2012-IPB-Stakeholder-Report.Pdf

Management Analysis, financial statements & Other Information

REPORT of the board & executive

Contents

Foreword 2

A Commitment to Quality 4

360 Degree View 6

Our Members 8

Our People 12

Our Clients 15

Our Partners 18

Our Government 19

Our Peers 21

Our Society 22

PBD Grading Strategy 26

CSE – Working to Make a Difference 28

IPB CSE Framework Themes 30

Conclusion 40 IPB 360 foreword

It gives me great pleasure to present to you our second combined Stakeholder and Annual Report, IPB 360. Last year, we produced the combined Report to firmly communicate our commitment to all of you who hold a stake in the wellbeing and success of IPB Insurance. The sheer scale and diversity of our Stakeholder audience is the reason we have titled this Report IPB 360, representing our Members at the centre of our Mutual through to our Members’ ultimate patrons, the Irish public.

In my Report to you last year I expressed to produce our Annual and Stakeholder my conviction that those of us in leadership Reports as one. We see our business as one positions must use our influence in element of our overall corporate mission and progressing the corporate movement for that is why we have taken a full circle approach, social engagement. or in other words, a 360 degree view. I am delighted to report that there has been CSE Framework – The Gathering a significant increase in activity regarding During the year we began detailing our engagement with all our Stakeholders plans for our Diaspora campaign, the first of throughout the year and we are making solid our five themed categories within the CSE progress in our Corporate Social Engagement Framework. Following extensive discussion (“CSE”) initiatives through our CSE Framework. and collaboration with The Gathering Ireland, it was agreed that a joint approach would be Social Engagement – A pillar of our adopted. IPB committed €1m towards funding business model Gathering events nationwide. It is my firm belief that truly successful organisations are by their nature embedded In response, the Government agreed to in their communities and place strategic match the IPB commitment creating a €2m importance on the principles of CSE. For joint partnership fund, which was officially socially responsible organisations, these launched by An Taoiseach Enda Kenny, T.D. principles must be an integral element of the The public-private partnership approach has overall business plan and not merely a cheque supported over 1,300 communities across writing exercise. Ireland further strengthening The Gathering’s momentum. I am delighted with the positive At IPB, we have an absolute commitment to response to the initiative and with the seeing that CSE features as a strategic element feedback from community leaders, of which within our on-going operational and business nearly 7,500 attended Gathering planning planning. I believe that to ensure we make meetings nationwide. The positivity around effective, long-term social impacts we must the country is particularly satisfying given the build our social objectives into our overall current economic climate. business plan aligned with our operational and commercial goals. Highlights of the year Notwithstanding the scale and impact Underlining our commitment, during the year nationally of The IPB Gathering Fund, we have we established CSE as a departmental function achieved significant progress in rolling out within the Company and the establishment of our CSE activity. A noteworthy development a Steering Committee to oversee the overall during the year included our decision to implementation and governance of the become title partners with Pride of Place, Programme. supporting and recognising community spirit As you will note, this Report has been and volunteerism. We see the IPB Pride of Place compiled along with our annual financial Awards as the perfect platform to encourage results and Report of the Board and Executive greater community cohesion and I would to make it clear that we identify that our like to recognise the work of Co-operation business goals and obligations are built not Ireland as event coordinators for their huge only around our commercial Stakeholders, but contribution to communities across the island for all. That is why we have made the decision over the past decade.

2 IPB Insurance Stakeholder & Annual Report 2012 STAKEHOLDER REPORT

Looking ahead, we are excited about the I hope you enjoy reading this Report and ask further roll-out of our CSE Programme for you to remember that it takes just one person 2013 and beyond. This year will see increased to make a difference and that person is you. activity in the areas of Education, Sport, Youth & Community and Business Innovation as we seek to develop new and existing relationships with leading organisations in these sectors. On behalf of our Local Authority Members we look forward to making a difference to Ronan Foley communities nationwide on their behalf. Chief Executive

IPB Insurance Stakeholder & Annual Report 2012 3 IPB 360 A Commitment to Quality

At IPB, we are committed to achieving the highest standards in all of our business practices. One way in which we measure our performance is by demonstrating compliance with ISO 9001, the International Standard for Quality. We initially registered our quality management system to ISO 9001 in 2002 and have successfully retained our registration ever since. The National Standards Authority of Ireland (“NSAI”) undertook the annual surveillance audit of the Quality Management System (“QMS’’) on 17 October 2012.

ISO 9001 is the foremost quality management standard in the world and it is used by hundreds of thousands of organisations around the globe. It sets out the essential requirements of a practical and effective QMS, which is ultimately a system for minimising risks and maximizing opportunities. ISO 9001 sets out eight key principles of an effective QMS including aspects that are part of our overall corporate philosophy, including customer focus, leadership, staff engagement and fact-based pragmatic decision making. The focus of the standard is to foster an organisational culture of continual improvement, identifying challenges and opportunities, both real and potential, and responding appropriately. At IPB, we feel one of the primary benefits is the confidence that we are always working to the highest international standards, which is nothing less than you deserve.

European Risk Management Awards IPB has a clear mission to build a world-class sustainable business, and we were delighted that our progress was recognised in 2012 at the European Risk Management Awards. The Awards highlight and reward organisations that demonstrate exceptional efforts and measurable results in improving risk management strategies. IPB’s Risk Manager, Rosemary Ryan was presented with the award in recognition of the Company’s work on risk management in the public sector, the only Irish company to be shortlisted as finalists.

IPB were recognised at the European Risk Awards 2012.

4 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT > Strategy > Engagement

Insight Health & Safety Technical Working Group

The Safety Management System is the result of two years of hard work carried out by the Health and Safety Technical Working Group (“H&STWG”) and Local Authority managers and employees.

The H&STWG was established by the Local »» Guidelines on the management of serious Government Management Agency (“LGMA’’) incidents in conjunction with the City and County »» An audit tool focused on demonstrating Managers’ Association in 2010 and is chaired compliance with legislation and codes of by IPB’s Risk Manager, Rosemary Ryan. The practice motto of the H&STWG is ‘Managing Safety – Delivering Excellence’ and this award is proof »» A five-year plan to support the that they are living up to that motto. implementation of the outputs within all Local Authorities. The Safety Management System was designed to support Local Authorities in the The delivery of awareness sessions to support management of safety, health and welfare the continued embedding of the Safety risk in order to support the demonstration of Management System began in late May compliance with required legislation, codes of 2012 and so far ten regional seminars have practice, guidance and standards. been delivered to in excess of 1,300 health and safety officers with their line managers, The H&STWG also developed a range of directors, engineers and senior officers. assurance tools and supporting systems to ensure good governance in the management Being chosen for the Joint Local Authority of health and safety. Initiative Award is a huge honour for our Members - the Local Authorities, the Some of these supports include: H&STWG and the LGMA - and recognises »» A toolkit to support safety inspections the significance of safety management and the importance of having a standardised »» 64 guidance policies and procedures for safety management system across the Local management of key safety, health Authority environment. & welfare risks

IPB Insurance Stakeholder & Annual Report 2012 5 IPB 360 I PB 360 360 degree view

The 360 approach is built on our mutuality and the ethos of co-operative support. As a Mutual, our core operational focus is to indemnify our Member organisations and to protect their assets. However, the mutual ethos is about much more than what we do; it’s about an ethos of inclusion, one that reaches out not only to our immediate Stakeholders but also to wider society as a whole. We accept that we have a responsibility to all people, not just those who play an active role in our business. Ultimately it’s all about people, and we recognise and respect the global citizenship that every human being holds.

At IPB we share a mutual vision that puts our Members at the centre of our organisation and society at the heart of our goals, recognising the role of all our Stakeholders in between.

The 360 Stakeholder approach is about inclusion and relationship building. By stating that we recognise all who share our society as Stakeholders, we are setting out our vision for a new way of doing business.

W hy Publish A Stakeholder Report? A Mutual Company comprising of Members who are charged with serving communities across Ireland, we act in the interests of our Members and their communities, the Irish public. Our mutuality and our Members’ ethos are at the centre of our business, and by insuring our Member organisations and their assets we are also protecting their communities.

This is our second Report and our aim is to reach out to all our Stakeholders, both internally and externally, in meeting our responsibilities to all. It is our ambition for all Stakeholders to feel a part of what we represent. We have published this Report so that there is a greater understanding and a sense of belonging among our varied Stakeholder audiences.

This Report is not about what we do; it’s about who we are.

6 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT > Strategy > Engagement

Our Stakeholders Our Stakeholders are our Members, staff, clients, strategic partners, government and regulatory bodies, our industry and society and social organisations. Protecting and fostering the development of all our Stakeholders is our responsibility. This Report marks a new phase in the proud history of IPB and our 87 years of protecting Local Authorities and public bodies. We have produced this Report because we know and appreciate that we are answerable to all our Stakeholders. Transparency and accountability can only be achieved through ethical management and proper governance procedures. This means individual and collective responsibility in our actions.

Our ambition for this Report is to communicate clearly and publicly what it is that drives us and our unwavering commitment to building a world-class business built on shared values and inclusivity. Furthermore, the commitments we make within this Report will act as our reference guide and ask the question, are we acting in the best interests of all our Stakeholders? Finally, as a financial services company we are obliged to meet high standards in reporting and transparency; this Report reflects our ambition to go further, to reach out and to open our business to the public, our ultimate Stakeholder.

SOCIETY People PLACE BUSINESS Technology Ethics OUR PARTNERS OUR PEOPLE Brokers Board of Directors Innovation Reinsurers Executive and Sta Advisors Social Suppliers Loyalty Dividend OUR MEMBERS OUR OUR CLIENTS GOVERNMENT Government Institutions DIFFERENCE Central Bank of Ireland

OUR PEERS

PBD strategy grading system

IPB 360 Stakeholder Approach PBD elements

IPB Insurance Stakeholder & Annual Report 2012 7 PLACE BUSINESS DIFFERENCE Culture Operations and Management Results (People + Values) (Innovative + Technological + Ethical) (Commercial and Social Dividend Model)

OUR SHARED SUCCESS

VISION

IPB 360

ENGAGEMENT STRATEGY

PBD CSE Target Model IPB 360 OUR MEMBERS

Putting Members at the Centre of our Business Our mutuality and our Members’ ethos are at the centre of our business, and by insuring our Member organisations and their assets we are also protecting their communities.

Membership Initiatives In 2012, IPB undertook many varied initiatives to reflect our approach in achieving our mission objective. These are just some of the initiatives established over the past 12 months: »» Commercial Dividend paid to Members in 2012

»» CSE Framework built around our Members and their communities

»» A quarterly Members newsletter, MyMutual

»» Supporting and fostering closer links between Local Authorities north and south of the border

»» Providing feedback mechanisms through research and Stakeholder forums

»» Internal structures, including the Members Consultative Forum (“MCF’’), to assist in communications and marketing to Members

»» Increased support for Stakeholder events, e.g. The Gathering Ireland 2013 and IPB Pride of Place Awards (see page 34)

»» Enhancing our services and improving our communication channels to include Value For Money reports and Smartphone Risk App for Local Authority staff, amongst other initiatives.

We recognise that our Members are the very essence of IPB as a Mutual Insurer. At IPB we are putting our Members at the very core of our activities, and by doing so we are also protecting the interests of all those who work and live in our Members’ communities.

Members’ Ethos Over the coming years, IPB will seek to enhance our engagement with Members, placing them firmly at the centre of the organisation. This continued focus will see us grow our relationship and change our corporate philosophy to reflect the societal role our Members play with their communities across the country.

Our corporate philosophy is reflected in this Stakeholder Report, comprising of three distinct elements: Stakeholder Vision, Sustainable Business Strategy and Social Engagement. This structure embeds IPB’s Mutual ethos and our new CSE model into the overall business strategy. The business strategy structure also, crucially, has been designed around the Membership profile and will become even more evident in the way the business evolves over the next three years and beyond. We are reaching out to Members with new initiatives to build closer links and to increase involvement in the way their Mutual operates.

IPB is committed to delivering new services and features of Membership, including increased accessibility through an enhanced online presence Member’s portal. This will allow Member staff greater access to product information, policy details and application progress. The progression of technology-based tools includes current project development for the Risk Management Health & Safety Application for smartphones. The Members newsletter introduced at the start of the year is now into its fifth issue, informing Members on a host of issues relevant to their needs.

8 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT > Strategy > Engagement

IPB continues to commit its support for existing Member business events as well as devising new events and seminars geared towards assisting them in achieving their organisational goals. Earlier this year, we announced a major new Member initiative, the Member Satisfaction Index (“MSI”), which will generate valuable feedback from our Members and benchmark our performance annually in terms of Members’ overall satisfaction with our products, operational and value added services and overall relationship management. This will be in addition to continued frequent on-site appointments as well as planned annual reviews.

Membership Feedback & Engagement Members Consultative Forum In 2012, representatives were elected to the newly created MCF, our new internal forum developed to more closely involve our Members in a variety of aspects relating to IPB. The newly constituted MCF aims to improve input from Members through communication and marketing to Local Authorities as well as direction on product and service development. See Report page 54.

IPB Members Consultative Forum Putting Our Members At The Centre of Our Mutuality

Members Mutual IPB Board Consultative Members & Executive Forum

Councillor representatives elected by fellow Nominee s MCF Forum Report to Board Executives appointed by relevant representative body

Members Satisfaction Index In last year’s Report, we outlined that we would create a platform to measure and benchmark Members satisfaction and seek to understand their needs. We have now received the feedback from Members and are collating and reviewing feedback for response.

Supporting Members and Their Communities IPB is increasing its engagement through sponsorship and active engagement with Stakeholders’ events, including the Local Authority Members Association (“LAMA”) Awards and the all-island IPB Pride of Place Awards. These events are examples of how our Members are working with their communities to improve the social, environmental and economic issues that they face. IPB through its Social Dividend is funding a CSE Framework, which will deliver community support in our Member Authority areas. Over the next three years, IPB will be working with its Members to make a difference to people who work to make their communities better.

IPB Insurance Stakeholder & Annual Report 2012 9 IPB 360

IMPACT Committed to Excellence Recognition for services to Members

Pictured at the Local Government Awards. Left to right Conn Cleary, Head of Sales & Relationship Management, IPB; Eddie Ronayne, Health and Safety Officer, Cork Co Co; Dan O’ Donovan, Health and Safety Officer, Waterford City Co; Amanda Bolger, Health and Safety Officer, Waterford City Co; Joe Crockett, Manager, Kilkenny Co Co; Laurence Nash, Health and Safety Officer, Donegal Co Co; Rosemary Ryan, Risk Manager, IPB; Tom Keane, Head of Communications, IPB.

Local Government Awards Excellence in Business Award Managing Safety Delivering Excellence In November, IPB was honoured with an At the ninth annual Chambers Ireland ‘Excellence in Business Award’ by Public Sector Excellence in Local Government Awards, Magazine. IPB was named outright winner in held in The Burlington Hotel, Dublin on 8 the Insurance Company for the Public Sector November 2012, the LGMA in association with category. The Awards, which have been running IPB Risk Management was jointly awarded the for four years, are dedicated to recognising Local Authority Initiative Award for the Local companies that deliver outstanding service Authority Safety Management System. to the public sector. Tommy Quinn, Managing Editor of Public Sector Magazine, said, Presenting the Awards, Jan O’Sullivan, T.D., Minister for State at the Department of “ IPB was recognised for their exceptional levels the Environment, Community and Local of service innovation and customer service Government, commented, standards in responding to Members’ needs.”

“ It is a source of pride that my Department continues to be associated with this event – the award ceremony offers the opportunity to pay tribute to those in Local Authorities who, through their dedication, creativity and ingenuity, continue to meet the dynamic and diverse needs of our changing communities.”

10 IPB Insurance Stakeholder & Annual Report 2012 STAKEHOLDER REPORT Vision > Strategy > Engagement 11 11

MANAGEMENT ANALYSIS, FINANCIAL STATEMENTS & OTHER INFORMATION

REPORT OF THE BOARD & EXECUTIVE

STAKEHOLDER REPORT 36O IPB stakeholder & annual report 2011 & annual report stakeholder IPB Insurance Wishing our Members and their communities success in their 2013 Gathering events throughout www.thegatheringireland.com www.ipb.ie Introduced new policy wordings across the across new policyIntroduced wordings of policyfull range covers. Introduction of enhanced existing covers Introduction covers existing of enhanced of new covers and the development Impact including EIL (Environmental Accident) (Personal Liability), PA IPB Insurance Stakeholder & Annual Report 2012 & Annual Report Stakeholder IPB Insurance

» » insurance insurance Risk Advisory – H&S TWG Toolkit completed Toolkit TWGRisk Advisory – H&S IFRS GAAP to from Transfer – Finance Members for Rate reductions introduced Dividend €10m Commercial Separate newsletters for Members and for Members and for for newsletters Separate non-members Report Stakeholder published First Developed internal marketing infrastructure internal Developed support to and tools and the Stakeholder functionsmanagement Stakeholder message and Redefined IPB’s our vision and mission communicated Social Dividend issued for first time Social Dividend issued for a public- launched creating CSE initiative The partnershipprivate fund of €2m for Gathering unveiled IPB re-branding and website Members Consultative Forum commenced commenced Forum Members Consultative CCMA, Nominees, from with representation be VECs – Individuals IPB may from HOFA, on occasion attend to invited embership Deliverables in 2012 embership Deliverables

» » » » » » » » » » » M » insurance insurance I PB 360 OUR PEOPLE

A firm belief in collective and individual responsibility

“ I am absolutely convinced that there is a better way of doing business, and for me, that means delivering both commercially and socially. I believe that a truly sustainable business must look to recognise and engage with all its Stakeholders. That is why I believe we must all take collective and individual responsibility for our actions in how we conduct our business.” Ronan Foley Chief Executive

“ In the face of these challenging times, I believe prudent finance and risk management is key to delivering sustainable earnings and maintaining the financial strength of the business.” Enda Devine Chief Financial Officer

“ My objective in managing the risk profile of the Company is to ensure the long-term sustainability of the business and to develop world-class risk management that sets our Company apart.” Tom Donlon Chief Risk Officer

“ Insurance is a promise to pay, and we in IPB are proud of our long history of insuring large risks and paying claims. Maintaining our ability to do this into the future through prudent underwriting is key to what we are.” Enda Brazel Head of Underwriting

“ Selling is about trust and honesty, building relationships that will last the test of time. Working with our Members and clients we are committed to listening to their needs and ensuring we meet their requirements for all eventualities.” Conn Cleary Head of Sales & Relationship Management

12 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT > Strategy > Engagement

“ I see my role as being a business enabler, delivering workable solutions to the Company’s legal and commercial concerns. In addition to a requirement to understand the business of the Company, my role involves a close alignment to the business strategy and engagement in decision-making, thereby facilitating a dedicated and focused delivery of IPB’s objectives.” Emily Chambers Head of Legal & Company Secretary

“ For me, I see regulations as the starting point rather than the finish line and enjoy embracing the challenge of setting and hopefully achieving higher levels of ethical and responsible business practices than otherwise required.” Julia Carmichael Chief Compliance Officer

“ My team is committed to delivering a first-class claims service to all our Members and clients. We understand the ever-changing needs of our Members and clients for all claims types, be it motor, property damage or liability, and we can respond, adapt and tailor that service to their individual needs.” Paddy Moran Head of Claims

“ In a field definedy b so many intangibles, I see our CSE strategy as a tangible way in which IPB can deliver the greatest impact to our Members’ communities” Máiréad Conway Head of Corporate Social Engagement

“ The Capital and Liquidity strength of IPB enables me to make long-term fundamental investment decisions by reducing the need to react to short-term market volatility. This ability to take the longer-term view has resulted in above average returns on the Investment Portfolio.” Pat McGinley Head of Investment

IPB Insurance Stakeholder & Annual Report 2012 13 IPB 360

Insight Bizworld

Pupils from Holy Trinity N.S., Leopardstown, with Fiona McKeon, BizWorld Ireland CEO, and Enda Devine, Chief Financial Officer, IPB.

Enda Devine is Chief Financial Officer at IPB and is a Director on the Board of BizWorld Ireland. Bizworld is a dynamic educational initiative that has as its mission to challenge and engage children from 10 to 14 years of age through learning programmes that teach the basics of business, entrepreneurship and money management.

The workshops are hands-on and promote The Bizworld Philosophy: critical thinking, leadership and teamwork »» The power of education to positively in the classroom. The students take on roles influence children based on their strengths and skills. BizWorld’s programmes not only allow students across the »» Financial, business and entrepreneurship cultural and economic spectrum to understand education as tools for economic prosperity how business works, but also enable them to »» The involvement of the private sector to experience it first-hand. bridge the gap between business and According to Enda, it is important for members education in local communities of staff to get involved in the initiatives »» The ingenuity, creativity and ability of all supported through the IPB CSE Framework: children to create opportunities for their “The fundamental concept of Bizworld really own success. appeals to me as it is focused around building Bizworld delivers workshops of between confidence in young people at an early ten and fifteen hours duration to primary age. I think it is important that children are schools. Each workshop involves a local encouraged to believe in themselves and to business-person as the judging expert, be positive about the future. From a personal supporting local involvement. perspective, particularly as a father of a child in primary school, I enjoy giving of my time and the feeling that I am making a difference, even if just in a very small way.”

14 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT OUR Clients > Strategy > Engagement

IPB is transforming. As part of our transformation, we have rebranded with a new trading name and logo designed to reflect IPB’s new Mutual Vision and our aspirations in becoming a truly world-class business offering the smartest products and next generation services to our clients. Through a new operational grading system (see page 26) IPB’s offering and approach will be defined by its innovation, the best use of technology and our ethical approach to doing business.

We are convinced that with the best business offering in our markets, we can achieve lasting sustainability underpinned by our CSE Framework, giving back to society. We will be regularly measuring our clients’ satisfaction to ensure that we keep on track and that we meet the expectations our clients set for us and our people.

IPB is undertaking a range of new initiatives to reach out to clients and keep them informed of the latest developments and products. We are increasing our focus on product development and service delivery by investing in our systems, including the recent instalment of our new IT system, Phoenix.

We have delivered a Commercial and a separate Social Dividend to fund our CSE model, which will be themed around our core markets by giving back to society and supporting social initiatives within the market segments in which we operate. We are developing a customer service charter to reflect our vision to be a world-class business driven by innovation, technology and an ethical approach to doing business. We are acutely aware that our success relies on our clients’ loyalty and we believe that supporting our clients in managing their risk is one of the key elements of our offering.

We have developed a customer newsletter, CoverStory, which is designed to inform our clients of new products and services as well as provide updates on our CSE activities and issues affecting our clients. We are also developing our website to provide additional information and resources to assist clients in doing business with us and increase accessibility. IPB will continually work to create new features and tools for clients in improving our relationship and assisting in generating feedback to aid service development.

Our clients will grow from our core market segment, our Local Authority Members, working in providing services to the public in education, sport, health, community, charity and socially-focused services. Over the past year, IPB has secured clients from across the spectrum of community-based initiatives as well as national organisations and representative bodies.

IPB Insurance Stakeholder & Annual Report 2012 15 IPB 360

Insight Mardyke Arena €4 Million Flood

In November 2009, Ireland experienced extensive floods, particularly in the South and West. In Cork City, the River Lee flooded and extensive damage was caused to commercial and private premises.

The Mardyke Arena, a leisure centre owned by UCC and located near the banks of the Lee, suffered a 1.4 metre flood. IPB, as insurers to the Arena, confirmed cover and its intention to offer renewal to ensure that the centre was repaired and that the business would continue to provide services to students and members of the public into the future. IPB was able to provide assistance in relation to the business continuity and the reinstatement of the building and contents.

The centre was closed from 19 November Mardyke Arena General Manager, Patsy Ryan 2009 to 15 February 2010. During this period, customers were accommodated with free and serving the public. Even in light of the vouchers to another leisure centre as well as a major flooding incident, IPB confirmed that shuttle bus to and from the Mardyke; this cost full cover would continue into the future. was covered completely by IPB. centre Manager Patsy Ryan coordinated the Within only ten weeks and a €4m reinstatement of the building with a new refurbishment, the Mardyke was open again extension to improve services to customers and

16 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT > Strategy > Engagement

“ It was great to know when the flood happened that we were contacting an insurance company that had

our interests at heart.” Mardyke Arena General Manager, Patsy Ryan

the installation of major flood protection works in Marine Simon Coveney, T.D. on Monday 23 April order to reduce the risk of a future flood. 2012 at UCC. Speaking at the re-opening Patsy Ryan, General Manager, Mardyke Arena said, IPB Loss Adjuster Jim Gaw commented on the quality of the claim presented by Patsy Ryan: ‘It is “ We could not have achieved what we did highly commendable that the determination and without the support of IPB who paid the claim efforts of all concerned ensured that the business and promised to continue flood cover into was able to re-open within three months of the the future with very little adjustment to the date of the damage.’ premium. IPB trusted us in relation to the flood improvement works we promised and let us Additional work included a new extension and do what we wanted to make this a world- flood relief mechanism, completed in March 2012. class facility. It was great to know when the The centre is now an example of a world-class flood happened that we were contacting an sporting facility of which UCC and its students insurance company that had our interests at can be proud. The centre is steeped in history and heart. It’s something you don’t realise until the celebrated its centenary by hosting a conference time comes to make a claim.” on the 2012 Olympics with contributions from Chinese, British and Irish sports experts.

The redeveloped Mardyke Arena was officially re-opened by Minister for Agriculture, Food &

IPB Insurance Stakeholder & Annual Report 2012 17 IPB 360 OUR PARTNERS

IPB is proud of its network of leading organisations whom we see as partners in our ambition to innovate and transform IPB into a truly world-class sustainable business. Our partners include advisers, brokers, representative bodies, reinsurers and social and charitable institutions. We have partnered with a range of businesses and not-for-profit bodies to meet our ambitious objectives, both commercial and social.

We continue to develop relationships with a range of representative organisations across our Membership base and market segment sectors to listen to the needs of our clients and provide much-needed assistance in their efforts to promote their sectors and social initiatives. We see our suppliers and brokers as partners in working to meet the needs of our Stakeholders and we are setting new ethical standards for all those who work with us in creating a sustainable business model.

Most importantly, we see all our suppliers as partners in meeting our objectives for our Stakeholders. For that reason, we expect our suppliers to share our values, to be ethical and to demonstrate the same commitment to giving back for social good. We must understand our responsibilities and act on them through social engagement.

IPB are the official underwriting partners to Irish sport through the Federation of Irish Sport Group Insurance Scheme in conjunction with BHP Insurances, official agents of the Scheme. Pictured at the launch of the scheme are (L–R) Ronan Foley, Chief Executive, IPB; Sarah O’Connor, Chief Executive, Federation of Irish Sport and Mark Phelan, Managing Director, BHP Insurances.

18 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT Our Government > Strategy > Engagement

As a Mutual Insurer comprising of Local Authority Members it is not surprising that our relationship with both Government and our regulatory bodies is of great importance. Understanding the needs of our Members means that we must continually foster and nourish relationships with our regulatory and governmental partners.

We have a clear understanding of our responsibilities to set ever higher standards of customer and regulatory requirements above and beyond the minimum.

Our CSE Framework aims to involve all our Stakeholders. The Government initiative, The Gathering Ireland 2013, served to underline the strong relationship IPB has with Government. IPB, through a 50:50 funding partnership with the Government, created a fund of €2m for local community and regional flagship events to celebrate the coming home of the Irish Diaspora. The IPB Gathering Fund was administered and delivered through IPB’s Members, the Local Authorities.

L–R: Pictured at the launch of the IPB Gathering Fund are Michael Ring TD, Minister of State at the Dept. of Transport, Tourism & Sport; Ronan Foley, Chief Executive of IPB; Imelda Rey, Head of Engagement & Communications for The Gathering 2013; George Jones, Chairman of IPB and Dr. Leo Varadkar TD, Minister for Transport, Tourism & Sport.

IPB Insurance Stakeholder & Annual Report 2012 19 IPB 360

Insight The IPB Gathering Fund

An Taoiseach Enda Kenny, T.D. pictured officially launching the IPB Gathering Fund at Government Buildings.

As the proud Insurer of Local Authorities and a long-standing supporter of community initiatives, IPB wanted to support the Local Authorities in their task and participation in The Gathering.

We were delighted to partner with The Ireland 2013 initiative. The Gathering Ireland Gathering 2013 to launch the €2m IPB 2013 will, I believe, bring new momentum Gathering Fund in October last year. This to the development of the global Irish public-private partnership will enable network and deliver not only short-term thousands more people to become actively benefits this year, but longer-term rewards as involved in planning and taking part in relationships develop.” The Gathering. The IPB Gathering Fund is being administered Speaking about why IPB decided to partner by the Local Authorities for flagship and with The Gathering, Chief Executive Ronan community events within their own areas. Foley said, Half of the Fund is being used to support up “ As a 100% Irish-owned Mutual Insurer to three flagship events and activities in every whose remit it is to protect the interests city and county, while the other half is being of our Local Authority Members and their used to support a number of smaller local and communities, we are absolutely convinced community events. By the end of the year, the by the economic rationale and business Fund will have supported over 1,300 individual opportunity afforded by The Gathering Gathering Ireland events.

20 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT Our Peers > Strategy > Engagement

We recognise that as a leading Irish financial services business there is an onus on us to contribute to the improvement in standards within our industry. IPB is an active Member of the Irish Insurance Federation with key executives such as our Chief Compliance Officer Julia Carmichael participating actively in the Federations Committees.

IPB is also the only Full Member of the Association of Financial Mutuals (AFM) operating in the Republic of Ireland. As Ireland’s only indigenous Mutual Insurer it is important that we engage and work with like-minded organisations internationally to incorporate best practice and to keep informed on issues of concern to mutual bodies.

Insight Julia Carmichael

Chief Compliance Officer, Julia Carmichael Approach’ as part of the IIF Education Lecture actively participates on behalf of IPB Insurance Series via several presentations across the within the Federation and its Committees country. She commented that it not only including; provided an opportunity for real discussion »» Regulatory, Legislative & Fiscal Committee on this critical piece of industry legislation but also presented an opportunity for attendees to »» Education & Training Advisory Committee network with each other on practical solutions »» Irish Insurance Data Oversight Committee for their own businesses in relation to these (establishing a centralised data base for use requirements. Julia enjoyed the opportunity to by the IIF Members) work with her peers and explains, Julia believes that the most powerful method of “ I have found participation with the developing a more innovative and progressive Federation an exceptional opportunity industry is by the continued sharing and both personally and professionally meeting participation by all insurers, brokers and third- consistently high achieving individuals and party Stakeholders within the new structure of businesses along the way. I hope to continue the IIF as envisioned by its’ CEO, Kevin Thompson. to contribute to the Federation and the goals As a member of the IIF, Julia was privileged the industry has set itself over the coming to deliver her view on ‘Solvency II - A Practical months and year.”

IPB Insurance Stakeholder & Annual Report 2012 21 IPB 360 Our SOCIETY

The continuing challenges presented by adverse economic conditions are a significant risk to societal development. At IPB we understand that we have a social responsibility and, more importantly, we know that only through active CSE can we truly make a difference. We are committed to building a long-term CSE culture with our internal Stakeholders and work to influence our external Stakeholders towards building a more inclusive and mutually beneficial way of doing business.

Our corporate vision is founded on the proud history of our mutual ethos and this means that we see all of us in society as the ultimate Stakeholders. Last year we embarked on a programme of corporate development. At IPB there is growing realisation and optimism that the efforts we make to succeed commercially can and will make a difference to many people in society who do not enjoy the same privileges that we take for granted.

This vision is about full engagement. We have built our social engagement approach into our business model and that means that all our resources have a part to play, from our people through to our financial resources. As the first Company in Ireland to formally adopt a system of allocating a Dividend to Society, it is our wish that we will be in a position to continue this commitment for as long as the Company is in a financial position to do so.

The IPB CSE Framework is underway and being delivered in the name of our Members, our Local Authorities, ensuring communities and their young people across the country enjoy the social benefits generated by this Framework.

Sustainable Giving: The IPB Endowment Scholarship – DCU Access Programme IPB have been involved with the Dublin City University Educational Trust since 2006, supporting students who receive a place on the DCU Access Programme with scholarships. Funded entirely by private support, over 500 students are beneficiaries of scholarships each year. IPB Insurance have committed to an IPB Endowed Scholarship, which means that an Access Scholarship will be bestowed into perpetuity on behalf of IPB.

The scholarships are used for costs associated with college such as; textbooks, materials, travel expenses and extra tuition. These scholarships enable students to concentrate on their studies and adjust to third-level without having to juggle a large work commitment as well.

22 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT > Strategy > Engagement

Insight DCU Access Programme: Meggan King

My name is Meggan King and I am currently in my third year of a BSc. in Psychology at Dublin City University. However, getting here hasn’t been easy...

From a very young age I was eager to learn, to best I could in school, in the hope that someday explore the world, and I had great ambitions. In my grades could help me get some kind of fact, I was so eager to learn that my parents had scholarship to attend university. to allow me to start school on my birthday-a When I was eleven years old, I moved year early! Since I was about nine years old, I had to Glasnevin where I attended St. Mary’s aspired to one day become a psychologist and Secondary School. In this place, I felt nothing help people – a dream that appeared far from could stop me! I joined the gospel choir, reach for someone in my position. played camogie for the school team and Despite the stark reality and obvious limitations studied very hard. Everything seemed to be that faced me and so many others around me, I going well until I became incredibly ill at the had a deep-rooted determination to do the very end of my first year. I was diagnosed with an

IPB Insurance Stakeholder & Annual Report 2012 23 IPB 360

acute form of leukaemia and had to undergo a Having missed a year of school, I repeated a year really intense course of chemotherapy for many and worked tirelessly in order to achieve those months (not a challenge I had been expecting things that would make life happiest. And, oh life to offer me, to say the least). boy, did it pay off when I got the points I needed to study psychology! When my offer arrived While I was living in Our Lady’s Hospital for from the Access Office, it was definitely one of Sick Children in Crumlin, I always had one of the most joyful days in my life. Since I began my my parents there with me 24 hours of the day, studies in psychology, my life has gone from every day. I can’t bear to think of the worry, strength to strength. Every day, what I learn is anguish and fear that was ravaging them as challenging my perspectives and is opening new they struggled to raise two little boys at home, windows that I never knew existed! The course is while trying their best to do everything possible quite demanding but it is absolutely invigorating! to keep their daughter and deal with the ever- magnifying financial struggle. Without an ounce Studying has enabled me to see why education of doubt, this was one of the most formidable and lifelong learning are so incredibly invaluable. times in my life. I didn’t know if I would ever play So, in order to make the very most of my time camogie again or wake up the next morning, let here in DCU, I have been embracing every alone become a psychologist. opportunity available to develop as a person and hone my skills for my future profession. I see how " It was like I was born the DCU Educational Trust embraces students every year with warm and open arms and I am again; I had been given a very privileged to say that I have just finished chance to seize life with work with the DCU Educational Trust for our both hands and that is annual telethon, in which we raised over €38,000 for Access Scholarships. exactly what I did." Currently, I am working as the Secretary for the Psychological Society of Ireland, Student Affairs Committee. Furthermore, having been one of Fortunately, I responded well to the treatment twelve students in Ireland to be chosen for the and recovered with the support of family, friends Google Building Opportunities for Leadership and the staff from St. John’s Ward and with the and Development (“BOLD”) Programme, I led the help of those in a support group for young triumphant team of four who won the Google people with cancer called CanTeen Ireland. Business Challenge for 2012! Subsequently, However the trauma of this time had not left me, I was one of three students selected from as I began to realise in my teenage years that my this programme to take part in the Google life was filled with going away parties for my dear mentoring programme. Just before Christmas, friends who were going from this world, leaving I was even given the wonderful opportunity me behind. of meeting Hillary Clinton and presenting her Being a survivor of cancer is almost like an with the Concern Award. This year, I am starting obscure gift. As a young girl, putting aside the to work with my local Youth Resource Centre grief, things like being bald, it was as if every and also beginning my internship in Applied little thing in the world was blossoming before Behaviour Analysis. DCU is certainly right; you my eyes, including the hairs on my head (my can go anywhere from here! granddad always assured me that my hair would grow back, unlike his own!). It was like I was born again; I had been given a chance to seize life with both hands and that is exactly what I did.

24 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT Insight

DCU Access Sports Scholarship: Paul Flynn > Strategy > Engagement

DCU Sports Academy: IPB Sports Scholarship Initiative

As well as supporting academic endeavor, the IPB CSE Fund is providing support to some of Ireland’s leading athletes through the DCU Sports Academy. Launched in 2006, it is Ireland’s largest elite athlete development programme. DCU is recognised as a leading third-level sporting institution offering a modern hub for sporting excellence.

The DCU Sports Academy offers the best coaching practices, strength and conditioning programmes, sports science centre, best medical advice and financial assistance, together with academic support where required. The DCU Sports Academy currently concentrates on the sports of Gaelic Football and Athletics. Dublin inter-county footballer and All-Ireland medal holder Paul Flynn talks about the Sports Scholarship and what it Paul Flynn, 4th Year, BSc Physical Education and means to him. Biology at Dublin City University

My name is Paul Flynn and I am 25 years old and from Swords, Co Dublin. I’m now in my fourth on campus. This has allowed me to give full year studying Physical Education and Biology attention to both my studies and my football at DCU. However, four years ago I was in a career. completely different place in my life. The impact DCU has had on my life has been I am the youngest of eight and although I had profound. From a sporting perspective, I’ve finished school, college wasn’t really on my gone from strength to strength. My sporting agenda due to financial limitations. It was a achievements have risen each year, which I matter of going out to get a trade and earn my attribute to DCU Academy. In the past four years keep. Instead, I had just served my time as a I have won two Leinster titles, one All-Ireland, plumber and thought I was in a great position, two Sigerson cups, two GAA/GPA All Stars and but little did I know that I was in a profession two Sigerson All Stars. I would like to take this that was going to take a serious downturn. opportunity to thank DCU GAA Academy and At the time I got talking to one of my Dublin those who support the programme. team mates, Kevin Nolan. He was studying in It has been an exceptional experience: a journey DCU and told me about the Sports Scholarship that was only possible with the backing of such Programme. I always had an ambition to go to committed and dedicated people in DCU. Their college and I decided to apply for DCU, which expertise and professionalism is world-class and has proven to be the best decision I ever made. I’m truly honoured to say I am a student of DCU I really can’t praise the Sports Scholarship and an elite member of such a prestigious, high Programme enough. One of the benefits of the achieving, successful Academy. I can’t thank the scholarship was the financial support provided, supporters of the DCU GAA Academy enough which afforded me the opportunity to live for what they have done for me.

