FBD strikes deal with staff to close defined benefit pension

Listed insurance group FBD has struck a deal with its staff to close off its defined benefit pension scheme, which has a deficit of about €54 million.

The terms, which appear generous by industry norms, mean the company will pay up to more than double the value of the pension pots of many of its employees when they transfer over to a new defined contribution scheme.

Other aspects of the deal, which are due to be signed off by the scheme’s trustees on Friday and were overwhelmingly approved in recent weeks by all staff, include a “kickstart” payment of 2 per cent of the value of staff pension pots.

Profit warnings

The company will also make payments of up to 15.5 per cent annually of staff members’ salaries into the new DC scheme.

FBD, which gave two profit warnings last year and is reputedly seeking to raise fresh equity to meet solvency requirements, was asked the cost of the pension deal but declined to comment. Informed sources speculated it could be as high as €10 million.

The company also refused to comment on detailed queries relating to a massive new technology project which sources say has encountered significant cost and time over-runs.

The Irish Times has learned Cathal O'Caoimh, the former chief financial officer who retired at the beginning of the year, stayed on as a consultant to implement the technology system project, known as TIA.

Sources said the cost of the project was set to be as high as €30 million, although the company would not comment on this figure.

Shares in FBD rose 7 per cent yesterday despite reports it may need up to €100 million in fresh capital to meet new EU solvency rules and the higher cost of future claims. The shares had fallen by up to 7 per cent on Thursday when the reports first surfaced.

The group insisted it was “no different” to other European insurance companies readying themselves for the implementation of Solvency II rules, which kick in on January 1st next.

"Plans are on course for FBD to continue to be in full compliance with all requirements by the due date for Solvency II," a spokesman told The Irish Times.

Pressure

Nonetheless, the insurer appears to be under considerable pressure in the wake of the profit warnings and the shock departure of chief executive

Andrew Langford

earlier this month.

In May, the company said it would scrap its interim dividend in August to protect its finances. Fiona Muldoon, a former head of insurance and banking regulation at the Central Bank, has taken over as interim chief executive.

The company is said to be close to announcing the sale of its stake in a hotels business jointly owned with farmers' group Farmer Business Development, which is also the largest shareholder in FBD.

It is expected to net it in region of €45 million-€50 million from the sale. There is speculation the company may move to issue subordinated bonds to bridge the remaining financial gap.