Investment Policy incorporating clearly defined

investment limits and rules, as approved annually by the Board of Directors and employment of appropriately qualified and

experienced personnel and external investment management specialists to manage the Group’s investment portfolio. The

overriding philosophy of the Investment Policy is to protect and safeguard the Group’s assets and to ensure its capacity to

underwrite is not put at risk.

Interest rate and spread risk

Interest rate and spread risk arises primarily from the Group’s investments in listed debt securities and deposits and their

movement relative to the Group’s liabilities. The Group reviews its exposure to interest rate and spread risk on a quarterly

basis by conducting an asset liability matching analysis. As part of this analysis it monitors the movement in assets minus

liabilities for defined interest rate stresses and ensures that they remain within set limits as laid out in its Asset Liability

Management Policy. Similar monitoring is done for spread risk.

185

Strategic Report Environmental, Social & Governance Financial Statements Other Information

36 FINANCIAL RISK MANAGEMENT (continued)

(c) Market risk (continued)

At 31 December 2022, the Group held the following deposits and listed debt securities:

	2022		2021
	Market
	Value
		Weighted
		average
		interest rate
			Market
			Value
				Weighted
				average
				interest rate
	€000s	%	€000s	%
Time to maturity
In one year or less	115,842	0.96	167,088	1.19
In more than one year, but not more than two years	82,389	1.23	140,867	0.95
In more than two years, but not more than three years	131,223	1.11	79,179	1.28
In more than three years, but not more than four years	203,391	1.09	103,619	1.04
In more than four years, but not more than five years	145,160	1.18	165,158	1.02
More than five years	165,860	1.44	236,584	0.82
Total	843,865		892,495

Equity price risk

The Group is subject to equity price risk due to its holdings in collective investment schemes which invest in listed equities.

The amounts exposed to equity price risk at the reporting date are:

	2022	2021
	€000s	€000s
Equity exposure	41,612	50,019

Foreign currency risk

The Group does not directly hold investment assets in foreign currencies; however, it does have exposure to non-euro

exchange rate fluctuations through its collective investment scheme holdings. The underlying exposure to foreign currency is

as follows.

Assets	2022	2021
	€000s	€000s
Emerging Markets*	14,367	17,208
USD	27,546	13,886
Other OECD	—	—

*The Emerging Markets currency exposure is achieved through the collective investment schemes and is highly diversified. The largest

exposure to any one currency as at 31 December 2022 was €1.9m in Hong Kong Dollars.

The Group did not directly hold any derivative instruments at 31 December 2022 or 31 December 2021.

186 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

36 FINANCIAL RISK MANAGEMENT (continued)

(d) Credit risk

Credit risk is the risk of loss in the value of financial assets due to counterparties failing to meet all or part of their obligations.

Financial assets are graded according to current credit ratings issued by the main credit rating agencies. Investment grade

financial assets are classified within the range of AAA to BBB ratings. Financial assets which fall outside this range are

classified as speculative grade. All of the Group’s bank deposits are with financial institutions which have a minimum A- rating.

The Group holds the following listed government bonds (average credit rating: A) and listed corporate bonds (average credit

rating: A-), with the following credit profile:

	2022		2021
	Market
	Value
		Weighted
		Average
		Duration
			Market
			value
				Weighted
				Average
				Duration
	€000s		€000s
Government bonds
AAA	20,706	0.6	21,205	1.6
AA+	32,902	2.5	8,056	1.2
AA	87,099	4.2	92,484	4.9
A+	—	0.0	40,072	0.2
BBB+	60,909	4.0	70,307	5.1
BBB	41,797	5.3	48,509	4.9
BBB-	27,599	3.7	22,376	4.8
Total	271,012	3.8	303,009	4.0
Corporate Bonds
AAA	6,414	4.4	—	0.0
AA+	4,970	4.2	2,031	6.2
AA	9,592	1.4	7,373	2.0
AA-	44,319	3.5	32,421	2.9
A+	69,279	3.6	72,825	3.3
A	59,107	2.7	59,667	2.7
A-	134,086	3.2	134,036	3.1
BBB+	104,602	2.8	122,694	3.0
BBB	98,230	2.6	118,984	3.0
BBB-	32,252	1.9	39,455	2.7
Total	562,851	3.0	589,486	3.0