IPB Insurance Stakeholder & Annual Report 2012 25 IPB 360 PBD GRADING STRATEGY

A new way of Doing Business At IPB we are transforming. Our overriding objective is to devise a business model themed on sustainability and built on our proud mutual heritage, putting society at the heart of our goals. To this end we have created a business strategy that reflects our mutual ethos. So what does this mean? It means we want to build a world-class business whose success directly depends on and benefits all Stakeholders. This approach means that success is not measured just by financial performance but by the way we apply all available resources from financial, human and through influence and leadership. Our programme of transformation is based on our PBD grading strategy.

PBD The PBD approach stands for Place, Business, Difference. Our ambition is to be the leading place to work, attracting the best people and working with all our other Stakeholders to build a successful world-class business, reaping a Social Dividend to drive our CSE Framework. Our outline business strategy allows us to harness ambition in a healthy way. As we succeed in achieving our goals and reaching our targets this success will drive our CSE Programme, which in turn starts the cycle again in a sustainable motion.

Corporate Goals »» Build on our rich heritage as a Mutual Insurer »» Develop the capability to achieve our goal of creating a world-class sustainable business »» Create a truly ethical business reflecting the ethos of mutuality »» Reinforce our underwriting ability as our core competence »» Identify ancillary and complementary markets through our existing Member base and by being agile enough to take the opportunities to grow our business »» Establish our compliance and regulatory framework to meet and exceed industry standards »» Lead in the area of CSE through effective implementation, measurement and evaluation of this key strategic initiative for the benefit of all Stakeholders and our financial success.

Keys to Achieving Corporate Goals Board Oversight of the business, setting the business strategy and ensuring that risk and compliance are properly managed. Stakeholders IPB must continue to increase support and services to Members and engage more with all Stakeholders People Nurture our staff to cultivate and develop high performing teams, model leadership behaviours and competence in individual and collective ownership of the vision for the business Culture Ability to foster a culture of trust, honesty, respect, fun, professionalism and core values embedded as an integral part of how we do business Environment Create a working environment that recognises effort, motivates and educates in an atmosphere that breeds innovation and excitement and where all Stakeholders appreciate that they have a key part to play Excellence Exceed expectations, develop and maintain distinctive capabilities and establish clear metrics across all parts of the business in order to achieve a sustainable world-class performance

26 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT > Strategy > Engagement PBD Relational Diagram

OUR PEERS

Plce a refers to our place of business and our people in creating a great workplace and instilling a culturePBD within strategy the organisation grading that attracts system the best people to serve the needs of our clients. As a service business, we can build a world-class operation built on having great people and corporate culture. IPB 360 Stakeholder Approach Business refers to the operational aspect of IPB in achieving commercial success. Within this elementPBD ourelements approach is to develop a world-class business driven by ethical governance, innovative products and services delivered through efficiencies from the best technologies available.

Difference refers to the outcomes from our business, which means that as a commercially successful business we can give back to our Stakeholders through a Commercial Dividend to our Members and a Social Dividend to society. PLACE BUSINESS DIFFERENCE PBDti Rela onal diagram CultureThe relational chart refers to theOperations interdependency and Management of Results the three elements and what(People links them+ Values) together. A great Place(Innovative and great + Technological Business is + Ethical) (Commercial and Social Dividend Model) about the internal Stakeholders who contribute to the Company’s operations. Business and Difference refers to the interdependence of commercial success and how it relates to our ability to contribute to society through a Social Dividend. Difference and Place completes the cycle as a commercially successful business can become sustainable by building long-term loyalty from all its Stakeholders. Underpinning all of this are our three ingredients for corporate success: ethics, innovation and technology.

IPB Insurance Stakeholder & Annual Report 2012 27

OUR SHARED SUCCESS

VISION

IPB 360

ENGAGEMENT STRATEGY

PBD CSE Target Model IPB 360 CSE – working to make a difference

The CSE Framework is based on our philosophy that businesses need to be more than responsible; they need to be accountable. The final part of the IPB ethical and sustainable business leadership and management approach is the CSE Framework.

This strategy allows us align our business and Stakeholder profile to a systematic themed approach, giving back to society for social good. Put simply, the CSE Framework is the process for disbursing our Social Dividend to pre-selected social categories relevant to our Members and broader Stakeholder base. Our approach to CSE is driven by our PBD corporate grading strategy underpinned by three factors: ethics, innovation and technology.

The CSE Programme 2013–2015 is built around the themes of Diaspora, Sport, Education, Youth & Community and Business Innovation. A simple graphic demonstration of the CSE Governance and Framework Programme roll-out is outlined below and opposite.

CSE Governance Organisational Chart

IPB Insurance Board of Directors

CSE Steering Committee Conn Cleary Ronan Foley Máiréad Michael Rosemary Head of Sales CEO & Conway Fitzgerald Ryan & Relationship Executive Head of CSE Group Risk Manager Management Director & Committee Non-Executive Chair Director

28 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT > Strategy > Engagement

IPB Insurance CSE Framework

Governance

IPB CSE IPB Board Steering of Directors Committee

Target Sectors: Themed Apporach

Youth & Business Diaspora Sport Education Community Innovation

Partnership

Sector Governmental Members Specific

Activation

Review Nominate Allocate

IMPACT

Measure Report

IPB Insurance Stakeholder & Annual Report 2012 29 IPB 360 IPB CSE Framework Themes

DIASPORA

The IPB Gathering Ireland Fund 2013 Every New Year brings with it a certain level of excitement and anticipation for the twelve months ahead. In Ireland, the arrival of 2013 has brought a bigger lift than usual because 2013 is the year of The Gathering. It is inconceivable that there is anyone in Ireland who will not have heard about The Gathering. It is officially the single biggest tourism event in the history of the State.

The initiative is a perfect fit for IPB. It is being driven regionally through our Members, the Local Authorities, and it is an event targeting our Diaspora, one of our five themed target sectors for our CSE. An estimated 70 million people around the world claim Irish heritage. The Gathering will encourage these people with an ancestral link to Ireland and those who just have a love for the country to make 2013 the year they come to visit.

The core objective of The Gathering is to bring an additional 325,000 tourists into the country, which would be a huge boost to Ireland’s finances and morale. This year-long celebration of Irish music, art, literature, dance, culture, heritage, sport, film and food gives each of us the opportunity to look with fresh eyes at what our country has to offer and remember all of the things that make Ireland great.

Throughout 2013, there will be Gathering events held across the country, from bigger and better St. Patrick’s Day celebrations and summer festivals to school and family reunions and céilís in the local sports hall. The success of The Gathering is going to depend on the people who get involved.

A Gathering event doesn’t have to be elaborate. It can be something as simple as inviting a friend or relative home for that long overdue holiday. There’s no reason why everyone can’t be part of it. The first event to receive official sponsorship from The Gathering Ireland was The Emerald Isle Classic, an American football game between Notre Dame and the Navy team held in the Aviva Stadium on 1 September 2012.

30 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT > Strategy > Engagement

IMPACT The Gathering 2013 in numbers

€2 million The amount of the IPB Gathering Fund

70 million 325,000 The number of people world-wide The number of additional tourists who claim Irish heritage The Gathering will bring to Ireland

7,500 1,300+ The number of people who The number of communities and attended local Gathering planning events the IPB Gathering Fund meetings in 2012 has supported

Insight Solas Bhride, Kildare

At a meeting in County Kildare last year to promote the Gathering, many groups present suggested that the heritage of St Brigid should be celebrated at a Gathering event.

Solas Bhríde in conjunction with local Ireland and overseas. There will be a special céad community groups submitted a proposal to míle fáilte to those who are named Brigid or who host a Brigid Gathering event in Kildare town have variations of the name. So all the Brigids in in September. The proposal was accepted and the world will be invited back for the celebration! funding from the IPB Gathering Fund has been Already groups from Europe, the US, Canada allocated for the event. and as far away as Australia are planning their The event hopes to attract between 600 and trips to Kildare for Solas Bhríde. The celebration 800 visitors to Kildare to celebrate the story of St will run from Sunday, 15 September to Saturday, Brigid, ranging from people around the world 21 September. Solas Bhríde will be partnering who have an affinity with St Brigid through with a wide variety of Community groups, schools, churches, parishes, associations and schools and overseas interests to create a place names, bringing visitors from other parts of wonderful programme of events.

IPB Insurance Stakeholder & Annual Report 2012 31 IPB 360

Youth & Community

Pride of Place The all-island IPB Pride of Place Competition recognises and celebrates the vital contributions that community partnerships make to society. The focus is on people coming together to shape, change and enjoy all that is good about their locality. It differs from other similar projects in that the involvement of the community is specifically where the recognition is made from all aspects of rural and urban regeneration, including promoting social cohesion, involvement in planning, the promotion of heritage and environmental awareness.

IPB has supported the Pride of Place Awards for the past nine years and is proud to have become the headline sponsor in this it’s tenth anniversary year. The competition is run by Co-operation Ireland in conjunction with the Pride of Place Steering Committee.

We see this all-island initiative as a perfect platform to partner with our Members and their communities by providing support to develop and grow the event into the future. The IPB Pride of Place is set to become the true All-Island Community Awards event embracing community initiative and fostering relationships with communities North and South.

LOIVC M International recognition for three Irish communities Last year saw three Irish communities shortlisted for the highly prestigious and competitive global LivCom Awards. The finals were held in Abu Dhabi in November and all shortlisted candidates, including the three Irish communities of Wicklow County, Abbeyleix and Moynalty, showcased their efforts at an open exhibition.

The LivCom Awards are the International Awards for Liveable Communities and they attract hundreds of entries from around the globe every year. Launched in 1997, the Awards are endorsed by the UN Environment Programme. Over 30 countries were represented at the finals.

The three communities represented Ireland and, through IPB’s new status as title sponsors of the IPB Pride of Place Awards, received grant support to help cover the costs of participation. There was huge success for the participating Irish communities as County Wicklow claimed gold and winner of their category meanwhile Abbeyleix and Moynalty both secured silver medals.

As a result of the success of the LivCom participation, five winning communities at the IPB Pride of Place Awards now go forward for the LivCom Awards this year. The Awards give a huge boost to civic pride as the winners can proudly call themselves one of the leading communities in the world, and on a national and international level the winners receive a huge amount of positive publicity. Participation is seen as an investment in the future of the community and IPB is delighted to be able to promote the very best Irish communities at an international level.

32 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT > Strategy > Engagement

Insight Dublin Fire Brigade 150th Anniversary

Dublin Fire Brigade presents George Jones, Chairman, IPB with an honorary 150th anniversary medal in recognition of the contribution IPB Insurance made to the anniversary celebrations.

Dublin Fire Brigade celebrated its 150th Anniversary with a series of events between 31 May and 3 June 2012. Around 1,000 firefighters, serving and retired, travelled to Dublin and participated in the event, which culminated in a parade through the city centre.

Dublin Fire Brigade came into existence under IPB has insured Dublin City Fire Brigade the Dublin Corporation Fire Brigade Act on 3 from its very foundation and were privileged June 1862 and the first Fire Station consisted of to facilitate the provision of the commemorative just 24 men. medal. IPB’s Chief Executive Ronan Foley also spoke at the event in the Mansion House. Today, Dublin Fire Brigade employs Echoing the Lord Mayor’s sentiments he approximately 1,000 people and responds to commended the work being done by the around 90,000 fire, emergency ambulance and ‘unsung heroes’ of the Dublin Fire Brigade rescue calls from the public each year. An official and said, medal giving ceremony was held where serving and retired members of Dublin Fire Brigade ‘It is humbling for all of us at IPB to be party were awarded a specially commissioned to a ceremony that recognises your selfless 150th anniversary medal. Speaking at the dedication to the people of Dublin. We event the then Lord Mayor Andrew Montague are delighted that we could assist you in congratulated the brave men and women commissioning this medal, which serves as an of Dublin Fire Brigade for giving such selfless important reminder of those who have made service to the people of Dublin over the last the ultimate sacrifice by giving their lives in the 150 years. line of duty.’

IPB Insurance Stakeholder & Annual Report 2012 33 IPB 360 IMPACT IPB Pride of Place Awards 2012

Communities from all over the island of Ireland competed in the 2012 IPB Pride of Place Awards. IPB were title sponsors of the Awards for first time. We have taken a look at some of the worthy winners announced at the Awards ceremony at Thomond Park, Limerick. Deputy Jan O’Sullivan, Minister of State at the Department of Environment, Community and Local Government, presented successful and runner-up community groups with their Awards.

Below are just some of the communities who enjoyed success at this year’s Awards.

Addergoole-Lahardane, in 1995 in response to addressing identified Co Mayo community needs. Operating from a The village of Lahardane was the focus of derelict building over the years, UACF has worldwide attention in April 2012 when the now established an effective, efficient and Mayo Titanic Cultural Week took place. In traceable record in managing projects. A April 1912, eleven of the fourteen steerage comprehensive range of Community and passengers from Addergoole Parish Family Support Services is provided, including (Laherdane) tragically perished on RMS Social Economy Daycare, youth services, Steps Titanic. The local people worked tirelessly to to Work, training placements, Community foster connections with local organisations, Volunteering Scheme, Job Assist Programme community groups and the worldwide Mayo and Support Programme for People with Community. Various successful community Disabilities, to name but a few. The UACF projects have been undertaken since 1999. is the lead and accountable agency for the The Addergoole Titanic society was formed Andersonstown Neighbourhood Renewal in 2001. The developments of educational, Partnership and through this work on a civic and recreational facilities have also daily, collaborative basis with Sure Start and been significant in the parish with great Integrated Services for Children and Youth voluntary and community effort at all levels. People. The Forum is established in many The Irish Countrywomen’s Association and areas as an accredited centre of excellence Irish Farmers’ Association were very active and operates key activities on a daily basis, organisations in the 1950s. The GAA, youth involving work with families and other youth clubs and Macra na Feirme were active and community groups. throughout the 1960s and 1970s. The local graveyard won the “Best-kept Burial Award” in Third Age – Summerhill, 2009 and took the runner-up award in 2011. Co Meath Successful village enhancement projects have Third Age is a voluntary organisation that also been undertaken in recent years. looks to promote the value of older people in communities throughout Ireland. Currently, Upper Andersonstown, Third Age gives employment to 23 people. Belfast, Co Antrim It has grown over the past 24 years from The Upper Andersonstown Community a cottage industry to a small to medium Forum (“UACF”) is a totally community-led, enterprise. In addition, Third Age has over community-driven organisation established 1,000 mainly older volunteers working

34 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT > Strategy > Engagement

nationally as listeners, nutritionists, tutors, wonderful views of Lough Derg and it has advocates, befrienders and more. excellent amenities for a village of its size. It is served by two pubs with restaurant facilities, At the local level, Third Age is a membership a furniture store, self-catering apartments organisation with a vibrant programme and bed and breakfast facilities. The village of activities, services and programmes green is attractively landscaped and a modern for members who are drawn from a wide sculpture had been installed. A village catchment area. Everything that Third Age park and a walking trail have recently been does is underpinned by principles of social developed by the community. inclusion and empowerment. The aim is to encourage the active engagement of older The village has benefited from environmental people, local and national, thereby modelling and visual enhancements through the work a community where older people are valued, of the residents and the Birdhill Tidy Village remain in the mainstream of life and enjoy Committee. The village has a wonderful good and effective relationships across the record in Tidy Towns competitions since generations. becoming involved in 1991 and holds the title of “Ireland’s Tidiest Village” for the years 2006, East Wall, Dublin City 2007 and 2008. It also has the distinction After a tragedy in the East Wall area in 2008, of winning a Gold Medal in the European there was unprecedented media coverage of Entente Floral Competition. the event with attendant negative publicity. The Lord Mayor requested a meeting of Bagenalstown, Co Carlow voluntary and community groups in the Bagenalstown, a former mill town, is a thriving East Wall area. Twenty people attended the rural community on the banks of the river meeting representing a variety of groups. Barrow with a population of 2,765. It was East Wall for All was set up as an umbrella established in the late eighteenth century by group to co-ordinate a fresh approach to Sir Walter Bagenal, to whose vision the town community problems. It was vitally important owes its rich architecture. The town is laid out that a positive message be sent to the wider in squares and noted pieces of architecture community. The advances that have been include the Bank of Ireland, the Post Office made since have been community-led, Building and the Victorian-designed railway through the church, school, Credit Union, station. The court house / library and other youth club, recreation centre, Sean O’Casey Georgian buildings also add to the unique community centre, water sports, history look of this town. Bagenalstown can be group and many more. There have been many approached along the banks of the river inter-generational activities throughout the Barrow from Leighlinbridge, where these year and the local school has undergone a landmark buildings become a feature of complete renovation. Much of this work has the landscape. been helped by the community’s approach Bagenalstown is a hub of engineering to working with statutory agencies Local excellence with numerous industries in Authorities, local businesses, Dublin Port and existence employing hundreds of people. Dublin Bus. It also has a very vibrant community that engages in many activities, such as promoting Birdhill, Co Tipperary sport and a clean environment, and has Birdhill (Cnocán an Ēin Fhill - The Hill of the voluntary support structures for all. Fair Bird) is a small picturesque village in Co Tipperary on the N7. The village benefits from

IPB Insurance Stakeholder & Annual Report 2012 35 IPB 360

EDUCATION

Insight Bizworld Ireland

How one organisation hopes to inspire a new generation of entrepreneurs

As a qualified lecturer and expert on personal to strength and is now a part of the state development, Fiona McKeon has devoted curriculum in California. In addition to its ever her working life to helping others better increasing presence in American schools, themselves and make the most of their BizWorld programmes are also currently potential. Fiona also holds an MA in Education available in the Netherlands, Korea, India, Leadership and Management and now, in her Singapore and now Ireland. latest role as CEO of BizWorld Ireland, she is putting all of her considerable experience to What is BizWorld’s mission? work. As part of our ongoing commitment BizWorld’s mission is to challenge and to supporting innovative and educational engage children across the cultural and learning tools for children, IPB is a founding economic spectrum through experiential patron of BizWorld Ireland. Fiona talks about learning programmes that teach the basics what Bizworld are doing and the long-term of business, entrepreneurship and money objective of the programme. management and promote teamwork and Where did BizWorld start? leadership in the classroom. We believe that The BizWorld Foundation was started in by sowing these seeds in childhood, we can America in 1997 by venture capitalist Tim give the next generation the ambition and Draper, who felt there was a need to inspire skills to pursue their dreams and set them on entrepreneurship in children. Since then, the road to becoming both responsible and the organisation has gone from strength successful adults.

36 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT > Strategy > Engagement

Why did you decide to get involved with What do you see as the main benefits for BizWorld? the children? As our economy went into recession, I realised The nature of the workshops and air of that our children would be facing a whole competition means children become new set of challenges in the changed global completely engrossed in what they’re economy and they would not be prepared doing and learn decision-making, money for them. As a teacher, I felt that I could play management, innovation and entrepreneurial a pivotal role in doing something about it. I skills in the process. discovered BizWorld as a result of searching the How many schools have taken part so far? internet for inspiration. As a part-time lecturer Since its formation in 2011, BizWorld has run in a teacher training college, I knew I was in workshops in 30 schools in the Dublin area the unique position of being able to introduce with a special emphasis on reaching schools in this as an option to potential teachers as a disadvantaged areas. voluntary pursuit. What has been the best part of introducing So how does the programme work? the BizWorld programme? The programme consists of a two-day Working with children and student teachers Immersion Workshop, which is run by a on a new and novel project has been the facilitator from BizWorld and attended by a most rewarding experience of my entire local business person who acts as Venture professional career. Seeing the children learn Capitalist. In these practical, hands-on about themselves and gain in confidence as workshops, the children form their own they acquire these life skills and getting hugely companies in groups, decide together who positive feedback from the class teachers and should have what role – President, Head of the school principals have been incredibly Marketing, Head of Design – and then create motivating. and market their own product. They pitch their ideas to the venture capitalist in a Dragon’s Who are the BizWorld facilitators? Den style set up in order to raise funds for their They are third level students and newly business. They are competing against the other qualified teachers who volunteer their time. groups in their class to see who can come up What has been the response from teachers with the most creative and ultimately profitable to the programme? business idea. The response has been 100% positive to the extent that some teachers are looking at how to implement the teaching methods used in BizWorld into other areas of the curriculum.

www.bizworldireland.ie

IPB Insurance Stakeholder & Annual Report 2012 37 IPB 360

IMPACT Recognition for CSE support in Education & Training

CSR Award for Water Safety Irish Water Safety’s National Awards Ceremony took place in City Hall, Dublin, on 27 November 2012. Irish Water Safety is the statutory body established to promote water safety in Ireland. Their role is to educate people in water safety best practices. They develop public awareness campaigns to promote necessary attitudes, rescue skills and behaviour to prevent drowning and water-related accidents. IPB was honoured to be presented with a Community L–R: Mr John Perry TD, Minister of State at the and Social Responsibility Award by the CEO of Department of Jobs, Enterprise and Innovation; Irish Water Safety, John Leech. IPB received the Conn Cleary, Head of Sales and Relationship award in recognition of support given to Irish Management, IPB and the Chairwoman of Irish Water Safety’s community work, charitable Water Safety, Breda Collins. activities and commitment to drowning prevention activities and the reduction of aquatic-related injuries.

DCU Corporate Leadership Award The Eighth Annual DCU Leadership Circle Dinner and Awards took place in June 2012 at the Helix Arena. Over 200 business and community leaders attended the event along with guest of honour, Chancellor of DCU, Senator Martin McAleese. The annual event thanks donors who support the DCU Access and Sports Scholarship Programmes through the DCU Educational Trust. The Trust aims L–R: Larry Quinn, Chairman of DCU Educational to improve access to university for students Trust; Julia Carmichael, Chief Compliance Officer, who have faced social, financial, personal or IPB, and DCU President Brian MacCraith. educational challenges that would otherwise restrict their access to higher education.

On the night, IPB received the DCU Corporate Leadership Award for recognition of the continued social engagement work being undertaken with the University among others.

38 IPB Insurance Stakeholder & Annual Report 2012 Vision STAKEHOLDER REPORT > Strategy > Engagement business innovation

Insight South Tipperary County Council & LIT R&D and Enterprise Unit

Objective: To promote community interests through the mechanism of sustainable economic activity

IPB is contributing to a R&D and Enterprise According to County Manager Billy McEvoy, joint partnership project between South the centre will play an important role for the Tipperary County Council and Limerick whole area: Institute of Technology (“LIT”). The project will “ The new centre will be a key player in South deliver a multi-purpose centre comprising Tipperary County Council’s strategic vision of R&D laboratories as well as training and to develop Clonmel as a hub for the life incubation space for start-up enterprises in sciences and food science sectors, supporting the life sciences and food science sectors. incubation and start-up / spin-out enterprises.” The centre can be adapted to meet changing Commenting on the partnership between LIT user requirements and will include high and South Tipperary County Council, Dr. Maria quality video conferencing facilities and Hinfelaar, President of LIT, said: align with LIT’s Document “Vision & Strategy “ LIT is delighted with the partnership that to 2020” as part of its commitment to has enabled this project to come to fruition. the development of enterprise within the It fits perfectly with our vision and strategy Munster region. LIT has well-established to provide active leadership in education, processes to facilitate such development and enterprise and engagement.” has facilities in Limerick and Thurles within which start-up enterprises can be incubated The project is expected to be completed in and supported. mid-2014.

Insight Cuan Mhuire Teo

Cuan Mhuire treats individuals suffering from addiction and is the largest voluntary addiction treatment service provider in Ireland. It is mainly run by a small number of nuns and lay volunteers.

To develop a sustainable business and future for the organisations and individuals they management structure for the survival and serve. The allocation of funding that specifically growth of Cuan Mhuire, IPB has committed to goes to resource long-term sustainability supporting Cuan Mhuire towards creating a planning is highly merited as the impact of the sustainable operational model, protecting its support has a much longer life span.

IPB Insurance Stakeholder & Annual Report 2012 39 SOCIETY People PLACE BUSINESS Technology Ethics OUR PARTNERS OUR PEOPLE Brokers Board of Directors Innovation Reinsurers Executive and Sta Advisors Social Suppliers Loyalty Dividend OUR MEMBERS OUR OUR CLIENTS GOVERNMENT Government Institutions DIFFERENCE Central Bank of Ireland IPB 360 conclusion OUR PEERS

PBD strategy grading system This document is our roadmap for our business model. It is a continuous process that aims to meet a new standard for doing business IPBwith 360 each Stakeholder element Approach interdependentPBD elements on the others. The three elements of the Model that we have outlined in terms of the Stakeholder Vision, Strategy and Engagement are the basis for our long-term sustainability. Combined, these elements form the overall IPB corporate plan.

We are satisfied that we have the plan in place to sustain a commercially profitable business that deliversPLACE real benefits for our BUSINESSMembers and makes a differenceDIFFERENCE to Culture Operations and Management Results society. This Report(People sets + Values) out our commitments(Innovative + Technological to all our + Ethical) Stakeholders(Commercial andand Social we Dividend will, Model) on an annual basis, report our progress and development in making IPB a truly world-class sustainable business.

Vision > Strategy > Engagement

OUR SHARED SUCCESS

VISION

IPB 360

ENGAGEMENT STRATEGY

PBD CSE Target Model

Our Shared Success reflects the inclusive approach we have adopted in embracing all our Stakeholders. The graph incorporates the three elements of the IPB sustainable business model approach. The three elements are cyclical and work together to form the overall corporate strategy.

40 IPB Insurance Stakeholder & Annual Report 2012 REPORT o f t h e b o a

Contents r d &

Chairman's Statement 42 e x

Directors' Report 44 e cu Chief Executive's Review 47

Board of Directors 50 t iv Members Consultative Forum 54 e Corporate Governance Leadership Statement 55

Authority and Board Sub-Committees 58

Directors Remuneration 63

Reporting 64

Risk Management Framework 66

Solvency II 69

Compliance and Regulatory Risk Management Framework 70

IPB Insurance Stakeholder & Annual Report 2012 IPB 360 Chairman’s Statement

2012 will be remembered as a year of major change for our Members and our Mutual, underlined as it was by the announcement of the proposed significant Local Government reform. At a national economic level, the past twelve months have also seen significant progress in working towards an orderly exit of the bailout programme in partnership with the Troika of IMF, ECB and European Union.

Although the Irish economy showed initial indications of recovery in the first half of the year, the second half of 2012 saw a slowdown in economic activity at the broader international level and downward revisions for growth prospects with our main trading partner nations.

GDP has grown by 0.9% in 2012, with GNP growth of 3.4%. Whilst GDP growth is expected to rise to 1.3% in 2013, this represents a downward revision of 0.4% to previous forecasts, reflecting the less favourable international outlook of recent months.*

I am nonetheless heartened by the certainty provided by the recent renegotiation of the national bank debt, which has led to an excellent return to the markets for longer-term ten year bonds, which were significantly over-subscribed. The confidence internationally in Ireland as demonstrated by the appetite for Irish paper is a further indication of the steady progress the country is making towards reclaiming fiscal sovereignty.

Local Government Government As mentioned earlier, our Members were informed The joint initiative between IPB and the Government of the proposed significant restructuring of the Local for The Gathering Ireland 2013 has been very warmly Government sector during the year. The ‘Putting received by our Members. The €2 million IPB Gathering People First’ programme being implemented by Ireland Fund launched by An Taoiseach Enda Kenny, Minister for the Environment and Local Government T.D. will see more than 1,300 communities receive Phil Hogan, T.D. and his Department will see funding for their own Gathering Events. The initiative, significant downsizing of our overall Membership promoted on behalf of and delivered by our Local base by the replacement of Town Councils, reduction Authority Members, will see over 80 major flagship in Regional Authorities and amalgamation of some events in 2013. Authorities. Our position as Mutual Insurer to Local Authorities means that we will significantly focus our Corporate Governance efforts and investment in delivering more for less for & Regulation our Members in support of their endeavours to meet I am pleased to reaffirm the appointments of our the challenges ahead. Chief Financial Officer, Enda Devine and Chief Risk

* Central Bank of Ireland Quarterly Bulletin 1, 2013.

4242 IPB Insurance Stakeholder & Annual Report 2012 REPORT

" The €2 million IPB Gathering Ireland Fund launched by o An Taoiseach Enda Kenny, T.D. will see more than 1,300 f

communities receive funding for their own Gathering Events." t h e

Officer, Tom Donlon to the Board of Directors. In Last year, we announced a MCF to provide a b recent years, we have seen an unprecedented level platform for Members to directly provide feedback o

of change in the regulatory environment, which to their Mutual. The June 2012 AGM gave rise to the a

relates to our business. During the year, we engaged appointment of Mr. Pat Gilmore, Galway VEC and his r in the implementation of a number of initiatives in election as Chairman; Cllr. Denis Foley, Carlow VEC and d & adherence to the Corporate Governance, Minimum his election as Deputy Chairman; Cllr. Bobby O’Connell, Competency and Consumer Protection Codes. Kerry County Council; Cllr. Dermot Lacey, Dublin City e Overall, the current Board continues to ensure that VEC; Cllr. Donal Marren, Dun Laoghaire VEC; Cllr. Mags x

IPB operates at the highest level to meet the strict Murray, Fingal County Council; Eddie Sheehy, Manager, e regulatory requirements of the Central Bank of Wicklow County Council; and Fiona Lawless, Head cu Ireland (“CBI’’). of Finance, Meath County Council. On behalf of the Board, I wish to extend our support and thanks to t iv Insurance Sector these appointees for their commitment to date.

The Irish general insurance market overall has e continued to experience downward movement in Outlook premium income with the sector posting almost a There are clearly huge challenges ahead for us 5% reduction year on year to less than €2.7 billion.** and for our Members as we seek to deliver further Whilst the market decline has been less dramatic efficiencies and continue to add value to our products than that witnessed in the life and pensions sector, and services. The slow but gradual expansion of premium volume is only at 75% of 2005 levels. the economy is encouraging but the international However, this shrinkage is somewhat mitigated by the economy poses a threat to any sustained domestic fact that weather-related losses have not returned to growth. The reform of our Members’ Local the scale previously witnessed in 2009 and 2010. Government sector presents unique challenges; however, I am convinced that we are ideally Members positioned to tackle the challenges head-on. Our Members face significant change as the ‘Putting People First’ programme of reform takes effect. The Board and Executive Management are fully prepared for the challenges that our Members and their Mutual face. We are focused on taking on the challenge to deliver greater efficiencies and ensure that the best use is made of all available resources. In this context, I am pleased to announce, on behalf of the Board, that the Company is in a position to approve a George Jones further Members Dividend in the maximum amount Chairman allowable of €10 million.***

** IIF Annual Report 2012. *** As per the Memorandum and Articles of Association as amended at the September 2011 EGM

IPB Insurance Stakeholder & Annual Report 2012 43 IPB 360 Directors’ REPORT

The Directors have pleasure in submitting the IPB 2012 Annual Report and the audited financial statements for the year ended 31 December 2012.

Directors’ Responsibilities R esults For The Year, Dividends, Statement and Financial Statements The Directors are responsible for preparing the The Company has adopted IFRS as at the financial year Directors’ Report and the financial statements in end and the financial statements have been prepared accordance with Irish law and regulations. Irish on this basis. In conjunction with the conversion to company law requires the Directors to prepare IFRS, there has also been a change in the accounting financial statements giving a true and fair view of policy for technical reserves and a change in estimate, the state of affairs of the Company and the profit or which has resulted in an overall increase in retained loss of the Company for each financial year. Under earnings of €130m. Further detail is disclosed in Notes that law, the Directors have elected to prepare the 3–5 of the financial statements. The Statement of financial statements in accordance with International Comprehensive Income for the year 31 December Financial Reporting Standards (“IFRS’’) as adopted 2012 and the Statement of Financial Position as at by the European Union. In preparing these financial 31 December 2012 are set out in the Management statements, the Directors are required to select Analysis and Financial Statements section of this suitable accounting policies and then apply them Report. The profit on ordinary activities before taxation consistently; make judgments and accounting amounted to €110m (2011: profit of €66m). After a estimates that are reasonable and prudent; state taxation charge of €14m (2011: €8m) and a Dividend of that the financial statements comply with IFRS as €10m, the increase in retained earnings is €86m (2011: adopted by the European Union; and prepare the €47m). The Board is delighted to be able to confirm financial statements on a going concern basis unless that a €10m Dividend was paid to Members during it is inappropriate to presume that the Company will 2012 in addition to the commitment to Members of a continue in business. Social Dividend in the sum of €5m.

The Directors are responsible for keeping proper The Directors consider it appropriate that these books of account that disclose with reasonable financial statements are prepared on a going concern accuracy at any time the financial position of the basis. No Directors were involved in any transactions Company and enable them to ensure that the with the business during the year other than those financial statements comply with the Companies outlined in the Directors Remuneration Report in the Acts 1963 to 2012. They are also responsible for Report of the Board and Executive section of safeguarding the assets of the Company and hence this Report. for taking reasonable steps for the prevention and detection of fraud and other irregularities. Principal Activities, Business Review and Future Developments The Directors are responsible for the maintenance and The principal activity of the Company continues to be integrity of the corporate and financial information the provision of a comprehensive insurance and risk included on the Company’s website. Legislation in management service to its Members and clients. The Ireland governing the preparation and dissemination Chairman's Statement and Chief Executive Review in of financial statements may differ from legislation in the Report of the Board and Executive section of this other jurisdictions. Report provides an overview of the performance for the year and future strategy for the business. Post Balance Sheet Events There were no events since the year end that warrant disclosure in the financial statements or notes thereto.

4444 IPB Insurance Stakeholder & Annual Report 2012 REPORT

Principal Risk and Uncertainties Directors and Their Interests Information on the principal risks and uncertainties The present Directors of the Company, together with o in the business is required by the European Accounts their respective biographies, are identified in the Report f Modernisation Directive (2003/51/EC). The principal of the Board and Executive section in this Report. The t

risks and uncertainties that the Company faces are, Directors of IPB do not have any interests as defined h

by the very nature of the business, those for which through the holding of shares or any share capital, e it provides or has provided insurance cover. The other than being remunerated for the undertaking of b

Company seeks to ensure that it collects sufficient their roles appropriately as Directors of IPB and/or as o

premium income to meet the cost of potential Chairmen of Sub-Committees of the Board. a claims over time, but the uncertainty surrounding r the severity and frequency of claims can lead to A ccountability and Audit d & significant variation in the Company’s performance The Directors are responsible for the preparation of the in the short term. Whilst considerable judgment is financial statements and a Statement detailing the full e

involved, the Directors adopt a prudent approach extent of these responsibilities is set out in this Report. x to the provision and valuation of insurance reserves, e with annual support and certification being provided Going Concern cu by an external actuary. The financial statements have been prepared on a going concern basis and, as required by the Corporate t iv Another risk facing the Company is the prevailing Governance Code for Credit Institutions and Insurance economic environment and its impact on the value Undertakings 2010 (the “Code’’) the Directors have e of assets held to support the technical reserves. satisfied themselves that the Company is a going The Company manages its capital requirements by concern, having adequate resources to continue in assessing its required solvency margins on a regular operational existence for the foreseeable future. In basis. The Board reviews the capital structure of the forming this view, the Directors have reviewed the Company on an on-going basis to determine the Company’s budget for 2013 and forecasts for 2014, appropriate level of capital required to pursue the which take account of reasonably foreseeable changes business strategy. in trading performance, the key risks facing the The Management Analysis section of this Report business and the medium-term plans approved by the provides some sensitivity information on the possible Board in its review of IPB’s corporate strategy. impacts of these scenarios. Books and Accounting Records Risk Management The Directors are responsible for ensuring that proper The Directors regularly consider the principal risk books and accounting records, in compliance with factors that could materially and adversely affect the Section 202 of the Companies Act, 1990, are kept future operating profits or financial position of the by the Company. To achieve this, the Directors have Company. The Company’s risk management and appointed accounts personnel who report to the compliance and regulatory management frameworks Board and ensure that the requirements of Section are outlined in the Report of the Board and Executive 202 of the Companies Act, 1990 are complied with. section of this Report. Details of the key risks are These books and accounting records are maintained outlined in the Risk Management Note 27 in the at the Company’s premises at 12–14 Lower Mount financial statements. With regard to financial risk Street, Dublin 2. management objectives and policies of the Company, please refer to the Financial Statements.

IPB Insurance Stakeholder & Annual Report 2012 45 IPB 360

Appointment of New Auditor Approval of Financial Statements The Audit Committee recommended that the The financial tatementss were approved by provision of external audit services be put to tender in the Board on 27 March 2013. 2012. Following a transparent and competitive tender, On behalf of the Directors including presentations from all candidate firms and discussions with Management, the Audit Committee recommended to the Board of Directors that Deloitte be appointed to replace Ernst & Young as IPB’s external auditor commencing with the 2013 financial year. This appointment is subject to Member approval and a resolution to that effect will be proposed at the Company’s 2013 AGM.

4646 IPB Insurance Stakeholder & Annual Report 2012 REPORT CHIEF EXECUTIVE'S REVIEW

2012 Review

It has been a busy, highly transformative o and successful year for IPB. Significant f changes have been made over the t intervening twelve months, particularly h e

in terms of Stakeholder engagement, b

product and service delivery and o

governance. The year was also notable a for the planned reforms outlined by the r Minister for the Environment and Local d & Government Phil Hogan, T.D. and this clearly places an onus on the Mutual e x to deliver even greater operational e

efficiencies for Members in the short to cu medium term. t iv

Financial Performance of which is on secure bonds and cash, with limited e In contrast to the current domestic and international holdings in equities and property. IPB continued economic environment, IPB delivered an exceptional to take action to mitigate falling yields, whilst performance for the year. Surplus before tax was maintaining the overall high credit quality and €110m, the strongest financial result recorded by diversification of the portfolio. the Company in its 86 year trading history. This very solid financial performance is primarily attributable Claims to the exceptional investment outcome for the year Claim numbers have fallen by 7% year on year, together with the settlement, in recent years, of large attributable to a range of factors. Improvements in claims below original provision levels. health and safety standards and a reduction in building projects, combined with the outsourcing of manual Underwriting tasks, resulted in a 25% reduction in new Employers The Company recorded a strong underlying Liability claims reported to IPB, whilst mild weather underwriting performance for the year; however, the conditions contributed to a reduction in property overall underwriting result recorded a loss due to an claims. Notwithstanding this reduction in claims exceptional once-off provision. The provision is in activity, IPB made claim payments totaling €76.8m to respect of a potential fall in the market discount rate to and on behalf of our Members and clients in 2012. be used in calculating the cost of bodily injury claims. IPB has benefited from settling large claims below Investments original provision levels in recent years. The reported The 12% investment return for the year represented net loss ratio increased to 102% from 20% in 2011 an exceptional performance in any context. IPB due to the impact of prior year reserve releases in the continues to follow a low risk investment strategy reported 2011 figures and the impact of the once-off underpinned by a high quality portfolio, the focus provision mentioned earlier.

