FBD: Short-term insurance gain has yielded long-term pain
Wednesday, 08 26 2015, Category: Insurance and Reinsurance, Country: Europe
The collapse of FBD’s share price on Monday represented the Perfect Storm for the Irish insurer but without George Clooney as eye candy.
Disastrous interim results, which resulted in a €96 million loss being booked, coupled with the Black Monday stock market meltdown globally over fears about China’s economy, resulted in FBD’s shares falling in value by 21 per cent.
There was a familiar narrative from the company of increased frequency of claims now that the economy is getting back on its feet, higher awards by the courts following structural changes (which the industry did not object to at the time), and customers taking longer to settle their cases, pushing up legal expenses.
Investment returns are unable to balance the books due to historically low interest rates, tight bond yields and stock market volatility.
FBD has set aside €88 million to meet the costs of future claims and decided to simplify its business model, forsaking the broad consumer market for a return to its roots of agri and small business.
FBD is the latest casualty in the Irish insurance sector. Malta-regulated Setanta collapsed in April 2014, leaving 75,000 policyholders here high and dry.
UK-based RSA was forced to pump hundreds of millions of euro into its Irish subsidiary after reserving and other issues emerged in 2013.
Source: The Irish Times