FBD set to take one more step to profitability

A bellwether of the beleaguered insurance sector, FBD Holdings, Ireland’s only publicly quoted insurer, will report its half-year results on Friday. The insurer, which has been loss-making in recent years, is expected to show continued progress towards the group’s aim of returning to underwriting profitability this year.

But it's unlikely to have got there just yet and, as chief executive Fiona Muldoon has previously said, it may be the fourth quarter of 2016 before her task of returning the insurer to the black is fulfilled.

Loss forecast

Indeed, Davy's Emer Lang has forecast a half-year insurance loss of € 9 million for FBD, down considerably on the €105 million loss reported in 2015. Lang is forecasting an underlying combined operating ratio (COR) of 106.0 per cent for the first half, an improvement from an underlying 106.5 per cent in the same period in 2015, on the back of continuing rate hardening. But returning to profitability will likely mean stabilising claims costs, she says.

Helping the insurer in this regard is the aforementioned hardening rate environment, with Central Bank figures showing Irish motor insurance costs soared by almost 40 per cent in the year to the end of June. And FBD has been employing these rate hikes. In February, the insurer said rates had risen by an average of 9 per cent in 2015, and signalled further rate increases for 2016.

Last week British insurer RSA – which itself is no stranger to losses in its Irish business – said premiums for its Irish business rose 11 per cent in the first half of the year, on the back of hefty rate increases.

The increase in rates means that FBD may not be too bothered by losing business – although Davy is forecasting a 3 per cent drop in premiums to €180 million due to a lower volume of business