Insurance provider FBD signals motor costs hike after €85m loss

The country’s only indigenous insurer FBD has warned of further premium rises across its business this year after an “exceptionally difficult” 2015 saw it record an €85m pre-tax loss.

The insurer’s losses were largely due to prior year claims of €96m which were flagged in its half-yearly results last August.

Excluding exceptional items, FBD made a loss of €101.7m in 2015 with €96.4m of this recorded in the first half of the year and €5.3m in the second half of the financial year.

FBD Holdings’ group chief executive, Fiona Muldoon said the insurer had managed to stabilise its business in the latter part of the year having taken “all the capital actions” it announced six months ago.

These included securing a €70m investment from Canadian firm Fairfax Financial in the form of a convertible bond and the sale of its property and leisure joint venture for €48.5m.

“After an exceptionally difficult year FBD has stabilised. We have delivered on the commitments made to our shareholders last summer.

"Our corrective pricing and risk selection actions are building momentum towards restoring profitability,” Ms Muldoon said.

The FBD chief said she expected “hefty” motor premium increases in the “low teens” in 2016 following a 31% increase in the cost of motor insurance across the industry last year.

The insurance industry, which FBD predicts will be lossmaking again this year, has blamed increasing claims’ costs for the price hikes.

“In hindsight, the industry under priced 2012-2014 the industry lost €500m so there is no doubt that with the benefit of hindsight in insurance risk — particularly motor and motor liability risk — has been under priced but there has also, in fairness, been a raft of changes in the courts’ environment and the industry did sound the warning bell that that would be inflationary and in fact, inflationary it has turned out to be,” Ms Muldoon said.

The Irish insurer expects to make a modest “single digit” million euro loss this year before returning to profitability in 2017.

Ms Muldoon also warned its agri customers to expect price increases of less than 5% on average in the coming 12 months.

FBD’s gross premium written remained stable at €363m for the full year while its net asset value per share at the end of the year was 623c compared to 786c for prior year and 512c at the end of June last.

Full year average premium rate increases of 9% were offset by a 9% decline in policy volumes.

FBD’s share price climbed close to 6.5% to €6.65 following yesterday’s announcement which still represents a significant premium to the €8.50 share price at which Fairfax can convert the 10-year bond which would give it a 19% stake in the business.

Ms Muldoon said the company was on track in terms of the recovery of its share price but added that global market volatility has not been helpful.

She said FBD was “in the penalty box” with its shareholders after a difficult year and the only way its share price would recover further would be through improving its net asset value.

The insurer also announced a shake-up of its board which will see the amalgamation of the group’s board and that of its main subsidiary, the insurance business.