TIDMFBH
RNS Number : 6586W
FBD Holdings PLC
11 November 2014
FBD Holdings plc
Interim Management Statement
11 November 2014
FBD Holdings plc ("FBD" or the "Group") is issuing the following
Interim Management Statement covering the third quarter of 2014 and
the period up to the date of this statement. Although the frequency
of attritional bodily injury claims relating to car insurance was
in line with expectation, in other respects the claims environment
in recent months has been far more challenging than expected. As a
result, the Group is guiding a full year 2014 operating loss per
share of zero to ten cent, excluding any exceptional events that
may arise.
Underwriting
In the first nine months of the year, the Irish insurance market
grew for the first time since 2003 as the industry began to benefit
from recent growth in economic activity and hardening car insurance
rates. FBD's gross premium written to the date of this statement
was ahead of the previous year by approximately 4%, marginally
increasing the Group's share of the insurance market.
In the second half of 2014 to date, FBD's premium growth was
entirely rate led. This reflects FBD's prudent approach to volume
growth in a recovering economy that has seen an increase in the
frequency of motor claims. In this context, FBD has prioritised
underwriting discipline and profitability over market share growth.
In the first half of 2014 gross premium written increased 5.1%
comprising volume growth of 2.0% and an increase of 3.1% in average
premium. The emphasis was moved to rate led growth so that in the
year to October gross premium written was up 4.1% with volume 0.6%
lower and average premium 4.7% higher.
In the second half to date, the frequency of attritional bodily
injury claims relating to car insurance was in line with
expectation. FBD has taken the rating and underwriting actions
necessary to compensate for the increased frequency of claims
associated with economic recovery.
However, in the second half to date, the development pattern on
a small number of prior year medium-sized injury claims (cost
between EUR0.2m and EUR1m net of reinsurance) has been
significantly higher than normally expected. This adverse
development related to accidents that occurred in 2011 and 2012 and
was due to factors such as the deterioration in claimants' medical
conditions or an increase in the probability of liability.
Following a detailed review, there is no reason to believe that
this development is systemic or that the experience will recur in
future periods. To reflect this exceptional development pattern,
FBD has updated its reserving and rating models and taken a charge
to current year earnings to ensure that a consistent level of
prudence is maintained in claims reserves. The combined cost of the
adverse development and maintenance of the reserve level results in
a charge of EUR13m. The Group has enjoyed a positive run-off for
the last ten years and continues to anticipate a positive claims
run off in 2014, albeit at a lower level than previous years. This
reflects FBD's prudent approach in providing for claims. While some
rating action remains to be implemented in the short term, it will
not be significant.
In addition, the Group has experienced an increase in large
claims costs due to a very small number of very large accident and
liability claims (cost greater than EUR1m net of reinsurance). Such
large claims, which can be very volatile especially over a short
period and were in line with expectation in the first half, cost
EUR7m more than expected in the four months to October. By their
nature, these large claims can be expected to revert to norm over a
period.
In 2014, FBD's customers and the Group's profitability have been
impacted by severe weather, an increase in frequency associated
with economic growth, poor large claims experience and adverse
development of prior year injury claims. However, the growth in
economic activity will have a very positive effect on FBD in the
medium term, particularly given the Group's track record of
outperforming the market. While the adverse events have had a short
term impact on profitability in 2014 and part of 2015, FBD has
taken appropriate rating and underwriting actions to date, and
continues to monitor trends to ensure that risks are adequately
priced.
Expenses and longer-term investment return were both in line
with expectations. Actual investment return was better than
expected, with an annualised return of 2.7% year to date.
FBD Insurance continues to maintain a strong capital base of 69%
of net premium earned (or 348% of minimum solvency margin) and the
reserving ratio has increased from 241% at 30 June 2014 to 248% at
30 September 2014. FBD's priority is to ensure that its claims
reserves are more than adequate to meet customers' claims at all
times.
Non-Underwriting
While the operating environment for the Group's pensions and
investment consulting business remains challenging, FBD's financial
services businesses are broadly in line with expectation. The
trading performance of the property and leisure joint venture is
ahead of 2013, with strong operating results, particularly in
Ireland.
Balance Sheet
The Group's financial position remains robust. Term deposits and
fixed interest securities represent 90% of insurance company
investment assets, higher than the 86% at year-end as the Group has
reduced its equity position. The average term of investment assets
remains shorter than that of the technical reserves, with more term
deposits and less fixed interest securities than the Group's
strategic investment allocation. The Group is satisfied that this
short term tactical asset allocation continues to be appropriate as
it minimises volatility and positions the Group well for the
anticipated medium term rise in market interest rates.
Outlook
The Group continues to invest in people and technology to
develop platforms for future growth and intends to continue
delivering products and services that matter to its farming and
direct business customers and to expand at opportune times in the
market's cycle. FBD is committed to achieving profitable growth by
taking appropriate action to deliver the required return.
FBD has a track record of delivering superior returns to
shareholders. The nature of the insurance business is that earnings
will be influenced from time to time by volatility in claims costs
and the fact that the industry is inherently cyclical. The Board is
confident that FBD is well positioned to outperform the market and
deliver strong returns for shareholders. As a result, the Board's
progressive dividend policy remains unchanged.
Given the unprecedented volatility in claims costs in recent
months, the Group is reducing the forecast result for the final
quarter of the year by EUR10m. As a result, the Group is guiding
full-year 2014 operating loss per share of zero to ten cent,
excluding any exceptional events that may arise.
About FBD Holdings plc
The Group was established in the 1960s and is one of Ireland's
largest property and casualty insurers looking after the insurance
needs of farmers, private individuals and business owners.
Forward Looking Statements
Some statements in this announcement are forward-looking. They
represent expectations for the Group's business, and involve risks
and uncertainties. These forward-looking statements are based on
current expectations and projections about future events. The Group
believes that current expectations and assumptions with respect to
these forward-looking statements are reasonable. However, because
they involve known and unknown risks, uncertainties and other
factors, which are in some cases beyond the Group's control, actual
results or performance may differ materially from those expressed
or implied by such forward-looking statements.
The following details relate to FBD's ordinary shares of EUR0.60
each which are publicly traded:
Listing Irish Stock Exchange UK Listing Authority
Listing Category Premium Premium (Equity)
Trading Venue Irish Stock Exchange London Stock Exchange
Market Main Securities Market Main Market
ISIN IE0003290289 IE0003290289
Ticker FBD.I or EG7.IR FBH.L
Enquiries Telephone
FBD +353 1 409 3208
Andrew Langford, Group Chief Executive
Cathal O'Caoimh, Group Finance Director
Peter Jackson, Head of Investor Relations
Murray Consultants +353 1 498 0300
Joe Heron
FBD Holdings plc FBD House, Bluebell, Dublin 12
Registered in Dublin, Ireland Registered Number 135882
This information is provided by RNS
The company news service from the London Stock Exchange
END
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