Defunct lender Friends First writes off 18pc of Irish loans
DEFUNCT Dublin lender Friends First Finance has written off 18pc of its entire Irish loan book, marking some of the most aggressive bad debt provisions ever seen in the Irish market.
News of the massive write-downs comes seven months after Friends First announced plans to close its lending division, which dabbled in everything from commercial mortgages to motor finance and personal lending.
Friends First took a €35m write-down on its lending book at the half-year point last summer, and the company yesterday confirmed a full-year write-down of €101m had been taken on the loan book.
The bad debt provisions pushed Friends First's overall Irish business to a €105m loss in 2009, even though the group's core life insurance division significantly outperformed the market.
"We certainly believe we have absolutely provided for our bad debts at this point," said Friends First marketing director Eamonn Twomey. "If anything, hopefully we've overprovided, and we'll be able to claw something back."
The massive loan loss more than wiped out the €78m of new life insurance business written by Friends First last year. That €78m, calculated using an industry benchmark that includes 10pc of single premium sales and 100pc of all regular premium sales, was down 15pc year-on-year against market-wide falls of about 32pc.
"It's been a tough year for life as well, but we're very happy to have outperformed the market," Mr Twomey said, adding that Friends First's market share grew from 5.7pc in 2008 to 6.7pc in 2009.
The insurer's strongest relative performance was in single premium life insurance sales, where the market was down 42pc and Friends First was down just 9pc. Friends First also significantly outperformed in the regular premium pension market, falling by only 24pc against a market-wide decline of 46pc.
"2010 is very definitely going to be another tough year for the industry but we've started the year quite well," Mr Twomey added, hinting at the continuing challenges facing the industry.
Those challenges include a risk adverse market that is wary of single premium investment-style policies, a poorer population that is less able to invest in pensions and regulatory changes like the 1pc life insurance levy.
The detail on Friends First Irish business was revealed as the company's Dutch parent Eureko presented its 2009 data to the markets. Eureko's earnings presentation contained just one reference to Ireland, noting that high loan loss provisions here "depressed" the overall banking result.
Eureko's overall banking division posted losses of €47m last year against a €36m profit in 2008, while the overall group swung to a €1.5m profit against a €2.6m loss.
The closure of the Irish finance division triggered 147 job losses, slimming Friends First's Irish team down to 370, but 30 to 40 people continue to work on the loan book. Mr Twomey said the wind-down of the book was likely to take between five and seven years.
He added that Friends First remained "absolutely committed" to the Irish insurance market and had made no moves to impose pay cuts on its remaining staff.