Insurer FBD plans to cut back motor business

Irish insurer FBD is planning to put the brakes on its motor business in response to an increased frequency of claims that last year were a factor in the company drifting into the red.

FBD’s share price sank by 11.6 per cent to €10.80 in Dublin yesterday after the company announced a pretax loss of €4.5 million for 2014, which the insurer said was the worst year of weather in its history. This loss compared with a profit of €51.5 million in 2013.

In terms of outlook, FBD guided a full-year 2015 operating earnings per share of between 20 and 40 cent. Stockbroker Davy had forecast 86.3 cent for this year and said it would review its figures.

"We are reducing our exposure to motoring insurance," FBD's chief executive Andrew Langford said yesterday. "We will focus more on retention over new business. We won't seek to increase volumes."

Mr Langford predicted its motor premiums would rise on average by about 7 or 8 per cent this year to reflect the increase in claims resulting from the economic recovery.

FBD is the fourth biggest motor insurer in Ireland, with market share of about 11 per cent. Mr Langford said its decision to pull back on growing its motor book would probably result in only a slight decrease in market share.

He said premiums across its categories of business would rise by an average of 6 per cent, although its home insurance rates would be flat or “slightly down”.

Mr Langford said 2014 was a “very difficult year” for the insurer, including two profit warnings.

When asked if he considered resigning, Mr Langford said: “I didn’t. What I have to do is to make sure that FBD returns to profitability. This is what I’m focused on. The management of the company has the confidence of the board.”

Share price

FBD’s share price has shed just over 40 per cent in the past year while its market capitalisation has declined by €255 million to €374 million.

Its gross written premium rose by 3.6 per cent to €363 million but a severe deterioration in the market claims environment and the “worst weather experience” in the group’s history adversely affected the insurer’s bottom line.

An increase in insurance rates during the year was not enough to match the sharp increase in claims, it said. FBD’s loss ratio increased from 67.9 per cent to 86 per cent in the same period.

In spite of the loss last year, FBD increased its dividend by 4.1 per cent to 51 cent a share.