Ireland’s FBD: Solvency Rule Program on Track as CEO Quits Unexpectedly

By | August 7, 2015

FBD Holdings plc said its plans to meet new solvency rules next year are on track as the Irish insurer struggles to return to profit and Andrew Langford unexpectedly quit as chief executive officer last week.

Dublin-based FBD said it’s “no different” to other European insurance companies readying for the implementation of Solvency II rules on Jan. 1. The company responded to Bloomberg News questions after an Irish Farmers Journal report on its capital on Thursday in Dublin.

“Plans are on course for FBD to continue to be in full compliance with all requirements by the due date,” Pat Walsh, a spokesman for the company, said in an e-mail on Friday in Dublin. He didn’t give any more details.

FBD’s market value fell by half in the past 12 months as Langford twice cut its 2014 earnings forecast and reported a worse-than-expected loss. The shares dropped 4 percent on Thursday in Dublin, after the Farmers Journal reported that a FBD plan to exit its property and leisure assets is unlikely to provide the insurer with adequate capital to meet the new rules.

“I don’t think the company will be in a position to be specific on how much capital is needed” when it reports first-half earnings later this month, John Cronin, an analyst at Investec plc in Dublin said. “To the extent that a capital shortfall is identified, I think they are likely to consider both a subordinated bond issue and an equity raise.”

Last month, Irish state-owned health insurer Vhi Insurance DAC said Warren Buffett’s Berkshire Hathaway Inc. granted it a subordinated loan, bolstering its capital reserves.

CEO Exits

Fiona Muldoon, a former head of insurance and banking regulation at the Irish central bank, took over as interim CEO after Langford, 46, quit last week.

In May, the company said it would scrap its interim dividend in August to protect its finances. FBD is due to publish first-half earnings figures on Aug. 25.

Under existing insurance capital rules, known as Solvency I, FBD had a solvency level of 67.6 percent of net premium earned at the end of 2014, almost three-and-a-half times the minimum requirement. FBD said in March it estimated it would have “sufficient capital” to meet its requirements under Solvency II rules.

The company’s shares dropped 0.3 percent to 7.06 euros as of 12:26 p.m. in Dublin, valuing it at 244.5 million euros ($267.3 million).

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