All of the Group’s current reinsurers either have a credit rating of A- or better. The Group has assessed these credit ratings as

being satisfactory in diminishing the Group’s exposure to the credit risk of its reinsurance receivables. At 31 December 2022,

the maximum balance owed to the Group by an individual reinsurer, including reinsurers’ share of insurance contract liabilities

not yet called, was €21,549,000 (2021: €30,148,000).

The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the

Group’s most significant exposure to credit risk. There are no financial assets past due but not impaired.

Receivables arising out of direct insurance operations are considered by the Directors to have low credit risk and therefore no

provision for bad or doubtful debts has been made. All other receivables are due within one year and none are past due.

187

Strategic Report Environmental, Social & Governance Financial Statements Other Information

36 FINANCIAL RISK MANAGEMENT (continued)

(e) Concentration risk

Concentration risk is the risk of loss due to overdependence on a singular investment or category of business. The main

concentration risks to which the Group is exposed, and how they are mitigated, are as follows:

● Exposure to a single country, counterparty or security as part of its sovereign or corporate bond portfolio. The Group

mitigates this risk by placing limits on these exposures with its investment managers which are continuously monitored.

● Exposure to a single counterparty as part of its cash and deposit holdings. The Group mitigates this risk by placing limits on

its total exposures to banking counterparties as set out in the Group’s Investment Policy, which is approved annually by the

Board of Directors.

● While all of the Group’s underwriting business is conducted in Ireland, with a significant focus on the agri-sector, it is

spread over a wide geographical area with no concentration in any one county or region. The resultant concentration risk

from adverse weather events, i.e. floods, storms or freezes in Ireland, are mitigated by a flood mapping solution and an

appropriate reinsurance strategy.

Receivables arising out of direct insurance operations and other receivables have no significant concentration of risk.

(f) Sensitivity analysis

The table below identifies the Group’s key sensitivity factors. For each sensitivity test, the impact of a change in a single factor

is shown, with other assumptions left unchanged.

Sensitivity factor	Description of sensitivity factor applied
Interest rate and investment return	The impact of a change in the market interest rate by an increase of 1% or a
	decrease of 0.25%. For example if a current interest rate is 2%, the impact of an
	immediate change to 3% and 1.75%.
Exchange rates movement	The impact of a change in foreign exchange rates by ± 10%.
Equity market values	The impact of a change in equity market values by ±10%.
Available for sale investments	The impact of a change in bond market valuations by ±5%.
Level 3 - investment property	The impact of a change in market rents ±10%.
Level 3 - investment property	The impact of a change in capitalisation yield ± 0.5%
Level 3 - property held for own use	The impact of a change in market rents ±10%.
Level 3 - property held for own use	The impact of a change in capitalisation yield ± 0.5%
Level 3 - other investments	The impact of a change in valuations by ±10%.
Net loss ratios	The impact of an increase in underwriting net loss ratios by 5%.

188 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

36 FINANCIAL RISK MANAGEMENT (continued)

(f) Sensitivity analysis (continued)

The pre-taxation impacts on profit and shareholders’ equity at 31 December 2022 and at 31 December 2021 of each of the

sensitivity factors outlined above are as follows:

