FBD rejects ‘insurance rip-off’ accusations as profits spike

Benign weather, investment returns and release of claims reserves boosted profit

FBD chief executive Fiona Muldoon is planning to step down this year. Photograph: Eric Luke

FBD chief executive Fiona Muldoon is planning to step down this year. Photograph: Eric Luke


Insurer FBD Holdings chief executive Fiona Muldoon has rejected claims that a profit spike at the company last year, prompting plans to double its shareholder dividend to €1 per share, is being driven by an industry ripping off customers.

Pretax profit rose to €112.5 million last year from €50.1 million for 2018, as the company released €40.1 million of unused money that had been set aside for expected insurance claims costs in previous years, an exceptionally benign weather throughout 2019, and better-than-expected returns from its investment portfolio.

The company had alerted the market earlier this month that its earnings would be significantly ahead of expectations and pretax profits would be at least €100 million, prompting criticism from politicians and consumer activists at a time when high insurance costs are in focus in the Republic. UK-owned rival RSA Insurance Ireland also reported an increase in its 2019 insurance underwriting result on Thursday.

‘Systemic reform’

“A few buses have come along together,” Ms Muldoon who is preparing to step down in the coming months after five years at the helm, said on Thursday of the factors that pushed up FBD’s profits.

Her remuneration rose by 6 per cent to €993,000.

“I don’t accept that we’re not very good value for money,” she told The Irish Times. “Prices came down last year. It’s a very competitive market. But while court awards [for bodily injuries] have stabilised, stabilising at these levels will not bring insurance costs down.”

Ms Muldoon acknowledged, however, there is a risk that high profit figures such as those in FBD’s 2019 results may take away from political and judicial will to bring about the “systemic reform” needed to reduce insurance costs.

She said that the establishment this month of the Judicial Council – which will be tasked with producing new guidelines for Irish personal injury awards, as average whiplash awards stand at more than four times the UK level – is progress.

“But we have to see if its output and whether its recommendations will actually be implemented in the courts,” she said.


Meanwhile, she said that shareholders, who received no dividends in 2015 and 2016 as FBD and its rivals racked up large losses, are entitled to the payout they are set to receive on 2019’s results. “We’re in the business to make a profit,” she said. “Shareholders’ money is put at risk.”

FBD’s average motor premiums declined by 4.2 per cent last year, the company said. Average farm premiums dipped by 2.5 per cent, even as the insurer improved its so-called multi-peril product with additional coverage for public liability and pollution liability.

Business premiums increased by 1.8 per cent, “primarily due to changes in mix as opposed to rate increases,” it said.

Net claims amounted to €148.7 million, down from €183.4 million for the previous year, helped by the increase in reserve releases.

“These releases have been driven primarily by better than expected settlements and a very low large claims frequency in some recent accident years. In particular, our latest view of the 2016 accident year continues to be better than previous expectations,” FBD said.

FBD’s combined ratio – the cost of claims and administration expenses relative to premiums earned – slid to 72.3 per cent from 81.2 per cent. A figure below 100 per cent indicates that an insurer is writing business at a profit. Industry players typically target a ratio of 90-95 per cent – a level that FBD is targeting for this year, absent “exceptional weather” events.

UK insurance giant RSA reported on Thursday that its Irish unit saw its insurance underwriting result rise 40 per cent to £42 million (€49.5 million), helped by benign weather, lower large claims and reserve releases.