FBD’s bumper €35m dividend payout may not go ahead

Insurer FBD Holdings' plan to pay out a €35 million dividend to shareholders is now in doubt following an intervention by the European Insurance and Occupational Pensions Authority (Eiopa) on Thursday, calling for an outright suspension in payouts by insurers in Europe.

The insurer moved on Friday to give itself additional space to consider the payment, as it postponed its annual general meeting, originally set for May 8th, to an unspecified later date, due to health and safety concerns surrounding Covid-19. The dividend is subject to an agm vote.

Davy analyst Diarmaid Sheridan said in a note to clients that the Eiopa statement places "significant risk" on the FBD dividend, which was being proposed at €1 per share, or double what it paid out last year.

Goodbody Stockbrokers analyst Eamonn Hughes said the Eiopa development "is likely to add to pressure across the insurance sector to see dividends deferred at a minimum, or suspended altogether for this year".

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“The longer-term impact of Covid-19 remains unknown at this juncture,” said Mr Sheridan. “While FBD provides insurance to SMEs and businesses, we understand that business interruption insurance related to pandemics is not a material feature of its policies. However, the economic impact of the pandemic and containment measures are likely to impact policy numbers and value.”

Negative return

Davy also expects FBD’s investment portfolio to deliver a negative return in 2020.

Eiopa's move came on the eve of Paul D'Alton, a former chief financial officer of Bank of Ireland, taking over as chief executive of FBD, succeeding Fiona Muldoon, who took over the helm of the organisation in 2015 as the Irish industry was grappling with major losses.

The €1-a-share dividend, equivalent to an exceptionally high 10 per cent dividend yield at the time it was announced, in late February, came as the company’s pre-tax profit rose to €112.5 million last year from €50.1 million for 2018.

Earnings had been driven as the company released €40 million of unused money that it had set aside for expected insurance claims costs in previous years, exceptionally benign weather throughout 2019, and better-than-expected returns from its investment portfolio.