Financial Services

FBD eyes another special investor payout after €36m dividend on strong results

Pretax profits jumps 24% to €81.4m after release of some reserves and €19.1m return on investments

Tomás Ó Midheach, chief of insurer FBD, which beat guidance that had already been sharply increased. Photograph: Alan Betson

Joe Brennan
Fri Mar 8 2024 - 07:56

FBD chief executive Tomás Ó Midheach signalled the insurer is looking to make a second special cash distribution to investors, after its planned payment of €36 million in regular dividends for a third straight year as it posted a strong set of results.

The State’s only indigenous general insurer issued a €36 million top-up to shareholders last October as it looked to reduce its excess capital reserves.

“We don’t want to hold on to surplus cash,” Mr Ó Midheach told The Irish Times, adding that while he did not want to make predictions, the insurer’s thinking around a special dividend “is not dissimilar to last year”.

“Given the surplus capital position of almost €120 million at end 2023, this bodes well for future special dividends, we think,” John Cronin, an analyst with Goodbody Stockbrokers, said.

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FBD said on Friday that its pretax profit last year rose 24 per cent to €81.4 million. The company had already said three weeks ago that the result would amount to about €80 million, much higher than the consensus estimate of almost €55 million among analysts at the time.

The better-than-expected results had been driven as the group released €44.4 million of reserves that had previously been set side for claims, as costs turned out to be less than feared, as well as €19.1 million of investment returns. The company had booked €10.8 million of investment losses in 2022.

Gross written premiums rose by 8 per cent to €414 million, with over 70 per cent of the increase coming through from farmer and business customers. Commercial premiums increased by an average of 5.3 per cent, “driven by a combination of sums insured increasing due to inflation in construction costs and customers increasing liability cover levels”, the company said.

Private motor average premiums increased 2.9 per cent. This followed a 7 per cent reduction by FBD in 2022. All told, motor premiums declined across the industry by 22 per cent between a peak in late 2017 and the end of 2022, according to Central Bank data, helped by an industry-wide decline in claims costs after new personal injury guidelines were approved by the Judicial Council in early 2021. Commercial motor premiums rose by 3.6 per cent last year.

FBD said the rate increases were “applied to offset the increased cost of motor damage claims stemming from inflation in labour, parts and paint costs, and the higher costs associated with repair and replacement of advanced technology on newer vehicles”.

The insurer is continuing to deal with pub business interruption claims stemming from outset of the Covid-19 pandemic in 2020. FBD estimated in August 2021 that total pub business interruption claims would amount to €183 million, including losses covered by reinsurers, after it lost a test case on the matter in the High Court. FBD has since repeatedly declined to give an update on total anticipated costs, but reduced the expected net cost to itself last August by €15 million to €27 million following the conclusion of final legal rulings on the test case.

A total of 940 of the 1,076 pubs that were in scope for payments have either pursued or signalled they will pursue claims. Some 180 cases have been fully settled. On the other end of the spectrum, 300 pubs have not engaged to date on the issue of costs.

Meanwhile, FBD has set aside €6.2 million to reimburse the State for subsidies paid to pub customers that lowered the amount it needed to pay in business interruption claims.

Average tractor premiums rose by 9.1 per cent due to a higher proportion of newer tractors, the increasing value of existing tractors and modest rate increases to offset inflation in the cost of damage claims.

FBD said that while there was an increase in named storms in 2023, the number of “attritional” weather events actually fell, resulting in weather losses being flat year-on-year.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times

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