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FBD reports dip in profits as market volatility impacts investments

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FBD chief executive Tomás O’Midheach

FBD chief executive Tomás O’Midheach

FBD saw a 3.1pc rise in policies in the first half of the year. Photo: Colin Keegan/Collins Dublin

FBD saw a 3.1pc rise in policies in the first half of the year. Photo: Colin Keegan/Collins Dublin

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FBD chief executive Tomás O’Midheach

Insurer FBD saw its pre-tax profits for the first half of the year fall as rising inflation and interest rates ate into investment returns.

FBD reported a profit before tax of €19m in the six months ended June 30, 2022 compared with €22m for the same period last year.

The company attributed the deterioration to the impact of interest rate rises and market volatility which led to an investment loss of €15.2m.

“The vast bulk of our money is in bonds, but we also have an element in equities and that’s where we’ve seen a significant fall,” chief executive Tomás Ó’Midheach told the  Irish Independent.

“We’re very happy with our asset allocation, though. Don’t forget, we had a sharp uptick in investment performance in 2021. This is just the froth coming off.”

Davy analyst Diarmaid Sheridan said the rising interest rate environment would ultimately become a positive for  FBD as the portfolio gets reinvested in higher-yielding bonds, which make up the bulk of its holdings.

“As reinvestment in the portfolio occurs, the underlying return from the portfolio will be a significant positive contributor to profitability,” he said.

FBD reported an underwriting profit of €34.5m on the back of gross written premiums of €193m in the first half of 2022, which were up 3.3pc on the prior year, excluding the impact of Covid-19 related rebates.

Policy count increased by 3.1pc in the first six months of the year, while business retention levels are at the highest in five years, so the business is growing on an underlying basis.

Average premiums remained flat across the portfolio, however, and private motor insurance premiums were down 8pc.

“There is an element of returning to normal, but motoring levels have not re-established themselves to pre-Covid levels, and we wouldn’t expect them to,” said Mr Ó’Midheach

Net claims were reduced by €21.9m to €85.6m.

The volume of claims rose 5pc year on year, with motor damage notifications rising by 29pc as traffic volumes returned to pre-pandemic levels.

FBD said that inflation on parts and labour is impacting the cost of repair of cars and as a result, claims have risen as people do not wish to pay for repairs outside of their insurance.

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Property damage claims remain in line with 2021 figures.

FBD also said that there is an expected reduction in claim costs as a result of the new Personal Injury Guidelines.

“The Personal Injury Guidelines appear to be having the desired effect of lowering costs for minor injury claims justifying the premium reductions given to our customers,” said Mr Ó’Midheach.

He also added that a further hearing is scheduled for FBD’s Business Interruption test case in November to discuss two remaining issues – “to determine the quantification of partial losses in respect of the bar counter and the treatment of Government subsidies.”

The net best estimate in respect of Business Interruption reduced by €1m to €43m since end of 2021, according to FBD.

In March, FBD said it paid out €30m in interim payments for business interruption claims following a High Court ruling in January.


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