Monday 22 January 2018

Shares fall as insurance group FBD axes dividend

FBD chief executive Andrew Langford
FBD chief executive Andrew Langford
John Mulligan

John Mulligan

Shares in insurance group FBD plunged over 10pc at one stage yesterday after it eliminated its interim dividend and warned of a continuing uncertain claims environment.

The company, headed by chief executive Andrew Langford, told shareholders at its annual general meeting yesterday that conditions in the Irish insurance market "remain challenging".

"Market rates continue to harden for both car insurance and business insurance, while home insurance rates remain weak with increased competition for new business given a benign winter and the absence of significant weather events," it noted.

FBD also added that the gross premium written by the firm in the first quarter of the year was marginally less than in the first quarter of the previous financial year. It said that firmer pricing had "substantially offset" volume reductions.

Shares in the company regained some lost ground after the earlier rout, and ended the day down 4pc, giving the company a market capitalisation of €317m. Its shares are currently trading 43pc lower than their 52-week high of €17.75.

Analyst John Cronin at Investec said he still has concerns about FBD's operating environment.

"While it is encouraging to note that price growth is offsetting volume decline, which is helping achieve profitability from a new business perspective, we have concerns with respect to the potential implications of the structural changes in the claims environment from both a profitability and reserving perspective," he said.

In November, shares in FBD sank over 17pc in one day after it issued its second profit warning in a matter of months.

It said at the time that a small number of medium-sized injury claims - which typically cost the firm between €200,000 and €1m net of reinsurance - had been "significantly higher" than normally expected. Those claims related to accidents that occurred in 2011 and 2012.

The firm has insisted that economic growth in Ireland with ultimately benefit FBD.

"However, the continuing significant uncertainty in the claims environment will impact the development of booked claims reserves and profitability in 2015 and FBD has taken appropriate underwriting and rating action to date," it said.

"There are early indications that these actions are restoring the business written in 2015 to profitability."

It added: "For the remainder of 2015, FBD will seek to continue to restore profitability through risk selection improvements and rate increases where these are merited or required."

In January, FBD announced that former high-profile Central Bank director of credit institutions and insurance supervision, Fiona Muldoon, was joining the firm as its group finance director.

Irish Independent

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