Tuesday 25 October 2016

FBD may park plan to raise up to €100m in bond deal

Published 04/09/2015 | 02:30

5/1/12 Fiona Muldoon, Director Insurance Supervision, Central Bank of Ireland. Picture:Arthur Carron/Collins
5/1/12 Fiona Muldoon, Director Insurance Supervision, Central Bank of Ireland. Picture:Arthur Carron/Collins

FBD may not proceed with a planned bond deal of up to €100m, the Irish Independent understands.

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The insurer, which posted heavy losses for the first six months of this year, is selling off its hotels and leisure business and closing its pension in order to hit European capital requirements known as Solvency II.

While those measures on their own mean that FBD will meet the Solvency II limits, FBD has signalled it will also look to raise between €50m and €100m on the debt markets. However it is understood that the insurer may not proceed with the offering if the price is too high.

Market volatility and the relatively small size of the bond may make it difficult to price in the near term, according to industry sources.

The doubt over the bond offering came even as the Irish Farmers' Association said it was willing to invest as much as €1m in the deal.

FBD is likely to pursue a subordinated bond if it proceeds. Such a bond could carry a double-digit interest rate. An FBD spokesman declined to comment.

FBD parted ways with chief executive Andrew Langford last month. Interim chief executive Fiona Muldoon has since revealed a loss of €95m for the first half of this year. While she maintained the worst was over for the company, she told the 'Irish Farmers Journal' there was a long road ahead yet.

There is a structural change under way in the insurance industry, Ms Muldoon said, with higher payouts now a fact of life that was not going to change.

She pointed to the fact that the cap on awards by the circuit court had been increased by 50pc to €60,000, while changes to how disability claims are calculated has also led to higher costs. Ms Muldoon admitted that by selling off the hotels business at this stage the company would not be able to take advantage of the recovery in property prices but FBD had no choice at this stage but to sell.

The company has also closed its pension scheme for all staff, a decade after FBD closed its scheme to new joiners.

Shares in the company rose 4.5pc in Dublin to hit €6.11. The shares are down over 30pc in the last six weeks and have fallen almost 60pc in a year.

Irish Independent

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