IPB Insurance Stakeholder & Annual Report 2012 47 IPB 360 CHIEF EXECUTIVE'S REVIEW

Operations regard, IPB is well positioned to comfortably meet the Financial Reporting requirements of the new solvency levels. During the year, the Board approved the adoption of the IFRS method of financial reporting from the Members previous GAAP method, moving the Company in line Local Government Reform with international standards. The figures in the Financial The Local Government initiative, which currently Results section of this Report are presented within the dominates our Members’ agenda, is the ‘Putting format of the newly adopted accounting standard. People First’ reform programme announced by Minister Hogan late in 2012. The introduction of the Strategic Development property tax following on from the household charge With an increased focus on all our Stakeholders, along with budget reductions, centralisation of some IPB introduced a new corporate identity and clear services and the replacement of Town Councils in vision for the future based on putting Members at 2014 are all considerations both for our Members the centre of the business and society at the heart and for IPB as the Government continues to drive the of its goals. IPB now needs to invest for the future by reforms programme. These reforms require increased expanding its services to members and developing concentration of resources towards our Members the optimum business operating model. coupled with enhancements to products and services and a focus on value for money. To do this, we know " With excellent financial that we must further increase efficiencies, broaden strength, IPB is well our covers and add value to fundamental and advisory services. The strategy we have put in place capitalised and prepared presents a roadmap for sustainable development of for the enhanced the Company over the next three to five years. requirements of Solvency II." Listening to Members As a Mutual Insurer, the challenges currently faced by Members are very much also our challenges. Standard & Poor’s Rating This means that we need to listen more to the Standard & Poor's assigned IPB a Financial Strength Membership. In this regard, we have established an Rating of BBB+/Stable/- in February 2013. The stable annual MSI Survey and the research will guide us as to outlook reflects on the upgrade to the Republic of where we must improve and where we can add value Ireland rating (BBB+/Stable/A-2) following Ireland's for Members. Promissory Notes Exchange deal. The Republic of Ireland rating effectively caps the IPB Financial Members Dividend Strength Rating. In 2011, IPB reviewed how best to utilise its financial Solvency II strength to benefit its Members. Its Articles of Standard & Poor’s have noted the Capital and Financial Association were changed at an EGM to allow for strength aspect of IPB’s rating as ‘AAA’. With excellent payment of a Dividend to Members with the first ever financial strength, IPB is well capitalised and prepared Dividend paid in November 2011 and a subsequent for the enhanced requirements of Solvency II. In this Dividend paid in October 2012.

4848 IPB Insurance Stakeholder & Annual Report 2012 REPORT

IPB has a firm commitment to Members to " IPB is changing to meet continuously seek to do more, to act in their best o

interests and to build on our mutual ethos by making the new challenges that lie f a difference to our Members and their communities, ahead and our on-going t setting us apart within the insurance sector in Ireland. h

gradual transformation e Social Dividend will see further innovative b

Last year, I outlined to you our intention to issue a o

Social Dividend, the first ever for an Irish company. Stakeholder activities with a The original Dividend announcement of €1m was our Members through to r subsequently increased to €5m by the Board and was d & formally announced at our AGM last year. To date, social engagement with the

our CSE Steering Committee has channeled over wider Irish public." e

€1.35m in funding through direct supports, strategic x partnerships with Government and our network of e

Looking ahead, I believe IPB’s future is very bright cu Members. and presents us with a challenging but exciting

opportunity to build our Mutual to even greater t

Conclusion iv heights with the values of mutuality, sustainability, Overall, I’m satisfied that in a year of significant ethics and social engagement playing a pivotal role in e economic challenges, IPB delivered its strongest our future success. financial performance to date. IPB is changing to meet the new challenges that lie ahead and our on-going gradual transformation will see further innovative Stakeholder activities with our Members through to social engagement with the wider Irish public.

The continuation of depressed economic conditions, alongside a shrinking insurance sector and competitive marketplace, presents a difficult Ronan Foley backdrop; however, I am confident that our unique Chief Executive position in the Irish marketplace as the only wholly Irish-owned insurance Company and leading public sector insurer will assist us in achieving sustainable profitable growth into the future.

IPB Insurance Stakeholder & Annual Report 2012 49 IPB 360 The Board of Directors

George Jones Chairman

George has spent approximately 38 years working in the insurance industry, during which he held management positions in the areas of Corporate, Personal, Commercial and Human Resources. George is an independent Chairman of the RSA Pension Scheme Ireland.

Spending over 34 years as an elected Member of Wicklow County Council and Greystones Town Council, George has been elected to the position of Chairman of Wicklow County Council on four occasions and to the position of Mayor of Greystones on six occasions.

He is currently Chairman of the Wicklow County Development Board and he chairs the Greystones Home Help Company, Wicklow – Wurzburg Partnership Committee and the La Touche Legacy Committee. He became an elected Group Non-Executive Director of the Board of IPB in 2006 and Chairman in 2010 and he is a Member of IPB’s Remuneration and Nomination Committee.

R onan Foley Chief Executive

Ronan joined IPB as Chief Executive in August 2011. In December 2011, he was appointed Executive Director of the Board of IPB, the first Executive Director of IPB in its 86 year history and he is also a Member of the Risk Committee. Prior to joining IPB, he worked with Ecclesiastical Insurance Group as Managing Director for Ireland. He has also worked with Chubb Insurance Company of Europe S.A., as Vice President and Regional Manager for England South East.

In 2012, he was appointed to the Board of The Ireland Funds and the Government's Forum on Philanthropy and Fundraising in Ireland.

Ronan is a Graduate Member of the Marketing Institute of Ireland ("MMII Grad") and a member of the Institute of Directors in Ireland.

5050 IPB Insurance Stakeholder & Annual Report 2012 REPORT

Michael McGreal Vice-Chairman o

Michael has been a Member of Roscommon County Council since 1985 and he f

is a Member and former Chairman of the West Regional Authority. t h

Michael undertook the Diploma in Corporate Governance programme in UCD e

Michael Smurfit Business School in 2009 and he graduated in December 2010. He b

is a member of the Institute of Directors in Ireland and he is currently pursuing the o

Institute's Chartered Director Programme. a

Michael has been a Group Non-Executive Director of the Board of IPB since 2005 r d & and he is Chairman of IPB’s Remuneration and Nomination Committee and a Member of IPB's Audit Committee. e x e

Garry Cullen cu Director t

Garry has over 40 years’ experience in the insurance industry, both locally and iv internationally. His career ranges from risk surveyor and underwriter with RSA Group e through broking with Willis.

In later years, his career has taken him through the Irish Financial Services Centre (“IFSC’’) where, in conjunction with the Irish Development Authority (“IDA’’) and the Department of Finance, he brought the first captive insurance operation to Dublin. As the former Chief Executive of Aon’s international operations in Ireland, he has contributed to numerous conferences and seminars.

A founding member of the Dublin Insurance and Management Association (“DIMA’’), he is also a member of the Institute of Directors in Ireland, a Chartered Insurer and an Associate of the Chartered Insurance Institute. He currently holds a number of Non-Executive Directorships of insurance and reinsurance companies for both Irish and international operations.

Garry has been an Independent Non-Executive Director of the Board of IPB since 2011 and he is Chairman of IPB’s Risk Committee.

IPB Insurance Stakeholder & Annual Report 2012 51 IPB 360 the board of directors

Enda Devine Director

Enda has held a number of Senior Executive and Board level positions over ten years in several leading global financial services organisations, including Scotiabank (Ireland) Limited, Postbank and EBS Building Society. Enda was Chief Financial Officer at Postbank and Head of Finance and Head of Strategic Planning at EBS Building Society. He is a Non-Executive Director at Bizworld Ireland Foundation Limited.

Enda is a qualified accountant and a Fellow of the Association of Chartered Certified Accountants. He is also a Fellow of the Institute of Bankers and a member of the Institute of Directors in Ireland, and he holds a Diploma in Information Systems from Trinity College.

Enda joined IPB as Chief Financial Officer in November 2011 and he is an Executive Director of the Board of IPB.

Tom Donlon Director

Tom joined IPB from AIG Ireland where he held the role of Executive Director and “Signing Actuary” and had responsibility for Risk Management and Actuarial Services. He worked for several years as an actuarial consultant with the non-life insurance practices at Ernst & Young (London), Deloitte (Sydney) and Quantum-EMB (Dublin), having started his career as a student actuary with the Prudential UK in 1995. Tom is a Fellow of the Society of Actuaries in Ireland, a member of its General Insurance Committee and a Fellow of the Institute of Actuaries, UK.

Tom joined IPB as Chief Risk Officer in 2012 and he is an Executive Director of the Board and a Member of IPB’s Risk Committee.

Michael Fitzgerald Director

Michael is a Tipperary County Councillor of 32 years. Michael has served as Chairman of his own Local Authority on three occasions, chaired the South East Regional Authority and was President of the Association of County & City Councils.

A farmer and public representative and formally a Board Member of Dairygold Co-Op Society (Tipperary Region) for seven years, Michael has vast experience of Local Government and Municipal Authorities. Michael has been a Group Non-Executive Director of the Board of IPB since 2008 and he is a Member of IPB’s Risk Committee.

Michael has recently been appointed to IPB's CSE Steering Committee, which is charged with setting guidance and direction and providing recommendations to the Board on the Company's CSE Framework.

5252 IPB Insurance Stakeholder & Annual Report 2012 REPORT

Dermot Gorman Director o

A Chartered Insurer and affiliate member of the Society of Actuaries in Ireland with f

over 30 years’ experience in local and international markets, Dermot has recently t been awarded the Diploma in Company Direction from the Institute of Directors. h Dermot is an Independent Non-Executive Director of a number of insurance e b institutions based in Ireland, including subsidiaries of RSA and ACE. o

He previously held senior positions at HSBC’s insurance operations and worked with a

FBD in the domestic market. r d & Dermot has been an Independent Non-Executive Director of the Board of IPB since 2011 and he is Chairman of IPB’s Audit Committee. e x e

Sean O’Grady cu Director t

Sean has 31 years’ experience in the insurance industry and now pursues a full-time iv career in public life. He has been an elected Member of the Killarney Town Council e since 1974 and is currently Mayor of Killarney.

He serves on many community associations and devotes considerable time to helping young people in their fight against substance and alcohol misuse. In April 2010, he was appointed Chairman of the Joint Policing Committee.

Sean brought his considerable knowledge of the industry to the Board of IPB in 2008 when he was appointed to the role of Group Non-Executive Director.

John Smyth Director

John is a professional corporate governance specialist with extensive experience in Ireland, the UK and Europe. He is a Chartered Director and Chartered Secretary, with post graduate diplomas in corporate governance and company direction. He is a past President of the Institute of Directors and Chairman of the Consultative Committee, which produced a Code of Practice for Corporate Governance Assessment in Ireland in March 2010.

Former Chief Executive of the First National Building Society /First Active plc., Director of various companies and Chairman of the Audit and Risk Management Committee at the Department of Education, Northern Ireland, John brings a strong and broad knowledge of corporate governance to his role of Independent Non- Executive Director of the Board of IPB, to which he was appointed in 2011. John is also a Member of IPB's Audit, Risk and Remuneration and Nomination Committees.

IPB Insurance Stakeholder & Annual Report 2012 53 IPB 360 The Members Consultative Forum

The MCF was established at IPB’s June 2012 AGM as a direct response to an idea put to the Board at the June 2011 EGM by Cllr. Dermot Lacey. This Member-led initiative will support IPB’s efforts in ensuring that it continues to put its Members at the centre of its business.

It was agreed that the MCF will be comprised of one Representing Munster appointed representative of the City and County Cllr. Bobby O’Connell, Kerry County Council Nominee Managers’ Association (“CCMA’’), one appointed Representing the Dublin Regional Electoral Region representative of the Heads of Finance (“HOF’’) and Cllr. Dermot Lacey, Dublin City VEC Nominee five Local Authority representatives (one representing Cllr. Donal Marren*, Dun Laoghaire VEC Nominee Connaught/Ulster, one representing Leinster, one Cllr. Mags Murray*, Fingal County Council Nominee representing Munster and two representing the Dublin European Electoral Region). Appointees: The individuals who were elected at the AGM to sit Representing the CCMA and serve on the Forum for the next three years are: Mr. Eddie Sheehy, Wicklow County Manager

Representing Connaught/Ulster Representing the Heads of Finance Mr Pat Gilmore, Galway County VEC Nominee Ms Fiona Lawless, Meath County Council

Representing Leinster At the inaugural Meeting of the MCF, Mr Pat Gilmore Cllr. Denis Foley, Carlow VEC Nominee was elected Chairman and Cllr. Denis Foley was elected Deputy Chairman.

Mr. Eddie Sheehy Cllr. Denis Foley Mr. Pat Gilmore Cllr. Dermot Lacey

Cllr. Bobby O’Connell Ms. Fiona Lawless Cllr. Donal Marren* Cllr. Mags Murray*

* Cllr. Marren and Cllr. Murray will share the representation of the Dublin European Electoral Region over the three year term of the Forum with Cllr. Marren taking the first half of the term.

5454 IPB Insurance Stakeholder & Annual Report 2012 REPORT Corporate Governance Leadership Statement

The commitment to high standards of corporate governance standards is led by the o Chairman, the Board of IPB and all staff working to achieve this requirement for the f business. IPB is not classified as a major institution under the Code of Corporate t

Governance for Credit Institutions and Insurance Undertakings 2010, however it is h required to meet the relevant requirements of that Code. In so doing, IPB ensures e b compliance with Article 10(3) of the European Communities (Non-Life Insurance) o Framework Regulations 1994 (S.I. No. 359 of 1994) and Regulation 20 of the a

European Communities (Reinsurance) Regulations 2006 (S.I. No. 380 of 2006). r

The Corporate Governance Leadership Statement outlines the manner in which IPB d & has worked to effectively comply with the Code during 2012, implementing it as one

of the key tools to a better way of doing business both ethically and structurally. e x

With its Membership at the heart of its operations, IPB has worked relentlessly to e cu provide assurance that regulatory control and changes have been adopted where required by the IPB Board of Directors in a clear and transparent manner. t iv

The annual assessment of the Board and its skills and expertise has ensured that e a fresh approach to all Board matters has continued. In this regard, the Board has seen the addition of two new Executive Directors in 2012, adding fresh skills and experience to its Membership.

IPB Insurance Stakeholder & Annual Report 2012 55 IPB 360 The Board of Directors

Board and Board Committee Composition during the financial year ended 31 December 2012

Audit & Remuneration Appointment Compliance & Nomination Risk Term on the Name Date Board Role Committee Committee Committee Board in Yrs George Jones 25-May-06 Chairman - Member - 6.6

Michael McGreal 26-May-05 Vice Chairman Member Chairman - 7.6

Garry Cullen 25-July-11 Non-Executive - - Chairman 1.4

Enda Devine 02-May-12 Chief Financial Officer Attendee Attendee 0.7

Tom Donlon 15-Nov-12 Chief Risk Officer Attendee - Member 0.1

Michael Fitzgerald 31-May-07 Non-Executive - - Member 5.6

Ronan Foley 21-Dec-11 Chief Executive Attendee - Member 1.0

Dermot Gorman 25-Jul-11 Non-Executive Chairman - - 1.4

Sean O’ Grady 29-May-08 Non-Executive - - - 4.6

John Smyth 25-July-11 Non-Executive Member Member Member 1.4

Role of the Board ie. the Chief Executive, Chief Financial Officer and Chief The key role of the Board is leadership and oversight Risk Officer. As the year progresses, Board Membership of the implementation of the business strategy by the may also be adapted to ensure the continued Chief Executive in a transparent and effective manner. development of its skills and expertise to meet The Chairman leads the Board and is responsible business demands. The biographies of each of the for ensuring that each Director participates fully as individuals who have accepted the role of IPB Director a Member. The positive and consistent challenges have been outlined towards the start of this corporate by the Board to Management are a critical function governance analysis. to provide assurance to IPB’s Members that the The skills provided by each of the Executive and business and its Executive Management Team achieve Independent Non-Executive Directors assist the appropriate governance standards whilst meeting the business during a time of development, whilst the business goals and objectives. There is a clear division Group Non-Executive Directors ensure that both the of responsibilities between the Chairman and the experience and continuity of the strong legacy of IPB Chief Executive. are maintained. The Board, following the amendments to its Membership in 2011, confirm that they have Composition of the Board the required skills and experience to meet the current Based on the revised Code and regulatory control objectives in the role of IPB Director effectively. requirements, the current Board is comprised of three A comprehensive programme of training and Independent Non-Executive Directors, four Group development has been agreed by all of the Directors to Non-Executive Directors and three Executive Directors, ensure continuous learning and skills enhancement.

5656 IPB Insurance Stakeholder & Annual Report 2012 REPORT

Terms of Reference and The Directors have confirmed during 2012 that they have met the requirements of independence, as

Reserved Powers o The Board meets regularly or as often as required specified under the Corporate Governance Code for f to meet its responsibilities and has clear terms of Credit Institutions and Insurance Undertakings 2010, the Fitness and Probity Standards (issued under Section t reference outlining its authority and responsibility, h

with a detailed schedule of matters reserved to it as 50 of the Central Bank Reform Act 2010) and also in e its agenda for discussion, debate and decision. agreement with the CBI requirements. b

The Board will resolve to formally approve the o

Board Meeting Protocol a strategy of the business and the appointment and

Prior to each Board Meeting, each Board Member is r removal of key roles within the Board Membership or provided with all of the relevant papers in a timely d & executive management as appropriate, including the fashion to ensure that the Board can operate in an internal Risk/Regulatory Management Framework and effective manner, giving them the appropriate time to all other systems of control within the business. This consider the matters at hand. Where a Board Member e provides the Board with the required oversight when x

requires additional expertise or guidance they can, e considering the risk appetite for the business. with the agreement of the Chairman of the Board, cu seek external expertise whilst also relying on the Conflicts of interest information provided to them by the expertise within t In advocating a requirement for transparency at all iv the Executive Management Team.

levels of the business, the Board has elected at each of e its Meetings or any of its Sub-Committees to require a The Executive Management Team or any other declaration of a conflict of interests, if appropriate, by any member of the Management Team may be called of its Members as a standing agenda item. upon by the Board to provide briefings, either orally or by written report as required. The Company Secretary This is to ensure that this is foremost in each of the acts as the central point for the co-ordination of Directors’ thoughts as they engage with the business. To Board Meetings and documentation and ensures this end, both Compliance and Human Resources have the compliance of Board procedures and all required included as part of their programme of work for 2012 regulatory controls as specified. the development of a detailed Conflict of Interest Policy as part of the Business Code of Conduct Policy and Board Performance Employee Handbook, which has been approved by the The Board undertakes an annual evaluation of Board as part of its responsibilities. its performance, its Directors and its Committees The Board requires its Directors to act in the best through a written evaluation and discussion. This interests of the business and to be independent of is recorded by the Company Secretary and where any other institution, management, political interests deficiencies are identified, actions are agreed to or inappropriate agenda outside interests, including remediate these as quickly as possible through the their own, to facilitate that requirement. Each Director Board and with the assistance of the Chief Executive represents the integrity of the business and its as appropriate. The position of Chairman is elected on requirement to work both ethically and compliantly as a an annual basis and each Director’s role is reviewed fundamental building block within IPB. through the annual evaluation process or at a minimum every three years.

IPB Insurance Stakeholder & Annual Report 2012 57 IPB 360

Authority and Sub-Committees with clear terms of reference and understanding Authority to effectively manage the business has of their commitment to meet them. The Board been delegated by the Board to the Chief Executive recognises that it cannot abrogate responsibility for and in effect to the Executive Management team. these Sub-Committees and seeks to ensure that they The Investment Sub-Committee of the Board meet their objectives with the Board maintaining full was subsumed to the Board during 2012 in order responsibility for internal control, internal audit, and to provide the Board with sufficiently frequent risk management. opportunities for the assessment of the high level The three Sub-Committees are as follows: asset allocation strategy and investment activities of the business, the consideration of investments that • The Audit Committee may involve reputational risk to the business and the • The Risk Committee monitoring of the implementation of IPB’s Investment Policy and IPB’s compliance with legislation, codes • The Remuneration and Nomination Committee and/or regulatory requirements as appropriate to the Each Sub-Committee has in place agreed terms nature of the investments made on behalf of IPB. of reference and a programme of work for The Board has, taking into account the size and implementation annually, which are formally complexity of IPB as a business, also delegated approved by the Board. The terms of reference for authority to three Board Sub-Committees to each Sub-Committee are available on www.ipb.ie and complete separate programmes of work on its behalf they are reviewed regularly as required by each whilst ensuring that they report on a regular basis Sub-Committee.

5858 IPB Insurance Stakeholder & Annual Report 2012 RE The Board Sub-committees PO RT The Audit Committee • Reviewing the statement on internal controls

As required by the Corporate Governance Code within IPB; of for Credit Institutions and Insurance Undertakings • Where appropriate, assessing and/or approving

2010, the majority of the Audit Committee consists Internal Audit function resources; and the of Independent Non-Executive Directors, one of • Reviewing and considering the escalation process whom, Dermot Gorman, is the Committee Chairman. for employees as per the Whistleblowing Policy

The Chief Executive, the Chief Financial Officer, the bo outlined in the Ethics Policy for IPB and the matters Chief Compliance Officer and the Chief Risk Officer raised through this process. normally attend these Meetings by invitation or ar as required in conjunction with the external and In addition to its usual work, during 2012 the d internal auditors. The Internal Audit function has Committee has overseen a tender of the external & e been outsourced and the Committee will review audit function and supervised a major project of these arrangements in 2013. The Committee remit conversion to International Financial Reporting Standards. The Chairman has outlined his role and the x is outlined in detail in its terms of reference and Committee objectives over the coming year as e includes but is not limited to: cu " to provide leadership to the business in enhancing • Monitoring the integrity of IPB’s financial its control environment, to provide the Board with ti statements and the judgments contained therein; assurance that appropriate progress is being made v

• Reviewing the annual and interim financial in this area, and to ensure the integrity of financial e statements for recommendation to the Board; reporting to members and other Stakeholders. The Committee has been very active during 2012 and • Reviewing the terms of engagement and looks to maintain that momentum in the coming independence of the external auditors, year. Our priorities include oversight of an intensive including making recommendations regarding programme of internal audit review, the further reappointment or removal of the external auditors development of financial reporting in the newly as appropriate; adopted IFRS framework, and ensuring continuing • Reviewing the annual internal audit plan for high standards of review by external auditors.” approval by the Board;

• Reviewing the risks highlighted through the internal audit plan and associated risks highlighted in the Management Risk Framework reported to the Committee; Dermot Gorman

IPB Insurance Stakeholder & Annual Report 2012 59 IPB 360

The Risk Committee and management of risk. The Committee developed The Risk Committee is chaired by Garry Cullen, a thorough understanding of the risks within the an Independent Non-Executive Director, and its business and continues to develop risk controls Membership was strengthened in 2012 with the as the business evolves. Monitoring of key risk Board-approved appointment of John Smyth, an metrics against Risk Appetite was implemented. The Independent Non-Executive Director. Michael Company’s Solvency II Steering Group continued to Fitzgerald, an Independent Non-Executive Director, deliver the Company’s Solvency II Program despite remains on the Committee and Committee external uncertainties about the timing of the Membership includes two Executive Directors, i.e. the Omnibus II Directive at a European level. A robust Chief Executive and the Chief Risk Officer. Meetings system of quantification of economic capital was are attended by the Chief Financial Officer, Chief introduced for the first time and is informing the Compliance Officer, Head of Underwriting, Head of Committee’s understanding of the Company’s risk Claims, Head of Investments and others as required. profile. The Committee also approved several risk The Committee continues to have the appropriate related policies in 2012 to enhance the control and skills and experience necessary to ensure that risks are governance environment. managed effectively and escalated as appropriate. As one of the key control functions, the Risk The Committee oversees the management of risk in Management Function will continue to evolve the Company and its duties include oversight of the throughout 2013 and it will continue to identify, Risk Management Function, advising the Board on risk measure, monitor, report and manage the risks strategy, risk policy and risk appetite and other duties to which the Company is or may be exposed. as prescribed in its terms of reference. The Committee will continue to closely monitor adherence to Risk Appetite and to take pre-emptive Risk is an integral part of insurance business and action in advance of risk emergence. It will continue results in both better-than-expected and worse- to strengthen risk governance and control systems than-expected outcomes. Risk Appetite is the and position the Company to withstand unexpected overall level of risk the Company is prepared to and unfavourable events as they arise. Solvency II accept and this is expressed by the Board in the preparations will continue at an appropriate pace, Company’s Risk Appetite Statement, which enables implementing best practices whether mandated or the Company to accept measured risk in pursuit of its not. The Committee will continue to oversee the day- strategic objectives. The Risk Management Function to-day management of risk resulting from strategic is responsible for monitoring adherence to Risk threats, regulatory change, operational change, Appetite. A system of alerts and proximity warnings is reserving uncertainty, natural catastrophes and other used to ensure that pre-emptive action is taken well emerging risks. in advance of a limit breach.

The programme of work that the Committee agreed for 2012 has delivered significant improvements to the Company’s risk management competency. For example, the Board-approved Risk Framework outlines the risk management system for the identification, measurement, monitoring, reporting Garry Cullen

6060 IPB Insurance Stakeholder & Annual Report 2012 REPORT

The Remuneration and competitive and that they will attract and retain individuals of the quality required and motivate them

Nomination Committee o The Remuneration and Nomination Committee is to perform in the best long-term interests of the f comprised of three Non-Executive Directors and organisation. t the Members are set out on page 56. There were no The Committee uses the services of external h changes to the composition of the Committee during independent consultants to provide advice on e b 2012. The Chief Executive is not a Member of the compensation and remuneration matters as required.

Committee but is invited from time to time to attend o The Remuneration and Nomination Committee as required. a

is responsible for the Fitness and Probity Process r The Committee meets at least twice during the year, regarding the nomination of appropriate applicants to d & and details of attendances at the Meetings held the Board. This also includes the annual review of Fitness during 2012 are set out on page 62. and Probity requirements of current Members of the e Board to ensure the continuation of required standards. The Committee is responsible for determining the x

Company’s policy on Executive Remuneration, The Committee ensures the continued development e cu considering and approving the remuneration for the and assessment of skills and experience for the Board Chief Executive, Chairman, Executive Directors and

Members. In-house training has been provided during t certain Senior Management who report directly to the year to the Board in this regard and a programme iv the Chief Executive.

of targeted and continuous professional development e The Committee is accountable for recommending to for Executive and Non-Executive Directors is scheduled the Board the fee structure for Non-Executive Directors for implementation during 2013. together with the remuneration of the Chairman.

During the year the Committee approved the Company’s Remuneration Policy, which it now governs.

The Remuneration and Nomination Committee aims to ensure that remuneration packages are Michael McGreal

IPB Insurance Stakeholder & Annual Report 2012 61 IPB 360

Attendance at Board and Board Committee Meetings during 2012

Audit & Remuneration Board Compliance & Nomination Risk

Name ABABABAB

George Jones (Chairman) 13 13 10 2 5 5 7 -

Michael McGreal (Vice-Chairman) 13 13 10 - 5 5 7 -

Garry Cullen 13 12 10 - 5 - 7 -

Enda Devine* 13 7 10 10 5 - 7 4

Tom Donlon** 13 3 10 2 5 - 7 5

Michael Fitzgerald 13 12 10 - 5 - 7 7

Ronan Foley 13 13 10 10 5 3 7 7

Dermot Gorman 13 13 10 10 5 - 7 -

Sean O’ Grady 13 13 10 - 5 - 7 -

John Smyth 13 13 10 10 5 5 7 1

A = the number of meetings held during the period. B = the number of meetings attended during the period as a Board or Committee Member. *Appointed as Director 02/05/12 **Appointed as Director 15/11/12 Note: In addition to the above scheduled Meetings, the Board held two away day strategy and planning sessions during 2012.

6262 IPB Insurance Stakeholder & Annual Report 2012 REPORT Directors' remuneration

Directors’ Remuneration Details The performance targets vary by individual and are Details of the total remuneration of the Directors in based on both Company performance and individual office during 2011 and 2012 are shown in note 9b on performance and contribution, but in each case the o page 109. required contribution by the individual is targeted f

towards those initiatives within the individual’s control t

Executive Director Remuneration h and/or influence that directly support the Board’s

The various elements of the remuneration package e strategic initiatives for growth for IPB. for Executive Directors comprises of fixed and b performance-related remuneration. Pension Benefits o IPB operates a defined contribution scheme to which Fixed Remuneration a contributions are made by the Company at an agreed Base salaries and benefits: The salaries of Executive r fixed rate. Non-Executive Directors do not participate Directors are set by the Remuneration Committee d & in the Company’s pension plan. and are reviewed annually having regard to individual performance, Company performance and Non-Executive Director Remuneration e competitive market practice. No fees are payable to The remuneration of the Non-Executive Directors x

Executive Directors. In addition to base salaries, the is determined by the Board and reflects the time e

remuneration package of Executive Directors includes commitment and responsibilities of their role. cu a motor and health insurance allowance. In setting the level of this remuneration, the Board

has full regard on the level of fees payable to the t Performance-Related Remuneration Non-Executive Directors of other similar Irish iv Annual bonuses are payable to the Executive Directors organisations. The Company reviewed the fee structure in respect of each financial year and are subject to e of the Non-Executive Directors and Chairman in 2012, the achievement of clear performance targets. These taking account of any changes in responsibilities and targets are reviewed and set by the Remuneration benchmarking data on the level of fees in a range Committee annually so as to ensure as far as possible of comparable Irish organisations. the alignment of Management interests with those of Stakeholders.

IPB Insurance Stakeholder & Annual Report 2012 63 IPB 360 Reporting

Relations With Members Annual General Meeting The Board gives high priority to communications with The Annual General Meeting of the Company will be Members. Through its Stakeholder and Annual Report held at the Convention Centre Dublin on 17 May 2013. and regulatory announcements during the year, IPB Memorandum and Articles of Association provides a review of its performance and prospects. The Company’s Memorandum and Articles of The IPB website www.ipb.ie provides the full text of its Association set out the principal objects and powers Stakeholder and Annual Reports for ease of reference of the Company. The Articles of Association detail the of its Stakeholders. provisions applicable to the holding of and voting at The Chief Executive, Chief Financial Officer and other General Meetings of the Company and appointment, Senior Executives meet with Members on an on-going removal, remuneration and re-election of Directors basis and also at the time of release of annual results. together with their duties and powers. The Company’s Throughout the year, the Company responds to letters Articles of Association can only be amended by the and e-mail communications received from Members. passing of a Special Resolution by Members (requiring Members also have access to the Chairman and, if a majority of at least 75% of the votes cast) at an Annual required, to other Board Members. or an Extraordinary General Meeting of the Company.

Members’ General Meetings Internal Control The Company holds its Annual General Meeting The Board is responsible for IPB’s system of internal (“AGM’’) in Ireland each year and Notice of the AGM, control and for reviewing its effectiveness. Such a together with the Stakeholder and Annual Report, is system is designed to manage rather than eliminate sent to Members at least 21 business days in advance. the risk of failure to achieve business objectives All Members* are entitled and encouraged to attend and can provide only reasonable and not absolute the AGM, at which they can meet the Chairman, assurance against material misstatement or loss. Sub-Committee Chairmen, Directors and Senior In accordance with the revised Corporate Governance Executives. A separate resolution is proposed on each Code for Credit Institutions and Insurance substantially separate issue, including a particular Undertakings 2010, the Board confirms that there is resolution relating to the Directors’ Report, financial an on-going process for identifying, evaluating and statements and the re-election of the Group Non- managing any significant risks faced by IPB. It also Executive Directors. notes that this process has been in place for the year All other General Meetings are called Extraordinary under review and up to the date of approval of the General Meetings (“EGMs”). In the instance where an financial statements and that this process is regularly EGM is called to pass a Special Resolution, 21 clear reviewed by the Board. The key risk management and days’ notice must be provided to all Members. internal control procedures include: A quorum for a General Meeting of the Company is • Skilled and experienced management and staff constituted by 20 or more Members entitled to vote • An organisation structure with clearly defined lines in person or by proxy. Resolutions, other than Special Resolutions require a simple majority, whilst Special of responsibility and authority Resolutions require at least 75% of votes. • A comprehensive system of financial control All Members have the right to attend, speak, ask incorporating budgeting, periodic financial questions and vote at General Meetings. reporting and variance analysis

* Members as defined in the Irish Public Bodies Mutual Insurances Ltd Memorandum and Articles of Association

6464 IPB Insurance Stakeholder & Annual Report 2012 REPORT

• The operation of approved risk management In 2012, IPB outsourced its Internal Audit function policies in the areas of underwriting, reinsurance, to Deloitte, who have implemented a schedule o claims reserving, investment and treasury of internal audit and review across all functions, including the Board, as part of its remit. The Internal f

• An internal control comprising Senior Management Audit function provides assurance to the Board, IPB t

whose main role is to identify, keep under review and Management and its Members that a robust internal h manage significant internal control risks facing IPB control framework is in place, whilst constantly striving e b • A Risk Committee, comprising Senior Management to independently recommend enhanced operational whose main role is to establish, document, and controls if required. o a devolve throughout the Company a comprehensive Proper Books and Records r risk management framework to fully meet the The Company has taken appropriate measures to d & requirements of Solvency II ensure that proper books of account have been • An Audit Committee whose formal terms of maintained through the employment of suitably

reference include responsibility for assessing the qualified accounting personnel and the maintenance e significant risks facing IPB in the achievement of of appropriate accounting systems. x its objectives and the controls in place to mitigate e those risks cu

• An Internal Audit function. t iv IPB has a comprehensive system of financial reporting involving budgeting, regular reporting and variance e analysis. The annual budget is reviewed and approved by the Board. Financial results with comparisons against budget are reported to Executive Directors on a regular basis and to the Board at each Board Meeting. Forecasts are updated regularly to reflect changes in circumstances.

Outsourcing In 2012, IPB has outsourced its operational functions to Brennan Insurances and in conjunction with Brennan Insurances seeks to ensure the highest level of service provision to all Stakeholders. There is in place a written agreement between both parties with key performance indicators and regular reviews scheduled annually. See also Financial Statements section note 9 and note 24 regarding outsourcing costs and note 29 regarding related party disclosures.

IPB Insurance Stakeholder & Annual Report 2012 65 IPB 360 Risk Management Framework

Risk Management and Internal Governance Risk management is at the heart of IPB. It is central is advised by subject matter experts on risk to safeguarding the promise IPB makes to its management, underwriting, claims, investments and policyholders. compliance.

The Board is responsible for ensuring that risk is Regular training, both internal and external, is a effectively managed by those involved in running the fundamental requirement for staff and Directors alike. Company on a day-to-day basis. The Board sets the Company’s appetite for risk and establishes prudent and effective controls to assess and manage risks. “…active participation

The Risk Committee assists the Board with its promotes a deep oversight of risk and risk management. The Risk understanding of the Committee follows a structured approach that covers business and effective risk all key risk types within the business, including emerging and strategic risks. The Risk Committee management.”

The Risk Framework The Risk Framework provides the Company with a comprehensive and efficient system to identify, measure, monitor and manage risk in the business. It ensures that risk management is aligned with the Company’s strategic objectives and it is guided by seven key principles.

Figure 1 Risk Management Principles

Risk Value Dynamic Compliant Holistic Proportional Integrated Culture Creation

Implementation of the Risk Framework relies on a system of integrated risk management tools that promote a risk culture throughout the Company.

Figure 2 Key Components

Risk Risk Capital Risk Risk ORSA Register Report Model Appetite Policies

6666 IPB Insurance Stakeholder & Annual Report 2012 REPORT

Risk Appetite “…an appropriate risk The Board defines Risk Appetite in order to ensure o the solvency of the Company at all times. Risk culture permeates f Appetite is ultimately expressed in terms of detailed throughout the Company.” t

operational limits that guide the day-to-day activities h

of those entrusted to run the business. This enables e the Company to pursue its strategic objectives whilst Capital Model b The Capital Model is used to quantify risk in the limiting risk in a clear and structured manner. o business. The Company uses the Solvency II Standard a All risks are monitored regularly and certain risk Formula for this purpose and its appropriateness r types are monitored daily. Procedures are in place

is regularly assessed. The Capital Model is used to d & to reduce risk levels should operational risk limits be quantify the capital impact of key events and key threatened. management actions. e

Risk Policies Own Risk and Solvency Assessment x Risk Policies define the formal risk management e

The Own Risk and Solvency Assessment (“ORSA”) cu and control requirements of the Company. The is the entirety of the processes and procedures effectiveness of policies and controls is regularly employed to identify, assess, monitor, manage and t reviewed and tested. report the risks the Company faces. It considers the iv

overall capital needs of the Company with reference e Risk Reporting and Risk Registers to a range of stressed scenarios. It also considers other The Risk Committee is regularly informed by a risks that may be outside the scope of the Capital comprehensive Risk Report that covers all risk types. Model. The Company continues to evolve the ORSA in The Report includes highly detailed data on key line with Solvency II guidance. risk exposures and risk metrics, as well as specific information on the key individual risks. Risk Profile A dynamic operational Risk Register is the key tool in The Company is exposed to a number of risk the management of operational risk. Workshops are categories. completed with staff at all levels to provide a detailed understanding of the various operational risks to The key risk for the Company is Underwriting which the Company is exposed on a day-to-day basis. Risk. Underwriting Risk arises from uncertainty in the occurrence, amounts and timing of insurance The management of risk is further facilitated by the obligations. prompt reporting of events that result in an actual loss, impair the efficient running of the Company or The Company is also exposed to Market Risk, which damage the Company’s good name. arises from financial instruments such as bonds and equities. It also includes uncertainty arising from interest rates and foreign exchange rates.

