FBD reports earnings slump as market volatility impacts investments


Insurer FBD saw its pre-tax profit fall in the first half as rising inflation and interest rates weighed on investment returns.

BD reported income before taxes of €19 million for the six months ended June 30, 2022 compared to €22 million for the same period last year.

The company attributed the deterioration to the impact of interest rate hikes and market volatility, resulting in an investment loss of 15.2 million euros.

“Most of our money is in bonds, but we also have an element in stocks, and that’s where we’ve seen a significant decline,” said CEO Tomás Ó’Midheach Irish Independent.

“However, we are very satisfied with our asset allocation. Don’t forget, we had a strong uptick in investment performance in 2021. That’s just the foam coming off.”

Davy analyst Diarmaid Sheridan said the rising interest rate environment would ultimately turn positive for FBD as the portfolio reinvests in higher-yielding bonds, which make up the majority of its holdings.

“If there is a reinvestment in the portfolio, the underlying return on the portfolio will be a significant positive contributor to profitability,” he said.

FBD reported an underwriting profit of 34.5 million euros based on gross written premiums of 193 million euros in the first half of 2022, up 3.3 percent year-on-year, excluding the impact of Covid-19-related rebates.

Policies grew 3.1 percent in the first six months of the year while retention rates in business are at their highest level in five years, showing business growth on an underlying basis.

However, average premiums were flat across the portfolio and personal auto insurance premiums fell 8 percent.

“There is an element of a return to normal, but engine levels have not returned to pre-Covid levels and we would not expect them to,” Mr Ó’Midheach said

Net losses were reduced by EUR 21.9 million to EUR 85.6 million.

Claims volume rose 5 per cent year-on-year, with reports of engine failures up 29 per cent as traffic levels returned to pre-pandemic levels.

FBD said inflation in parts and labor is affecting car repair costs and, as a result, claims have risen as people don’t want to pay for repairs outside of their insurance.

Property damage will remain at the 2021 level.

FBD also said that a reduction in claims costs is expected due to the new personal injury guidelines.

“The personal injury policy appears to be having the desired effect of reducing the cost of minor claims, justifying the premium discounts we offer our customers,” said Mr. Ó’Midheach.

He also added that another hearing for the FBD business interruption test case is planned in November to discuss two remaining questions – “to determine the quantification of fractional losses related to the bar counter and the treatment of government subsidies.”

The best net estimate in terms of business interruption has fallen by €1m to €43m since the end of 2021, according to the FBD.

In March, FBD announced it had paid €30 million in interim payments for business interruption claims following a Supreme Court ruling in January. FBD reports earnings slump as market volatility impacts investments

Fry Electronics Team

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