		2022	2021
		€000s	€000s
Interest rates	1%	(33,582)	(37,488)
Interest rates	(0.25%)	9,044	11,335
FX rates	10%	4,191	3,109
FX rates	(10%)	(4,191)	(3,109)
Equity	10%	4,161	5,002
Equity	(10%)	(4,161)	(5,002)
Available for sale investments	5%	41,693	44,625
Available for sale investments	(5%)	(41,693)	(44,625)
Level 3 - investment property - Market Rent (note 17(b))	10%	1,700	1,800
Level 3 - investment property - Market Rent (note 17(b))	(10%)	(1,800)	(1,900)
Level 3 - investment property - Capitalisation yield (note 17(b))	0.5%	(1,300)	(1,400)
Level 3 - investment property - Capitalisation yield (note 17(b))	(0.5%)	1,400	1,600
Level 3 - property held for own use - Market Rent (note 17(b))	10%	796	1,202
Level 3 - property held for own use - Market Rent (note 17(b))	(10%)	(943)	(1,440)
Level 3 - property held for own use - Capitalisation yield (note 17(b))	0.5%	(930)	(1,031)
Level 3 - property held for own use - Capitalisation yield (note 17(b))	(0.5%)	1,063	1,174
Level 3 - other investments (note 17(b))	10%	2,868	1,511
Level 3 - other investments (note 17(b))	(10%)	(2,868)	(1,511)
Net loss ratio	(5%)	16,793	16,712

The sensitivity of changes in the assumptions used to calculate general insurance liabilities and reinsurance assets are set out

in the table below:

31 December 2022
	Change in
	assumptions
		Increase
		in gross
		technical
		reserves
			Increase/
			(decrease)
			in net
			technical
			reserves
				Impact
				on profit
				before
				taxation
					Reduction/
					(increase) in
					shareholders’
					equity
		€000s	€000s	€000s	€000s
Injury claims IBNR and IBNER	+10%	8,379	6,704	(6,704)	5,866
Other claims IBNR and IBNER	+10%	2,725	(5,312)	5,312	(4,648)
Reinsurance assets - claims outstanding	(10)%	—	13,685	(13,685)	11,974
31 December 2021
Injury claims IBNR and IBNER	+10%	9,091	7,077	(7,077)	6,192
Other claims IBNR and IBNER	+10%	3,248	(9,850)	9,850	(8,619)
Reinsurance assets - claims outstanding	(10)%	—	19,525	(19,525)	17,084

189

Strategic Report Environmental, Social & Governance Financial Statements Other Information

36 FINANCIAL RISK MANAGEMENT (continued)

(f) Sensitivity analysis (continued)

Limitations of sensitivity analysis

The above tables demonstrate the effect of a change in a key assumption while other assumptions remain unchanged. In

reality, there is a correlation between the assumptions and other factors. It should also be noted that these sensitivities are

non-linear, and larger or smaller impacts should not be interpolated or extrapolated from these results. The sensitivity

analysis does not take into consideration that the Group’s assets and liabilities are actively managed. Additionally, the

financial position of the Group may vary at the time that any actual market movement occurs.

Other limitations in the above sensitivity analysis include the use of hypothetical market movements to demonstrate potential

risk. They represent the Group’s view of possible near-term market changes that cannot be predicted with any certainty and

assume that all interest rates move in an identical fashion.

37 IFRS 9 FINANCIAL INSTRUMENTS DEFERRAL DISCLOSURES

As set out in accounting policy K in note 3, the Group has chosen to defer application of IFRS 9 due to its activities being

predominantly connected with insurance.

To facilitate comparison with entities applying IFRS 9, the table below presents an analysis of the fair value of the classes of

financial assets as at the end of the reporting period, as well as the change in fair value during the reporting period. The

financial asset classes are divided into two categories:

i. Solely Payments of Principal and Interest (SPPI): assets of which cash flows represent solely payments of principal and

interest on an outstanding principal amount, but are not meeting the definition of held for trading in IFRS 9, or are not

managed on a fair value basis; and,

ii. Other: all financial assets other than those specified in SPPI:

1. with contractual terms that do not give rise on specified dates to cash flows that are solely payments of principal and

interest on the principal amount outstanding;

2. that meet the definition of held for trading in IFRS 9; or

3. that are managed and whose performance are evaluated on a fair value basis.

