FBD has made a loss of €96m before tax for the first six months of 2015. Part of this loss is represented by an €88m top-up needed in its reserves for prior-year claims. The group says this has come about due to the adverse claims environment. Claims increased 84% to €215.8m for the six months ending June 2015.

The group attributes the increase in reserves of €88m to structural changes in the claims environment and a shift in settlement approach due to changes in the legal and judicial framework over the last 18 months.

Interim chief executive officer Fiona Muldoon said: “This is a difficult day for FBD, our shareholders and our staff. We are taking decisive action now to de-risk our strategy and return to profitability by the end of 2016. I am confident that the steps outlined today will put FBD on the path to profitability.”

The group said the first half of 2015 had been particularly poor. This has been mainly driven by an increase in liability and motor bodily injury claims, and relates to outstanding claims since 2011.

The current year claims charge was €127.8m, representing a current year loss ratio of 82.8%. The balance related to prior years. This has resulted in a total loss ratio of 139.8% for the half year.

Gross written premiums were flat at €184.8m and policy volumes declined by 9.6%. Average premium rates increased 8.6%.

Hotels business

In order to replenish capital in its core insurance business and in preparation for the new Solvency II regime, FBD has agreed to sell its stake in FBD Property and Leisure, the joint venture with Farmer Business Developments. The proceeds of the sale are to be used as equity in FBD Insurance.

To further strengthen its capital position, the group has agreed changes to the staff defined benefit pension scheme. The changes include closing the scheme to future accrual and severing the link with final salary.

The group announced it is also exploring options to raise capital in the debt capital markets.

FBD admits that the existing business strategy has not delivered profitable growth. The group has now decided to focus on servicing its core agricultural and small business customers and operating under a single-brand consumer model for motorists and homeowners. At present, it operates as FBD and nononsense.ie. This new strategy targets cost savings of €7m annually.

The half-year results have seriously affected the group’s capital position. Ordinary shareholders’ funds stand at €177.5m, down from €270.6m in December 2014. This is mainly due to the losses in the period and the payment of the final 2014 dividend.

FBD had already signalled there would be no interim dividend and, given these results, it says there will be no final dividend 2015 dividend either.

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