Benign winter heralds profitability, but tempests loom

HELPED by a benign winter, FBD has returned to profit. But analysts are confident that after a tumultuous couple of years, the insurance firm is now on course for sustained profitability, having cut costs, restructured its business and being more careful about the type of customers it takes on.

A former Central Banker, Fiona Muldoon took over at FBD as it was battered by its own financial storm. In 2015, she oversaw a deal with Canada’s Fairfax Financial – founded by legendary financier Prem Watsa – that saw it lend €70m to FBD via a convertible bond.

It was a lifeline for FBD, giving it the means to bolster its capital reserves as it struggled to cope with bigger claims and low investment returns that had damaged its solvency buffer.

FBD then set about axing 100 jobs, and agreed to sell its 50pc stake in its leisure business for €48.5m to Farmers Business Development, which owns about 29pc of FBD. Last year, FBD also sold a 70pc stake in the Passage East Ferry Company, making a €1.9m profit. And although it made money in 2016, the environment FBD is operating in remains challenging – and will probably continue to be so for some time.

The recommendations from the Government’s working group on insurance costs could take a couple of years to implement, creating uncertainty for consumers over how high their premiums might actually go.

FBD’s average premium increase last year was 9pc, offset by a 5pc decline in policy volume from direct operations. Net claims incurred by FBD amounted to €217m last year, compared to €341m in 2015 when it set aside an additional €96m for reserving.

Ms Muldoon also pointed out that FBD didn’t implement any increases in tractor or farm premiums last year. Any increases farmers saw in 2016 were a result of price changes implemented in 2015, she said.

Analysts welcomed FBD’s results yesterday, with Investec arguing that 2016 may be an inflection point for the firm. Despite that, Investec noted that the insurance sector in Ireland “remains in a difficult position”. And with Brexit looming, Ms Muldoon has more storms to navigate.