Figure 3 Risk Categories

Underwriting Market Liquidity Credit Operational Strategic Reputational Emerging

IPB Insurance Stakeholder & Annual Report 2012 67 IPB 360

Liquidity Risk arises when assets may not be available The Company moved to a quarterly cycle of to settle financial obligations when they fall due, or updating the Capital Model. This facilitates a deeper where assets can only be liquidated at a material cost. understanding of the key drivers of risk within the business. The Risk Committee is now provided with a Credit Risk arises from an unexpected default or quantification of the changes in the Company's risk deterioration in the credit standing of counterparties profile on a quarterly basis. The Company has also and debtors, particularly in relation to cash and developed new applications for the Capital Model, reinsurance. including the assessment of credit risk for reinsurance Other key risks for the Company include Strategic counterparties. Risks and Operational Risks. Plans for 2013 Progress in 2012 In 2013, the Company will focus on an automation of The Company appointed a Chief Risk Officer (“CRO”) the Capital Model calculations to improve efficiency in May 2012. and quality of the output. The Company will Key activities during the year included the continue to integrate the use of the Model into the formalisation of the risk management framework management of the business. and the implementation of new policies and controls The Company will continue to develop its risk including the Internal Control Framework. Other management capabilities throughout 2013, existing policies and controls were upgraded to a consistent with preparations for Solvency II. Key areas Solvency II standard, including the Investment Policy of focus will include risk reporting, the identification and the Risk Appetite Statement. and management of Strategic Risk and the ORSA.

6868 IPB Insurance Stakeholder & Annual Report 2012 REPORT SOLVENCY II

The purpose of Solvency II is to unify a single EU insurance market and to enhance policyholder protection. It is a risk-based system requiring the Company to hold capital o

consistent with the underlying risks of the Company. Solvency II is based on a f

“market-consistent” principle where the value of assets and liabilities are consistent t with observable markets. h e b

“ Solvency II is not just were unlikely to be completed to plan. This may o

about capital. It’s about a have implications for the planned Solvency II a

implementation date of 1 January 2014. Nevertheless, r

change of behaviour.” the Company continues to proceed with its own d & Thomas Steffen, Chairman of CEIOPS, at the launch internal preparations to the original timelines. of the draft framework of the Directive.

In 2012, the Board established the “Solvency II e

Steering Group” to formally manage the delivery of x

Solvency II encourages companies to manage e Solvency II within the Company. The Steering Group their financial position within a risk management cu is delivering Solvency II to a detailed plan and to framework and to measure, monitor and remediate or

an approved budget. Key activities during the year t transfer risk within their individual business. included the implementation of new policies and iv

Solvency II is underpinned by a “three pillar” approach. controls required under Solvency II and the upgrading e Pillar 1 covers the quantitative requirements, of existing policies and controls to a Solvency II specifically in relation to capital requirements. Pillar standard. 2 sets out requirements for the governance and risk management of insurance companies, as well as for Plans for 2013 the effective supervision of insurers. Pillar 3 focuses on In 2013, the Company will enhance data and disclosure and transparency requirements. procedures relating to the Capital Model as required under Pillar 1. K ey Developments in 2012 Under Pillar 2, the Company will continue to upgrade Solvency II negotiations continued throughout internal governance to a Solvency II standard and 2012 between the European Commission, the ensure successful implementation. European Parliament and the European Insurance and Occupational Pensions Authority (“EIOPA”). Under Pillar 3, the Company will continue to evolve Towards the end of the year it became apparent the detailed disclosures required throughout 2013 that negotiations on the “Omnibus II Directive” and into 2014.

Solvency II 3 Pillars Pillar 1 Pillar 2 Pillar 3 Quantitative Captial Governance & Supervision Market Discipline Requirements

• Risk-based • Internal controls • Transparency • Market-consistent • Risk management • Management information • ORSA • Public Disclosure • Supervisory review process • Solvency and financial • Capital add-ons condition report • Report to supervisors

IPB Insurance Stakeholder & Annual Report 2012 69 IPB 360 Compliance and Regulatory Risk Management Framework

Compliance management is the effective implementation of regulatory and compliance requirements within the business to ensure IPB provides its Stakeholders and staff with the relevant assurance. It ensures that IPB operates within a transparent, controlled and compliant environment.

IPB strives to provide its Members, clients and staff with confidence that the appropriate regulatory controls are embedded within its business to allow staff to manage each of their individual roles. This ensures that the Company continues to provide consistent standards of service to its Members in a positive and commercially competitive manner. In the current regulatory environment, compliance is a clear driver for the success of IPB in the market and as such, IPB will continue to invest in its processes, policies and people to maintain a high level of compliance in every aspect of its business.

Compliance Governance Structure The IPB Compliance and Regulatory Governance The key objective of the relationship structure clearly outlines the manner in which between the Board and the Compliance compliance and regulatory matters are discussed Department is to ensure effective throughout the business at all levels, ensuring a escalation where required, leading to clear understanding of the implications of non- effective decision-making and a continued compliance. The Compliance Department reports acknowledgement of the regulatory on an operational basis to the Chief Executive responsibilities of IPB as a business and of and to the Board directly. It also reports on a its Directors. regular basis or as required into the relevant The IPB Compliance Framework strives to embed Sub-Committees. its objectives through the methodologies and Whilst the Board has delegated the day-to- tools within the business. day compliance oversight activities to the The three core aspects of the Compliance Compliance Department, it still exercises Department include: oversight over it. The Compliance Department reports directly to the Board on all regulatory • Compliance and Regulatory Governance matters, and it has therefore been mandated to Structure provide training to the Company on all significant • Compliance Risk Framework legislative, regulatory issues and compliance risk management controls. It also requires periodic • Compliance Control Assessments and reporting on compliance statistics, risk analysis, Awareness Programmes action plans and significant issues to the Board and its Sub-Committees.

7070 IPB Insurance Stakeholder & Annual Report 2012 REPORT o

IPB Board f t h e b o

Remuneration a Audit Chief Risk & Nomination r

Committee Executive Committee d & Committee e x e

Chief cu Compliance Officer t iv e

“A strong IPB compliance environment relies on the People of its business to fuel its success.”

People Policies People Policies

Compliance Compliance & Ethics & Ethics

Process Process

IPB Insurance Stakeholder & Annual Report 2012 71

Credit Risk Insurance Risk Operational Risk Concentration Risk

Investment Risk Liquidity Risk Strategic Risk Environmental Risk Fraud Risk

Business risk Reputational Risk Financial Risk Market Risk

Risk Appetite Governing Financial Objectives

Risk Management Principles

Risk Appetite Measures

Strategic Business Objectives IPB 360

K ey External Stakeholder Compliance and Ethics Relationship Compliance is not limited to the embedding of IPB is regulated by the CBI and as such the CBI is regulatory requirements to ensure compliance as a a recognised Stakeholder in the success of the financial institution; rather, IPB seeks to operate from business. The Compliance function is responsible for a position of a positive and clear ethical background. the management of the relationship with the CBI In order to support the people of the business in however; there is a clear understanding across the their day-to-day management of situations that may business that the CBI may and will engage at the level cause any ethical concern to them, the Compliance appropriate to its objectives. Department has worked with Human Resources in implementing the Employee Handbook during 2012. Compliance Risk Framework This is a resource to staff and includes key policies such The IPB Compliance Framework is a tool for as whistleblowing processes, management of third Management to undertake their roles in a clear and parties and parties personally known to staff, standards transparent manner, aware of the regulations that of staff behaviour and general policies concerning impact their areas of responsibility on a day-to-day receipt of gifts or expressions of thanks from clients in a basis. The Framework includes: positive manner. Compliance and Regulatory Strategy Ethics within IPB can be defined as the application by and Statement the individual of a code of conduct to the strategic • Detailed business compliance manual and operational management of the business. • Detailed annual compliance plan It is set by the IPB Board and driven by all staff, all • Detailed policies and procedures Management and the Board. Ethics within IPB take shape in three definitive ways: • Annual statement of compliance • Across the industry in which it operates IPB Compliance Objectives • Identification, assessment, management and • Its corporate social engagement with the controlled implementation of compliance and communities it engages itself in regulatory requirements • Its reliance on the people who work within it.

IPB Compliance Principles In essence, IPB’s commercial objectives seek to go • Embedding regulatory and compliance hand-in-hand with the right people and environment requirements as part of decision-making processes that shape its industry. and business as usual within IPB for all staff and the Board of IPB.

IPB Compliance Framework Implementation Methodology • Compliance and regulatory control assessments • Incident management and recording • Governance structures and reporting • Compliance and regulatory training and awareness programmes at all levels. During 2012, a detailed programme of review has been agreed by the IPB Board for completion by the Compliance Department within IPB to ensure that IPB as a business continues to operate to the highest compliance and regulatory standards possible. This is only achievable with the direct involvement of staff, Management and the Board as leaders of the business.

7272 IPB Insurance Stakeholder & Annual Report 2012 Management Analysis, financial statements & Other Information 79 80 81 82 83 84 85 86 87 74 75 78 140 144 142

ATEMENTS

y t a Glance t a Glance olvency es to the Financial Statements the Financial es to nvestments and Assets Allocation and Assets nvestments tement of Changes In tement Equity Flows of Cash tement tement of Comprehensive Income of Comprehensive tement Position of Financial tement I Claims and Losses S ont THER INFORMATION ontrols and Accounting Policies and Accounting ontrols inancial Highlights Glossar C FINANCIAL ST Sta Sta Sta Sta Not O Our Members Company Information Information Company F IPB a Report Independent Auditors’ C ents ANALYSIS MANAGEMENT Market Context I PB 360 MANAGEMENT ANALYSIS

Market Context Economic factors remain challenging; however, the claims environment is positive.

E conomy Gross Domestic Product Growth Irish Insurance Market % €Bn 2 • Nega4 tive or weak GDP and fragile domestic demand. 1.4% 0.9% 0 -0.8% • E3conomic uncertainty has reduced but -2.1% -2 domestic demand is likely to decline further. 2 -5.5% • The central3.5 Government 3.2 3.1 initiative 2.9 to 2.7 -4 consolidate local Government, combined 1 -6 with the establishment of Irish Water and lower activity, reduces the value of insurable -8 risks0 in the Company’s core market. 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Source: CSO

Industry Market Gross Loss Ratio (Estimate) Gross Written Premium Gross Domestic Product Growth % Irish Insurance Market €m 100 Gross Domestic Product Growth Irish Insurance Market % €Bn 120 % • €BnIrish domestic insurance market 2 4 2 100contracted4 by circa 5.5% in 2012 to €2.7bn. 1.4% 0.9% 0 1.4% 0.9% 80 -0.8% 03 • Continued reductions in insurable risks -0.8% 3 -2.1% and values outweigh any rate increases. -2 50 -2.1% 60 -2 2 67% 80% 80% 70% 66% • Lower112 investment 112 returns 92 - a “new 89 norm” 90 -5.5% 3.5 3.2 3.1 2.9 2.7 402 -4 -5.5% for premium3.5 pricing. 3.2 3.1 2.9 2.7 -4 1 20 -6 1 -6 0 0 -8 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 -8 2008 2009 2010 2011 2012 Source:0 CBI 2008 to 2010 and estimates 2011 and 2012. 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Underwriting Result ClaimsNet Written Environment Premium • All insurers are reporting reduced €m €mfrequency10 in the47 claims 56environment 54 (1) Market Gross Loss Ratio (Estimate) 100 Gross Written Premium 60 Market Gross Loss Ratio (Estimate) Gross Written Premium % €m throughout 2012 across all classes of % 40€m 100 80120 claims. 16.8 100 120 47.4 26.3 100 • 20Indus try benefits from favourable weather38.9 60 100 6.2 30.0 28.0 conditions0 and no spike9.0 in property 80 4.0 92 91 72 70 72 80 40 claims. 50 60 -20 50 • R60eduction in the incidence of large claims.-40.2 67% 80% 80% 70% 66% 20 112 112 92 89 90 40 67% 80% 80% 70% 66% -40 112 112 92 89 90 • E40conomic activity and road safety -60 020 measures reducing risk in the market. 2008 2009 2010 2011 2012 20 2008 2009 2010 2011 2012 0 0 • Market claim volumes estimated to be 0 Underlying underwriting result Prior year releases and real 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 0 2008 2009 2010 2011 2012 down2008 7% in 2012. 2009 2010 yield adjustment 2011 2012 Net Combined Ratio Note: ProfitMarket BeforeGross Loss Tax Ratio % = Gross Claims Incurred / Gross Earned Premium % % 104% 65% 40% 42% 123% €m 150 Underwriting Result Source:100 CBI 2008 to 2010 and estimates 2011 and 2012. Net Written Premium 75 Underwriting Result 110 €m Net Written Premium 95 125€m€m 10 47 56 54 (1) 50 100 74 IPB60 Insurance Stakeholder & Annual Report 2012 €m 10 47 5666 54 (1) 100 2560 42 100 53.6% 0 40 80 16.8 26.3 -2540 7580 47.4 16.8 26.3 20 38.9 -50 47.4 30.0 20 38.9 60 6.2 28.0 -75 30.0 5060 9.0 -1716.2 28.0 0 69.6% -100 9.0 92 91 72 70 72 4.0 0 40 25 104%92 65% 91 40% 72 40% 70 72 -125 4.0 -2040 -150 -40.2 -20 0 -175 -40.2 20 -40 20 2008 2009 2010 2011 2012 -40 2008 2009 2010 2011 2012 Net combined ratio excl real yield -60 0 Real yield adjustment -60 2008 2009 2010 2011 2012 0 2008 2009 2010 2011 2012 Members2008 Dividend 2009 2010 2011 2012 Gross2008 Loss Ratio 2009 2010 2011 2012 Underlying underwriting result Prior year releases and real €m yield adjustment % Underlying underwriting result Prior year releases and real 12 105 yield adjustment 90% 80% Net Combined Ratio Profit Before Tax 85 10 Net Combined Ratio Profit Before Tax 70% % 104% 65% 40% 42% 123% €m 65 % 104% 65% 40% 42% 123% €m 60% 150 1008 150 10045 75 110 86.5% 43.6% 50% 95 75 82.2% 110 125 650 25 95 58.5% 50.5% 125 40% 42 1066 10 50 24.7% 25 5 66 30% 100 4 25 42 53.6% 1000 53.6% -150 -5.5% 20% -25 -30.5% 75 2 -25 -15.1% 75-50 -35 -50.4% 10% -50 -75 -55 0% 50 0 -171 -75 69.6% -10050 -171 2008 2009 2010 2011 201269.6% -100 2008 2009 2010 2011 2012 25 104% 65% 40% 40% -125 104% 65% 40% 40% -125 Gross loss (incurred) ratio prior year -15025 -150 releases and real yield adjustment 0 -175 2008 2009 2010 2011 2012 0 2008 2009 2010 2011 2012 -175 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Net combined ratio excl real yield Real yield adjustment Net combined ratio excl real yield Real yield adjustment Members Dividend Gross Loss Ratio Members Dividend Gross Loss Ratio €m %Gross Loss Ratio Solvency & Growth - Solvency I (Coverage Ratio) €m 12 %105 % 90% 12 89% 49% 23% 20% 102% 105 90% 115 35 80% 85 80% 10 85 95 30 70% 1065 70% 75 47.7% 65 60% 8 25 55458 60% 43.6% 50% 95.7% 86.5% 87.7% 45 3525 82.2% 20 86.5% 43.6% 50% 6 67.3% 58.5%58.8% 50.5% 82.2% 6 54.8% 25 40% 58.5% 50.5% 10 10 15 24.7% 40% 5 10 10 15 33 4 5 30% 24.7% -54 25 30% -15 -6.7%-5.5% 20% -25 -38.7%-30.5% -1510 19 20% 2 -18.3%-15.1% -64.6% -5.5% 16 -352 -50.4% -15.1%10% -30.5% -45 -355 12 -50.4% 10% 0% 0 -65-55 0 -55 0% 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 0 20082008 2009 2009 2010 2010 2011 2012 2012 2008 2009 2009 2010 2010 2011 2012 Gross loss (incurred) ratio prior year Net loss (incurred) Net loss (incurred) ratio prior year reserve Gross loss (incurred) ratio prior year ratio underlyingreleases and real yield releasesadjustment & real yield adjustment Solvencyreleases & andGrowth real yield -adjustment Solvency Required Margin New Claims Number & Excess of Assets over Liabilities Units € m 7,000 600 Gross Loss Ratio 6,000 Solvency & Growth - Solvency I (Coverage Ratio) % Gross Loss Ratio 500 Solvency & Growth - Solvency I (Coverage Ratio) 89% 49% 23% 20% 102% 5,000% 115 35 89% 49% 23% 20% 102% 115 40035 95 4,000 9530 600 30030 75 47.7% 3,000 5,951 7525 5,753 5,398 47.7% 55 4,731 4,396 20025 384 95.7% 87.7% 2,00055 298 332 35 67.3% 20 95.7% 87.7% 58.8% 54.8% 35 67.3% 20 200 15 1,000 58.8% 54.8% 100 1515 33 -5 15 33 0 25 0 -6.7% -510 25 -25 -38.7% -6.7% 19 2008 2009 2010 2011 2012 -18.3% -64.6% -25 2008 200916 2010 2011-38.7% 2012 10 19 -18.3% 16 -45 5 12 -64.6% S I (Surplus Capital - €m’s) -45 5 12 -65 -650 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Net loss (incurred) Net loss (incurred) ratio prior year reserve Net loss (incurred) ratio underlying releases & real yield adjustment Net loss (incurred) ratio prior year reserve Solvencyratio underlying & Growth -releases Solvency & real yieldRequired adjustment Margin Surplus before Tax Components InvestmentSolvency & AndGrowth Asset - Solvency Allocation Required Returns Margin New Claims Number & Excess of Assets over Liabilities New Claims Number % & Excess of Assets over Liabilities Units €m€ m (171) 95 42 66 110 7,000 Units95 €15 m 7,000600 11.2 600 6,000 55 48.6 10 6,000500 110.9 5 12% 5,000 15 10.2 500 2% 5,000 46.8 56.4 54.3 6% 400 0 4,000 -25 -1.3 400 4,000 -14.5 600 -1% 300 -5 600 3,000 5,753 5,951 -65 300 5,398 3,000 5,951 4,731 5,753 -17% 4,396 200 5,398 384 -10 2,000 -105 298 332 4,731 384 2,000 -181.1 4,396 200 332 200 -15 298 1,000 -145100 200 100 1,000 -20 0 -1850 2008 2009 2010 2011 2012 0 20082008 2009 2009 2010 2010 2011 2011 2012 2012 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 UnderwritingS I (Surplus result Capital - €m’s)Investment result less operating costs S I (Surplus Capital - €m’s) Actual Claims Numbers Financial Highlights - Net Combined ratio Units % 7,000 150 6,000 Surplus before Tax Components Investment And Asset Allocation Returns 125 Surplus before Tax Components Investment And Asset Allocation Returns 5,000% €m (171) 95 42 66 110 100% €m (171) 95 42 66 110 53.6% 4,00015 5,872 5,753 5,951 5,398 4,731 95 15 95 75 11.2 10 55 48.6 3,000 11.2 55 48.6 10 110.9 12% 50 15 10.2 2,0005 2% 104% 12% 46.8 56.4 54.3 10.2 6% 110.9 5 2% 15 46.8 56.4 54.3 0 25 66%6% 69.6% -25 1,000 -1.3 0 41% -14.5 -25 -1% -1.3 40% -5 -14.5 -1% -65 0 -50 -65 -10 -17% -105 2007 2008 2009 2010 2011 -10 2008-17% 2009 2010 2011 2012 -181.1 -105 -15 -181.1 Real yield -145 -15 -145 -20 -185 Analysis of the Investment Portfolio by Type -20 Analysis of the Investment Portfolio by Source -185 2008 2009 2010 2011 2012 % 2008 2009 2010 2011 2012 % 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Underwriting result Investment result less operating costs 100 100 Underwriting result Investment result9% less operating12% costs Actual Claims Numbers Financial14% Highlights - Net Combined ratio 14% 15% 80 Actual Claims15% Numbers 18% 80 Financial Highlights - Net18% Combined ratio Units % 14% 15% Units 14% 15% % 7,000 150 14% 11% 7% 7,00060 15060 9% 6,000 21% 17% 6,000125 14% 22% 27% 40 12540 5,000 61% 60% 61% 57% 59% 24% 5,000100 18% 22% 14% 5,872 5,753 5,951 5,398 4,731 53.6% 100 11% 4,000 20 20 4% 3% 53.6% 4,00075 5,872 5,753 5,951 5,398 4,731 4% 7% 21% 3,000 75 14% 17% 18% 14% 3,000 050 0 2,000 104% 50 2,000 2008 2009 2010 2011 2012 2008104% 2009 2010 2011 2012 25 66% 69.6% 1,000 66% 69.6% 1,000 Loan and receivables and other41% % Equity40% % 25Loan and receivables and other Local Authority Loans Ireland Sovereign Debt 41% 40% 0 0 Cash and cash equivalents % Local Authority Loans % Cash and cash equivalents Corporate bonds Germany Sovereign Debt 0 0 2007 2008 2009 2010 2011 2008Corporate bonds 2009 % 2010 Sovereign 2011 debt % 2012 Equity Other Sovereign Debt France Sovereign Debt 2007 2008 2009 2010 2011 2008 2009 2010 2011 2012 Real yield Real yield

Analysis of the Investment Portfolio by Type Analysis of the Investment Portfolio by Source Analysis of the Investment Portfolio by Type Analysis of the Investment Portfolio by Source % % % % 100 100 9% 12% 100 100 14% 9% 12% 14% 15% 14% 80 15% 18% 80 14% 18% 15% 80 15% 18% 14% 15% 80 18% 14% 15% 15% 14% 15% 14% 14% 11% 7% 60 60 14% 11% 60 9% 7% 60 21% 17% 9% 14% 22% 27% 21% 17% 40 40 14% 22% 27% 61% 60% 61% 57% 59% 40 24% 40 61%18% 60%22% 61% 57%14% 59% 11% 18% 24% 22% 14% 11% 20 20 4% 3% 7% 20 4% 20 4% 3% 7% 21% 17% 18% 4% 14% 14% 21% 17% 18% 0 0 14% 14% 0 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Loan and receivables and other % Equity % Loan and receivables and other Local Authority Loans Ireland Sovereign Debt Loan and receivables and other % Equity % Loan and receivables and other Local Authority Loans Ireland Sovereign Debt Cash and cash equivalents % Local Authority Loans % Cash and cash equivalents Corporate bonds Germany Sovereign Debt Cash and cash equivalents % Local Authority Loans % Cash and cash equivalents Corporate bonds Germany Sovereign Debt Corporate bonds % Sovereign debt % Equity Other Sovereign Debt France Sovereign Debt Corporate bonds % Sovereign debt % Equity Other Sovereign Debt France Sovereign Debt Gross Domestic Product Growth Irish Insurance Market % €Bn 2 4 Gross Domestic Product Growth Irish Insurance Market % €Bn 1.4% 0.9% 2 4 0 -0.8% 3 1.4% 0.9% -2.1% 0 -2 -0.8% 3 2 -2.1% -5.5% -2 3.5 3.2 3.1 2.9 2.7 -4 2

-5.5% 3.5 3.2 3.1 2.9 2.7 Manage -41 -6 Financial highlights 1 -6 -8 0 2008 2009 2010 2011 2012 The Company's2008 2009 financial 2010 position 2011 remains 2012 strong and the sustainability of its earnings continues to -8 0 be underpinned2008 2009 by our 2010 strong financial 2011 2012management. 2008 2009 2010 2011 2012 m

Gross Written Premium ent Market Gross Loss Ratio (Estimate) Gross Written Premium % €m 100 Gross Domestic Product Growth 120IrishMarket Insurance Gross LossMarket Ratio (Estimate) Gross Written Premium • Solid performance in a reduced market. A % €Bn% €m 100 nalysis 2 1004 • 120Exceptionally high retention rates.

1.4% 0.9% 80 • 100The reduction in gross written premium 0 -0.8% 3 50 60 since80 2009 is due to: -2.1% -2 67% 80% 80% 70% 66% 112 112 92 89 90 • The loss of the HSE public and 50402 60 -5.5% 67%3.5 80% 3.2 80% 3.1 70% 2.9 66% 2.7 employer's112 liability 112 cover, 92 which 89switched 90 -4 20 40 to being indemnified by the State. 1 -60 0 •20 Lower premium rates to Members. 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 0 -8 0 0 2008 2009 2010 2011 2012 20082008 2009 2009 2010 2010 2011 2011 2012 2012 Prior year2008 results are 2009 restated under 2010 IFRS 2011 2012 on a best estimate basis.

Net Written Premium NetUnderwriting Written Premium Result €m €m 10 47 56 54 (1) Underwriting Result 100 60 Net Written Premium Market Gross Loss Ratio (Estimate) €mGross Written Premium €m 10 47 56 54 (1) % 10040 • 60Prudent reinsurance policy in place. 80 €m 16.8 100 120 47.4 26.3 20 38.9 • 40Reinsurance profile largely unchanged 80 30.0 16.8 26.3 60 100 6.2 28.0 year on year. 47.4 0 9.0 20 38.9 4.0 92 91 72 70 72 60 6.2 30.0 28.0 40 80 -20 0 9.0 92 91 72 70 72 4.0 50 6040 -40.2 20 67% 80% 80% 70% 66% -40 112 112 92 89 90 -20 -40.2 40 20 0 -60 -40 2008 2009 2010 2011 2012 20 2008 2009 2010 2011 2012 0 -60 0 Underlying2008 underwriting 2009 result 2010 Prior year 2011 releases and 2012 real 2008 2009 2010 2011 2012 0 yield adjustment Prior year results are restated under IFRS 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 on a bestUnderlying estimate underwriting basis. result Prior year releases and real Net Combined Ratio Profit Before Tax yield adjustment % 104% 65% 40% 42% 123% €m NetNet Underwriting Combined Ratio Result Profit Before Tax 150 100 • Excellent underwriting performance % 104% 65% 40% 42% 123%110 €m Net Written Premium 75Underwriting 95Result 2008 to 2012; however, the reported 125 15050 100 €m €m 66 underwriting result is boosted by prior 110 25 10 47 5642 54 (1) 75 95 100100 12560 year50 provision releases. 53.6% 0 66 25 42 -2540 7580 100 16.8 • Underlying underwriting profits achieved -50 26.3 53.6% 0 47.4 over the past 5 years. -7520 38.9 -25 50 75 -171 30.0 60 69.6% -100 6.2 28.0 -50 9.0 • The reported underwriting loss in 2012 is 104% 65% 40% 40% -1250 -75 25 92 91 72 70 72 50 4.0 due to-171 a once-off provision in respect of 40 -150 69.6% -100 -20 25 104% 65% 40% 40% -125the impact on IPB of a potential fall in the 0 -175 -40.2 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 -150 20 -40 market discount rate to 0.5% to be used in Net combined ratio excl real yield 0 -175calculating the cost of bodily injury claims. Real yield adjustment 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 -60 0 Net combined ratio excl real yield Members2008 Dividend 2009 2010 2011 2012 Gross2008Real Loss yield adjustment Ratio 2009 2010 2011 2012 Note: Excludes allocated investment income and €m % operating costs. Prior year results are restated under Underlying underwriting result Prior year releases and real 90% 12 105Members Dividend yield adjustment IFRSGross on a Lossbest estimate Ratio basis. €m % 80% 85 12 105 90% 10 Net Combined Ratio Profit Before Tax 70% 65 80% 85 %8 104% 65% 40% 42% 123% €m10 60% 45 70% 65 150 100 86.5% 43.6% 50% 258 82.2% 110 IPB Insurance Stakeholder & Annual Report 2012 75 60% 6 75 95 58.5% 50.5% 45 40% 10 10 43.6% 50% 125 505 24.7% 86.5% 66 25 82.2% 30% 4 256 42 58.5% 50.5% 40% 100 -15 10 10 20% 24.7% 53.6% 0 -5.5% 5 30% 2 4 -15.1% -30.5% -25-35 -50.4% 10% 75 -15 -5.5% 20% -50 -30.5% 0 -552 -15.1%0% -75 -35 -50.4% 10% 50 2008 2009 2010 2011 2012 2008-171 2009 2010 2011 2012 69.6% -1000 -55 0% Gross loss (incurred) ratio prior year 25 104% 65% 40% 40% -125 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 -150 releases and real yield adjustment Gross loss (incurred) ratio prior year 0 -175 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 releases and real yield adjustment Net combined ratio excl real yield Real yield adjustment MembersGross Loss Dividend Ratio GrossSolvency Loss & Ratio Growth - Solvency I (Coverage Ratio) €m% % 89% 49% 23% 20% 102% 11512 10535Gross Loss Ratio Solvency & Growth90% - Solvency I (Coverage Ratio) % 80% 95 8530 89% 49% 23% 20% 102% 10 115 35 75 47.7% 70% 65 9525 30 558 60% 95.7% 87.7% 7545 47.7% 35 67.3% 20 43.6% 25 50% 58.8% 54.8% 55 82.2% 86.5% 156 25 95.7% 58.5% 50.5% 15 87.7% 33 40% 10 10 35 67.3% 24.7% 20 -5 5 58.8%25 54.8% 30% 4 -6.7% 15 -25 -38.7% 10 19 15 33 -18.3% -15 -5.5% 16 20% -64.6% -5 -30.5% 25 -452 5 -6.7%12 -15.1% -25-35 -50.4% -38.7% 10 10% 19 -65 -18.3% -64.6% 16 0 -45-550 5 12 0% 2008 2009 2010 2010 2011 2011 2012 -65 20082008 2009 2010 2010 2011 2011 2012 2012 Net loss (incurred) Net loss (incurred) ratio prior year reserve 0 Gross loss (incurred) ratio prior year ratio underlying releases & real yield adjustment 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Solvencyreleases & and Growth real yield adjustment- Solvency Required Margin Net loss (incurred) Net loss (incurred) ratio prior year reserve New Claims Number & ratioExcess underlying of Assets overreleases Liabilities & real yield adjustment Solvency & Growth - Solvency Required Margin Units € m 7,000 New Claims Number & Excess of Assets over Liabilities Units600 € m 6,000 7,000 Gross Loss Ratio 500Solvency & Growth - Solvency I (Coverage Ratio) 600 5,000% 6,000 89% 49% 23% 20% 102% 400 500 115 35 4,000 5,000 600 95 30030 400 3,000 5,753 5,951 4,000 75 5,398 47.7% 4,731 600 4,396 20025 384 300 2,00055 3,000 5,951298 332 95.7% 5,753 5,398 87.7% 200 4,731 1,00035 67.3% 10020 4,396 200 384 58.8% 54.8% 2,000 298 332 15 15 33 200 0 1,0000 100 -5 2008 2009 2010 2011 2012 2008 2009 2010 201125 2012 -6.7% -38.7% 10 -25 0 19 -18.3% -64.6% S I (Surplus Capital16 - €m’s) 0 -45 5 200812 2009 2010 2011 2012 2008 2009 2010 2011 2012 -65 S I (Surplus Capital - €m’s) 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Net loss (incurred) Net loss (incurred) ratio prior year reserve ratio underlying releases & real yield adjustment Surplus before Tax Components SolvencyInvestment & GrowthAnd Asset - Solvency Allocation Required Returns Margin % €m New(171) Claims Number95 42 66 110 &Surplus Excess before of Assets Tax over Components Liabilities Investment And Asset Allocation Returns Units95 €15 m % 7,000 €m (171) 95 42 66 110 11.2 10 55 48.6 60095 15 6,000 12% 10.2 110.9 5 11.22% 10 15 46.8 56.4 54.3 50055 48.66% 5,000 0 110.9 12% -25 -1.3 10.2 5 2% -14.5 40015 46.8 56.4-1% 54.3 6% 4,000 -5 -65 600 0 300-25 -1.3 3,000 5,951 -17% -14.5 -1% 5,753 5,398 -10 -5 -105 -181.1 4,731 -65 4,396 200 384 2,000 -15 298 332 -17% -145 -10 -105 -181.1200 1,000 100-20 -15 -185 -145 2008 2009 2010 2011 2012 0 2008 2009 2010 2011 2012 0 -20 2008 2009 2010 2011 2012 -185 2008 2009 2010 2011 2012 Underwriting result Investment result less operating costs 2008 2009 2010 2011 2012 2008S I (Surplus 2009Capital - €m’s) 2010 2011 2012 Actual Claims Numbers FinancialUnderwriting Highlights result - NetInvestment Combined result less operatingratio costs Units % 7,000 150Actual Claims Numbers Financial Highlights - Net Combined ratio Units % 6,000 7,000125 150 5,000 Surplus before Tax Components Investment And Asset Allocation Returns 6,000100 125 €m (171) 95 42 66 110 % 53.6% 4,000 5,872 5,753 5,951 5,398 4,731 5,000 95 1575 100 53.6% 3,000 4,000 5,872 5,753 5,951 5,398 4,731 55 11.2 10 48.6 50 104% 75 2,000 3,000 12% 10.2 110.9 5 2% 15 46.8 56.4 54.3 66% 69.6% 1,000 25 6% 50 104% 2,0000 41% 40% -25 -14.5 -1.3 66% 69.6% 0 1,0000 -1% 25 -5 41% 40% -65 2007 2008 2009 2010 2011 2008 2009 2010 2011 2012 -100 -17% 0 -105 Real yield -181.1 2007 2008 2009 2010 2011 2008 2009 2010 2011 2012 -15 -145 Real yield Analysis of the Investment Portfolio by Type -20 Analysis of the Investment Portfolio by Source -185% % 2008 2009 2010 2011 2012 100 2008 2009 2010 2011 2012 100Analysis of the Investment Portfolio by Type Analysis of the Investment Portfolio by Source 9% 12% % % Underwriting result Investment result less operating costs 14% 14% 100 15% 80 15% 18% 80 18% 100 Actual Claims Numbers Financial Highlights - Net Combined9% ratio 12%15% 14% 15% 14% 14% Units 14% % 14% 15% 11% 7% 80 15% 18% 80 18% 60 60 15% 7,000 150 9% 14% 15% 14% 21% 17% 14% 11% 22% 6,000 14% 7% 27% 40 1256040 60 9% 61% 60% 61% 57% 59% 21% 17% 18% 24% 22% 5,000 22% 14% 11% 14% 27% 10040 40 20 20 61% 60% 61%4% 57%3% 53.6% 59% 4,000 5,872 5,753 5,951 5,398 4,731 4% 7% 24% 21% 18% 22% 14% 75 14% 17% 18% 14% 11% 20 20 4% 3% 3,0000 0 4% 7% 21% 17% 18% 2008 2009 2010 2011 2012 50 104% 14% 14% 2,000 0 2008 2009 2010 2011 2012 0 Loan and receivables and other % Equity % Loan and receivables and66% other Local Authority Loans Ireland69.6% Sovereign Debt 1,000 25 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Cash and cash equivalents % Local Authority Loans % Cash and cash equivalents Corporate41% bonds 40% Germany Sovereign Debt 0 Corporate bonds % Sovereign debt % 0 Equity Loan and receivables and otherOther % Sovereign DebtEquity % France Sovereign Debt Loan and receivables and other Local Authority Loans Ireland Sovereign Debt 2007 2008 2009 2010 2011 2008Cash and cash 2009 equivalents % 2010 Local 2011 Authority 2012Loans % Cash and cash equivalents Corporate bonds Germany Sovereign Debt Corporate bonds % Sovereign debt % Equity Other Sovereign Debt France Sovereign Debt Real yield

Analysis of the Investment Portfolio by Type Analysis of the Investment Portfolio by Source % % 100 100 9% 12% 14% 14% 15% 80 15% 18% 80 18% 15% 14% 15% 14% 14% 11% 7% 60 60 9% 21% 17% 14% 22% 27% 40 40 61% 60% 61% 57% 59% 18% 24% 22% 14% 11% 20 20 4% 3% 4% 7% 21% 14% 17% 18% 14% 0 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Loan and receivables and other % Equity % Loan and receivables and other Local Authority Loans Ireland Sovereign Debt Cash and cash equivalents % Local Authority Loans % Cash and cash equivalents Corporate bonds Germany Sovereign Debt Corporate bonds % Sovereign debt % Equity Other Sovereign Debt France Sovereign Debt Gross Domestic Product Growth Irish Insurance Market % €Bn 2 4

1.4% 0.9% 0 -0.8% 3 -2.1% -2 2 -5.5% 3.5 3.2 3.1 2.9 2.7 -4

1 -6

-8 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Market Gross Loss Ratio (Estimate) Gross Written Premium % €m 100 120

100

50 60 67% 80% 80% 70% 66% 112 112 92 89 90 40

0 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Gross Domestic Product Growth Irish Insurance Market % €Bn Net Written Premium Underwriting Result 2 4 €m €m 10 47 56 54 (1) 100 1.4% 0.9% 60 0 -0.8% 3 40 80 -2.1% 16.8 -2 47.4 26.3 202 38.9 60 -5.5% 6.23.5 30.0 3.2 3.128.0 2.9 2.7 -4 0 9.0 92 91 72 70 72 4.0 40 1 -6 -20 -40.2 20 -40 -8 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 0 -60 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Underlying underwriting result Prior year releases and real yield adjustment

Gross Domestic Product Growth NetMarketIrish Combined Insurance Gross Loss Ratio Market Ratio (Estimate) GrossProﬁt WrittenBefore Tax Premium % % €Bn% 104% 65% 40% 42% 123% €m 100 120 2 150 4 100 75 110 100 95 1.4% 0.9% 125 50 0 66 -0.8% 3 25 42 80 -2.1% 100 53.6% 0 -2 50 -25 75 2 60 -5.5% 67%3.5 80% 3.2 80% 3.1 70% 2.9 66% 2.7 -50 112 112 92 89 90 -4 -7540 50 -171 1 69.6% -100 -6 25 104% 65% 40% 40% -12520 -150 0 -8 0 0 -1750 2008 2009 2010 2011 2012 200820082008 2009 2009 2009 2010 2010 2010 2011 2011 2011 2012 2012 2012 2008 2009 2010 2011 2012 Net combined ratio excl real yield Real yield adjustment Members Dividend Gross Loss Ratio €mNet Written Premium % Underwriting Result 12 105 90% €m Market Gross Loss Ratio (Estimate) Gross Written Premium €m 10 47 56 54 (1) 80% % 100€m 6085 10 70% 100 120 65 40 60% 808 16.8 26.3 100 45 47.4 86.5% 43.6% 50% 2025 82.2% 38.9 6 30.0 58.5% 50.5% 40% 6080 10 10 6.2 28.0 05 9.0 24.7% 4 4.0 30%

I 92 91 72 70 72 50 PB 360 4060 -15 20% -20 -5.5% 67% 80% 80% 70% 66% Financial112 112 highlights 92 89 90(Continued) -30.5% 2 -35 -15.1% -50.4% -40.2 10% 40 20 -40 0 -55 0% 20 2008 2009 2010 2011 2012 0 2008 2009 2010 2011 2012 -60

