The board of FBD Holdings has approved that payment of a special €35.8 million dividend to shareholders in October as pretax profits at the insurer surged in the first half of the year amid a sharp reduction in costs.
On Friday the insurer said that it has now received final judgment on outstanding issues in relation to a High Court test challenge on Covid business interruption claims mounted by a small number of pubs in 2020, which provides “certainty on the measurement of losses” associated with the claims.
As a result, FBD said it wrote back some of the provisions set aside to cover the losses last year, contributing to a sharp decline in its insurance service expenses over the period to €92 million compared with €127.3 million in the first half of last year.
At the same time the insurer’s gross written premium jumped 7.3 per cent in the first half compared with the January to June period last year, while overall insurance revenues increased 4.5 per cent to €195.5 million.
The group reported a profit before tax of €39.5 million for the first six months, up from just €2.9 million last year, with the board approving the payment of a €35.88 million dividend in October, up slightly from last year.
“I am pleased to announce a strong profit for the first half of 2023, where the business continued to grow and deliver for all stakeholders,” said FBD chief executive Tomás Ó Midheach.
Mr Ó Midheach said that while economic conditions “remain challenging” the insurer welcomes the final ruling in the business interruption test case which ”allows us to finalise all valid Covid-19-related claims and State subsidies”.
Injury claims increased over the period by just 4 per cent year-on-year, “largely reflecting increased policy count”, FBD said. The average cost of injury claims decreased 5 per cent “and continues to be lower than experienced pre-Covid”, largely due to the adoption of the Personal Injures Guidelines in 2021. Mr Ó Midheach characterised the jump in claim numbers as “benign”.
However, he said that inflation continues to be a feature for motor damage and property claims.
Motor damage notifications jumped 17 per cent in the first six months of 2023 with traffic volumes returning to pre-Covid levels, FBD said, while settlement costs also increased by more than 11 per cent. The insurer said this was down to an increase in policies but also price inflation related to labour and the cost of parts.
Meanwhile, the insurer’s investment returns were positive for the first half of the year after the portfolio took a €100 million hit last year as the value of bonds on its books declined while central banks hiked interest rates aggressively to tackle inflation.
FBD reported an actual investment return of 1.5 per cent compared with a loss of 6.6 per cent last year as interest rates “stabilised in the first half of 2023 after extraordinary rate increases in 2022″.
However, the group said that the rise in interest rates did result in one of its corporate bonds being downgraded below investment grade. FBD said it sold the bond, “resulting in a realised loss of €900,000″. It also wrote down the value of its investment property by 5 per cent following advice from its valuation agent.
FBD’s half-year solvency ratio stood at 217 per cent of the amount of cash reserves it estimates it would need to withstand a one-in-200-year loss event over the space of 12 months, down from 226 per cent at the end of last year but well ahead of its target of 150-170 per cent.
