FBD Shares Surge on Reduced Losses, 2017 Profit Forecast

By Peter Flanagan | August 12, 2016

FBD Holdings Plc shares surged the most in almost eight years after the insurer posted a smaller first-half loss and said it’s on track to making a profit next year.

FBD shares rose as much as 12 percent, their biggest gain since December 2008, after the insurer reported a pretax loss of 3.7 million euros ($4.1 million), narrower than a loss of 96.4 million euros a year ago. Average premium rates, a measure of how much the company is charging customers, increased 11 percent.

FBD, which provides auto, home and farm insurance, has been undergoing a turnaround under Chief Executive Officer Fiona Muldoon since she took on the job a year ago. Under Muldoon, the company has cut costs and raised capital, as well as selling off non-core parts of its business. FBD posted pretax losses in 2014 and 2015.

“These results demonstrate that we are returning the business to profitability,” Muldoon said. “We are seeing fewer accidents, and that has made our book inherently less risky.”

The shares climbed 11.4 percent to 6.85 euros at 9:21 a.m. in Dublin.
‘On Track’

The company said its combined ratio, a measure of claims and expenses divided by premium income, fell to 101 percent compared to 167 percent a year ago. FBD is targeting a ratio of below 100 percent by the end of this year. Gross written premiums fell 2 percent to 180.8 million euros as FBD cut the amount of business it did through brokers.

FBD said it is on “firmly on track” to make a full-year profit in 2017. The company probably won’t pay a dividend before 2018, Muldoon told reporters.

The earnings showed a “much improved underwriting performance due to rate hardening and reduced risk exposure,” Davy analysts including Stephen Lyons said in a research note.
Government Intervention

The Irish insurance industry has been hit by increasing claims across the sector. Muldoon says the government needs to intervene to prevent claims going too high.

“We believe that structural reforms are necessary to tackle injury claims inflation and address the impact claims costs are having on the affordability of insurance for farmers, businesses and other consumers,” she said.

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