0 0 2008 2009 2010 2011 2012 2008Gross loss 2009 (incurred) ratio 2010 prior year 2011 2012 releases and real yield adjustment 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Underlying underwriting result Prior year releases and real yield adjustment Net Combined Ratio Net Combined Ratio Proﬁt Before Tax • Strong underwriting results, with underlying % 104% 65% 40% 42% 123% €m Underwriting Result net combined ratio of 70%. Net Written Premium 150 Gross Loss Ratio 100Solvency & Growth - Solvency I (Coverage Ratio) €m %€m 10 47 56 54 (1) 75 110 89% 49% 23% 20% 102% • A conservative95 reinsurance programme is 100 12511560 5035 maintained. 66 95 25 42 40 30 80 100 16.8 53.6% 0 75 47.4 26.3 47.7% • The reserving policy is to create a ‘best -2525 755520 38.9 estimate’ provision for claims and then add 60 95.7%6.2 30.0 87.7% 28.0 -50 35 67.3% 20 0 9.0 58.8% 54.8% -75a provision for uncertainty. 92 91 72 70 72 5015 4.0 -171 40 69.6% -10015 33 -5-20 • 2012 includes a €40m charge net of reinsurance 25 104% 65% 40% 40% -125 25 -6.7% -38.7% -40.2 10 19 -25 -18.3% -150in respect of potential fall in the discount rates 20 -40 -64.6% 16 -450 -175used5 in12 pricing bodily injury awards. 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 -65-60 0 Net combined ratio excl real yield Prior0 year results are restated under IFRS 2008 2009 2010 2011 2012 20082008Real yield adjustment 2009 2010 2010 2011 2011 2012 on a best2008 estimate 2009 basis. 2010 2011 2012 NetUnderlying loss (incurred) underwriting resultNet loss (incurred)Prior year ratio releases prior year and reservereal Membersratio underlying Dividend releases & real yield adjustment Gross Loss Ratio yield adjustment Solvency & Growth - Solvency Required Margin S€murplus (Loss) Before Tax % & Excess of Assets over Liabilities 90% Net Combined Ratio 12 New Claims Number 105 Proﬁt Before Tax 80% Units € 85m % €m 104% 65% 40% 42% 123% 7,00010 70% 150 100 • 60065A strong result in difficult times. 6,0008 110 60% 75 95 45 500 43.6% 50% 125 5,00050 • The surplus before86.5% tax in 2012 is primarily 66 25 82.2% 625 42 58.5% 50.5% 40% 10 10 400driven by an exceptional investment result 100 53.6% 4,000 0 5 24.7% 4 of €128m. 600 30% -25 300 3,000 5,951 -15 20% 75 5,753 5,398 -5.5% -50 4,731 -30.5% 2 4,396 200-35 -15.1% -50.4% 384 10% 2,000-75 298 332 50 -171 -100 Note:-55 The 200surplus (loss) before tax = profit (loss) before tax. 0% 69.6% 1,0000 100 Prior year results are restated under IFRS on a best 25 104% 65% 40% 40% -125 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 -1500 estimate0 basis. Gross loss (incurred) ratio prior year 0 -175 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 releases and real yield adjustment 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 S I (Surplus Capital - €m’s) Net combined ratio excl real yield Real yield adjustment Members Dividend SurplusGross (LossLos Ratios) Before Tax Components €m % Gross Loss Ratio Solvency & Growth90% - Solvency I (Coverage Ratio) 12 105Surplus before Tax Components Investment And Asset Allocation Returns % 80% 85 89% 49% 23% 20% 102% 115€m (171) 95 42 66 110 %35 10 70% 9565 • 15The surplus (loss) before tax components 30 60% 8 75 47.7% over the past five years are shown in this 5545 11.2 10 48.6 43.6% 25 50% 55 82.2% 86.5% chart. 6 25 110.9 12% 15 95.7%10.2 87.7%58.5% 50.5% 5 40% 2% 10 10 35 46.8 56.4 54.3 20 6% 67.3% 58.8% 24.7% 5 54.8% 0 30% 4 -2515 -1.3 -14.5 15 -1% 33 -15 -5.5% 20% -5 -30.5% -5 25 2 -65 -6.7% -15.1% -25-35 -50.4% -38.7% 10 10% 19 -18.3% -10 -17% 16 -105 -64.6% 0 -45-55 -181.1 5 12 0% -15 2008 2009 2010 2011 2012 -145-65 2008 2009 2010 2011 2012 0 2008Gross loss 2009 (incurred) ratio 2010 prior year 2011 2012 -20 -185 Note: The2008 surplus (loss) 2009 before tax 2010 = profit (loss) 2011 before 2012 tax. releases and real yield adjustment 2008 2009 2010 2011 2012 Net2008 loss (incurred) 2009 Net 2010 loss (incurred) 2011 ratio prior year 2012 reserve Prior year results are restated under IFRS on a best ratio underlying releases & real yield adjustment Underwriting result Investment result less operating costs estimateSolvency basis. & Growth - Solvency Required Margin ActualNew Claims Claims Number Numbers &Financial Excess ofHighlights Assets over - Net Liabilities Combined ratio Units €% m 7,000 Gross Loss Ratio Solvency & Growth - Solvency I (Coverage Ratio) 600150 % 6,000 89% 49% 23% 20% 102% 500125 115 35 76 5,000IPB Insurance Stakeholder & Annual Report 2012 95 100 30 400 53.6% 4,000 5,872 5,753 5,951 5,398 4,731 75 47.7% 600 25 30075 55 3,000 5,951 95.7% 5,753 5,398 87.7% 4,731 35 67.3% 20 4,396 20050 104% 384 58.8% 54.8% 2,000 298 332 15 15 33 200 66% 69.6% 1,000 10025 -5 25 41% 40% -6.7% 10 -25 -38.7% 0 19 0 -18.3% -64.6% 16 0 -45 5 2007200812 20092008 20102009 2010 2011 20112012 20082008 2009 2009 2010 2010 2011 2012 2012 -65 SReal I (Surplus yield Capital - €m’s) 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Net loss (incurred) Net loss (incurred) ratio prior year reserve Analysis of the Investment Portfolio by Type Analysis of the Investment Portfolio by Source ratio underlying releases & real yield adjustment % Solvency & Growth - Solvency Required Margin % 100 100 New Claims Number & Excess of Assets over Liabilities9% 12% Surplus before Tax Components Investment14% And Asset Allocation Returns Units € m 14% 15% 80 15% 18% %80 18% 7,000 €m (171) 95 42 66 110 15% 14% 15% 14% 95600 15 14% 11% 6,000 60 7% 60 11.2 10 9% 55500 48.6 21% 17% 5,000 14% 22% 27%12% 40 10.2 110.9 405 2% 15400 46.8 56.4 54.3 6% 4,000 61% 60% 61% 57% 59% 24% 0 18% 22% 14% -25 600 11% 20300 -14.5 -1.3 20 4% 3% 3,000 5,753 5,951 4% -1% 7% 5,398 -5 21% 4,731 -65 384 14% 17% 18% 14% 4,396 200 332 2,000 0 298 -100 -17% -105 -181.1200 1,000 100 2008 2009 2010 2011 2012 -15 2008 2009 2010 2011 2012 -145 Loan and receivables and other % Equity % Loan and receivables and other Local Authority Loans Ireland Sovereign Debt 0 0 -20 2008 2009 2010 2011 2012 -185 2008Cash and cash2009 equivalents % 2010 Local 2011 Authority Loans 2012 % Cash and cash equivalents Corporate bonds Germany Sovereign Debt 2008 2009 2010 2011 2012 2008CorporateS I (Surplus bonds 2009 Capital % - €m’s) 2010 2011Sovereign debt 2012 % Equity Other Sovereign Debt France Sovereign Debt Underwriting result Investment result less operating costs Actual Claims Numbers Financial Highlights - Net Combined ratio Units % 7,000 150 Surplus before Tax Components Investment And Asset Allocation Returns 6,000 125 €m (171) 95 42 66 110 % 5,000 95 15 100 53.6% 4,000 5,872 5,753 5,951 5,398 4,731 11.2 10 55 48.6 75 110.9 3,000 12% 15 10.2 5 2% 46.8 56.4 54.3 6% 50 104% 2,000 0 -25 -1.3 -14.5 -1% 25 66% 69.6% 1,000-5 -65 41% 40% 0 -100 -17% -105 -181.1 2007 2008 2009 2010 2011 2008 2009 2010 2011 2012 -15 -145 Real yield -20 -185 2008 2009 2010 2011 2012 Analysis2008 of the 2009 Investment 2010 Portfolio 2011 by Type 2012 Analysis of the Investment Portfolio by Source Underwriting result Investment result less operating costs % % 100 100 Actual Claims Numbers Financial Highlights - Net Combined9% ratio12% 14% Units % 14% 15% 80 15% 18% 80 18% 15% 7,000 150 14% 15% 14% 14% 11% 7% 6,000 60125 60 9% 21% 17% 5,000 14% 22% 27% 40100 40 61% 60% 61% 57% 59%53.6% 24% 4,000 5,872 5,753 5,951 5,398 4,731 18% 22% 14% 75 11% 20 20 4% 3% 3,000 4% 7% 21% 17% 18% 50 104% 14% 14% 2,000 0 0 66% 69.6% 1,000 25 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 41% 40% 0 0 Loan and receivables and other % Equity % Loan and receivables and other Local Authority Loans Ireland Sovereign Debt 2007 2008 2009 2010 2011 2008Cash and cash 2009equivalents % 2010 Local 2011 Authority Loans 2012 % Cash and cash equivalents Corporate bonds Germany Sovereign Debt Corporate bonds % Sovereign debt % Equity Other Sovereign Debt France Sovereign Debt Real yield

1.4% 0.9% 0 -0.8% 3 -2.1% -2 2 -5.5% 3.5 3.2 3.1 2.9 2.7 -4

1 -6

-8 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Market Gross Loss Ratio (Estimate) Gross Written Premium % €m 100 120

100

50 60 67% 80% 80% 70% 66% 112 112 92 89 90 40

0 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Net Written Premium Underwriting Result €m €m 10 47 56 54 (1) 100 60

40 80 16.8 47.4 26.3 20 38.9 60 6.2 30.0 28.0 0 9.0 92 91 72 70 72 4.0 40 -20 -40.2 20 -40

0 -60 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Underlying underwriting result Prior year releases and real yield adjustment

Net Combined Ratio Proﬁt Before Tax % 104% 65% 40% 42% 123% €m 150 100 110 75 95 125 50 66 Gross Domestic Product Growth 25 Irish Insurance42 Market 100 53.6% 0 % -25 €Bn 75 2 -50 4 -75 50 -171 1.4%69.6% 0.9%-100 0 104% 65% 40% 40% -125 25 -0.8% 3 -150 0 -2.1% -175 -2 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Net combined ratio excl real yield 2 Real yield adjustment-5.5% 3.5 3.2 3.1 2.9 2.7 -4 Members Dividend Gross Loss Ratio €m % 1 -612 105 90% 80% 85 10 70% -8 65 0 8 60% 2008 2009 2010 2011 201245 2008 2009 2010 2011 2012 86.5% 43.6% 50% 25 82.2% 6 58.5% 50.5% 40% 10 10 5 24.7% 4 30% -15 -5.5% 20% -30.5% 2 -35 -15.1% -50.4% 10%

0 -55 0% Market2008 Gross 2009 Loss 2010 Ratio (Estimate) 2011 2012 2008 2009Gross 2010 Written 2011 Premium 2012 % €m Gross loss (incurred) ratio prior year 100 releases and120 real yield adjustment

100

80 Gross Loss Ratio Solvency & Growth - Solvency I (Coverage Ratio) 50% 60 89% 49% 23% 20% 102% 35 115 67% 80% 80% 70% 66% 112 112 92 89 90 95 30 40 75 47.7% 25 55 95.7% 87.7% 20 35 20 67.3% 58.8% 54.8% 15 0 15 0 33 -5 25 -6.7% 2008 2009 2010 2011 2012 -25 2008 2009 2010-38.7% 2011 201210 19 -18.3% -64.6% 16 -45 5 12 -65 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Net loss (incurred) Net loss (incurred) ratio prior year reserve ratio underlying releases & real yield adjustment Underwriting Result Net Written Premium Solvency & Growth - Solvency Required Margin €m New Claims Number & Excess of Assets€m over10 Liabilities47 56 54 (1) Units100 € m 60 7,000 600 6,000 40 80 500 16.8 26.3 5,000 47.4 400 20 38.9 4,00060 6.2 30.0 28.0 600 300 9.0 3,000 5,951 0 5,753 5,398 4.0 92 91 724,731 70 72 4,396 200 384 2,00040 298 332 200 -20 1,000 100 -40.2 20 0 0 -40 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 0 S I (Surplus -60Capital - €m’s) 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Underlying underwriting result Prior year releases and real yield adjustment Surplus before Tax Components Investment And Asset Allocation Returns €mNet(171) Combined95 Ratio42 66 110 % Proﬁt Before Tax 95 15 % 104% 65% 40% 42% 123% €m 11.2 10 15055 48.6 100 12% 10.2 110.9 5 2% 110 15 46.8 56.4 54.3 756% 95 125 0 50 -25 -1.3 -14.5 -1% 66 -5 25 42 100-65 53.6%-10 -17% 0 -105 -181.1 -25 Manage 75 -15 -145Financial highlights (Cont-50inued) -20 -185 -75 50 2008 2009 -171 2010 2011 2012 2008 2009 2010 2011 2012 69.6% -100 Underwriting result Investment result less operating costs The25 solid104% financial65% position40% has allowed40% IPB to make -125a real difference to key stakeholders throughActual Claimsits Members' Numbers Dividend and Social DividendFinancial Fund.Highlights-150 - Net Combined ratio Units0 % -175 7,000 150

2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 m 6,000 Net combined ratio excl real yield 125 ent 5,000Members' Real yield Dividend adjustment 100 53.6% 4,000 5,872 5,753 5,951 5,398 4,731 Members Dividend 75 Gross Loss Ratio 3,000€m %

50 • The Members' Dividend of €10m in 2011 A 90% 2,00012 104% 105 69.6% and66% 2012 underlines the Company’s nalysis 80% 1,000 25 85 41% 40% 10 commitment to Members. 70% 0 0 65 8 2007First 2008 ever Dividend 2009 2010 2011 2008 2009 2010 2011 2012 60% Real yield 45 issued following 86.5% 43.6% 50% 25 82.2% 6 58.5% 50.5% 40% Analysis amendmentsof the Investment toPortfolio by Type10 10 Analysis of the Investment Portfolio by Source 5 24.7% 4% Memorandum and % 30% 100 100 9% 12% -15 20% Articles in 2011. 14% -5.5% 2 14% 15% -30.5% 80 15% 18% 80 18% -15.1% -35 15%-50.4% 10% 14% 15% 14% 14% 11% 7% -55 0% 600 60 9% 21% 17% 2008 2009 2010 2011 2012 14% 2008 200922% 27% 2010 2011 2012 40 40 61% 60% 61% 57% 59% 18% Gross24% loss (incurred) ratio prior year 22% 14% 11% 20 20 releases4% and 3%real yield adjustment 4% 7% 21% 14% 17% 18% 14% Social0 Dividend Fund 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 €m Loan and receivables and other % Equity % Loan and receivables and other Local Authority Loans Ireland Sovereign Debt 6 Cash and cash equivalents % Local Authority Loans % Cash and cash equivalents Corporate bonds Germany Sovereign Debt GrossCorporate Loss bonds Ratio % Sovereign debt % Equity • TheSolvency SocialOther Sovereign &Dividend Growth Debt France Fund- SovereignSolvency ofDebt €5m, I (Coverage which Ratio) %5 89% 49% 23% 20% 102% was introduced in 2012 on behalf of IPB’s 115 35 4 Members, underlines the IPB commitment to 95 30 47.7% make a real difference in the communities in 753 25 55 5 which its Members operate. 95.7% 87.7% 352 20 67.3% 58.8% 54.8% 15 1 15 33 -5 25 -6.7% 10 -250 -38.7% 19 -18.3% -64.6% 16 -45 2008 2009 2010 2011 2012 5 12 -65 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Net loss (incurred) Net loss (incurred) ratio prior year reserve ratio underlying releases & real yield adjustment Solvency & Growth - Solvency Required Margin New Claims Number & Excess of Assets over Liabilities Units € m 7,000 600 6,000 500 5,000 400 4,000 600 300 3,000 5,951 5,753 5,398 4,731 4,396 200 384 2,000 298 332 200 1,000 100

0 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 S I (Surplus Capital - €m’s)

Surplus before Tax Components Investment And Asset Allocation Returns €m (171) 95 42 66 110 % IPB Insurance Stakeholder & Annual Report 2012 77 95 15 11.2 55 48.6 10 12% 10.2 110.9 5 2% 15 46.8 56.4 54.3 6% 0 -25 -1.3 -14.5 -1% -5 -65 -10 -17% -105 -181.1 -15 -145 -20 -185 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Underwriting result Investment result less operating costs Actual Claims Numbers Financial Highlights - Net Combined ratio Units % 7,000 150

6,000 125 5,000 100 53.6% 4,000 5,872 5,753 5,951 5,398 4,731 75 3,000 50 2,000 104% 66% 69.6% 1,000 25 41% 40% 0 0 2007 2008 2009 2010 2011 2008 2009 2010 2011 2012 Real yield

1.4% 0.9% 0 -0.8% 3 -2.1% -2 2 -5.5% 3.5 3.2 3.1 2.9 2.7 -4

1 -6

-8 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Market Gross Loss Ratio (Estimate) Gross Written Premium % €m 100 120

100

50 60 67% 80% 80% 70% 66% 112 112 92 89 90 40

0 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Net Written Premium Underwriting Result €m €m 10 47 56 54 (1) 100 60

40 80 16.8 47.4 26.3 20 38.9 60 6.2 30.0 28.0 0 9.0 92 91 72 70 72 4.0 40Gross Loss Ratio -20 % 89% 49% 23% 20% 102% -40.2 20 -40 100 80 0 47.7% -60 60 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 95.7% 87.7% 40 Underlying underwriting result Prior year releases and real 67.3% 58.8% 54.8% 20 yield adjustment 0 Net-6.7% Combined Ratio Proﬁt Before Tax -20 -38.7% % 104% -18.3%65% -64.6%40% 42% 123% €m I -40 PB 360 150 100 I-60PB at a Glance: ClaIms & Losses 110 75 95 125 2008 2009 2010 2011 2012 50 66 25 42 Net loss (incurred) Net loss (incurred) ratio prior year reserve 100 ratio underlying releases & real yield adjustment 53.6% 0 -25 75 -50 -75 50 -171 Claims Gross Loss (Incurred) Ratio 69.6% -100 25 104% 65% 40% 40% -125 -150 • The profile of the book is significantly % 0 77% 71% 8% 20% 75% -175 100 2008 2009 2010 2011 2012 weighted2008 towards 2009 long-term 2010 exposures. 2011 2012 80 Net combined ratio excl real yield Real yield adjustment • The Company only writes business that 60 43.6% is within the risk appetite approved by 40 Members82.2% Dividend86.5% Gross Loss Ratio €m 58.5% the Board. 20 50.5% % 12 31.9% 105 90% 0 • 2012 includes a €42m gross of reinsurance 80% -15.1% 85 -1510 -5.5% -30.5% -50.4% provision in respect of a potential fall in the 70% 65 -35 discount rate used in the pricing of bodily 8 60% -55 45 injury awards. 86.5% 43.6% 50% 25 82.2% 6 2008 2009 2010 2011 2012 58.5% 50.5% 40% 10 10 24.7% Gross loss (incurred) ratio prior year releases and real yield adjustment Prior year5 results are restated under IFRS 4 30% Gross loss (incurred) ratio underlying on a best estimate basis. -15 -5.5% 20% -30.5% 2 -35 -15.1% -50.4% 10%

0 -55 0% Claims2008 Net Los 2009s (I ncurred) 2010 Ratio 2011 2012 • The Company2008 2009has benefited 2010 from 2011 settling 2012 large claimsGross loss below (incurred) the ratio originalprior year provision Gross Loss Ratio levels inreleases recent and realyears. yield adjustment

% 89% 49% 23% 20% 102% • The reported net loss ratio increased to 100 102% from 20% in 2011. This is due to the 80 47.7% impact of prior year reserve releases in 60 Gross Loss Ratio theSolvency reported & 2011Growth figures - Solvency and the I (Coverage impact Ratio) 95.7% 87.7% 40% 89% 67.3%49% 23%58.8% 20% 102% of a €40m (net of reinsurance) provision 115 54.8% 35 20 in respect of a potential fall in the 95 0 discount30 rate used in the pricing of bodily 75 -6.7% -38.7% 47.7% -20 -18.3% injury25 awards. 55 -64.6% -40 95.7% 87.7% 35 20 -60 67.3% 58.8% 54.8% • The underlying net loss ratio moved down 15 2008 2009 2010 2011 2012 to15 47.7% in 2012 from 58.8% in 2011. 33 -5 25 Net -6.7%loss (incurred) Net loss (incurred) -38.7%ratio prior year reserve Prior10 year results are restated under19 IFRS -25 -18.3% ratio underlying releases-64.6% & real yield adjustment on a best estimate basis.16 -45 5 12 -65 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Net loss (incurred) Net loss (incurred) ratio prior year reserve Numbersratio underlying of New Claimsreleases & real yield adjustment Solvency & Growth - Solvency Required Margin • Claim numbers have fallen by 335 (7%) to % New77% Claims 71% Number 8% 20% 75% & Excess of Assets over Liabilities 4,396 between 2011 and 2012. 100Units € m 7,00080 • Impr600 oved health and safety standards and 6,00060 43.6% a reduction in building projects, combined 40 82.2% 86.5% 500 5,000 58.5% with the outsourcing of manual tasks, 20 50.5% 31.9% 400 4,000 resulted in a 25% reduction in new EL 0 600 -15.1% claims300 reported to the Company. 3,000-15 -5.5% 5,951 -30.5% 5,753 -50.4%5,398 4,731 -35 4,396 • Mild200 weather conditions are responsible384 2,000 298 332 -55 for reduced200 numbers of property claims. 1,000 100 2008 2009 2010 2011 2012 0 Gross loss (incurred) ratio prior year releases and real yield adjustment 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Gross loss (incurred) ratio underlying S I (Surplus Capital - €m’s)

78 IPB Insurance Stakeholder & Annual Report 2012

Surplus before Tax Components Investment And Asset Allocation Returns €m (171) 95 42 66 110 % 95 15 11.2 55 48.6 10 12% 10.2 110.9 5 2% 15 46.8 56.4 54.3 6% 0 -25 -1.3 -14.5 -1% -5 -65 -10 -17% -105 -181.1 -15 -145 -20 -185 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Underwriting result Investment result less operating costs Actual Claims Numbers Financial Highlights - Net Combined ratio Units % 7,000 150

6,000 125 5,000 100 53.6% 4,000 5,872 5,753 5,951 5,398 4,731 75 3,000 50 2,000 104% 66% 69.6% 1,000 25 41% 40% 0 0 2007 2008 2009 2010 2011 2008 2009 2010 2011 2012 Real yield

1.4% 0.9% 0 -0.8% 3 -2.1% -2 2 -5.5% 3.5 3.2 3.1 2.9 2.7 -4

1 -6

-8 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Market Gross Loss Ratio (Estimate) Gross Written Premium % €m 100 120

100

50 60 67% 80% 80% 70% 66% 112 112 92 89 90 40

0 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Net Written Premium Underwriting Result €m €m 10 47 56 54 (1) 100 60

40 80 16.8 47.4 26.3 20 38.9 60 6.2 30.0 28.0 0 9.0 92 91 72 70 72 4.0 40 -20 -40.2 20 -40

0 -60 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Underlying underwriting result Prior year releases and real yield adjustment

Net Combined Ratio Proﬁt Before Tax % 104% 65% 40% 42% 123% €m 150 100 110 75 95 125 50 66 25 42 100 53.6% 0 -25

75 Manage -50 -75IPB at a Glance: Solvency 50 -171 69.6% -100 25 104% 65% 40% 40% -125 -150 0 -175 Very strong capital adequacy and prudent reserving. 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Net combined ratio excl real yield m Real yield adjustment Solvency I: Required Margin & Excess of Assets over Liabilities ent Members Dividend Gross Loss Ratio €m %€m • The Company holds significant surplus 90% 12 105600 regulatory and economic capital, as well as A 630 80% 85 holding sufficient capital to: nalysis 10 500 70% 65 8 • Cover latent risks60% inherent in our business. 45400 86.5% 384 43.6% 50% 25 82.2% • Deliver on our strategic objectives. 6 300 58.5%332 50.5% 40% 10 10 298 5 24.7% 4 200 • Cover the additional30% capital required -15 -5.5%200 under Solvency20% II in the future. -30.5% 2 -35100 -15.1% -50.4% 10%

0 -55 0 0% 2008 2009 2010 2011 2012 20082008 2009 2009 2010 2010 2011 2011 2012 2012 Prior year results are not restated under IFRS. S I - Min Margin add on 150% S I - Calculated Solvency Margin Gross loss (incurred) ratio prior year S Ireleases - Excess and of Assets real yield over adjustment Liabilities

Solvency I: Required Margin Cover

Gross Loss Ratio Solvency & Growth - Solvency I (Coverage Ratio) % • The Company’s reinsurance programme 89% 49% 23% 20% 102% 115 35 enables it to minimise volatility in earnings 95 30 from large losses and catastrophic events. 75 47.7% 25 55 • The overall solvency margin continues to 95.7% 87.7% 35 20 remain strong with the cover representing 67.3% 58.8% 54.8% 15 15 33 33 times the capital required under -5 25 Solvency I. -6.7% -25 -38.7% 10 19 -18.3% -64.6% 16 • The Company’s credit rating from Standard -45 5 12 -65 & Poor’s is BBB+ with a stable outlook. 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 • The Company has set the minimum Net loss (incurred) Net loss (incurred) ratio prior year reserve credit rating for reinsurers with which it ratio underlying releases & real yield adjustment Solvency & Growth - Solvency Required Margin transacts at A. New Claims Number & Excess of Assets over Liabilities Units € m Prior year results are not restated under IFRS. 7,000 600 6,000 500 5,000 400 4,000 600 300 3,000 5,951 5,753 5,398 4,731 4,396 200 384 2,000 298 332 200 1,000 100

0 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 S I (Surplus Capital - €m’s)

Surplus before Tax Components Investment And Asset Allocation Returns €m (171) 95 42 66 110 % 15 95 IPB Insurance Stakeholder & Annual Report 2012 79 11.2 55 48.6 10 12% 10.2 110.9 5 2% 15 46.8 56.4 54.3 6% 0 -25 -1.3 -14.5 -1% -5 -65 -10 -17% -105 -181.1 -15 -145 -20 -185 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Underwriting result Investment result less operating costs Actual Claims Numbers Financial Highlights - Net Combined ratio Units % 7,000 150

6,000 125 5,000 100 53.6% 4,000 5,872 5,753 5,951 5,398 4,731 75 3,000 50 2,000 104% 66% 69.6% 1,000 25 41% 40% 0 0 2007 2008 2009 2010 2011 2008 2009 2010 2011 2012 Real yield

1.4% 0.9% 0 -0.8% 3 -2.1% -2 2 -5.5% 3.5 3.2 3.1 2.9 2.7 -4

1 -6

-8 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Gross Domestic Product Growth Irish Insurance Market % €Bn 2 4

1.4% 0.9% 0 -0.8% 3 -2.1% Market Gross Loss Ratio (Estimate) Gross Written Premium -2Gross Domestic Product Growth %Irish Insurance Market €m % €Bn1002 120 -5.5% 3.5 3.2 3.1 2.9 2.7 -42 4 100 1.4% 0.9% 1 -60 -0.8% 3 80 -2.1% -2-8 500 60 2008 2009 2010 2011 2012 2 67%2008 80% 2009 80%2010 201170% 66%2012 112 112 92 89 90 -5.5% 3.5 3.2 3.1 2.9 2.7 -4 40

1 20 -6 0 0 -8 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Market2008 Gross 2009 Loss Ratio 2010 (Estimate) 2011 2012 Gross2008 Written 2009 Premium 2010 2011 2012 % €m 100 120

100 Net Written Premium Underwriting Result €m80 €m 10 47 56 54 (1) Market Gross Loss Ratio (Estimate) 100 Gross Written Premium 60 %50 €m60 100 67% 80% 80% 70% 66% 120 112 112 92 89 90 40 80 16.8 40 47.4 26.3 100 20 38.9 6020 6.2 30.0 28.0 0 9.0 80 4.0 0 92 91 72 70 72 400 50 2008 2009 2010 2011 2012 60 2008 2009 2010 2011 2012 -20 67% 80% 80% 70% 66% 112 112 92 89 90 -40.2 4020 -40

200 -60 Underwriting2008 2009 Result 2010 2011 2012 2008 2009 2010 2011 2012 0 Net Written Premium 0 €m 2008 2009 2010 2011 2012 €m 200810 200947 201056 2011 54 2012(1) Underlying underwriting result Prior year releases and real 100 60 yield adjustment

40Net Combined Ratio 80 16.8 Profit Before Tax 47.4 26.3 % 104% 65% 40% 42% 123% €m 20 38.9 60 150 Underwriting6.2 30.0 Result 28.0 100 Net Written Premium 110 9.0 75 95 €m €m0 92 91 72 70 72 125 104.0 47 56 54 (1) 50 10040 60 66 -20 25 42 100 40 53.6%-40.2 0 8020 16.8 -40 47.4 26.3 -25 75 20 38.9 -50 -60 30.0 600 6.2 28.0 -75 50 9.0 -171 2008 2009 2010 2011 2012 0 2008 2009 2010 2011 2012 -100 92 91 72 70 72 4.0 69.6% 40 104% 65% 40% 40% -125 -2025 Underlying underwriting result Prior year releases and real yield adjustment -40.2 -150 20 -400 -175 Net Combined Ratio Profit2008 Before 2009 Tax 2010 2011 2012 2008 2009 2010 2011 2012 Net combined ratio excl real yield %0 104% 65% 40% 42% 123% -60€m Real yield adjustment 150 2008 2009 2010 2011 2012 100 2008 2009 2010 2011 2012 75 110 MembersUnderlying underwritingDividend95 result Prior year releases and real Gross Loss Ratio 125 €m50 yield adjustment % 66 1225 42 105 90% 100 80% Net Combined Ratio 53.6% 0Profit Before Tax 85 10-25 70% 75% 104% 65% 40% 42% 123% €m -50 65 150 1008 60% -75 45 50 110 75 -171 95 43.6% 50% 69.6% -100 82.2% 86.5% 125 506 25 58.5% 50.5% 104% 65% 40% 40% -125 66 40% 25 25 42 10 10 24.7% -150 5 30% 100 53.6% 40 0 -175 -15 -25 -5.5% 20% 75 2008 2009 2010 2011 2012 2 2008 2009 2010 2011 2012 -30.5% -50 -35 -15.1% -50.4% 10% Net combined ratio excl real yield -75 50 Real yield adjustment 0 -171 -55 0% 69.6% -100 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 25 Members104% Dividend65% 40% 40% -125 Gross Loss Ratio €m -150% Gross loss (incurred) ratio prior year 90% 120 -175105 releases and real yield adjustment 80% 2008 2009 2010 2011 2012 85 2008 2009 2010 2011 2012 10 Net combined ratio excl real yield 70% Real yield adjustment 65 8 60% 45 Members Dividend Gross Loss Ratio86.5% 43.6% 50% 25 82.2% €m6 %Gross Loss Ratio 58.5% 50.5% Solvency & Growth40% - Solvency I (Coverage Ratio) 90% 12 10 10 105% 24.7% 5 89% 49% 23% 20% 102% 30% 4 115 35 80% 85 10 -15 -5.5% 20% 95 -30.5% 70% 2 65 -15.1% 30 75-35 -50.4% 47.7% 10% 8 60% 45 25 0 55-55 43.6% 0% 95.7% 86.5% 50% 25 82.2% 87.7% 6 2008 2009 2010 2011 2012 35 2008 67.3% 2009 58.5% 2010 50.5% 2011 2012 20 40% 10 10 58.8% 54.8% 155 Gross loss (incurred) ratio prior year 24.7% 4 15 30% 33 releases and real yield adjustment -15-5 25 -6.7%-5.5% 20% -25 -30.5%-38.7% 10 19 2 -35 -18.3%-15.1% -64.6%-50.4% 16 10% -45 5 12 -55 0% 0 -65 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Gross Loss Ratio SolvencyGross loss & (incurred)Growth ratio - Solvency prior year I (Coverage Ratio) Net loss (incurred) % releases and real yield adjustmentNet loss (incurred) ratio prior year reserve 89% 49% 23% 20% 102% ratio underlying releases & real yield adjustment 115 35 Solvency & Growth - Solvency Required Margin New Claims Number & Excess of Assets over Liabilities 95 30 75 47.7% Units € m 7,00025 55 600 95.7% 87.7% 35Gross Loss Ratio 6,00020 Solvency & Growth - Solvency I (Coverage Ratio) 67.3% 58.8% 54.8% %15 500 89% 49% 23% 20% 102% 5,000 33 115 3515 -5 25 400 -6.7% 95 -38.7% 4,0003010 19 -25 -18.3% 600 -64.6% 47.7% 16 -4575 12 300 3,00025 5 5,753 5,951 55 5,398 -65 95.7% 4,731 4,396 384 87.7% 2,000 0 200 332 35 67.3% 20 298 2008 2009 2010 58.8% 2011 54.8% 2012 2008 2009 2010 2011 2012 200 15 1,000 100 Net loss (incurred) Net loss (incurred) ratio prior year reserve 15 33 -5 ratio underlying 25 -6.7% releases & real yield adjustment 0 0 -25 -38.7% 10 Solvency & Growth - Solvency19 Required Margin -18.3% -64.6% 2008 200916 2010 2011 2012 2008 2009 2010 2011 2012 -45 New Claims Number & Excess12 of Assets over Liabilities 5 S I (Surplus Capital - €m’s) Units-65 € m 7,000 0 2008 2009 2010 2011 2012 600 2008 2009 2010 2011 2012 6,000 Net loss (incurred) Net loss (incurred) ratio prior year reserve 500 ratio underlying releases & real yield adjustment 5,000 Solvency & Growth - Solvency Required Margin 400Surplus before Tax Components Investment And Asset Allocation Returns 4,000 New Claims Number & Excess of Assets over Liabilities 600 % Units €€m300 m (171) 95 42 66 110 3,000 5,951 7,000 5,753 5,398 95 15 4,731 600 384 4,396 200 332 2,000 IPB 360 11.2 6,000 55 48.6298 10 500 200 12% 5,0001,000 I100PB10.2 at a Glance: Inve110.9stment s5 & Asset Alloca2%tion 15 46.8 56.4 54.3 6% 400 0 0 0 4,000 -25 -1.3 2008 2009 2010 2011 2012 2008 2009 -14.5 2010 2011 2012600 -1% 300 3,000 5,951 -5 5,753 5,398 -65 S I (Surplus Capital - €m’s) 4,731 Strong, positive cash flows and a384 liquid portfolio. -10 -17% 2,000 4,396 200 332 -105 -181.1 298 200 -15 1,000 -145100 Investment Returns -20 0 -1850 • The market value of the investment portfolio Surplus2008 before 2009 Tax Components 2010 2011 2012 Investment20082008 2009And 2009 Asset 2010 Allocation 2011 2011 Returns 2012 2012 2008 2009 2010 2011 2012 S I (Surplus Capital - €m’s) is €1.1bn. €m (171) 95 42 66 110 % Underwriting result Investment result less operating costs 95 15 Actual Claims Numbers • InvestmentFinancial Highlights returns reflect - Net Combinedthe volatility ratio in 11.2 Units %the financial markets. 55 48.6 10 7,000 150 110.9 12% 15 10.2 5 2% • An exceptional investment return of 12% was 46.8 56.4 54.3 6,000 6% Surplus before Tax Components 0Investment And Asset Allocation Returns 125recorded in 2012. -25 -1.3 €m -14.5 5,000% -1% (171) 95 42 66 110 -5 100 -65 15 • The 2008 result was driven by market falls.53.6% 95 4,000 5,872 5,753 5,951 5,398 4,731 -10 -17% The portfolio was then rebalanced to reduce -105 11.2 10 75 55 -181.1 48.6 3,000 the exposures to higher risk asset classes. -15 12% -145 110.9 5 50 15 10.2 2,000 2% 104% 46.8 56.4 54.3 -20 6% -185 0 25 66% 69.6% -25 -1.3 1,000 -14.5 2008 2009 -1% 2010 2011 2012 Prior year results are restated under41% IFRS 40% 2008 2009 2010 2011 2012 -5 0 -65 Underwriting result Investment result less operating costs 0 on a best estimate basis. -17% -10 2007 2008 2009 2010 2011 2008 2009 2010 2011 2012 -105 Actual-181.1 Claims Numbers Financial Highlights - Net Combined ratio Units -15 Real yield -145 % 7,000 -20A150nalysis of the Investment Portfolio -185 Analysis of the Investment Portfolio by Type Analysis of the Investment Portfolio by Source 6,000 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 125% % • The Company follows a high quality, low risk 5,000 Underwriting result Investment result less operating costs 100 100 100 9% 12%53.6% investment strategy. 4,000 Actual5,872 Claims 5,753 Numbers 5,951 5,398 4,731 Financial14% Highlights - Net Combined ratio 14% 15% 80 15% 18% 80 18% Units %75 15% 3,000 14% 15% • The Company focus is on high quality14% bonds 7,000 150 14% 11% and cash, with limited holdings in equities 6050 104% 7% 60 2,000 9% 17% 6,000 125 and property. 21% 66% 69.6% 22% 27% 1,000 25 14% 5,000 40 41% 40% 40 100 61% 60% 61% 57% 59% 24% 0 0 53.6% 18% 22% 14% 4,000 5,872 5,753 5,951 5,398 4,731 11% 20 20 4% 3% 2007 2008 2009 2010 2011 75 2008 2009 2010 2011 2012 4% 7% 3,000 21% 18% Real yield 14% 17% 14% 500 0 2,000 104% Prior year results are restated under IFRS 2008 200966% 2010 2011 69.6% 2012 2008 2009 2010 2011 2012 1,000 Analysis of the Investment Portfolio by Type 25 Analysis of the Investment Portfolio by Source on a best estimate basis. % % Loan and receivables and other41% % Equity40% % Loan and receivables and other Local Authority Loans Ireland Sovereign Debt 0 1000 100 Cash and cash equivalents % Local Authority Loans % Cash and cash equivalents Corporate bonds Germany Sovereign Debt 9% 2007 2008 2009 2010 201112% 2008Corporate bonds 2009 % 2010 Sovereign 2011 debt 2012% Equity Other Sovereign Debt France Sovereign Debt 14% 14% 15% 80 15% 18% 80 Real yield 18% 15% 14% 15% Analysis of the Investment Portfolio14% by Source 14% 11% 7% 60Analysis of the Investment Portfolio by Type 60Analysis9% of the Investment Portfolio by Source 21% 17% % % 14% 22% 27% 10040 10040 61% 60% 61% 57%9% 59% 24% • The Company continued to take action to 12% 18% 22% 14% 14% 14% 15% 11% mitigate falling yields, whilst maintaining the 8020 15% 18% 8020 18%4% 3% 7% 4% 14% 15% 14% 15% 21% 17% 18% overall high credit quality and diversification 14% 14% 14% 0 11% 7% 0 of the portfolio. 60 60 9% 21% 17% 2008 2009 2010 2011 2012 200814% 2009 2010 201122% 201227% 40 40 61%Loan and receivables 60% and other 61% % 57%Equity % 59% Loan and receivables and other Local Authority Loans Ireland Sovereign Debt 18% 24% Cash and cash equivalents % Local Authority Loans % Cash and cash equivalents22% Corporate bonds14% Germany11% Sovereign Debt 20 20 4% 3% Corporate bonds % Sovereign debt % Equity 4% Other Sovereign Debt France7% Sovereign Debt 21% 14% 17% 18% 14% 0 0 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Loan and receivables and other % Equity % Loan and receivables and other Local Authority Loans Ireland Sovereign Debt Cash and cash equivalents % Local Authority Loans % Cash and cash equivalents Corporate bonds Germany Sovereign Debt Corporate bonds % Sovereign debt % Equity Other Sovereign Debt France Sovereign Debt

80 IPB Insurance Stakeholder & Annual Report 2012 Manage Controls and Accounting Policies

Internal controls approach m

KEY ent SCOPING RISKS CONTROLS ASSESSMENT Determination of Identification of risk Identification of key Assessment of significant account scenarios that could controls that the design and and operating units to result in a material prevent or detect operating A be covered by financial misstatement errors or evidence effectiveness nalysis systems of internal of fraud resulting of key controls control from risk scenarios

FINANCIAL MISSTATEMENT RISK ASSESSMENT

Controls and procedures It is Management’s responsibility to produce the financial information contained in this Report, which was recommended to the Board by the Audit Committee and approved by the Board.

