Wednesday 14 November 2018

The €1.5bn insurance king that grew from a £50 note

From modest Naas Rd meetings, FBD is now our fourth-largest insurer

FBD has raised its profile with the sponsorship of Fair City, top. Inset: Philip Fitzsimons is at the helm of the group
FBD has raised its profile with the sponsorship of Fair City, top. Inset: Philip Fitzsimons is at the helm of the group

Jim Aughney

WHEN a number of farmers' leaders set up FBD Holdings as an insurance company focused on the needs of people working in agriculture in 1969, little did they know what an insurance giant they were creating.

From humble beginnings in meetings on Dublin's Naas Road and countless small hotels around the country, FBD is now an insurance group with a turnover of €700m in 2006 and profits of €300m.

Its market capitalisation is close on €1.5bn, which is just short of its total assets. And from its farmers, publicans and shop-keepers roots, it has become arguably the fourth-largest insurance company in the country.

All those farmer shareholders who scraped up the requested £50 note in the depressed late 1960s will be happy with the return on their investment.

Those who held on to their shares, and a very large proportion of them did, are looking at an investment worth €82,602 today. Furthermore, any of them who subscribed €1,117 to the rights issue at 77c per share are now looking at a pot worth €58,888.

It has even moved to complement its rural ties with a concerted push to attract the urban insurer, leading to sponsorship of RTE's prime time soap Fair City.

But what now for the several thousand shareholders in FBD Holdings and for Farmers Business Developments which has a significant stake in the ordinary and preference share capital?

Over the next few days cheques worth €177m will be winging their way to shareholders arising out of the proceeds of the sale of surplus land at the La Cala golf resort in Spain. It may not be the only big payout for shareholders as the insurance group still has substantial assets in Ireland and Spain which could be seen as non-core.

Over many years FBD has been building up the Tower Group of hotels. This began as a stake in a single Tower Hotel in Waterford when FBD supported a management buyout. FBD now controls the expanded Tower Group which has 583 rooms - 490 of them in hotels fully owned by FBD. Two of the hotels in Ireland, at Faithlegg and Castleknock, are linked to golf courses, which increases the occupancy rates. It also has a number of hotels at or near La Cala in Spain.

Anna Lalor, analyst at Goodbody Stockbrokers, calculates that applying the Jurys Inn price of €204,000 per room would put a value of €234m on FBD's hotel assets.

"FBD's property assets were re-valued last December on an existing use basis - including golf courses - at €180m, which is 33pc below the price implied by the expected Jurys Inn sale price," Ms Lalor says.

FBD's chief executive, Philip Fitzsimons, is in no rush to sell off the Tower Group.

However, if the right approach was made, he could be persuaded to dispose of this or any other non-core asset.

Even though FBD is the fourth-largest insurer in the country, its broad base in the small and medium business sector means it doesn't have to chase young male drivers for motor insurance.

On the insurance front, things are going the way of insurers.

Figures released by the Road Safety Authority this week show that the number of people killed on Irish roads has dropped by almost a quarter since mandatory breath-testing was introduced last July.

There were 80 fewer deaths in the 11-month period since it was introduced.

The average cost of each road fatality accident is estimated at €2.28m.

Random breath-testing is good for insurance companies like FBD, as well as helping the economy.

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