FBD eyes target-beating €100m profit as it passes on more pub costs

Insurer FBD said on Friday evening that it expects to report a “significantly” better than expected €100 million profit for last year, as it indicated it will manage to shift more of the costs arising from Covid-19 business interruption claims from pubs to its reinsurers.

The company said that the profit, which compares to a €41 million consensus estimate among analysts, has also benefited from “benign weather”, and lower general claims costs than previously factored in for 2021 and previous years. It added that it had also made “strong” returns on its investment portfolio.

As of the middle of last year, FBD had set aside €67 million of provisions to cover expected costs stemming from a landmark Covid-19 business interruption pubs test case ruling that February, leaving it on the hook to pay compensation to 1,000 pubs. However, it said that it expected total claims from the cases to amount to €183 million, with most of it being borne by reinsurers.

It is believed that FBD has concluded that the €183 million is now too high, on foot of an additional High Court ruling on Friday on what can be included in payouts to the pubs.

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FBD also said in its statement that following extensive discussions with its reinsurers, it has secured a “favourable impact on previously booked reserves net of reinsurance”. This clearly indicates that it is on track to release some of the €67 million provision, boosting its profit figure for 2021.

A spokesman for the company said that it is committed to paying valid claims “as promptly as possible and as the court process allows”.

In addition, FBD said that Government subsidies paid to pub customers with business interruption cover during the Covid-19 pandemic “have not and will not contribute to 2021 profits”.

Observers said that this suggests either FBD and its reinsurers, or pubs, will reimburse the State to the extent that some of the pubs’ losses that were indemnified by insurance contracts had been covered way of Covid-19 subsidies. Minister of State Seán Fleming said that while the court did not issue a judgment in relation to the issue of the deduction of State supports from successful business interruption claims, it may do so at a later date. The case has been listed again for mention on February 17th.

“FBD notes and welcomes the quantum hearing judgement delivered in the High Court this morning relating to Covid-19 related business interruption claims from public house customers,” the insurer said. “This judgment has provided considerable clarity on the definition of business closure and on other matters such as allowable wages. While some matters remain to be clarified, FBD will now continue to progress with the settlement of valid claims for customers.”

As of the middle of last year FBD had made €20 million of interim payments to pubs. The Central Bank said that its business interruption insurance supervisory framework requires that “take urgent action” to settle claims where legal action results in an outcome “that has a beneficial impact for similar customers”.

The development will also be closely assessed by other insurers where there is a read across to their policies.

“As with the initial judgment last February, the findings are substantial and will take some time for all parties to consider,” said Mr Fleming. “However, I note that the court has asked the parties to make every effort to resolve outstanding issues between themselves. This approach is to be encouraged, and where a contractual liability exists, the Government expects that such claims are settled promptly.”