C ontrols and procedures The Company’s controls and procedures are designed to provide reasonable assurance that information is accumulated and communicated to the Company’s Management. This includes the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.

Internal control over financial reporting Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. These controls include policies and procedures that:

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions, acquisitions and disposals of the assets of the Company;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures are being made only in accordance with authorisations of Management and Directors of the Company; and

• provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposals of the Company’s assets that could have a material effect on the financial statements.

All control systems contain inherent limitations, no matter how well designed. As a result, the Company’s Management acknowledges that its internal control over financial reporting will not prevent or detect all misstatements due to error or fraud. In addition, Management’s evaluation of controls can provide only reasonable, not absolute, assurance that all control issues that may result in material misstatements, if any, have been detected.

Changes in internal control over financial reporting There have been no significant changes that have materially affected the Company’s internal control over financial reporting during the year ended 31 December 2012.

IPB Insurance Stakeholder & Annual Report 2012 81 I PB 360 Independent Auditors’ Report To the Members of Irish Public Bodies Mutual Insurances Limited

We have audited the financial statements of Irish Public Bodies Mutual Insurances Limited for the year ended 31 December 2012, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flow and the related notes 1 to 30. The financial reporting framework that has been applied in their preparation is Irish law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This Report is made solely to the Company's Members, as a body, in accordance with section 193 of the Companies Act, 1990. Our audit work has been undertaken so that we might state to the Company's Members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's Members as a body for our audit work, for this Report or for the opinions we have formed.

R espective responsibilities of directors and auditors As explained more fully in the Directors’ Responsibilities Statement set out on page 44, the Directors are responsible for the preparation of the financial statements giving a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with Irish law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of whether the accounting policies are appropriate to the Company’s circumstances and have been consistently applied and adequately disclosed, the reasonableness of significant accounting estimates made by the Directors and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Chairman's Statement, Directors' Report and Chief Executive's Review to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements In our opinion the financial statements:

• give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Company’s affairs as at 31 December 2012 and of its profit for the year then ended; and

• have been properly prepared in accordance with the requirements of the Companies Acts 1963 to 2012.

Matters on which we are required to report by the Companies Acts 1963 to 2012:

• We have obtained all the information and explanations which we consider necessary for the purposes of our audit.

• In our opinion proper books of account have been kept by the Company.

• The financial statements are in agreement with the books of account.

• In our opinion, the information given in the Directors’ Report is consistent with the financial statements.

Matters on which we are required to report by exception We have nothing to report in respect of the provisions in the Companies Acts 1963 to 2012 that require us to report to you if, in our opinion, the disclosures of Directors’ Remuneration and transactions specified by law are not made.

Kieran Kelly For and on behalf of Ernst & Young Dublin

Date: 27 March 2013

82 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTSfinancial state STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2012

2012 2011 Note €’000 €’000 Gross written premiums 6 90,125 88,628 Premiums ceded to reinsurers 6 (17,744) (18,136) Net written premiums 72,381 70,492 Change in the gross provision for unearned premiums 6 2,058 (2,535)

Net earned premiums 74,439 67,957 m

Commission income 7 4,430 4,477 ents Net investment return 8 128,191 21,929 Other revenue 132,621 26,406

Total revenue 207,060 94,363

Gross claims paid 6 (76,880) (91,490) Claims ceded to reinsurers 6 13,786 23,005 Claims paid net of reinsurance (63,094) (68,485) Gross change in contract liabilities 6 7,347 74,306 Change in contract liabilities ceded to reinsurers 6 (19,945) (19,509) Net claims incurred (75,692) (13,688) Operating expenses 9 (21,753) (15,157) Total claims and other expenses (97,445) (28,845)

Profit before tax 109,615 65,518 Tax expense 10 (13,887) (8,126) Profit for the year 95,728 57,392

Total comprehensive income for the year 95,728 57,392

Profit attributable to: Members 95,728 57,392

Approved by the Board on 27 March 2013

Directors

IPB Insurance Stakeholder & Annual Report 2012 83 I PB 360 STATEMENT OF FINANCIAL POSITION As at 31 December 2012

As at 2012 2011 01-Jan-11 Note €’000 €’000 €’000 Assets Equipment 12 125 163 - Financial assets Derivative financial instruments 13 23,042 7,437 11,992 Financial assets at fair value through profit or loss 14 854,237 741,843 845,035 Loans and receivables 14 165,106 120,370 66,874 Insurance assets 15 21,203 19,553 24,649 Reinsurance assets - Claims outstanding 16 35,982 55,926 75,435 Current tax assets 10 - 1,259 832 Insurance receivables 17 4,797 11,643 3,823 Other receivables 18 21 38 132 Deferred expenses 19 - 78 125 Prepayments and accrued income 20 16,346 18,702 18,420 Cash and cash equivalents 21 65,546 109,562 70,374 Total assets 1,186,405 1,086,574 1,117,691 Equity Retained earnings 630,003 544.275 496,883 Total equity 630,003 544,275 496,883

Liabilities Insurance contract liabilities Provision for unearned premiums 16 16,324 18,383 15,849 Claims outstanding 16 496,701 504,047 578,352 Derivative financial instruments 13 22,973 7,338 12,000 Deferred tax liabilities 22 6,620 8,536 11,756 Current tax liabilities 10 320 - - Insurance payables 23 5,104 982 1,226 Trade and other payables 24 8,360 3,013 1,625 Total liabilities 556,402 542,299 620,808

Total equity and liabilities 1,186,405 1,086,574 1,117,691

Approved by the Board on 27 March 2013

Directors

84 IPB Insurance Stakeholder & Annual Report 2012 FINANCIALfinancial STATEMENTSstatements 85 85 8585 €’000 Total equity Total €’000 57,392 57,392 95,728 95,728 57,392 57,392 95,728 95,728 544,275 544,275 630,003 630,003 496,883 496,883 544,275 544,275 Earnings Retained

11 (10,000) (10,000) 11 (10,000) (10,000) Note Note IPB Insurance Stakeholder & Annual Report 2012 & Annual Report Stakeholder IPB Insurance ITY QU E

CHANGES

F O ENT ecember 2012 ecember D M At 1 January At 2011 year for the Profit income comprehensive Total Dividends paid during the year Profit for the year for the Profit income comprehensive Total Dividends paid during the year At 31 December 2011 31 December At At 31 December 2012 31 December At At 1 January At 2012 Approved by the Board on 27 March 2013 on 27 March the Board by Approved Directors STATE 31 As at IPB 360 STATEMENT OF CASH FLOWS For the year ended 31 December 2012

2012 2011 Note €’000 €’000 Operating activities Gross premiums received 95,458 86,743 Reinsurance premiums paid (17,861) (18,178) Commission received on reinsurance premiums paid 4,162 4,222 Claims paid gross (75,360) (91,490) Claims reinsurance recoveries 19,413 23,005 Interest received 30,467 30,117 Dividends received 4,582 5,325 Operating expenses paid (16,012) (13,677) Premiums paid to brokers (1,665) (1,139) Commission earned on premiums paid to brokers 268 255 Cash generated from operating activities 43,452 25,183 Taxation paid (13,372) (11,771) Net cash flows from operating activities 30,080 13,412

Investing activities Loans repaid by local authorities 3,489 3,539 Purchase of investments designated as fair value through profit or loss (662,585) (609,512) Proceeds from sale of investments designated as fair value through profit or loss 644,011 697,985 Deposit paid on investment property (2,380) - Increase in loans and receivables on deposit with credit institutions (46,631) (56,069) Purchase of property and equipment - (167) Net cash flows from/(used in) investing activities (64,096) 35,776

Financing activities Dividends paid (10,000) (10,000) Net cash flows from/(used in) financing activities (10,000) (10,000)

Liabilities Increase in cash and cash equivalents 21 (44,016) 39,188 Cash and cash equivalents at 1 January 21 109,562 70,374 Cash and cash equivalents at 31 December 21 65,546 109,562

86 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS Notes to the financial statements

1. corporate information Irish Public Bodies Mutual Insurances Limited, trading as The Company (“the Company”), is a Mutual Company, limited by guarantee, incorporated and domiciled in Ireland. The principal activities of the Company continue to be the provision of a comprehensive insurance and risk management service to its Members and customers.

The financial statements were authorised in accordance with a resolution of the Directors on 27 March 2013.

2. summary of significant accounting policies The principal accounting policies applied in the preparation of the financial statements are set out below.

Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (IASB) and with those parts of the Companies Acts, 1963 to 2012 applicable to companies reporting under IFRS.

For all periods up to and including the year ended 31 December 2011, the Company prepared its financial statements in accordance with Irish Generally Accepted Accounting Principles (Irish GAAP). These financial statements for the year ended 31 December 2012 are the first the Company has prepared in accordance with IFRS. Refer to note 3 for information on how the Company adopted IFRS.

The financial statements have been prepared on a historical cost basis except for those financial assets and financial liabilities that have been measured at fair value through the profit and loss.

The financial statements are prepared in euro and all values are rounded to the nearest thousand (€’000) except where otherwise stated.

Judgements, estimates and assumptions The Company’s accounting policies are integral to understanding and interpreting the financial results reported in the financial statements. Some of these policies require Management to make estimates and subjective judgements that are difficult and complex and often relate to matters that are inherently uncertain. The policies outlined below are considered to be particularly important to the presentation of the Company’s financial position and results, because changes in the judgements and estimates could have a material impact on the financial statements. Judgements and estimates are adjusted in the normal course of business to reflect changes in underlying circumstances.

(a) Judgements For certain accounting policies, there are different accounting treatments permitted under IFRS that would have a significant influence on the basis on which the financial statements are reported. In the process of applying the Company’s accounting policies, Management have made judgements, apart from those involving estimations and assumptions, which have a significant effect on the amounts recognised in financial statements. These are discussed below.

(b) Estimates The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

IPB Insurance Stakeholder & Annual Report 2012 87 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. summary of significant accounting policies (continued) (i) Insurance contract liabilities

The classes of business written by the Company give rise to a significant degree of uncertainty concerning the ultimate cost of claims. Uncertainty arises for the following reasons in respect of the majority of policies written by the Company:

• Whether an event has occurred that would give rise to a policyholder suffering an insured loss;

• The extent of policy coverage and limits applicable;

• The amount of insured loss suffered by the policyholder;

• The timing of a settlement to the policyholder; and

• The costs associated with handling claims.

Estimates have to be made both for the expected cost of claims reported at the reporting date and for the expected ultimate cost of claims incurred but not yet reported (IBNR) at the reporting date. It can take a significant period of time before the ultimate claims cost can be determined with certainty.

The Company uses estimation techniques, based on statistical analysis of past experience and future estimates, to calculate a range of estimated cost of claims outstanding at the reporting date, which is subjected to sensitivity analysis. These techniques take into account the characteristics of the Company’s business. Provisions are calculated gross of any reinsurance recoveries. A separate provision is made for the amounts that will be recoverable from reinsurers based upon the gross provisions and having due regard to collectability.

The main assumption is that the development pattern of the current claims will be consistent with previous experience while considering the likely future costs. Qualitative judgement is used to assess the extent to which past trends may not apply in future. These changes or uncertainties may arise from issues such as the effects of one- off occurrences, changes in external or market factors such as public attitudes to claiming, levels of claims inflation and the legal environment, or internal factors such as business mix and claims handling procedures. This leads to the estimated ultimate cost of claims that present the likely outcome from the range of possible outcomes, taking account of all the uncertainties involved. Changes in assumptions about these factors could affect the reported fair value of insurance contract liabilities.

Insurance contracts (a) Product classification Insurance contracts are those contracts under which one party, the insurer, accepts significant insurance risk from another party, the policyholder, by agreeing to compensate the policyholder if a specified uncertain future event, the insurance event, adversely affects the policyholder. Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder of its lifetime, even if the insurance risk reduces significantly during this period, unless all rights and obligations are extinguished or expire. All insurance contracts entered into by the Company meet the definition of insurance contracts.

Reinsurance contracts are those contracts issued by one insurer (the reinsurer) to compensate another insurer (the cedant) for losses on one or more contracts issued by the cedant. Ceded reinsurance arrangements do not relieve the Company from its obligations to policyholders. All reinsurance contracts entered into by the Company meet the definition of reinsurance contracts.

(b) Premiums Gross written premiums comprise the total premiums receivable for the whole period of cover provided by contracts entered into during the accounting period. They are recognised on the date on which the policy commences. Premiums include any adjustments arising in the accounting period for premiums receivable in respect of business written in prior accounting periods.

88 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. summary of significant accounting policies (continued) Premiums collected by intermediaries, but not yet received, are assessed based on estimates from underwriting or past experience and are included in gross written premiums.

Premium adjustments for retrospectively rated policies are recognised as accrued income when the related losses are paid. A provision for premium adjustments for retrospectively rated policies is recognised when provision is made for the related losses.

Reinsurance premiums comprise the total premiums payable for contracts entered into during the period and are recognised on the date on which the policy incepts. Reinsurance premiums include any adjustments arising in the accounting period in respect of reinsurance contracts incepting in prior accounting periods.

The reinsurer’s share of premium adjustments for retrospectively rated policies is recognised as an insurance payable when the related losses are paid. A provision for the reinsurer’s share of premium adjustments for retrospectively rated policies is recognised when provision is made for the related losses.

(c) Provision for unearned premiums Unearned premiums are those proportions of premiums written in a year that relate to periods of risk after the reporting date. Unearned premiums are calculated on the twenty-fourths basis. The proportion attributable to subsequent periods is deferred as a provision for unearned premiums.

Unearned reinsurance premiums are those proportions of premiums written in a year, that relate to periods of risk after the reporting date. Unearned reinsurance premiums are deferred over the term of the underlying insurance contracts and calculated on the twenty-fourths basis. The proportion attributable to subsequent periods is deferred as a provision for unearned reinsurance premiums.

(d) Claims incurred Gross claims incurred include all claims occurring during the year, whether reported or not, related internal and external claims handling costs that are directly related to the processing and settlement of claims, a reduction for the value of salvage and other recoveries, and any adjustment to claims outstanding from previous years.

Reinsurance claims are recognised when the related gross insurance claims are recognised according to the terms of the relevant reinsurance contract.

(e) Insurance contract liabilities Insurance contract liabilities include the outstanding claims provision, the provision for unearned premium, a provision for unallocated loss adjustment expenses, and, if required, the provision for premium deficiency.

The outstanding claims provision is based on the estimated ultimate cost of all claims incurred less any payments on account or part payments at the reporting date, whether reported or not, together with related claims handling costs. In addition, provision is made in respect of the Company’s share of the estimated liability for outstanding claims of the Motor Insurers’ Bureau of Ireland.

Delays can be experienced in the notification and settlement of certain types of claims; therefore, the ultimate cost of these cannot be known with certainty at the reporting date. The liability is calculated at the reporting date using a range of standard actuarial claim projection techniques, based on empirical data and current assumptions. The liability is not discounted for the time value of money. No provision for equalisation or catastrophe reserves is calculated.

The liabilities are derecognised when the obligation to pay a claim expires, is discharged or is cancelled.

IPB Insurance Stakeholder & Annual Report 2012 89 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. summary of significant accounting policies (continued) At each reporting date, the Company reviews its unexpired risk and a liability adequacy test is performed to determine whether there is any overall excess of expected claims over unearned premiums. The calculation uses current estimates of future contractual cash flows after taking account of the investment return expected to arise on assets relating to the relevant technical provision. If these estimates show that the carrying amount of the unearned premiums is inadequate, the deficiency is recognised in the statement of comprehensive income by setting up a provision for premium deficiency.

(f) Reinsurance assets Reinsurance assets represent balances due from reinsurance companies. Reinsurance assets include the reinsurance outstanding claims provision and the reinsurer's share of the provision for unearned reinsurance premiums.

Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contract.

Reinsurance assets are reviewed for impairment at each reporting date, or more frequently when an indication of impairment arises during the reporting year. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the reinsurance asset that the Company may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Company will receive from the reinsurer. The impairment loss is recorded in the statement of comprehensive income.

Reinsurance assets are derecognised when the contractual rights are extinguished or expire or when the contract is transferred to another party.

(g) Insurance receivables Insurance receivables are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. Subsequent to initial recognition, the carrying amount of insurance receivables approximate to their fair value. The carrying value of insurance receivables is reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be fully recoverable, with the impairment loss recorded in the statement of comprehensive income.

Insurance receivables are derecognised when derecognition criteria for financial assets have been met.

(h) Insurance payables Insurance payables are recognised when due and measured on initial recognition at the fair value of the consideration paid or payable less directly attributable transaction costs. Subsequent to initial recognition, insurance payables are measured at fair value.

Insurance payables are derecognised when the obligation under the liability is settled, cancelled or expired.

(i) Commission income Commission receivable on outward reinsurance contracts is deferred and amortised on a straight line basis over the term of the expected premiums payable.

Insurance agency commissions, which do not require the provision of further services, are recognised as revenue on the effective commencement or renewal date of the related insurance policies.

90 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. summary of significant accounting policies (continued) Financial instruments

(a) Financial assets Initial recognition and measurement On initial recognition, financial assets may be categorised into one the following categories:

• Financial assets at fair value through profit or loss;

• Loans and receivables;

• Held to maturity financial assets; or

• Available for sale financial assets.

The classification depends on the purpose for which the investments were required. Management determines the classification of its investments at initial recognition.

The Company designates investments in equity and debt securities at fair value through profit or loss. This is in accordance with its investment strategy, under which the investment return is internally managed and evaluated on the basis of the total return on the investment.

Other financial investments consist of loans to Local Authorities and deposits with credit institutions with a maturity date in excess of three months. These investments are designated as loans and receivables.

Financial assets arising from non-investment activities include cash and short-term deposits and insurance and other receivables.

A financial asset is initially recognised at fair value on the date the Company commits to purchase the asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in a marketplace are recognised on the trade date. In the case of all financial assets not classified at fair value through profit or loss, transaction costs are directly attributable to its acquisition.

Subsequent measurement The subsequent measurement of financial assets depends on their classification. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value, with changes in fair value recognised in net investment return in the statement of comprehensive income. Loans and receivables are subsequently measured at amortised cost using the effective interest rate method (EIR), less any provision for impairment.

Investment income is recognised in the statement of comprehensive income as part of the net investment return. Dividends on equity investments are recognised on the date at which the investment is priced ‘ex-div’. Interest income on debt securities is accrued and recognised in the income statement using the effective interest rate. Interest income on loans and receivables is recognised using the effective interest rate method.

Gains and losses arising on financial assets are recognised in net investment income in the income statement.

Derecognition A financial asset is derecognised when the rights to receive cash flows from the investment have expired or have been transferred and when the Company has substantially transferred the risks and rewards of ownership of the asset.

IPB Insurance Stakeholder & Annual Report 2012 91 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. summary of significant accounting policies (continued) (b) Financial liabilities Initial recognition and measurement The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are designated as at fair value through profit or loss and recognised initially at fair value.

Subsequent measurement Financial liabilities are carried in the statement of financial position at fair value with changes in fair value recognised in the income statement. Gains or losses are recognised in the statement of comprehensive income.

Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

(c) Derivative financial instruments The Company uses forward currency contracts to limit its exposure to foreign currency transactions. These derivative financial instruments, which are designated as held for trading, are typically entered into with the intention to settle in the near future.

Derivatives are initially measured at fair value on the date the contract is entered into and subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Gains or losses on assets or liabilities held for trading are recognised in net investment income in the income statement.

(d) Cash and cash equivalents Cash and cash equivalents comprise of cash at bank and in hand and short-term deposits with an original maturity of three months or less in the statement of financial position.

(e) Fair value of financial instruments The fair value of financial instruments that are traded in active markets is determined by reference to quoted mid- market prices, without any deduction for transaction costs.

For financial assets not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions, reference to the current fair value of another instrument that is substantially the same, a discounted cash flow analysis or other valuation models.

(f) Impairment of financial assets The Company assesses, at each reporting date, whether there is any objective evidence that a financial asset is impaired. A financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated.

Where there is objective evidence that an impairment loss has been incurred for financial assets carried at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, excluding future expected credit losses that have not yet incurred. The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

92 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. summary of significant accounting policies (continued) The carrying amount of the asset is reduced and the amount of the loss is recognised as an expense in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the carrying amount of the asset is increased or decreased to the revised estimate of its recoverable amount, but only to a level that does not exceed the carrying amount that would have been determined had the impairment not been recognised.

(g) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Taxation (a) Current tax Tax assets and liabilities, for the current and prior periods, are measured at the amount expected to be recovered from or paid to the taxation authorities, using tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Current tax relating to items recognised directly in equity or other comprehensive income is recognised in equity or other comprehensive income and not in the income statement.

Current tax assets and liabilities are offset where a legally enforceable right exists to set off the recognised amounts and the Company intends to settle on a net basis, or to release the asset and settle the liability simultaneously.

(b) Deferred tax Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amount for financial reporting purposes.

Deferred tax assets are recognised for all deductible temporary 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 exception to this is where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

Deferred tax liabilities are recognised for all taxable temporary differences, except where the deferred tax liability relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

IPB Insurance Stakeholder & Annual Report 2012 93 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. summary of significant accounting policies (continued) The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax relating to items recognised outside the statement of comprehensive income is recognised outside of the statement of comprehensive income in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and liabilities are offset where there is a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to taxes levied by the same taxation authority.

Retirement Benefits (a) Defined benefit scheme The Company participates in an externally funded defined benefit pension scheme covering a former employee of the Company and other employees in participating employers. Consequently, it is not practicable to identify the Company’s share of underlying assets and liabilities of the scheme or to provide information on the implications of the surplus or deficit in the scheme for the Company. Therefore, the Company has accounted for the scheme as if it was a defined contribution plan and recognises expenses equal to the contribution payable for the period.

(b) Defined ontributionc scheme Contributions to defined contribution schemes are charged to the income statement on an accruals basis.

Dividend policy The payment of a dividend in any year is at the sole discretion of the Board. The dividend is payable to current Members in proportion to the gross premium income derived from them in the most recent financial year less any commissions paid to third parties in respect of this business.

Dividends are recognised as a liability when approved by the Board.

Other accounting policies (a) Equipment Equipment is stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and/or accumulated impairment losses, if any.

Depreciation is calculated on the straight-line method to write down the carrying value of assets to their residual values over their estimated useful lives as follows: • Fixtures and fittings - 10% to 33% per annum • IT hardware - 33% per annum An item of equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss on derecognition is calculated as the difference between the net disposal proceeds and the carrying amount of the asset, and is taken into the income statement in the period the asset is derecognised.

The assets’ residual values and useful lives are reviewed, and adjusted prospectively if appropriate, at each reporting date.

94 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. summary of significant accounting policies (continued) (b) Impairment of non-financial assets The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount for the individual asset. The estimated recoverable amount is the higher of the asset’s fair value less costs to sell or value in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. This impairment loss shall be recognised immediately in the income statement in the expense category consistent with the nature of the impaired asset.

An assessment is made, at each reporting date, as to whether there is any indication that an impairment loss recognised in prior periods for an asset may no longer exist or may have decreased. If any such indication exists, the Company estimates the recoverable amount of that asset. The carrying amount of the asset shall be increased to its recoverable amount. This increase is a reversal of an impairment loss and shall not exceed the carrying amount that would have been determined, net of amortisation or depreciation, had no impairment loss been recognised for the asset in prior periods. The reversal of an impairment loss for an asset shall be recognised immediately in the statement of comprehensive income, unless it is carried at revalued amount, in which case the reversal is treated as a revaluation increase.

(c) Foreign currency translation Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.

All differences are taken to the statement of comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transactions and are not subsequently restated. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The gain or loss arising on translation of non-monetary items is recognised in line with the gain or loss of the item that gave rise to the translation difference.

(d) Provisions Provisions are recognised when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when it is virtually certain that the reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset.

The amount recognised for the reimbursement shall not exceed the amount of the provision. The expense relating to a provision may be presented net of the amount recognised for a reimbursement.

IPB Insurance Stakeholder & Annual Report 2012 95 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

2. summary of significant accounting policies (continued) (e) Adoption of new or revised IFRS Accounting Standards and Interpretations: As permitted under Irish Company Law, the Company prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). The IFRS adopted by the EU and applied by the Company are those that were effective at 31 December 2012. These have been applied for the preparation of these financial statements. The following list provides a brief outline of the impact of new and amended IFRS interpretations that the Company has not yet adopted.

Standards issued, but not yet effective Standards issued, but not yet effective, up to the date of issuance of the Company’s financial statements are listed below. This listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt the standards when they become effective.

(i) IFRS 7 Financial Instruments: Disclosures This amendment introduces new disclosures to help investors and other financial statement users better assess the effect or potential effect of offsetting arrangements on the balance sheet and to better understand how entities mitigate credit risk. The effective date of this standard is 1 January 2013.The adoption of IFRS 7 may have an effect on the disclosure of the Company’s financial assets. The Company will be reviewing this on an on-going basis.

(ii) IAS 32 Financial Instruments (Amendment) The amendment to IAS 32 addresses inconsistencies in the current practice when applying the offsetting criteria in IAS 32. The effective date of the standard is 1 January 2014. This amendment will have no impact on the financial statements of the Company.

(iii) IAS 19 Employee Benefits (Amendment) The amendments to IAS 19 remove the option to defer the recognition of actuarial gains and losses, i.e. the corridor mechanism. All changes in the value of defined benefit plans will be recognised in profit or loss and other comprehensive income. The effective date of the standard is 1 January 2013. The Company has a defined benefit pension scheme in place for only one employee and, hence, this amendment will have minimal impact on the financial statements of the Company.

(iv) IFRS 13 Fair Value Measurement IFRS 13 provides guidance on how to measure the fair value of financial and non-financial assets and liabilities when required or permitted by IFRS. The standard is effective for annual periods on or after 1 January 2013. The adoption of IFRS 13 will affect some of the fair values of certain assets and liabilities and thus affect the profit and equity of the Company. The Company will be reviewing this on an on-going basis.

The Directors anticipate that the adoption of the other Standards and Interpretations listed above will have no material impact (other than on presentation and disclosure) on the financial standards of the Company in future periods.

96 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

3. first time adoption of IFRS The financial statements for the year ended 31 December 2012 are the first that the Company has prepared in accordance with IFRS. For periods up to and including the year ended 31 December 2011, the Company prepared its financial statements in accordance with Irish Generally Accepted Accounting Practice (Irish GAAP).

Accordingly, the Company has prepared financial statements that comply with IFRS applicable for periods ending on or after 31 December 2012, together with the comparative period data as at and for the year ended 31 December 2011, as described in the accounting policies. In preparing these financial statements, the Company’s opening statement of financial position was prepared as at 1 January 2011, the Company’s date of transition to IFRS. This note explains the principal adjustments made by the Company in restating its Irish GAAP statement of financial position as at 1 January 2011 and its previously published Irish GAAP financial statements as at and for the year ended 31 December 2011.

(a) Exemptions applied IFRS 1 First-Time Adoption of International Financial Reporting Standards allows first-time adopters certain exemptions from the retrospective application of certain IFRS.

The Company has adopted the following exemptions:

In accordance with the transitional rules of IFRS 4 the Company is claiming relief from full retrospective disclosure of claims development on the basis that it is impractical for the Company to do otherwise.

(b) Estimates At the date of transition, the estimates under IFRS are consistent with estimates previously made under Irish GAAP.

(c) Transition from previous Irish GAAP to IFRS The following reconciliation tables explain how the transition from Irish GAAP to IFRS affected the Company’s reported financial position and financial performance. The transition from Irish GAAP to IFRS has not had a material impact on the statement of cash flows.

Presentation adjustments reclassify items that the Company recognised under previous GAAP as one type of asset, liability or component of equity, but which are a different type of asset, liability or component of equity under IFRS.

Valuation adjustments recognise all assets and liabilities whose recognition is required by IFRS. They do not recognise items as assets or liabilities if IFRS does not permit such recognition and apply IFRS in measuring all recognised assets and liabilities.

IPB Insurance Stakeholder & Annual Report 2012 97 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

RECONCILIATION OF EQUITY As at 1 January 2011 (date of transition)

Irish GAAP IFRS IFRS Other as at presentation valuation valuation IFRS as at 01-Jan-11 adjustments adjustments adjustments 01-Jan-11 Note €’000 €’000 €’000 €’000 €’000 Assets Financial assets A 957,641 (957,641) - - - Derivative financial instruments B - - 11,992 - 11,992 Financial assets at fair value through A - 829,991 15,044 - 845,035 profit or loss Loans and receivables A - 67,501 (627) - 66,874 Insurance assets C - - - 24,649 24,649 Reinsurance assets - Provision for unearned premiums C 2,158 - - (2,158) - Claims outstanding C 58,844 - - 16,591 75,435 Deferred tax assets D 13,033 - (13,033) - - Current tax assets 832 - - - 832 Insurance receivables 3,823 - - - 3,823 Other receivables A 71 61 - - 132 Deferred expenses 125 - - - 125 Prepayments and accrued income C 17,522 (4,291) (162) 5,351 18,420 Cash and cash equivalents A 5,995 64,379 - - 70,374 Total assets 1,060,044 - 13,214 44,433 1,117,691

Equity Retained earnings 329,330 - 11,720 155,833 496,883 Total equity 329,330 - 11,720 155,833 496,883

Liabilities Insurance contract liabilities Provision for unearned premiums C 12,379 - - 3,470 15,849 Claims outstanding C 715,484 - - (137,132) 578,352 Derivative financial instruments B - - 12,000 - 12,000 Deferred tax liabilities D - - (10,506) 22,262 11,756 Insurance payables 1,226 - - - 1,226 Trade and other payables 1,625 - - - 1,625 Total liabilities 730,714 - 1,494 (111,400) 620,808

Total equity and liabilities 1,060,044 - 13,214 44,433 1,117,691

98 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

RECONCILIATION OF EQUITY As at 31 December 2011

Irish GAAP IFRS IFRS Other as at presentation valuation valuation IFRS as at 31-Dec-11 adjustments adjustments adjustments 31-Dec-11 Note €’000 €’000 €’000 €'000 €’000 Assets Equipment A 163 - - - 163 Financial assets A 917,844 (917,844) - - - Derivative financial instruments B - - 7,437 - 7,437 Financial assets at fair value A - 711,477 30,366 - 741,843 through profit or loss Loans and receivables A - 112,942 7,428 - 120,370 Insurance asset C - - - 19,553 19,553 Reinsurance assets - Provision for unearned premiums C 2,319 - - (2,319) - Claims outstanding C 43,820 - - 12,106 55,926 Deferred tax assets D 17,125 - (17,125) - - Current tax assets 1,259 - - - 1,259 Insurance receivables 11,643 - - - 11,643 Other receivables A 30 8 - - 38 Deferred expenses 78 - - - 78 Prepayments and accrued income C 21,494 (7,201) (1,038) 5447 18,702 Cash and cash equivalents A 8,943 100,618 1 - 109,562 Total assets 1,024,718 - 27,069 34,787 1,086,574

Equity Retained earnings 370,624 - 31,502 142,149 544,275 Total equity 370,624 - 31,502 142,149 544,275

Liabilities Insurance contract liabilities Provision for unearned premiums C 14,663 - - 3,720 18,383 Claims outstanding C 635,436 - - (131,389) 504,047 Derivative financial instruments B - - 7,338 - 7,338 Deferred tax liabilities D - - (11,771) 20,307 8,536 Insurance payables 982 - - - 982 Trade and other payables 3,013 - - - 3,013 Total liabilities 654,094 - (4,433) (107,362) 542,299

Total equity and liabilities 1,024,718 - 27,069 34,787 1,086,574

IPB Insurance Stakeholder & Annual Report 2012 99 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

RECONCILIATION OF TOTAL COMPREHENSIVE INCOME For the year ended 31 December 2011

Irish GAAP IFRS IFRS Other IFRS as at presentation valuation valuation as at 31-Dec-11 adjustments adjustments adjustments 31-Dec-11 Note €’000 €’000 €’000 €’000 €’000 Gross written premiums C 93,628 - - (5,000) 88,628 Premiums ceded to reinsurers C (13,914) (4,222) - - (18,136) Net written premiums 79,714 (4,222) - (5,000) 70,492 Change in the gross provision for unearned premiums C (2,285) - - (250) (2,535) Change in the reinsurance provision for unearned premiums C 161 - - (161) - Net earned premiums 77,590 (4,222) - (5,411) 67,957

Commission income C 255 4,222 - - 4,477 Net investment return A,B (1,333) 653 22,609 - 21,929 Other revenue (1,078) 4,875 22,609 - 26,406

Total revenue 76,512 653 22,609 (5,411) 94,363

Gross claims paid (91,490) - - - (91,490) Claims ceded to reinsurers 23,005 - - - 23,005 Claims paid net of reinsurance (68,485) - - - (68,485) Gross change in contract liabilities C 80,049 - - (5,743) 74,306 Change in contract liabilities ceded to reinsurers C (15,024) - - (4,485) (19,509) Net claims incurred (3,460) - - (10,228) (13,688)

Operating expenses (14,504) (653) - - (15,157) Total claims and other expenses (17,964) (653) - (10,228) (28,845)

Profit before tax 58,548 - 22,609 (15,639) 65,518 Tax expense D (7,254) - 1,083 (1,955) (8,126) Profit for the year 51,294 - 23,692 (17,594) 57,392

Total comprehensive income for the year 51,294 - 23,692 (17,594) 57,392

Total comprehensive income attributable to: Members 51,294 - 23,692 (17,594) 57,392

100 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Notes to the reconciliation of equity as at 1 January 2011 and 31 December 2011 and total comprehensive income for the year ended 31 December 2011

A Designation of financial assets and financial liabilities At the date of transition, the Company chose to designate according to the IFRS designation criteria, certain of its existing financial assets as at fair value through profit or loss. The mark to market value increase in debt securities for the year ended 31 December 2011 is €17.7m (2010: €11.4m) and €12.7m (2010: €26.4m) for equity shares.

B Derivatives The fair value of forward foreign exchange contracts is recognised under IFRS and was not recognised under Irish GAAP. These contracts have been designated as held for trading as at the date of transition to IFRS and valued at fair value through profit or loss. The corresponding adjustment has been recognised against retained earnings.

C Insurance contracts In conjunction with the conversion from Irish GAAP to IFRS, the Company undertook a review of its accounting policy for insurance contracts. The details of the changes made are outlined in Note 4.

D Deferred tax The various adjustments lead to different temporary differences. Deferred tax adjustments are recognised in correlation to the underlying transaction either in retained earnings or a separate component of equity.

IPB Insurance Stakeholder & Annual Report 2012 101 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

4. change in accounting policy and prior year adjustment The Company is committed to improving the relevance and reliability of the financial statements and undertook a review of its accounting policy for insurance contracts.

(i) Change in accounting policy – insurance contracts The Company determined that existing claims provisions should be measured on a best estimate basis plus a margin for uncertainty. The Company believes that this approach is sufficiently prudent, but not excessively so. It also provides more relevant and transparent information on the emergence of claims costs and ultimately on the financial performance and financial position of the Company. Previously, the Company reserved at the higher end of a reasonable range of estimates.

The cumulative impact of the change in valuation method for claims outstanding as at 1 January 2011 is a reduction in the value of gross insurance liabilities for claims outstanding of €137m and an increase in reinsurance claims outstanding of €16m, an overall increase in retained earnings after tax of €130m.

The impact of the new accounting policy in respect of insurance contracts is shown in the tables below.

