Ireland’s largest farm insurer FBD made profits of €112.5m last year, more than double the €50m in profits it made in 2018.

Announcing its financial results for 2019 last week, FBD said the surge in profits was down to the mild weather last year as well as strong returns on investments.

Farmer shareholders in FBD will be pleased with the insurer’s performance. FBD said it will double its dividend payout to €1 per share, meaning almost €35m will be returned to shareholders in a cash dividend. Farmer Business Developments, the largest shareholder in FBD with a 25% stake, will receive more than €8.5m in dividends.

Unusually for a company reporting such a strong set of results, FBD’s surge in profits last year has been met with political backlash, which is no surprise given the scrutiny the insurance industry is under.

Defended

Speaking to the Irish Farmers Journal this week, FBD chief executive Fiona Muldoon defended her company’s performance last year and said the insurer’s strong results were down to the absence of any major weather events.

“We had no attritional weather in Ireland last year, which meant FBD had no claims above €400,000. That is very unusual. There were no severe wind or rain events last year to generate claims in excess of €400,000, which is when we have to trigger reinsurance,” said Muldoon.

The absence of any major weather events is underlined by the 50% increase in FBD’s profits from writing insurance (underwriting profit) to a very strong €93.7m.

The FBD chief insisted the insurance market in Ireland is very competitive at the minute. For 2019, FBD’s topline figure of gross written premiums, which is the total amount of insurance FBD writes for the year, fell by €1.5m to just over €370m.

According to Muldoon, the decline in gross written premiums could have been as high as €10m last year if it wasn’t for a new partnership signed between FBD and An Post. FBD’s average premiums fell 2.2% last year, while motor premiums were down 4.2%.

The farm insurance market is also getting increasingly competitive says Muldoon. In order to defend its market share in this core part of its business, FBD had to invest a lot more in discounting premiums on farm insurance policies last year. Farm insurance premiums were down 2.5% last year, which is good news for farmers.

The insurance industry has long argued that the Irish legal system has been tilted towards excessive payouts for insurance claims. According to Muldoon, 2019 was a better year to resolve claims, with stabilisation starting to emerge in the average cost of claims.

In 2015 and 2016, average claims costs jumped by 11% and 10% respectively. Over the last two years, FBD said the inflation in claims costs has risen by just 3%.

Outlook

While a lot will be dictated by weather events, Muldoon’s outlook for 2020 is for continued competitive headwinds in the insurance sector, suggesting the price of insurance on farms and other segments could fall further this year.