FBD Insurance posted a pre-tax loss of €9.3m for the first six months of 2020 after the company booked a €30m charge to cover potential claims and legal costs related to paying out business interruption insurance as a result of COVID-19.

Announcing half-year results last week, FBD said the €9.3m pre-tax loss included a near €5m underwriting loss in its core insurance business as well as a €3.3m loss on its portfolio of investments.

The insurer said it made an underwriting loss of almost €5m after the net cost of claims jumped above €117m in the first six months. However, this figure includes a €30m provision that FBD has set aside in case it is forced to pay out business interruption insurance to its customers.

A number of publicans have taken legal proceedings against FBD Insurance and a test case will be heard in the Commercial Court in October to resolve the issue

Excluding this €30m provisional charge, FBD’s underlying insurance business performed strongly in the first half of 2020 and would have made profits in the region of €25m.

The insurer said it has received almost 900 claims for business interruption cover after COVID-19 forced the closure of all non-essential businesses earlier this year. Most of these claims came from publicans but FBD said it had declined every claim as it believes its business interruption insurance does not cover any loss of business due to the COVID-19 pandemic.

A similar case involving insurers and publicans in the UK will also be heard later this month in UK courts

A number of publicans have taken legal proceedings against FBD Insurance and a test case will be heard in the Commercial Court in October to resolve the issue. A similar case involving insurers and publicans in the UK will also be heard later this month in UK courts, which is likely to influence the decision here in Ireland.

Underlying business

In the first half of the year, FBD’s gross written premiums dropped by 7%, or €13.5m, to just over €176m. However, of this €13.5m fall in premiums, just over €11m relates to rebates paid out to customers on motor and commercial insurance to reflect the reduced car usage and activity during the COVID-induced lockdown.

FBD said its average premium for motor insurance was down 8% in 2020

Excluding these rebates, FBD’s underlying insurance business performed quite strongly in the first half of the year despite the COVID pandemic, with underlying insurance premiums back just 1% year on year. FBD said its average premium for motor insurance was down 8% in 2020, while the average cost of its farm insurance policies was back 3%. Home insurance premiums were down 2% in the period.

Speaking to the Irish Farmers Journal FBD interim CEO Paul D’Alton said he was actually really happy with how the business had performed despite the difficult trading environment created by COVID. He said customer numbers had increased 6,500 in the first half of the year, mostly in the motor insurance category.

Dividend

Back in February, FBD had announced it would pay a dividend to shareholders of €1/share, which would amount to €35m. The company subsequently announced it would hold back on paying the dividend to shareholders following the coronavirus outbreak.

While D’Alton says he still hopes to pay out the €1 per share dividend to shareholders at some time in the future, he said it wasn’t going to happen any time in 2020 and it would likely be 2021 before the conditions were right for the company to pay out its 2019 dividend.

New CEO

FBD also announced that Tomás O’Midheach will take up the role as CEO of the company in February 2021. O’Midheach has over 25 years’ experience in the financial services industry and currently serves as deputy CEO of AIB.

“I am very pleased to announce Tomás will join the board and as chief executive officer in February 2021 on the back of an extensive search process and with the approval of the Central Bank of Ireland. He is highly regarded in the financial community and has considerable knowledge of the Irish financial services landscape. We look forward to his arrival,” said FBD chair Liam Herlihy.