Impact of the new accounting policy in respect of insurance contracts 2012 2011 on the statement of comprehensive income €’000 €’000 Change in the gross provision for unearned premiums 400 (250) Change in the reinsurance provision for unearned premiums 174 (161) Net earned premiums 574 (411)

Gross change in contract liabilities 11,343 (5,743) Change in contract liabilities ceded to reinsurers (2,359) (4,485) Net claims incurred 8,984 (10,228)

Profit (loss) before tax 9,558 (10,639)

Tax expense (1,195) 1,330 Retained earnings after tax - decrease 8,363 (9,309)

Impact of the new accounting policy in respect of insurance contracts 2012 2011 01-Jan-2011 on the statement of financial position €’000 €’000 €’000 Reinsurance balance - decrease in provision for unearned premiums 174 (161) (2,158) Reinsurance balance - increase in claims outstanding (2,359) (4,485) 16,591 Gross of reinsurance - increase in provision for unearned premiums 400 (250) (3,470) Gross of reinsurance - decrease in claim outstanding 11,343 (5,743) 137,132 Net of reinsurance - decrease in claims premiums and unearned 9,558 (10,639) 148,095 premiums Deferred and current tax provision balance - increase (1,195) 1,330 (18,512) Retained earnings after tax - increase 8,363 (9,309) 129,583

102 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

4. change in accounting policy and prior year adjustment (continued) (ii) Prior period adjustment - retro rated premiums Additionally, a number of the Company’s insurance contracts are subject to the payment of a minimum premium followed by an adjustment premium dependent on paid claims experience. The Company determined that all the rights and obligations arising under insurance contracts should be provided for in its financial statements.

Accordingly the Company has provided for retrospectively rated premiums based on claims paid as accrued income while future adjustment premiums related to case estimates have been provided for as an insurance asset. The income is recognised as gross written premium in the income statement. The Company previously recognised premium adjustments for retrospectively rated policies when they were recognised as premium written when related losses were paid in full, and when claims were fully and finally settled and agreed with clients. The Company decided to make a prior year adjustment in respect of retro rated premiums as it believes it is more transparent than the approach adopted in prior years. The impact of this prior period adjustment is shown in the table below.

Impact of the new accounting policy in respect of retro rated premiums on the 2012 2011 statement of comprehensive income €’000 €’000 Gross written premium - movement - (5,000) Tax expense - decrease - 625 Retained earnings after tax - increase - (4,375)

w Closing Balance 31-Dec- 01-Jan- Impact of the new accounting policy in respect of retro 2012 2012 2011 2011 rated premiums statement of financial position €’000 €’000 €’000 €’000 Insurance assets - (decrease)/increase 21,203 1,650 (5,096) 24,649 Prepayments and accrued income - (decrease)/increase 3,797 (1,650) 96 5,351 Total 25,000 - (5,000) 30,000 Current tax provision balance (625) 625 Deferred tax provision balance (2,500) (625) 625 (3,750) Retained earnings after tax - increase 21,875 - (4,375) 26,250

These adjustments have been applied retrospectively in line with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

IPB Insurance Stakeholder & Annual Report 2012 103 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

5. change in accounting estimate Change in accounting estimate - impact of claim provisions of a real yield fall

Current Irish practice in relation to bodily injury awards is based on the use of a discount rate (real yield) of approximately 3% per annum, which was determined in the Boyne Judgement in 2002. However, real yields underlying the pricing of financial investments are currently running significantly below this level.

Future loss of earnings might be expected to increase in line with earnings inflation while future cost of care might be expected to increase in line with medical costs inflation. Historically, both earnings inflation and medical costs inflation have exceeded consumer price inflation, and we consider that this pattern is likely to continue in future.

In previous years, there was no immediate prospect that the real yield would reduce below 3% per annum. There now appears to be increasing pressure for the real yield underlying bodily injury awards to reduce to ensure that medical care inflation is matched by real yields achievable from investment markets. In this context, it is relevant to note that the UK Privy Council determined recently that the applicable discount rate in respect of the Helmont V Simon case in Guernsey should be -1.5% (i.e. a negative discount rate).

This implies the following approximate increase in claims reserves as at 31 December 2012 if real yields reduce immediately from 3% per annum to the levels shown:

New real yield increase in increase in level projected projected % p.a reserves reserves (gross) (net) € million € million 2.5 7.3 6.9 2.0 15.8 14.9 1.5 25.8 24.2 1.0 37.5 35.2 0.5 51.4 48.3 0.0 68.2 63.9 (0.5) 88.5 83.0 (1.0) 113.3 106.4 (1.5) 144.1 135.1 (2.0) 182.7 171.4

The figures in the table above are subject to a substantial degree of uncertainty and are intended to be indicative of the approximate change in case estimates that might be caused by a reduction in the applicable discount rate.

For 2012, the Company decided that the real yield of 0.5% is the most relevant given the current market conditions. This has created a net provision of €48m when estimating outstanding claims provisions, based on a probability weighted average of all future scenarios.

The amount of the effect in future periods is not disclosed because estimating it is impractical due to the lack of available market evidence.

104 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

5. change in accounting estimate (continued) The table below provides an overview of the impact on the statement of comprehensive income and the statement of financial position of the accounting estimate change in respect of the real yield.

Analysis of the real yield provision change on the statement 2012 of comprehensive income €’000 Gross of reinsurance - increase to claims incurred (41,800) Net of reinsurance - increase to net claims incurred (39,900)

Analysis of the real yield provision change on the statement 2012 of financial position €’000 Gross of reinsurance - increased gross claim provisions 41,800 Net of reinsurance - increased net claim provisions 39,900

Total provision gross of reinsurance 51,400 Total provision net of reinsurance 48,300

6. analysis of underwriting result

Fire and other Third party damage to Analysis of underwriting result liability property Motor Other Total 2012 €’000 €’000 €’000 €’000 €’000 Gross written premiums 56,101 24,654 6,308 3,062 90,125 Premium ceded to reinsurers (3,676) (13,460) (396) (212) (17,744) Change in the gross provision for unearned premiums 1,446 82 520 10 2,058 Net earned premiums 53,871 11,276 6,432 2,860 74,439

Gross claims paid (58,759) (11,859) (5,865) (397) (76,880) Claims ceded to reinsurers 6,688 7,098 - - 13,786 Gross change in contract liabilities (4,412) 10,120 2,062 (423) 7,347 Change in contract liabilities ceded to reinsurers (8,896) (8,663) (2,386) - (19,945) Net claims incurred (65,379) (3,304) (6,189) (820) (75,692)

Other revenue 82,554 36,279 9,282 4,506 132,621 Operating expenses (13,541) (5,951) (1,523) (738) (21,753)

Profit before taxation 57,505 38,300 8,002 5,808 109,615

Net insurance liabilities 432,250 18,156 24,396 2,241 477,043

*Other revenue consists of commission income (note 7) and net investment return (note 8). The allocation of this income is based on gross written premium.

IPB Insurance Stakeholder & Annual Report 2012 105 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

6. analysis of underwriting result (continued)

Fire and other Third party damage to Analysis of underwriting result liability property Motor Other Total 2011 €’000 €’000 €’000 €’000 €’000 Gross written premiums 54,226 24,384 7,075 2,943 88,628 Premium ceded to reinsurers (3,829) (13,673) (435) (199) (18,136) Change in the gross provision for unearned premiums (338) (600) (411) (1,186) (2,535) Net earned premiums 50,059 10,111 6,229 1,558 67,957

Gross benefits and claims paid (63,974) (21,408) (5,917) (191) (91,490) Claims ceded to reinsurers 7,363 14,991 651 - 23,005 Gross change in contract liabilities 57,809 10,385 6,706 (594) 74,306 Change in contract liabilities ceded to reinsurers (14,937) (6,063) 1,491 - (19,509) Net claims incurred (13,739) (2,095) 2,931 (785) (13,688)

Other revenue 16,156 7,265 2,108 877 26,406 Operating expenses (9,274) (4,170) (1,210) (503) (15,157)

Profit before taxation 43,202 11,111 10,058 1,147 65,518

Net insurance liabilities 420,380 19,695 24,594 1,835 466,504

All premiums resulted from contracts of insurance concluded in the Republic of Ireland.

*Other revenue consists of commission income (note 7) and net investment return (note 8). The allocation of this income is based on gross written premium. All premiums resulted from contracts of insurance concluded in the Republic of Ireland.

106 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

7. commission Income

2012 2011 Analysis of commission income €’000 €’000 Commission income 268 255 Reinsurance commission income 4,162 4,222 Total commission income 4,430 4,477

Commission income is earned by the Company on contracts where the Company places insurance contracts with another insurance company, rather than underwriting the business itself.

Reinsurance commission reflects the amounts allowed by the Company’s reinsurers to cover administration and other expenses.

8. net Investment Return Net Net Total Investment realised unrealised Investment Analysis of net investment return Income gains/(losses) gains/(losses) Return 2012 €’000 €’000 €’000 €’000 At fair value through profit or loss - Debt securities 23,503 12,552 56,912 92,967 Equity securities 4,667 (10,469) 35,906 30,104 Loans and receivables - Loans to local authorities 672 - - 672 Deposits with credit institutions 4,029 - - 4,029 Cash and cash equivalents 679 - (118) 561 Derivatives - (112) (30) (142) Total net investment return 33,550 1,971 92,670 128,191

IPB Insurance Stakeholder & Annual Report 2012 107 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

8. net Investment Return (continued)

Net Net Total Investment realised unrealised Investment Analysis of net investment return Income gains/(losses) gains/(losses) Return 2011 €’000 €’000 €’000 €’000 Investment properties - (1,308) - (1,308) At fair value through profit or loss Debt securities 27,504 (37,853) 42,461 32,112 Equity securities 5,344 6,384 (24,914) (13,186) Loans and receivables - Loans to local authorities 774 - - 774 Deposits with credit institutions 1,887 - - 1,887 Cash and cash equivalents 1,028 - 66 1,094 Derivatives - 448 108 556 Total net investment return 36,537 (32,329) 17,721 21,929

Investment income includes interest earned on debt securities and cash and cash equivalents, interest income calculated using the effective interest rate on loans to Local Authorities and deposits with credit institutions for a period of three months or more, and dividends receivable on equity securities.

108108 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

9. total Operating Expenses 9(a) Operating Expenses

2012 2011 STATE Analysis of other operating expenses €’000 €’000 Outsourcing costs - Brennan Insurances (note 29) 10,139 10,698 Directors remuneration (note 9(b)) 1,000 704 Employee benefits expense (note 9(c)) 2,059 927 M ENTS Investment transaction costs 530 653 Depreciation on equipment (note 12) 38 4 Auditors' remuneration (note 9(d)) 242 169 Deferred expenses (note 19) 78 205 Amortisation of deferred expenses (note 19) - (158) Social dividend fund (note 9(e)) 5,000 - Other expenses 2,667 1,955 Total operating expenses 21,753 15,157

9(b) Directors' remuneration An analysis of the Directors’ remuneration is outlined in the Directors Remuneration report.

Directors’ remuneration is as follows:

2012 2011 Analysis of Directors' remuneration €’000 €’000 Directors' remuneration - salaries, benefits and fees 909 278 Directors' remuneration - pensions 65 215 Directors' remuneration - compensation for loss of office or retirement 26 211 Total Directors' remuneration 1,000 704

Directors’ remuneration includes salaries paid to Executive Directors during the period.

IPB Insurance Stakeholder & Annual Report 2012 109 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

9. total Operating Expenses (continued) 9(c) Employee benefits expense

2012 2011 Analysis of employee benefits expense €’000 €’000 Staff costs - salaries and benefits 1,274 700 Staff costs - social welfare 211 68 Staff costs - pensions 573 159 Total employee benefits expense 2,059 927

The increase in the 2012 wages and salaries is due to the recruitment of the Executive team combined with an accrual for a deficit in the defined benefit pension scheme.

The average number of full-time equivalents employed by the Company in the financial year was:

Employee numbers 2012 2011 Permanent staff 8 4

The actual number of full-time equivalents employed by the business at 31 December 2012 was 9 (2011: 4). The Company has contracted Brennan Insurances to conduct services on its behalf, details of which are included in note 29 Related Party Disclosures.

9(d) Auditors’ remuneration An analysis of the auditors’ remuneration is set out below.

2012 2011 Analysis of auditors' remuneration €’000 €’000 Fees and expenses paid to our statutory auditors are analysed as follows: Audit of the financial statements 120 113 Other assurance services 65 7 Tax advisory 57 49 Total auditors' remuneration 242 169

Auditors’ remuneration (excluding value added tax) in 2012 for audit services is €0.120m (2011: €0.113m) and for non-audit services is €0.122m (2011: €0.056m). The Board and the Audit Committee review the level of fees on an on-going basis and are satisfied that they have not affected the independence of the auditors.

9(e) Social dividend At the AGM in 2012, the Company announced its commitment to a €5m (2011: nil) Social Dividend Fund as part of its Corporate Social Engagement (CSE) framework. To guide the development, implementation and management of the CSE framework, a Steering Group has been formed, reporting to the Board of Directors.

110110 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

10. tax Charge on Profit on Ordinary Activities 10(a) Current tax year charge

2012 2011 STATE Tax charge on profit on ordinary activities €’000 €’000 Analysis of charge for year: Tax charge based on the results for the year is as follows:

Current tax: M

Taxation on foreign dividends (300) (569) ENTS Tax charge (15,453) (10,767) Adjustment in respect of prior years (50) (10) Total current tax charge (15,803) (11,346)

Deferred tax: Origination and reversal of timing differences 1,916 3,220 Total deferred tax (charge) credit (note 22) 1,916 3,220

Tax charge on profit on ordinary activities (note (10b)) (13,887) (8,126)

Trading income is subject to corporation tax at the rate of 12.5%.

10(b) Tax Charge on Profit on Ordinary Activities The tax assessed for the year is higher than the standard rate of corporation tax due to the differences as explained below.

2012 2011 Tax charge on profit on ordinary activities analysis €’000 €’000 Profit on ordinary activities before tax 109,615 65,518

Profit on ordinary activities multiplied by standard rate of corporation tax of 12.5% 13,702 8,190

Effect of: Expenses not deductible for tax purposes 418 12 Adjustment in respect of prior years 50 10 Taxation on foreign dividends 300 569 Income not subject to tax (583) (655) Tax charge 13,887 8,126

The total tax charge in future periods will be affected by any changes in the corporation tax rate.

Current tax assets The current tax assets relate to withholding tax amounts that are refundable to the Company.

IPB Insurance Stakeholder & Annual Report 2012 111111 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

11. Dividends paid and proposed 2012 2011 Dividend paid and proposed €’000 €’000 Declared and payable during the year: Interim dividend 10,000 10,000 Total dividends paid in the year 10,000 10,000

The prohibition on the Company making dividend payments was removed at the EGM of the Company in 2011 and the Board implemented a dividend policy.

The payment of a dividend in any year is at the sole discretion of the Board. Payment in any one year does not entitle Members to payment in subsequent years. Any dividend payment respects the sanctity of the financial strength of the Company.

The proposed interim dividend for approval at the 2013 AGM is not recognised as a liability in 2012 financial statements.

12. Equipment

Fixtures & IT Fittings hardware Total Equipment €’000 €’000 €’000 Cost Balance at 1 January 2011 - - - Additions 154 13 167 Balance at 31 December 2011 154 13 167 Additions - - - Balance at 31 December 2012 154 13 167

Depreciation Balance at 1 January 2011 - - - Depreciation for the year (3) (1) (4) Balance at 31 December 2011 (3) (1) (4) Depreciation for the year (34) (4) (38) Balance at 31 December 2012 (37) (5) (42)

Carrying amounts Balance at 1 January 2011 - - - Balance at 31 December 2011 151 12 163 Balance at 31 December 2012 117 8 125

112112 IPB Insurance Stakeholder & Annual Report 2012 financial state NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

13. Derivative Financial Instruments The Company is exposed to currency risks arising from the foreign currency investments it holds, mainly Norwegian debt securities and Sterling denominated equity securities. The Company normally enters into forward currency agreements for a three month period to reduce foreign currency risk. These derivative instruments are held for trading and not as hedging instruments.

The following table shows the fair value of derivative financial instruments, recorded as assets or liabilities, together with

their underlying principal. m

Underlying ents Derivative financial instruments - Assets Liabilities principal held for trading €’000 €’000 ’000 Balance at 31 December 2012 Forward foreign exchange contracts 10,903 10,806 NOK 80,000 Forward foreign exchange contracts 9,863 9,850 STG 8,000 Forward foreign exchange contracts 2,276 2,317 USD 3,000 Total financial instruments held for trading 23,042 22,973

Balance at 31 December 2011 Forward foreign exchange contracts 5,037 5,024 NOK 39,000 Forward foreign exchange contracts 2,400 2,314 STG 2,000 Total financial instruments held for trading 7,437 7,338

Balance at 1 January 2011 Forward foreign exchange contracts 10,498 10,475 STG 9,000 Forward foreign exchange contracts 1,494 1,525 USD 2,000 Total financial instruments held for trading 11,992 12,000

113113 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

14. Other financial assets and liabilities Financial instruments other than derivative financial instruments are summarised by the following categories:

As at 2012 2011 01-Jan-11 Other financial assets €’000 €’000 €’000 Designated as at fair value through profit or loss Debt securities 695,240 607,105 668,886 Equity securities 158,997 134,738 176,149 Total financial assets designated as at fair value through profit or loss 854,237 741,843 845,035

Loans and receivables Loans to local authorities 34,328 37,733 41,222 Deposits with credit institutions 130,778 82,637 25,652 Total loans and receivables at amortised cost 165,106 120,370 66,874

Total other financial assets 1,019,343 862,213 911,909

The Company ceased providing new loans to Local Authorities in 2009 (see Note 29). Balances outstanding are monitored on a monthly basis.

Determination of fair value and the fair value hierarchy The Company held the following financial instruments carried at fair value: debt securities, equity securities and derivatives.

The valuation technique for determining and disclosing the fair value hierarchy of financial instruments is as follows:

• Level 1 - quoted (unadjusted) prices in active markets for identical assets and liabilities,

• Level 2 - other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly,

• Level 3 - techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

The following tables provide an analysis of financial assets that are measured subsequent to initial recognition at fair value grouped into Level 1 to 3 based on the degree to which the fair value is observable.

Total Fair value hierarchy Level 1 Level 2 Level 3 fair value 2012 €’000 €’000 €’000 €’000 Derivative financial assets - 23,042 - 23,042 Financial assets designated at fair value through profit or loss Debt securities 670,346 24,894 - 695,240 Equity securities 150,661 8,036 300 158,997 Total assets 821,007 55,972 300 877,279

Derivative financial liabilities - 22,973 - 22,973 Total liabilities - 22,973 - 22,973

114 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

14. Other financial assets and liabilities (continued)

Total Fair value hierarchy Level 1 Level 2 Level 3 fair value 2011 €’000 €’000 €’000 €’000 Derivative financial assets - 7,437 - 7,437 Financial assets designated at fair value through profit or loss Debt securities 585,980 21,125 - 607,105 Equity securities 126,034 8,378 326 134,738 Total assets 712,014 36,940 326 749,280

Derivative financial liabilities - 7,338 - 7,338 Total liabilities - 7,338 - 7,338

Total Fair value hierarchy Level 1 Level 2 Level 3 fair value As at 1 January 2011 €’000 €’000 €’000 €’000 Derivative financial assets - 11,992 - 11,992 Financial assets designated at fair value through profit or loss Debt securities 642,733 26,153 - 668,886 Equity securities 168,055 8,038 56 176,149 Total assets 810,788 46,183 56 857,027

Derivative financial liabilities - 12,000 - 12,000 Total liabilities - 12,000 - 12,000

Movement in Level 3 financial instruments measured at fair value The table below shows a reconciliation of Level 3 fair value measurement of financial assets.

2012 2011 Reconciliation of level 3 measurement of financial instruments €’000 €’000 Balance at 1 January 326 56 Transfer from level 1 9 5 Unrealised gains/(losses) (35) 265 Balance at 31 December 300 326

Level 3 financial instruments consist mainly of equities that no longer have an active market.

IPB Insurance Stakeholder & Annual Report 2012 115 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

14. Other financial assets and liabilities (continued) During 2012, the Company transferred certain financial instruments from Level 1 to Level 3 of the fair value hierarchy as per the table below. The reason for the change in level is that the market for these securities had become inactive, which has led to a change in the method used to determine fair value. Prior to transfer, the fair value for Level 1 securities was determined using quoted prices in active markets. Since transfer, those assets have been valued using valuation models incorporating non-market observable inputs.

2012 2011 Transfers from level 1 to level 3 €’000 €’000 Financial assets designated at fair value through profit or loss Equity securities 9 5

There have been no transfers from Level 2 to Level 3 in 2011 or 2012.

Sensitivity of Level 3 financial instruments measured at fair value to changes in key assumptions The following table shows the impact on the fair value of Level 3 instruments of using reasonable possible alternative assumptions by class of instrument:

As at Sensitivity of 2012 2011 01-Jan-11 Level 3 financial Effect of Effect of Effect of instruments reasonable reasonable As at reasonable measured at fair 2012 possible 2011 possible 01-Jan-11 possible value Carrying alternative Carrying alternative Carrying alternative to changes in key amount assumptions amount assumptions amount assumptions assumptions €’000 (+/-) €’000 (+/-) €’000 (+/-) Financial assets designated at fair value through profit or loss Equity securities 300 (1) 326 (326) 56 (56)

15. insurance assets Insurance assets relate to retro rated premiums that will become due from customers once certain claims are settled. Retro rated premiums arise under an insurance risk financing plan under which the insured pays a premium based on actual loss experience incurred during the policy period. The premium adjustments made over the life of the plan are based on incurred losses, which takes into consideration the outstanding reserves and expenses of the claims in addition to the actual paid indemnity and medical costs.

2012 2011 Insurance assets €’000 €’000 Insurance assets - retro rated premiums 21,203 19,553

116 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

16. insurance liabilities (a) The following table show an analysis of the insurance contract liabilities.

2012 2011 Insurance Insurance contract Reinsurance contract Reinsurance Contract liabilities liabilities of liabilities Net liabilities of liabilities Net

Provision for reported claims by 385,089 28,593 356,496 427,547 47,426 380,121 policyholders Provision for claims 111,612 7,389 104,223 76,500 8,500 68,000 adverse deviations Outstanding claims 496,701 35,982 460,719 504,047 55,926 448,121 provision

Provision for 16,324 - 16,324 18,383 - 18,383 unearned premiums Total contract 513,025 35,982 477,043 522,430 55,926 466,504 liabilities

(b) The following tables show the movement in the gross and reinsurance claims provision.

Movements in gross outstanding claims provision 2012 2011 €’000 €’000 Carrying amount at 1 January 504,047 578,352

Claim losses and expenses incurred in the current year 88,526 87,868 Decrease in estimated claim losses and expenses incurred in prior years (60,819) (70,683) Change in provision for reduction in real yield in prior years 41,827 - Incurred claims losses and expenses 69,534 17,185 Less Payments made on claims incurred in the current year (2,610) (4,875) Payments made on claims incurred in prior years (74,270) (86,615) Claims payments made in the year (76,880) (91,490)

Carrying amount at 31 December 496,701 504,047

Provision for unearned premiums 16,324 18,383

IPB Insurance Stakeholder & Annual Report 2012 117 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

16. insurance liabilities (continued)

Movements in outstanding reinsurance claims provision 2012 2011 €’000 €’000 Carrying amount at 1 January 55,926 75,435

Claim losses and expenses incurred in the current year 4,406 1,929 (Decrease)/increase in estimated claim losses and expenses incurred in prior years (12,506) 1,567 Change in provision for reduction in real yield in prior years 1,942 - Incurred claims losses and expenses (6,158) 3,496 Less Payments made on claims incurred in the current year (315) (2,442) Payments made on claims incurred in prior years (13,471) (20,563) Claims payments made in the year, net of recoveries (13,786) (23,005)

Carrying amount at 31 December 35,982 55,926

(c) Provision for unearned premiums The following changes have occurred in the premium for unearned premiums during the year.

Provision for unearned premiums 2012 2011 €’000 €’000 Carrying amount at 1 January 18,383 15,849

Gross premium written during the year 90,125 88,628 Gross premium earned during the year (92,184) (86,094) Changes in unearned premium recognised as income (2,059) 2,534

Carrying amount at 31 December 16,324 18,383

(d) Assumptions Please refer to the risk management note 27 for a description of the assumptions used to calculate insurance liabilities. See note 4 in relation to the changes in the reserving policy as at 31 December 2012.

118 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

17. insurance receivables As at 2012 2011 01-Jan-11 €’000 €’000 €’000 Due from policyholders 2,488 3,707 2,407 Due from reinsurers 2,309 7,936 1,416 Total current receivables 4,797 11,643 3,823

18. Other receivables

As at 2012 2011 01-Jan-11 €’000 €’000 €’000 Amounts due from brokers for investment sales - 2 - Other receivables 21 36 132 Total 21 38 132

19. Deferred expenses 2012 2011 €’000 €’000 Balance at beginning of reporting year 78 125 Acquisition expenses incurred - (205) Amortisation (78) 158 Balance at end of reporting year - 78

20. Prepayments and accrued income As at 2012 2011 01-Jan-11 €’000 €’000 €’000 Retrospective premium receivable 3,797 5,447 5,351 Interest on debt securities 10,037 13,097 12,980 Interest on cash and cash equivalents 6 117 89 Cash deposits paid to purchase investment property 2,380 - - Dividends 126 41 - Total 16,346 18,702 18,420

The cash deposits totalling €2.38m relate to deposits placed on two new Irish commercial property investments before year end. The total value of the properties was €24m and these properties have been acquired in 2013.

IPB Insurance Stakeholder & Annual Report 2012 119 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

21. cash and cash equivalents As at 2012 2011 01-Jan-11 Cash and cash equivalents €’000 €’000 €’000 Cash at banks and on hand (110) 8,943 5,995 Short-term deposits 65,656 100,619 64,379 Total 65,546 109,562 70,374

2012 2011 Movement in cash and cash equivalents €’000 €’000 Balance at beginning of reporting year 109,562 70,374 Balance at end of reporting year 65,546 109,562 (Decrease)/increase in cash and cash equivalents (44,016) 39,188

Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Company, and earn interest at the respective short-term deposit rates.

The carrying amounts disclosed above reasonably approximate fair value at the reporting date.

22. Deferred tax liabilities

2012 2011 Deferred taxation liabilities €’000 €’000 Balance at 1 January 8,536 11,756 Income statement (note 9) (1,916) (3,220) Balance at 31 December 6,620 8,536

Tax deferred on adjustments arising on conversion to IFRS (3,908) (4,883) Tax deferred on social dividend (207) - Tax deferred on adjustments arising from change in accounting policy and prior year adjustment 10,735 13,419 Balance at 31 December 6,620 8,536

Valuation adjustments arising on the conversion from Irish GAAP to IFRS and as a result of a change in accounting policy and prior year adjustments resulted in additional liabilities to tax. The additional liabilities are payable to the Revenue Commissioners over five years, with the first payment being due in 2012. The remaining tax liabilities will be released to current tax in four equal annual instalments.

120 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

23. insurance payables As at 2012 2011 01-Jan-11 Insurance payables €’000 €’000 €’000 Due to policyholders 4,427 89 402 Due to reinsurers 665 782 824 Due to insurance brokers 12 111 - Total 5,104 982 1,226

24. trade and other payables As at 2012 2011 01-Jan-11 Trade and other payables €’000 €’000 €’000 Trade creditors 861 898 367 Amounts due for outsourcing costs - Brennan Insurances (Note 29) 1,133 1,494 1,046 Social dividend payable 4,914 - - Short-term employee benefits 1,310 529 176 Accruals 142 92 36 Total 8,360 3,013 1,625

Tax and social welfare included in accruals: PAYE 87 53 15 Social Welfare 53 48 6 VAT 2 (9) 15 Total 142 92 36

25. Pension Costs The Company participates in an externally funded defined benefit pension scheme and also operates two defined contribution pension schemes, one in respect of employees of the Company and the other in respect of the Directors. The Directors’ pension scheme was set up in 2010 with an effective date of 1 January 2004. Contributions in respect of 2004 to 2009 were paid into the scheme in accordance with an agreed schedule between 2010 and 2012. This scheme was closed during 2012.

2012 contributions for the employees’ defined benefit and defined contribution pension schemes amounted to €0.573m (2011: €0.159m). Contributions of €0.78m were outstanding as at 31 December 2012 (2011: €0.289m).

2012 contributions for the Directors’ defined contribution pension schemes amounted to €0.017m (2011: €0.215m). There were no contributions outstanding at the end of the period (2011: €0.017m).

IPB Insurance Stakeholder & Annual Report 2012 121 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

26. capital Management The Central Bank of Ireland requires the Company to maintain an adequate regulatory solvency position. The minimum solvency margin required under the European Communities (Non-Life Insurance) Framework (Amendment) Regulations 2004 is €19.4m (2011: €15.7m). The capital position is reviewed frequently by the Board of Directors. As at 31 December 2012, the Company had admissible assets to cover the required solvency margin of €630m (2011: €384m). Compliance with regulatory capital requirements are continuously assessed.

The Company targets capital far in excess of regulatory standard to meet the risks of the business with a high degree of confidence. The Company currently enjoys capital levels that are consistent with the highest credit rating agency financial strength levels.

The Company has developed risk metrics to quantify the risks to which the business is exposed. A capital model is used to quantify the risks of the business taking into account diversification effects. This is done in the context of the Company’s Own Risk and Solvency Assessment (“ORSA”), which continues to evolve in parallel with Solvency II guidelines. The Company considers overall solvency needs including risks that are beyond the scope of the capital model. This is achieved using a range of sensitivity tests and scenario analysis. The appropriateness of the capital model is regularly assessed. The Company considers capital requirements and capital efficiency in the context of profitability, expenses and market position relative to peers.

The prohibition on the Company making Members dividend payments was removed at the EGM of the Company in 2011 and the Board implemented a dividend policy. During 2012, the Company paid a dividend to its Members of €10m (2011: €10m). The payment of a dividend in any year is at the sole discretion of the Board. Payment in any one year does not entitle Members to payment in subsequent years. Any proposed dividend payment must, prior to payment, be made known to the Central Bank of Ireland. Any dividend payment respects the sanctity of the financial strength of the Company. The Board operates the following restrictions on dividend payments:

• No Member dividend should be payable should the impact of the dividend payment be to reduce the solvency cover below 1500% of the Minimum Required Solvency Margin (Solvency II). In this case, “solvency cover” is defined as the total of available assets at market value less all technical provisions and other liabilities.

• No Member dividend payment in any year should be more that the profit after tax in the previous financial year or €10m, whichever is the lesser.

• No Member dividend should be payable where an underwriting loss, defined as premium earned (including other technical income) less claims incurred less commissions and expenses (all elements to be net of reinsurance), has been made in the previous financial year. The Board may override this restriction if they are satisfied that the underwriting loss does not impact the current or future solvency of the business in a material way.

The Company maintained its robust capital position and complied with all regulatory solvency margin requirements throughout the year under review and prior years. The Company’s overall capital management objectives remain unchanged from 2011.

122 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management The Company recognises the critical importance of effective and efficient risk management. In accordance with the Company’s policies, key Management personnel have primary responsibility for the effective identification, management, monitoring and reporting of risks. The Board ensures that the monitoring processes are followed. The major risks the Company faces are described below.

Strategic risk Strategic risk arises from adverse business strategies, failure to implement business strategies and unanticipated changes in the business environment.

The Company takes its strategic direction from the Board. The business plan is reviewed annually and is subject to Board approval. The Board monitors progress against the business plan. The Company monitors changes in the business environment and considers their impact on the business. The Company also considers the implications that changes in the operating model might have for the quality and efficiency of the service that is provided to Members and other policyholders. Other strategic considerations relate to the efficient use of capital and the Company’s ability to raise capital in the medium to long term.

Underwriting risk Underwriting risk arises from uncertainty in the occurrence, amounts and timing of non-life insurance obligations. The key risk associated with any insurance contract is the possibility that an insured event occurs and that the timing and amount of actual claim payments differ from expectations. The principal lines of business covered by the Company include public liability, employer’s liability, motor and property. The Company mitigates underwriting risk through its underwriting strategy, claims handling and reinsurance arrangements.

The Board-approved underwriting policy establishes the underwriting strategy and principles. It defines underwriting limits, risk selection, authorities, escalation procedures and actuarial review requirements. The underwriting policy is implemented by means of underwriting guidelines. The Company has developed its underwriting strategy to diversify the type of insurance risks written and within each of the types of risk, to achieve a sufficiently large population of risks to reduce the variability of the expected outcome. The underwriting strategy includes the employment of appropriately qualified underwriting personnel, the targeting of certain types of business, constant review of pricing policy using up-to-date statistical analysis and claims experience and the surveying of risks carried out by experienced personnel.

IPB Insurance Stakeholder & Annual Report 2012 123 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued) The frequency and severity of claims can be affected by several factors, most notably the level of awards, inflation on settling claims and the subsequent development of long-term claims. The history of claims development is set out below, both gross and net of reinsurance.

Before the effect of reinsurance, the loss development table is:

Gross of Reinsurance Before 2010 2010 2011 2012 Total Underwriting year €’000 €’000 €’000 €’000 €’000 At end of underwriting year - 105,682 87,868 88,526 - One year later - 97,518 85,313 - - Two years later - 95,077 - - -

Cumulative claims incurred 1,413,882 95,077 85,313 88,526 1,682,798

Underwriting year At end of underwriting year - (8,577) (4,875) (3,891) - One year later - (24,301) (13,395) - Two years later - (32,435) - - -

Cumulative payments to date (1,136,376) (32,435) (13,395) (3,891) (1,186,097)

Total gross non-life insurance outstanding claims provisions per the statement of financial position 277,506 62,642 71,918 84,635 496,701

124 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued) 27. risk Management (continued) The frequency and severity of claims can be affected by several factors, most notably the level of awards, inflation on After the effect of reinsurance, the loss development table is: settling claims and the subsequent development of long-term claims. The history of claims development is set out Net of Reinsurance below, both gross and net of reinsurance. Before 2010 2010 2011 2012 Total Before the effect of reinsurance, the loss development table is: Underwriting year €’000 €’000 €’000 €’000 €’000 Gross of Reinsurance Before At end of underwriting year 92,272 85,939 84,120 - 2010 2010 2011 2012 Total One year later 79,258 83,744 - - Underwriting year €’000 €’000 €’000 €’000 €’000 Two years later 78,204 - - - At end of underwriting year - 105,682 87,868 88,526 - One year later - 97,518 85,313 - - Cumulative claims incurred 1,195,510 78,204 83,744 84,120 1,441,578 Two years later - 95,077 - - - Underwriting year Cumulative claims incurred 1,413,882 95,077 85,313 88,526 1,682,798 At end of underwriting year (5,095) (2,433) (3,515) - One year later (12,659) (9,796) - - Underwriting year Two years later (19,340) - - - At end of underwriting year - (8,577) (4,875) (3,891) - One year later - (24,301) (13,395) - Cumulative payments to date (948,208) (19,340) (9,796) (3,515) (980,859) Two years later - (32,435) - - - Total gross non-life insurance Cumulative payments to date (1,136,376) (32,435) (13,395) (3,891) (1,186,097) outstanding claims provisions per the statement of financial position 247,302 58,864 73,948 80,605 460,719

Total gross non-life insurance outstanding claims provisions per The Board-approved reinsurance policy establishes the reinsurance strategy and principles. The reinsurance program the statement of financial position 277,506 62,642 71,918 84,635 496,701 reduces the variability of the underwriting result. For its motor, employer's liability and public liability business, the Company has in place excess of loss reinsurance treaties and quota share and catastrophe reinsurance treaties operate for its property business. The Company's retention on all reinsurance treaties is approved by the Board of Directors on an annual basis.

A primary objective of the Company is to ensure that sufficient reserves are available to cover liabilities. The Company uses independent actuaries to assist with the estimation of liabilities to ensure that the Company’s reserves are adequate. Should the reserves be deemed to be inadequate, any deficiency is recognised immediately in the Income Statement.

Virtually all of the underwriting risk is concentrated in the Republic of Ireland. This geographical concentration may increase the risk from adverse weather events such as windstorm, flood and freeze. Business is also concentrated by line of business, being predominately public liability and employers liability. The other significant insurance risk concentration relates to the fact that the Company primarily insures public sector organisations.

While keeping the insurance needs of Members at the top of the agenda, the Company endeavours to apply core underwriting competencies to further diversify the insurance portfolio into complementary lines and policyholders. In any case, all concentrations are significantly mitigated by an appropriate reinsurance program. There are no other significant underwriting risk concentrations.

IPB Insurance Stakeholder & Annual Report 2012 125 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued) Credit risk Credit risk arises from an unexpected default or deterioration in the credit standing of counterparties and debtors, including reinsurance and premium receivables. The Company is exposed to credit risk from its operating activities, primarily customer and reinsurer receivables, from cash deposits and from its loans to Local Authorities.

The Risk Appetite Statement sets out the operating limits for reinsurance counterparty, cash counterparty and other credit exposures. The Risk Appetite Statement is regularly assessed for appropriateness and is approved by the Board annually.

The Risk Appetite Statement requires diversification by reinsurance counterparty. In particular, no reinsurance counterparty may exceed 15% of the total insurance asset. This limit is increased to 25% for reinsurance counterparties with the very highest credit ratings, typically equivalent to S&P AA- or better. The limits are monitored on a regular basis, and exposures and breaches are reported to the Risk Committee. At each reporting date, the Company performs an assessment of creditworthiness, and considers whether its reinsurance assets are impaired.

Cash balances with credit institutions are either with financial institutions that have a strong credit rating or have a Government guarantee. The minimum requirements and exposure limits for each counterparty are set out in the Risk Appetite Statement. The limits are monitored on a regular basis and exposures and breaches are reported to the Risk Committee. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Company’s maximum credit exposure.

Trade and other receivables are generally balances due from customers, who are unlikely to seek credit ratings as part of their normal courses of business and are considered low risk. Recoverability of trade and other receivables are monitored on a monthly basis and provision for impairment made, where appropriate. Receivables arising out of direct insurance operations are a low credit risk and there is no significant concentration of risk.

The Company has the following provisions for doubtful debts at the reporting date. No actual bad debt expense has occurred in the current year or in 2011. The reinsurance debtor provision below is included in the claims outstanding balance, whereas the other debtors balance is included in insurance receivables.

2012 2011 Bad debt provisions €’000 €’000

Re-insurance debtors 1,300 2,400 Other debtors 270 -

Total 1,570 2,400

Age analysis of financial assets past due but not impaired There are no financial assets past due or impaired in 2012 or 2011.

For assets to be classified as past due and impaired, contract payments must be in arrears for more than 90 days. No collateral is held as security for any past due or impaired assets.

Impaired financial assets The Company records impairment allowances for insurance and other receivables in a separate impairment allowance account. At the reporting date, there were no impaired financial assets (2011: Nil).

