FBD denies bailout prompted dumping of government bonds
Published 09/03/2011 | 05:00
HOMEGROWN insurance giant FBD dumped all its Irish government bonds in the second half of last year, but yesterday denied the move had any link to November's bailout.
News of the sell-off emerged as FBD posted an expectation-beating set of full-year results, including a 41pc rise in operating profits and a €30m improvement in bottom-line losses.
Shareholders are being rewarded with a final dividend of 21c, bringing the full-year's dividend to 31.5c -- up 5pc on 2009's distribution.
FBD only bought into government bonds in mid-2009, snapping up some €84m of the securities just months after deeming them "too risky" to invest in. Yesterday, FBD confirmed it had sold down the entire portfolio in the second half of last year.
"The volatility in the third and fourth quarter last year meant we couldn't hold any Irish government bonds at year end," FBD boss Andrew Langford said. "We intend to reinvest as soon as that volatility is reduced."
The insurance chief refused to say when exactly the bonds had been sold, but said it was "wrong" to assume the decision was linked to November's bailout.
"It doesn't mean we're nervous about the Irish outlook," he stressed. "Our investment policy dictates if there is investment volatility, we have to pull away from certain asset classes."
Mr Langford also pointed out that a "very big chunk" of FBD's €231m of deposits and cash were held in Irish institutions.
The comments came in a media briefing where Mr Langford also confirmed that while premiums across the insurance industry were "likely" to rise this year, FBD had no plans to raise its rates.
"The insurance industry as a whole is not making money from personal lines insurance," he stressed, pointing to the massive losses from last year's exceptional weather claims, which triggered claims of €90m at FBD alone.
The insurance boss said that while there was "not a rampant fraud culture out there", FBD was dealing with "hundreds" of possible fraud cases, reflecting the general increase in fraud that comes with recessions.
Mr Langford acknowledged an insurance levy was a "possibility" later this year, depending on the outcome of the protracted sales process around embattled Quinn Insurance.
The challenges contrast starkly with last year's trading performance, where FBD grew gross written premium for the first time since 2007 (albeit at a rate of just 0.3pc) and enjoyed sharply better bottom-line results.
Mr Langford attributed FBD's strong trading performance to its roots in the farming community, which has been less badly hit than other sectors, as well as "good" progress in the Dublin market, where FBD's share is now at 5pc.
Last year's bottom-line losses, which came in at just €3m, benefited from a one-off pension gain of €11m and a €10m fall in impairments to FBD's hotel and leisure portfolio.
Mr Langford said he hoped last year's €19m impairments, which followed the €29m hit in 2009, would "draw a line under any residual doubts people might have" about the value of the portfolio which includes four Irish hotels and a resort in Spain.
FBD sold 46 properties in the La Cala development in Spain last year, helping the non-underwriting business to a €4.5m profit.
The insurer was "unlikely" to clear the remaining 50 properties this year, FBD finance chief Cathal O Caoimh said.