Job losses to follow FBD’s record €96.4m loss

A record €96.4m loss coupled with imminent staff redundancies and higher customer premiums yesterday marked a very weak set of half-yearly results for FBD.

The insurer laid the blame largely at the door of what it described as a “structural shift in the claims environment in Ireland” which has led to increased claims costs.

The previously signalled claims uncertainty has deteriorated further and the existing business strategy has not delivered profitable growth.

“It’s a very disappointing set of results and I suppose we see large claims losses and we think there’s a structural shift under way in Ireland that has caused us to undergo a fundamental review of the business and we are also, as importantly, announcing that we’re addressing our challenges and that we’ll be going in a new strategic direction,” said interim chief executive, Fiona Muldoon.

In response, the insurance company has strengthened its claims reserve by €88m, which is reflected in the €96m loss, while it has also announced that it is to close off its defined benefit pension scheme to future accrual and cutting the link with future salary.

The company is also in talks to sell its stake in FBD Property and Leisure Group, its Irish and Spanish hotels joint venture.

The proposed sale of the stake to Farmers Business Development, which is conditional on shareholder approval, would generate €48.5m.

Scores of jobs could be lost as FBD looks to find €7m in cost savings, or 10% of its total cost base.

With approximately 1,000 employees and the majority of its costs relating to payroll, a 10% reduction could see just shy of 100 job losses although FBD was yesterday unable to confirm the exact figure.

The insurer is also to adopt a single consumer brand and scrap its “No Nonsense” business in an attempt to row back from previous strategic decisions which haven’t borne fruit.

With just 28,000 policies, the group’s disappointing performance can’t be attributed to the “No Nonsense” brand, Ms Muldoon said, adding that customers will be transitioned as their policies come up for renewal.

The envisioned restructuring of the business would see it return its focus to its core markets in the agriculture and SME spheres.

“We’ll be more focused on our farm and SME direct business. We will have one brand, the FBD brand, in the consumer areas so we’ll stop marketing under the “No Nonsense” banner and we [will] just have a greater focus on doing fewer things and doing them better.”

The interim chief executive, who was appointed to the role following the departure last month of long-time FBD employee, Andrew Langford who headed the company for the past seven years, said, in hindsight, the modest growth achieved was into areas that have seen significant claims inflation.

FBD’s market share grew from 11.9% in 2011 to 13.8% in 2014. “I wouldn’t characterise it as flawed but I would say that our timing may have been misjudged; our execution and our timing maybe could have been better,” said Ms Muldoon.

FBD’s gross written premium in the first six months was relatively stable at €185m as price increases of 8% on average led to a similar reduction in policy volumes.

Net claims incurred rose from €117.2m in the opening half of 2014 to €215.8m in the same period this year.