The IFA is considering investing at least €1m of its reserves in FBD by subscribing to the insurer’s planned capital bond – once satisfactory changes are implemented.

The farm organisation is interested in doing so for a number of reasons. It sees the bond as a good investment for its reserves given the prevailing low interest rates available elsewhere. It believes that farmers’ long-term interests will be best served by having a domestic insurer with strong links to the sector and that subscribing to the bond would be a concrete step to helping FBD Holdings. It believes the move will boost confidence of the markets, shareholders and customers in the Irish insurance firm.

FBD plans to issue the bond in order to reach the target levels of reserves it will need to hold when new EU Solvency 2 standards come into force at the end of this year.

It has indicated that it would seek to raise €50-€100m via the bond, to add to the €48.5m it will raise by selling off its hotel and leisure interests plus savings it plans in pension and operating costs. The cashing in of the FBD hotels requires shareholder approval.

The idea of subscribing to the FBD bond was discussed at length at this week’s IFA national council meeting. Overall, council was supportive of the idea but many delegates warned that the investment could only be made if there were changes within FBD.

Beforehand, FBD interim chief executive Fiona Muldoon addressed the meeting and presented a future strategy for the company.

IFA president Eddie Downey said that he is in favour of the move. “I think that if FBD places a bond and if it is an attractive business proposed, then our membership would expect us to do it,” he said. “I am very much in favour of it.”

Eddie Downey represents IFA on the board of FBD Holdings.

IFA treasurer Jer Bergin noted that FBD already has almost €900m sitting in reserves to meet the future cost of claims. Reserves would rise to close to €1bn through the bond placement and cashing in of its hotels and leisure interests.

Delegates queried whether individual farmers could invest in the bond. However, they were told that this bond would not be secured and therefore would not be suited for retail sale to individual investors.

Eddie Downey warned that change was necessary in the company.

“It is also clear that the necessary changes must be made at all levels of FBD to restore confidence and get the business back to profitability as soon as possible.”

Writing in this week’s Irish Farmers Journal, Fiona Muldoon says that the timing of the bond issue and interest rate will depend on market conditions and the strength of the FBD brand. See page 14.