Insurance customers are set to foot the bill for difficult market conditions last year which cost insurer FBD badly and saw it post a €4.5m pre-tax loss.
Motor and liability premiums will see the biggest increases — potentially double-digit gains — as the Irish insurer looks to make up for higher claims costs and poor weather conditions that hit its performance last year.
The worst weather conditions in FBD’s existence eroded its profitability and led to an extremely difficult 2014 for the insurer which is likely to be replicated over the coming year, said chief executive Andrew Langford.
The Irish insurance group fared particularly badly in the wake of Storm Darwin, which battered much of the country in the early part of last year and resulted in claims costs of €44m over a six-week period.
Mr Langford indicated that an average 6% increase could be expected across its insurance products but, with the increases likely to be concentrated on motor and liability premiums, cover in those areas could cost significantly more.
Commenting on the challenging set of results, the FBD chief executive said the insurance environment proved difficult for all insurers but admitted that the fallout from Darwin hit its business more so than others. “2014 was a very difficult year for the Irish insurance industry and for FBD,” said Mr Langford.
“The claims environment has deteriorated significantly and at a speed which exceeded expectations.
“In the first quarter last year, we had the worst ever wind-related weather in Ireland and 9,000 of our customers were impacted by that and that did affect everybody in the industry but because of the nature of the risk we insure — we have more rural risks — [and] the fact that geographically, the weather hit exactly in the areas where we are strongest… that gave rise to €44m of claims which is the biggest claims hit we’ve ever had.”
The FBD chief also said that it was somewhat caught on the hop by the pace of the economic recovery which resulted in a higher number of claims and for which they were not adequately prepared.
In hindsight, said Mr Langford, FBD was not prepared for the economy’s reversal of fortunes but said that the insurer was not alone in this regard and that it had not entirely missed the signs of improvement in late 2013.
An unusually high incidence of large claims of over €1m also contributed to the overall loss — which compares to profits of €51.5m the previous year. In the third quarter alone, the insurer had five or six such claims which in light of an annual average of between three and eight was exceptionally high, Mr Langford said.
The group aims to return to profitability in 2015 and is guiding full year operating earnings per share of 20c to 40c. Despite the tough trading conditions in 2014, FBD recommended a final dividend of 34c per share, up 2.3% on 2013 and full year dividend growth of 4.1% to 51c. It market share also rose 0.1% to 13.6%.
The insurer’s gross premium written — the total premium written and assumed by an insurer before reductions — increased by 3.6% to €363.7m.
Net premium earned rose 2.4% to €303.4m. Net underwriting expenses were €81.8m in 2014, up from €77.6m in 2013, increasing the expense ratio from 26.2% to 27.0%.
© Irish Examiner Ltd. All rights reserved