Fair Values as of 31 December 2022

Financial assets
	Financial
	assets that
	passed SPPI	Other *	Total Fair Value
	€000s	€000s	€000s
Loans	580	—	580
Other receivables	58,307	—	58,307
Deposits with banks	10,000	—	10,000
Cash and cash equivalents	105,793	56,605	162,398
Available for sale investments	—	834,994	834,994
Investments held for trading	—	132,965	132,965
Total Financial Assets	174,680	1,024,564	1,199,244

* Other includes Financial assets that have passed SPPI and are evaluated on a FV basis

190 FBD Holdings PLC Annual Report 2022

Financial Statements

Notes to the Financial Statements (continued)

37 IFRS 9 FINANCIAL INSTRUMENTS DEFERRAL DISCLOSURES (continued)

Fair Values as of 31 December 2021

Financial assets
	Financial
	assets that
	passed SPPI	Other *
			Total
			Fair Value
	€000s	€000s	€000s
Loans	577	—	577
Other receivables	58,047	—	58,047
Deposits with banks	—	—	—
Cash and cash equivalents	164,479	—	164,479
Available for sale investments	—	893,715	893,715
Investments held for trading	—	137,547	137,547
Total Financial Assets	223,103	1,031,262	1,254,365

* Other includes Financial assets that have passed SPPI and are evaluated on a FV basis

For receivables, loans and cash and cash equivalents carried at amortised cost, the carrying value is considered to be

approximately equal to fair value.

The below table presents fair value movements on financial assets measured on a fair value basis and investments held for

trading.

There was no material change in fair value during the year in respect of financial assets that passed the SPPI test.

	Financial
	assets
	measured on a
	fair value basis
		Financial
		instruments
		held for
		trading
	€000s	€000s
Balance at 1 January 2022	893,715	137,547
Additions	238,126	25,312
Disposals	(203,750)	(13,573)
Realised loss	(129)	(619)
Unrealised loss	(92,968)	(15,702)
Balance at 31 December 2022	834,994	132,965

For financial assets whose cash flows represent SPPI as defined above, the table below provides information on credit risk

exposure. The Group mitigates it’s concentration risk to a single counterparty as part of its cash and deposit holdings by

placing limits on its total exposures to banking counterparties, the Group’s largest exposure to any counterparty for cash and

deposit holdings is €33,000,000 (2021:€36,200,000). The financial assets are categorised by asset class with a carrying

amount measured in accordance with IAS 39 requirements.

191

Strategic Report Environmental, Social & Governance Financial Statements Other Information

37 IFRS 9 FINANCIAL INSTRUMENTS DEFERRAL DISCLOSURES (continued)

As at 31 December 2022
	Loans
		Other
		receivables
			Deposits
			with banks
				Cash and cash
				equivalents	Total
Rating	€000s	€000s	€000s	€000s	€000s
AAA	—	—	—	—	—
AA	—	—	—	7,563	7,563
AA-	—	—	—	—	—
A+	—	—	—	76,054	76,054
A-	—	—	10,000	—	10,000
A	—	—	—	—	—
BBB	—	—	—	22,176	22,176
Unrated	580	58,307	—	—	58,887
Total	580	58,307	10,000	105,793	174,680

As at 31 December 2021
	Loans
		Other
		receivables
			Deposits
			with banks
				Cash and cash
				equivalents	Total
Rating	€000s	€000s	€000s	€000s	€000s
AAA	—	—	—	—	—
AA	—	—	—	7,869	7,869
AA-	—	—	—	22,884	22,884
A+	—	—	—	15,451	15,451
A-	—	—	—	41,865	41,865
A	—	—	—	66,178	66,178
BBB	—	—	—	10,232	10,232
Unrated	577	58,047	—	—	58,624
Total	577	58,047	—	164,479	223,103

38 SUBSEQUENT EVENTS

There have been no subsequent events that would have a material impact on the financial statements.