126 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued) 27. risk Management (continued) Credit risk Market risk Credit risk arises from an unexpected default or deterioration in the credit standing of counterparties and debtors, Market risk arises from financial instrument market price volatility. It reflects the structural mismatch between assets and including reinsurance and premium receivables. The Company is exposed to credit risk from its operating activities, liabilities, particularly with respect to duration. It includes interest rate risk, equity risk, property risk, spread risk, currency primarily customer and reinsurer receivables, from cash deposits and from its loans to Local Authorities. risk and asset concentrations. Asset concentrations arise where there is a lack of diversification, e.g. by issuer. The Board-approved investment policy outlines how market risks are managed. Investments are limited to assets The Risk Appetite Statement sets out the operating limits for reinsurance counterparty, cash counterparty and other whose risks can be properly identified, monitored and managed. The Company employs appropriately qualified and credit exposures. The Risk Appetite Statement is regularly assessed for appropriateness and is approved by the Board experienced personnel to manage the investment portfolio. Assets held to cover insurance liabilities are invested in a annually. manner appropriate to the nature and duration of the insurance liabilities. The Risk Appetite Statement requires diversification by reinsurance counterparty. In particular, no reinsurance The Risk Appetite Statement is reviewed and approved annually by the Board of Directors. It defines the extent of counterparty may exceed 15% of the total insurance asset. This limit is increased to 25% for reinsurance counterparties permissible market risk exposures in terms of specific operational limits. with the very highest credit ratings, typically equivalent to S&P AA- or better. The limits are monitored on a regular basis, Compliance with policy and risk appetite is monitored daily and exposures and breaches are reported to the Risk and exposures and breaches are reported to the Risk Committee. At each reporting date, the Company performs an Committee. assessment of creditworthiness, and considers whether its reinsurance assets are impaired. Currency risk Cash balances with credit institutions are either with financial institutions that have a strong credit rating or have a Currency risk relates to the sensitivity of the value of assets and liabilities to changes in currency exchange rates. The Government guarantee. The minimum requirements and exposure limits for each counterparty are set out in the Risk Company's liabilities are almost entirely denominated in euro. However, the Company holds investment assets in foreign Appetite Statement. The limits are monitored on a regular basis and exposures and breaches are reported to the Risk currencies, which gives rise to exposure to exchange rate fluctuations. The Company is primarily exposed to sterling Committee. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, (GBP), Norwegian krone (NOK) and other high-quality currencies. Derivative instruments are used for the purposes of represents the Company’s maximum credit exposure. protecting the euro value of assets denominated in non-euro currencies in circumstances where the cost of the hedge is deemed commercial having regard to the potential foreign currency risk. Trade and other receivables are generally balances due from customers, who are unlikely to seek credit ratings as part of their normal courses of business and are considered low risk. Recoverability of trade and other receivables are monitored on a monthly basis and provision for impairment made, where appropriate. Receivables arising out of direct insurance operations are a low credit risk and there is no significant concentration of risk.

2012 2011 Bad debt provisions €’000 €’000

Re-insurance debtors 1,300 2,400 Other debtors 270 -

Total 1,570 2,400

Age analysis of financial assets past due but not impaired There are no financial assets past due or impaired in 2012 or 2011.

For assets to be classified as past due and impaired, contract payments must be in arrears for more than 90 days. No collateral is held as security for any past due or impaired assets.

IPB Insurance Stakeholder & Annual Report 2012 127 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued) The carrying amount of the Company's foreign currency denominated assets at the reporting date is as follows:

The carrying amount of the Company's foreign Currency currency denominated assets Gross Hedge Net 2012 €’000 €’000 €’000 Sterling 38,310 9,863 28,447 Norwegian Krone 46,240 10,903 35,337 Swiss Francs 4,478 - 4,478 US Dollars 8,322 2,275 6,047 Swedish Krona 13,752 - 13,752 Danish Krona 4,774 - 4,774 Total 115,876 23,041 92,835

The carrying amount of the Company's foreign Currency currency denominated assets Gross Hedge Net 2011 €’000 €’000 €’000 Sterling 30,972 2,400 28,572 Norwegian Krone 10,840 5,037 5,803 Swiss Francs 5,671 - 5,671 US Dollars 8,905 - 8,905 Swedish Krona 1,181 - 1,181 Danish Krona 1,635 - 1,635 Total 59,204 7,437 51,767

The carrying amount of the Company's foreign Currency currency denominated assets Gross Hedge Net As at 1 January 2011 €’000 €’000 €’000 Sterling 35,581 10,497 25,084 Norwegian Krone 764 - 764 Swiss Francs 5,107 - 5,107 US Dollars 6,364 1,494 4,870 Swedish Krona 1,058 - 1,058 Danish Krona 1,723 - 1,723 Total 50,597 11,991 38,606

The net foreign exchange exposure after currency hedges is €92.8m (2011: €51.8m, 2010: €38.6m).

There was a significant increase in foreign currency denominated assets over the course of 2012. This served to mitigate the emerging risk of a deepening euro zone economic crisis, such as a currency redenomination. Exposure was increased only to currencies of the very highest quality, predominately Norwegian Krone and Swedish Krona.

128 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued) Interest rate risk Interest rate risk relates to the sensitivity of the values of assets and liabilities to changes in the term structure of interest rates. The Company faces a significant interest rate risk due to the nature of its investments and liabilities. Interest rate risk arises primarily from the Company's investments in fixed interest debt securities and from insurance liabilities.

Asset Liability Matching is used to minimise the impact of an unintended mismatch between assets and liabilities. The characteristics of assets are matched to the characteristics of liabilities as far as possible, including by amount, type, duration and currency. The Risk Committee regularly reviews the appropriate level of exposure to interest rate risk, taking into consideration yield volatility and historical returns. At the reporting date, the Company held the following assets that are exposed to interest rate risk:

As at 2012 2011 01-Jan-11 Financial assets subject to interest rate risk €’000 €’000 €’000 Debt securities Irish government fixed interest bonds 149,644 176,202 170,672 Other government fixed interest bonds - euro 427,561 357,404 417,862 Other government fixed interest bonds - non-euro 56,887 17,227 6,695 Corporate bonds 50,191 41,917 50,160 Loans and receivables Loans to local authorities and deposits with credit institutions 550 682 808 Total 684,833 593,432 646,197

€’000 €’000 €’000 Debt securities Irish government fixed interest bonds 149,644 176,202 170,672 Other government fixed interest bonds 484,448 374,631 424,557 Corporate bonds 50,191 41,917 50,160 Loans and receivables Loans to local authorities and deposits with credit institutions 550 682 808 Total 684,833 593,432 646,197

IPB Insurance Stakeholder & Annual Report 2012 129 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued) The return profile of the interest earning investments is analysed in the table below. The table excludes non-interest earning investment assets such as equities, managed funds, property and amounts held on short-term deposits with credit institutions, and is categorised by maturity date.

2012 2011 Weighted Weighted 2012 Average 2011 Average Market Value Interest rate Market Value Interest rate Investments Analysis €000's % €000's % In one year or less 25,802 5.57 13,012 9.00 In more than one year, but less than two years 118,172 3.61 24,481 4.51 In more than two years, but less than three years 87,328 3.29 257,295 3.76 In more than three years, but less than four years 70,503 3.85 121,920 2.91 In more than four years, but less than five years 86,335 2.45 39,032 4.07 More than five years 296,693 4.27 137,692 5.49 Total 684,833 3.81% 593,432 4.15%

The Board-approved investment policy sets out the requirements of Asset Liability Matching. The primary objective of the “Matched Portfolio” is to ensure that the Company meets policyholder obligations as they fall due. This implies high quality, secure, liquid and local investments with characteristics that approximately match those of the liabilities.

The Board-approved Risk Appetite Statement defines detailed operating limits, which limits the extent of permissible mismatch between asset and liabilities. Spread risk Spread risk mainly relates to changes in the market value of bonds due to changes in the credit standing of the issuer. The Company limits the credit quality of bonds in which the Company may invest. The table below provides information regarding the market risk exposure of the Company by classifying debt securities by credit rating.

Market risk exposure Not by credit rating AAA AA A BBB BB B CCC C rated Total 2010 to 2012 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 Financial assets at fair value through profit or loss Debt securities 2012 211,173 288,429 1,750 153,788 1,005 - - 14,201 24,894 695,240 2011 383,782 - 24,003 169,027 - - - 8,167 22,126 607,105 2010 435,528 - 176,943 6,785 893 4,246 2,380 12,997 29,114 668,886

The Risk Appetite Statement requires diversification within the fixed interest bond portfolio. In particular, no individual sovereign may exceed 25% of the total sovereign bond portfolio, by market value. Similarly, no individual corporate bond may exceed 5% of the portfolio, by market value. Quoted debt securities comprise of €211m (2011: €382m) of Government bonds which carry an AAA rating and €25m (2011: €7m) of corporate bonds which are not rated. Given the rating of its Government bond portfolio, the Company deems this level of concentration risk to be acceptable.

There are no other significant concentrations of risk.

130130 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued) 27. risk Management (continued) The return profile of the interest earning investments is analysed in the table below. The table excludes non-interest Equity risk earning investment assets such as equities, managed funds, property and amounts held on short-term deposits with Equity risk relates to the volatility of equity market prices. This volatility may be caused by factors specific to the individual credit institutions, and is categorised by maturity date. financial instrument, specific to the issuer or factors affecting all similar financial instruments traded in the market. Equity risk excludes changes due to currency movements, which is considered as a separate risk type. The Company is subject 2012 2011 to equity risk due to changes in the market values of its holdings of quoted shares, unquoted shares and managed funds. Weighted Weighted 2012 Average 2011 Average Equity risk is managed in line with the Board-approved Investment Policy. The Risk Appetite Statement places operating Market Value Interest rate Market Value Interest rate limits on the size of any single share-holding and on exposure to certain sectors. This imposes a diversification discipline Investments Analysis €000's % €000's % within the equity portfolio. Consequently, there are no significant equity risk concentrations. In one year or less 25,802 5.57 13,012 9.00 Other market risks In more than one year, but less than two years 118,172 3.61 24,481 4.51 Property risk relates to the volatility of real estate market prices. In more than two years, but less than three years 87,328 3.29 257,295 3.76 Liquidity risk In more than three years, but less than four years 70,503 3.85 121,920 2.91 Liquidity risk arises where sufficient assets exist on a financial position basis, but those assets are not available to settle In more than four years, but less than five years 86,335 2.45 39,032 4.07 financial obligations when they fall due. Liquidity risk also arises where assets can only be liquidated at a material cost. More than five years 296,693 4.27 137,692 5.49 The Company is exposed to daily calls on its cash resources, mainly for claims and other expense payments. Total 684,833 3.81% 593,432 4.15% The Investment Policy sets out the assessment and determination of what constitutes liquidity risk for the Company. Compliance with the policy is monitored and exposures and breaches are reported to the Risk Committee. The policy The Board-approved investment policy sets out the requirements of Asset Liability Matching. The primary objective of is regularly reviewed for pertinence and for changes in the risk environment. Guidelines are set for asset allocations, the “Matched Portfolio” is to ensure that the Company meets policyholder obligations as they fall due. This implies high portfolio limit structures and maturity profile of assets in order that sufficient funding is available to meet insurance quality, secure, liquid and local investments with characteristics that approximately match those of the liabilities. contract obligations. Asset liquidity is such that it is sufficient to meet cash demands under extreme conditions. Localisation of assets is such that it ensures their availability. The Investment Policy specifies a Contingency Funding Plan The Board-approved Risk Appetite Statement defines detailed operating limits, which limits the extent of permissible should a liquidity shortfall arise. mismatch between asset and liabilities. The Company has mitigated much of its liquidity risk through assets and liability matching. The tables below show the Spread risk maturity analysis of financial assets and financial liabilities based on the remaining undiscounted contractual obligations, Spread risk mainly relates to changes in the market value of bonds due to changes in the credit standing of the issuer. including interest receivables or where relevant on the following assumptions: The Company limits the credit quality of bonds in which the Company may invest. The table below provides information regarding the market risk exposure of the Company by classifying debt securities by credit rating. • Loans and other receivables – Cash flows for loans to Local Authorities are based on agreed loan repayment schedules. Deposits with credit institutions are assumed to be repaid on the contracted maturity date. Market risk exposure Not by credit rating AAA AA A BBB BB B CCC C rated Total • Financial assets at fair value through profit or loss – Debt securities are assumed to be repaid on the contractual 2010 to 2012 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 maturity date. However, the Company sells debt securities prior to maturity to take advantage of yield curve Financial assets at fair value through profit or loss opportunities. Equity securities are assumed to have no maturity date. Debt securities • Insurance contract liabilities – Maturity profiles are determined based on estimated timing of net cash outflows 2012 211,173 288,429 1,750 153,788 1,005 - - 14,201 24,894 695,240 from the recognised insurance liabilities. Unearned premiums, the reinsurers’ share of unearned premiums and 2011 383,782 - 24,003 169,027 - - - 8,167 22,126 607,105 deferred expenses have been excluded from the analysis as they are not contractual obligations. 2010 435,528 - 176,943 6,785 893 4,246 2,380 12,997 29,114 668,886 • Cash and cash equivalents – Cash flows include interest earned to the end of the reporting period.

There are no other significant concentrations of risk.

IPB Insurance Stakeholder & Annual Report 2012 131 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued)

No Maturity analysis (contracted Carrying Within 1 Within 1 After 5 maturity undiscounted cash flow basis) value year to 5 years years date Total 2012 €’000 €’000 €’000 €’000 €’000 €’000 Financial assets Derivative financial instruments 23,042 23,042 - - - 23,042 Financial assets at fair value through profit or loss Debt securities 695,240 25,311 320,031 224,267 10,364 579,973 Equity securities 158,997 - - - 158,997 158,997 Loans and receivables Loans to local authorities 34,328 4,165 10,558 24,095 - 38,818 Deposits with credit institutions 130,778 55,039 83,865 - - 138,904 Insurance assets 21,203 3,291 8,535 9,377 - 21,203 Reinsurance assets Claims outstanding 35,982 6,890 14,957 14,135 - 35,982 Insurance receivables 4,797 4,797 - - - 4,797 Other receivables 21 21 - - - 21 Cash and cash equivalents 65,546 65,552 - - - 65,552 Total 1,169,934 188,108 437,946 271,874 169,361 1,067,289

Financial liabilities Insurance contract liabilities Claims outstanding 496,701 77,084 199,947 219,670 - 496,701 Derivative financial instruments 22,973 22,973 - - - 22,973 Insurance payables 5,104 5,104 - - - 5,104 Trade and other payables 8,360 8,360 - - - 8,360 Total 533,138 113,521 199,947 219,670 - 533,138

132 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued)

No Maturity analysis (contracted Carrying Within 1 Within 1 After 5 maturity undiscounted cash flow basis) value year to 5 years years date Total 2011 €’000 €’000 €’000 €’000 €’000 €’000 Financial assets Derivative financial instruments 7,437 7,437 - - - 7,437 Financial assets at fair value through profit or loss Debt securities 607,105 13,042 432,845 154,324 10,323 610,534 Equity securities 134,738 134,738 134,738 Loans and receivables Loans to local authorities 37,733 4,086 12,156 26,662 - 42,904 Deposits with credit institutions 82,637 58,564 29,410 - - 87,974 Insurance assets 19,553 3,611 9,652 6,290 - 19,553 Reinsurance assets Claims outstanding 55,926 11,300 26,501 18,125 55,926 Insurance receivables 11,643 11,643 - - - 11,643 Other receivables 38 38 - - - 38 Cash and cash equivalents 109,562 109,679 - - - 109,679 Total 1,066,372 219,400 510,564 205,401 145,061 1,080,426

Financial liabilities Insurance contract liabilities Claims outstanding 504,047 93,079 248,815 162,153 - 504,047 Derivative financial instruments 7,338 7,338 - - - 7,338 Insurance payables 982 982 - - - 982 Trade and other payables 3,013 3,013 - - - 3,013 Total 515,380 104,412 248,815 162,153 - 515,380

IPB Insurance Stakeholder & Annual Report 2012 133 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued) No Maturity analysis (contracted Carrying Within 1 Within 1 After 5 maturity undiscounted cash flow basis) value year to 5 years years date Total At 1 January 2011 €’000 €’000 €’000 €’000 €’000 €’000 Financial assets Derivative financial instruments 11,992 11,992 - - - 11,992 Financial assets at fair value through profit or loss Debt securities 668,886 6,400 494,329 187,541 10,281 698,551 Equity securities 176,149 - - - 176,149 176,149 Loans and receivables Loans to local authorities 41,222 4,249 13,609 29,295 - 47,153 Deposits with credit institutions 25,652 25,860 - - - 25,860 Insurance assets 24,649 4,435 10,849 9,365 - 24,649 Reinsurance assets Claims outstanding 75,435 16,909 18,747 39,779 - 75,435 Insurance receivables 3,823 3,823 - - - 3,823 Other receivables 132 132 - - - 132 Cash and cash equivalents 70,374 70,463 - - - 70,463 Total 1,098,314 144,263 537,534 265,980 186,430 1,134,207

Financial liabilities Insurance contract liabilities Claims outstanding 578,352 104,054 254,555 219,744 - 578,352 Derivative financial instruments 12,000 12,000 - - - 12,000 Insurance payables 1,226 1,226 - - - 1,226 Trade and other payables 1,625 1,625 - - - 1,625 Total 593,203 118,905 254,555 219,744 - 593,203

134 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. Risk Management (continued) Operational risk Operational risk arises from inadequate or failed internal processes, from personnel and systems, or from external events. Operational risk includes legal and regulatory compliance risk but excludes strategic and reputational risk. In particular, the Company's operational risk includes outsourcing risks, including bankruptcy of the service providers, disruption of services and failure to achieve standards.

The Company regularly reviews all major operational risks. The Risk Committee reviews the risk assessment to ensure that all operational risks are identified and evaluated. Each operational risk is assessed by considering the potential impact and the likelihood of the event occurring. Impact assessments are made against financial, operational and reputational criteria. The effectiveness of internal controls on controlling operational risk is also measured.

Internal audit is carried out on a continuous basis, in accordance with a rolling internal audit plan approved by the Audit Committee. The Internal Audit Findings Register is updated on a monthly basis, and circulated to the Board.

The Company has a Business Continuity Plan for the restoration of function should critical business processes be disrupted.

The Company outsources certain functions to service providers. Outsourced arrangements are governed by Service Level Agreements. Service providers are required to adhere to Company policy and implementation of policy is tested by Internal Audit. Service providers are subject to detailed Key Performance Indicator reporting requirements.

Other risks The scope of the Company Risk Framework covers all risk types. For example:

• Reputational risk – Risk arising from negative perception of the business amongst Members, customers, the Central Bank of Ireland, counterparties, business partners and other Stakeholders; and

• Emerging risk – Risks that may emerge in the future and have the potential to materially affect solvency.

Correlations between risks Risk categories and specific risks are correlated to each other to a greater or lesser extent. Risks are correlated where an unfavourable outcome in one risk tends to be accompanied by an unfavourable outcome in another risk. For example, equity risk and property risk are correlated in the sense that a fall in property values can often be accompanied by a fall in equity values.

Risks have little correlation where it is unlikely that both risks will experience an unfavourable outcome at the same time. Such risks are said to be largely uncorrelated, or independent.

The result is a “diversification benefit”. For example, Lapse Risk may be somewhat independent of Premium Risk as lapse rates are unlikely to increase when premium rates are inadequate.

As the same capital resources are used to manage many different sources of risk, it is necessary to manage risk as a portfolio. An isolated change in risk in one part of a portfolio will also influence the capital required to finance other risks, due to correlations. Consequently, it is necessary to explicitly model the correlations between risks. The quantification of correlations is highly uncertain and the capital model relies on the “dependency structure” defined in the Solvency II Standard Formula Technical Specification.

The Risk Report includes quantification of the diversification benefits assumed in the capital model. It also considers key correlations between certain specific risks, often quantitatively but sometimes in a qualitative manner.

IPB Insurance Stakeholder & Annual Report 2012 135 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued) Sensitivity Analysis The tables below provide sensitivity analysis on the Company's key risks. The impact of a change in a single factor is shown, with other assumptions left unchanged, for each of the risk types.

Risk Methods and assumptions used in preparing the sensitivity analysis Underwriting risk The impact of an increase in net loss ratios for general insurance business by 5%. Currency risk The impact of a change in foreign exchange rates by ± 10%. Interest rate risk The impact of a change in the ECB benchmark reference interest rate by an increase of 1% or a decrease of 0.25%. (e.g. if a current interest rate is 5%, the impact of an immediate change to 6% and 4.75%). Equity risk The impact of a change in equity market values by ±10%.

The above sensitivity factors have the following impacts on profit before tax and equity:

Sensitivity analysis 2012 2011 Impact on profit before tax €’000 €’000 Underwriting risk 5.00% (3,722) (3,398) Currency risk 10.00% 9,284 5,177 Currency risk -10.00% (9,284) (5,177) Interest rate risk 1.00% 6,848 5,934 Interest rate risk -0.25% (1,712) (1,484) Equity risk 10.00% 15,900 13,474 Equity risk -10.00% (15,900) (13,474)

Sensitivity analysis 2012 2011 Impact on equity €’000 €’000 Underwriting risk 5.00% (3,257) (2,973) Currency risk 10.00% 8,123 4,530 Currency risk -10.00% (8,123) (4,530) Interest rates 1.00% 5,992 5,193 Interest rates -0.25% (1,498) (1,298) Equity risk 10.00% 13,912 11,790 Equity risk -10.00% (13,912) (11,790)

In addition, the impact of changes in the assumptions used to calculate general insurance liabilities and sensitivities are indicated in the table below. The gross impact in the table below is calculated by multiplying the gross Incurred But Not Reported (IBNR) reserve by 10%, while the net impact is estimated at 80% of the gross figure.

136 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued)

Estimated Increase increase Impact in gross in net on profit Change in technical technical before Reduction Sensitivity analysis assumptions reserves reserves tax in equity 2012 (note 27) €’000 €’000 €’000 €’000 Third party liability and other 10.00% 4,677 3,742 (3,742) (3,274) Motor 10.00% 361 289 (289) (253) Fire and other damage to property 10.00% 17 14 (14) (12) Total 5,055 4,045 (4,045) (3,539)

Estimated Increase increase Impact in gross in net on profit Change in technical technical before Reduction Sensitivity analysis assumptions reserves reserves tax in equity 2011 (note 27) €’000 €’000 €’000 €’000 Third party liability and other 10.00% 1,177 942 (942) (824) Motor 10.00% (80) (64) 64 56 Fire and other damage to property 10.00% 37 30 (30) (26) Total 1,134 908 (908) (794)

It has not been possible to quantify the sensitivity of certain assumptions such as legislative changes or uncertainty in the estimation process. Reserve projections are subject to a substantial degree of uncertainty and should be viewed as only part of a wider range of possible values produced by alternative assumptions. Particular areas of uncertainty in the projections include:

• The possibility of a future reduction in the level of real yields underlying the determination of Irish bodily injury awards as outlined in Note 2 Judgements, estimates and assumptions;

• The extent to which any adverse trends in respect of Irish bodily injury awards will be maintained or deteriorate in the future;

• The possible emergence of new types of latent claims, which are not allowed for in the projections;

• The potential for stress claims to arise significantly more frequently in the current economic climate than past data would suggest;

• Projections in respect of cerebral palsy claims; and

• Projections in respect of abuse claims.

The methods used for deriving sensitivity information did not change from the previous period.

IPB Insurance Stakeholder & Annual Report 2012 137 IPB 360 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

27. risk Management (continued)

Limitations of sensitivity analysis The tables in this section 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 Company’s assets and liabilities are actively managed.

Other limitations in the above sensitivity analysis include the use of hypothetical market movements to demonstrate potential risks that only represent the Company's view of possible near-term market changes that cannot be predicted with any certainty and the assumption that all interest rates move in an identical fashion.

28. contingencies and regulations 28(a) Capital Commitments The Company has no capital commitments at the reporting date.

28(b) Legal proceedings and regulations The Company is not involved in any material legal proceedings other than proceedings which relate to the settlement of claims.

The Company is subject to insurance regulation in Ireland and has complied with these regulations. There are no contingencies associated with the Company’s compliance or lack of compliance with such regulations.

29. related Party Disclosures The Company enters into transactions with related parties in the normal course of business. Transactions with related parties are at normal market prices. Details of significant transactions carried out during the year with related parties are outlined below.

Key Management personnel For the purpose of the disclosure requirements the term “key Management personnel” (i.e. those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly) comprises of the Board of Directors and Executive Management who manage the business and affairs of the Company. Disclosure in relation to the 2012 and 2011 compensation entitlements of the Board of Directors is provided in the Report on Directors’ Remuneration. There were no loans outstanding between the Company and its Directors at any time during the year, nor is it the policy of the Company to engage in such transactions.

Brennan Insurances In the normal course of business, the Company enters into transactions with Brennan Insurances, a party related through its key Management.

Under a long-term agreement (1 September 1997 to 31 December 2020) between the Company and Brennan Insurances, the latter provides underwriting and related insurance services to the Company, subject to the control and direction of the Board of Directors of the Company.

Brennan Insurances is remunerated by an annual insurance underwriting commission, the cost of which was €10.1m in 2012 (2011: €10.7m), of which €1.1m (2011: €1.5m) was due at the reporting date.

Outstanding balances at the reporting date are unsecured and interest-free.

138 IPB Insurance Stakeholder & Annual Report 2012 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

29. Related Party Disclosures (continued) Loans to Local Authorities The Company previously issued a number of loans to Local Authorities for the purpose of developing local community initiatives (including Local Authority premises, roads and amenities). The Company ceased providing these loans with effect from 2009, therefore there were no loan advances made to Local Authorities during the year. Loan capital repayments and interest made by Local Authorities during the year amounted to €3.5m (2011: €3.5m).

All loans were issued unsecured and with interest rates at normal commercial terms. During the period interest income on these loans totalled €0.5m (2011: €0.8m) and is treated as investment income and recognised in the Income Statement. Interest is payable by the Authorities on a bi-annual basis. The loans are reviewed for impairment at each reporting date and the Directors do not recommend any impairment provisions as of 31 December 2012 or 2011. No loans were past due at the period end.

Members The percentage of total gross premiums written with Members in 2012 was 87% (2011: 79%). Please refer to page 140 for details of our Members.

Member employees The Company provides insurance cover to Members' Employees. This cover is only provided on a standard commercial basis to avoid any conflict of interest.

30. Approval of Financial Statements The financial statements were approved and authorised for issue by the Board of Directors on 27 March 2013.

IPB Insurance Stakeholder & Annual Report 2012 139 IPB 360 Our Members

Our Members For the purpose of registration the number of Members of the Company is declared not to exceed 250 (two hundred and fifty), but an increase in the number of Members may be subsequently registered. “Local Authority” has the meaning assigned to it by the Local Authorities (Mutual Assurance) Acts, 1926 to 1935.

The Company's Members must all be Local Authorities (as defined by the 1926 to 1935 Local Authorities (Mutual Assurance) Acts) and no Local Authority shall be capable of becoming a Member unless insured, or about to be insured, either against Fire Risk or Employers’ Liability Risk or in respect of any other risk normally insured against by the Company and the act of insuring against any such risk is deemed to constitute Membership. If a Local Authority ceases to be insured against Fire Risk or Employers’ Liability Risk or in respect of any other risk normally insured against, so that it is no longer insured with the Company against any of such risks, it shall ipso facto immediately cease to be a Member.

L egal Status of the Company The Company is limited by guarantee and does not have any share capital. This guarantee is provided by its Members. However, the Members guarantee is limited based on the following rule: “Every Member of the Company undertakes to contribute to the assets of the Company in the event of its being wound up while he is a Member, or within one year afterwards, for payment of the debts and liabilities of the Company contracted before he ceases to be a Member, and of the costs, charges and expenses of winding-up, and for adjustment of the rights of the contributories among themselves, such amount as may be required not exceeding Twelve Euro and Seventy Cents (€12.70)”.

Source: Irish Public Bodies Mutual Insurance Limited Memorandum and Articles of Association - 16 June 2011.

List of Members during the financial year ended 31 December 2012 COUNTY COUNCILS Louth County Council Clare VEC Carlow County Council Mayo County Council County Cork VEC Cavan County Council Meath County Council County Dublin VEC Clare County Council Monaghan County Council County Galway VEC Cork City Council North Tipperary County Council County Waterford VEC Cork County Council Offaly County Council Donegal VEC Donegal County Council Roscommon County Council Dun Laoghaire VEC Dublin City Council Sligo County Council Galway City VEC Dun Laoghaire Rathdown County South Dublin County Council Kerry Education Service Council South Tipperary County Council Kildare VEC Fingal County Council Waterford County Council Kilkenny VEC Galway City Council Waterford City Council Laois VEC Galway County Council Westmeath County Council Leitrim VEC Kerry County Council Wexford County Council Limerick County VEC Kildare County Council Wicklow County Council Longford VEC Kilkenny County Council Louth VEC Laois County Council VECs Mayo VEC Leitrim County Council Carlow VEC Meath VEC Limerick City Council Cavan VEC Monaghan VEC Limerick County Council City of Cork VEC North Tipperary VEC Longford County Council City of Dublin VEC Offaly VEC

140140 IPB Insurance Stakeholder & Annual Report 2012 Other I

Roscommon VEC Edenderry Town Council Westport Town Council nf Sligo VEC Ennis Town Council Wicklow Town Council o

South Tipperary VEC Enniscorthy Town Council Youghal Town Council r

Waterford City VEC Fermoy Town Council m

Westmeath VEC Gorey Town Council BOROUGH COUNCILS ati Wexford VEC Granard Town Council Clonmel Borough Council o Wicklow VEC Greystones Town Council Drogheda Borough Council n Kells Town Council Kilkenny Borough Council TOWN COUNCILS Kilkee Town Council Sligo Borough Council Ardee Town Council Killarney Town Council Wexford Borough Council Arklow Town Council Kilrush Town Council Athlone Town Council Kinsale Town Council REGIONAL AUTHORITIES Athy Town Council Leixlip Town Council Border Regional Authority Ballina Town Council Letterkenny Town Council Dublin Regional Authority Ballinasloe Town Council Listowel Town Council Mid-East Regional Authority Balbriggan Town Council Longford Town Council Mid-West Regional Authority Ballybay Town Council Loughrea Town Council Midland Regional Authority Ballyshannon Town Council Macroom Town Council South East Regional Authority Bandon Town Council Mallow Town Council South West Regional Authority Bantry Town Council Midleton Town Council Portarlington Joint Burial Board Belturbet Town Council Monaghan Town Council West Regional Authority Birr Town Council Mountmellick Town Council Boyle Town Council Muinebheag Town Council OTHER Bray Town Council Mullingar Town Council An Comhairle Leabharlanna Buncrana Town Council Naas Town Council Barrow Drainage Board Bundoran Town Council Navan Town Council Ballinamore/Ballyconnell Joint Carlow Town Council Nenagh Town Council Drainage Committee Carrickmacross Town Council New Ross Town Council Border Midland and Western Regional Assembly Carrick-on-Suir Town Council Passage West Town Council Burrin Joint Drainage Committee Cashel Town Council Portlaoise Town Council Catlebar Town Council Shannon Town Council Dundalk Joint Burial Board Castleblayney Town Council Skibbereen Town Council Goul Joint Drainage Committee Cavan Town Council Templemore Town Council Loughs Oughter & Gowna & River Erne Drainage District Joint Clonakility Town Council Thurles Town Council Committee Clones Town Council Tipperary Town Council River Suck Joint Drainage Cobh Town Council Tralee Town Council Committee Cootehill Town Council Tramore Town Council Southern & Eastern Regional Droichead Nua Town Council Trim Town Council Assembly Dundalk Town Council Tuam Town Council Tipperary Joint Libraries Committee Dungarvan Town Council Tullamore Town Council Portarlington Joint Burial Board

IPB Insurance Stakeholder & Annual Report 2012 141141 IPB 360 G lossary

Below is a simple explanation of some of the key technical terms used within this Report and in the industry generally.

Term Definition Capacity Largest amount of insurance available from a company.

Can also refer to the largest amount of insurance or reinsurance available in the marketplace.

Capital The money invested in the Company. This includes the money invested by Members and profits retained within the Company. Central Bank of Ireland (CBI) The regulatory authority for Ireland’s insurance industry.

Claims Frequency Average number of claims per policy over the year.

Claims Handling Expenses The administrative cost of processing a claim (costs of running claims centres, etc. and allocated shares of the costs of head office units). Not the cost of the claim itself. Claims Reserve (Provision for Reserve established by the Company to reflect the estimated cost of claims payments and related Losses and Loss Adjustment expenses that is estimated we will ultimately be required to pay. Expenses) Claims Severity Average cost of claims incurred over the period.

Combined Operating Ratio The sum of the claims ratio (loss ratio) and expense ratio. (COR) Measures how much the company pays out in claims and expenses for each unit of premium received. A COR of less than 100% indicates that the Company is writing profitable business.

Gross Combined Operating Calculated as: Ratio Gross Incurred Claims + Expenses (including commissions) %

Gross Earned Premiums

Net Combined Operating Ratio Calculated as:

Net Incurred Claims + Expenses (including commissions) %

Net Earned Premiums

Commission An amount payable/receivable to/from an intermediary such as a broker for generating business.

Commission Ratio Ratio of net commission costs to net earned premiums.

Current Year Result on The underwriting profit or loss earned from business for which protection has been provided in Underwriting the current financial period. Defined Benefit Plans For defined benefit plans, the participant is granted a defined benefit by the employer or via an external entity. In contrast to defined contribution arrangements, the future cost to the employer of a defined benefit plan is not known with certainty in advance. To determine the expense over the period, accounting regulations require that actuarial calculations are carried out according to a fixed set of rules. Defined Contribution Plans Defined contribution plans are funded through independent pension funds or similar organisations. Contributions fixed in advance (e. g. based on salary) are paid to these institutions and the beneficiary’s right to benefits exists against the pension fund. The employer has no obligation beyond payment of the contributions and is not participating in the investment success of the contributions. Deferred Tax Assets / Liabilities The calculation of deferred tax is based on tax loss carry forwards, tax credit carry forwards and temporary differences between the carrying amounts of assets or liabilities in the published financial position and their tax base. The tax rates used for the calculation are local rates. Changes to tax rates already adopted at the reporting date are taken into account.

142142 IPB Insurance Stakeholder & Annual Report 2012 Other

Discount Rate The interest rate used in discounted cash flow analysis to determine the present value of future I

cash flows. The discount rate takes into account the time value of money (the idea that money nf available now is worth more than the same amount of money available in the future because it

could be earning interest) and the risk or uncertainty of the anticipated future cash flows (which o

might be less than expected). r

Earned Premium The portion of an insurance premium for which the Company have already provided protection. m

Economic Capital The Company’s assessment of the capital the Company must hold to have a high confidence of ati meeting our obligations.

Expense Ratio Is the percentage of net earned premiums which is paid out in operating expenses, e.g. o

salaries, premises costs, etc. The ratio does not include claims related expenses but can include n commission costs. Exposure A measurement of risk the Company are exposed to through the premiums we have written. For example, in motor insurance one vehicle insured for one year is one unit of exposure. Gross Written Premium (GWP) Total premium written or processed in the period, irrespective of whether it has been paid, gross of reinsurance. Gross/ Net In insurance terminology the terms gross and net mean before and after deduction of reinsurance, respectively. In the investment terminology the term “net” is used where the relevant expenses (e. g. gross dividends less funds charges) have already been deducted. Loss Ratio (Gross and net) Proportionate relationship of incurred losses to earned premiums expressed as a percentage. The Company uses the gross loss ratio as a measure of the overall underwriting profitability of the insurance business the Company write and to assess the adequacy of its pricing. The net loss ratio is meaningful in evaluating our financial results, which are net of ceded reinsurance, as reflected in the financial statements. IAS International Accounting Standards.

IFRS International Financial Reporting Standards. Since 2002, the designation IFRS applies to the overall framework of all standards approved by the International Accounting Standards Board. Already approved standards will continue to be cited as International Accounting Standards (IAS). IBNR (Incurred but Not A reserve for claims that have occurred but which have not yet been reported to the company. Reported) IGD Capital Requirement Insurance Groups Directive capital is the capital the Company is required to hold based on standard calculations defined by the CBI under the EU Solvency I directive. Insurance Result This is a measure of how well the Company has done, including both our underwriting and investment results. Net Asset Value (NAV) The value of the Company calculated by subtracting the Company's total liabilities from our total assets.

Net Claims Ratio (Loss Ratio) The Net Claims Ratio for any period of time is the ratio of Net Losses plus loss adjustment expenses incurred during such period to Net Premium Earned for such period.

Net Earned Premium (NEP) The portion of net premiums for which the Company has already provided protection. This is included as income in the period.

Net Incurred Claims (NIC) The total claims cost incurred in the period less any share to be paid by reinsurers. It includes both claims payments and movements in claims reserves in the period.

Net Written Premium (NWP) Net written premium is premium written or processed in the period, irrespective of whether it has been paid, less the amount payable in reinsurance premiums.

Operating Profit The profit generated by the ordinary activities of the Company including both insurance and investment activity.

Portfolio Management Management of a group of similar risks, these are usually grouped by line of business.

Prior Year Result on Claims Profit or loss generated by settling claims incurred in a previous year at a better or worse level than the previous estimated cost.

IPB Insurance Stakeholder & Annual Report 2012 143143 IPB 360 Glossary (CONTINUED)

Property General Insurance Property insurance covers loss or damage through fire, theft, floods, storms and other specified risks.

Premium Rate The price of a unit of insurance based on a standard risk for one year. Actual premium charged to the customer may differ from the rate due to individual risk characteristics and marketing discounts.

Real Yield The return from an investment adjusted for the effects of inflation.

Reinsurance The practice whereby the Company transfer part or all of the risk it has accepted to another insurer (the reinsurer).

Return on Equity (ROE) A measure of the profits the Company earns relative to funds attributable to ordinary shareholders or Members.

Solvency I This is the existing capital adequacy regime for the European insurance industry. It will be replaced by Solvency II over the next few years.

Solvency II New capital adequacy regime for the European insurance industry. Establishes a revised set of EU wide capital requirements and risk management standards.

Premiums earned plus allocated investment income less claims and operating costs in an Technical Result insurance business.

Total Equity Return A measure of performance based on the overall value to equity holders of their investment in the Company over a period of time. Includes the movement in the share price and dividends paid, expressed as a percentage of the share price at the beginning of the period.

Underwriting Result This is a measure of how well the Company has done excluding its investment performance and is calculated as: NEP – Claims (including claims handling expenses) – Expenses (including commissions).

Unearned Premium The portion of premium that relates to future periods, for which protection has not yet been provided, irrespective of whether the premium has been paid or not.

Yield Rate of return on an investment in percentage terms. The dividend payable on a share expressed as a percentage of the market price.