Insurer FBD defends 110% profit jump amid political fire

Drop in claims boosts profit but chief executive warns litigation claims costs still rising

FBD Insurance chief executive Fiona Muldoon: “We are making a profit and that’s a good thing. I don’t apologise for that.” Photograph: Eric Luke

FBD Insurance chief executive Fiona Muldoon: “We are making a profit and that’s a good thing. I don’t apologise for that.” Photograph: Eric Luke

 

FBD chief executive Fiona Muldoon said she would not apologise for the insurer delivering a surprise doubling in profits in the first half of this year.

The result came as an “exceptionally benign winter” resulted in fewer weather-related claims and the value of assets in the group’s investments portfolio jumped.

The Republic’s only indigenous publicly-quoted insurer reported that its pretax profit jumped 110 per cent to €38.7 million on the year-earlier period, beating analysts’ expectations.

“We are advertising motor insurance from €399. I don’t think in an environment where the average award for whiplash is €16,000 that that amounts to anything other than good value,” Ms Muldoon said in an interview with The Irish Times. “Insurance companies are businesses and businesses seek to make a return on capital employed in them. We are making a profit and that’s a good thing. I don’t apologise for that.”

The return of the Irish insurance industry to profitability since 2017 after years of losses – during which FBD was forced to seek a bailout-bond investment from a Canadian investor – has been politically contentious as households and businesses have faced dramatic increases in coverage costs. The extent of the fallout was reflected in comments last month by Michael D’Arcy, the Minister of State for financial services and insurance, indicating that he doesn’t trust insurers or hold them in high regard.

Input costs

“To really bring the cost of insurance down, you have to bring the cost of inputs down,” Ms Muldoon said, adding that while court awards for personal injuries claims had “moderated at a high level” in recent times, they still had not come down.

While FBD said there had been a “modest reduction” in motor injury claims in the first half of 2019, employers’ liability claims have been rising, driven by economic activity.

Net claims incurred during the first half fell by €10.4 million from a year earlier to €94.3 million, primarily due to benign weather in 2019, while the insurer released €8.8 million of reserves that had been set aside for claims in previous years as it saw some improvement in case settlements.

FBD’s insurance underwriting business posted a €29.2 million profit, up from €18.9 million. Investment income was €9 million for the period, up from €1 million, as a result of a rally seen across bond and equity markets during the period.

FBD has little appetite to move into covering play centres and bouncy-castle providers, after a leading provider of such insurance, Axa XL, decided last month to pull out of this area, according to Ms Muldoon. However, she said FBD was interested in covering community-based events, which have been struggling in recent times to get affordable insurance.