Ireland’s largest farm insurer, FBD, delivered an overall profit of €50m last year, up from €49.7m in 2017. Profits from writing insurance increased a strong 41% to reach €63.4m.

This is after accounting for a €6.6m net cost from last year’s extreme weather event, Storm Emma.

The strong results come despite gross written premiums falling marginally (€1m) to €371.5m last year.

The driver of performance was a prior year reserve benefit of €28.7m compared to €21m in 2017. Net claims fell by €20m to €183m last year.

Underwriting expenses increased 10% to €84.1m, with €4.6m of the increase relating to changes in improved reinsurance arrangements.

The balance reflects additional IT spend in respect of work for the introduction of GDPR, wage inflation and increased regulatory costs.

FBD’s combined operating ratio, which is a metric for how profitable its core insurance business is (with anything over 100% making a loss) fell from 86.2% in 2017 to 81.2% in 2018.

FBD’s total investment return for 2018 was -0.5%, down from 1.2% in 2017.

The farm insurance market was shaken up last summer with the entry of AXA into the market

The group’s financial services operations delivered a profit before tax of €2.5m for the year, down from €4.5m in 2017. Holding company costs increased from €1.4m to €3.5m, primarily due to significant legal expenses during 2018 and higher allocated salary costs than the prior year.

The farm insurance market was shaken up last summer with the entry of AXA into the market.

FBD, which claims to hold around 75% of the farm insurance market, said it saw a reduction in its farm insurance as it “maintained underwriting discipline in the face of strong competition”.

Speaking to the Irish Farmers Journal, FBD CEO Fiona Muldoon said she was satisfied with volumes in its farm book following an initial shock with the entrance of AXA into the market in the summer.

She said the company has worked very hard to compete and hold on to its customers but acknowledged that the farm book had “lost marginal market share”.

She believes farmers have benefited from the increased competition. She said that while they will compete and hold on to their customers, it is important for them to be profitable.

Premium prices

Muldoon explained the higher profits were a result of better risk selection rather than charging higher premiums.

She said overall premium prices were flat in 2018 and that the insurer “did not charge more in 2018 than it did in previous years”.

She maintains that FBD is now better at risk selection and better at pricing.

“We are very committed to working with farmers, marts and agribusiness to help with safety issues,” according to Mudoon.

Responding to the claim that farmers are subsidising other sectors, Muldoon said she does not believe in cross-subsidisation and that “every line of business should stand on its own feet and be profitable”.

Muldoon says she does not want to increase prices

“The farm insurance book is not the most profitable part of FBD’s book,” according to Muldoon.

She said while farmers themselves are relatively careful, a lot of the payouts are for third party claims.

Muldoon says she does not want to increase prices.

She said that while other companies can come in and undercut, she said farmers have to ask is that something they can do in the long term.

She said FBD is “writing insurance for 50 years and stability and certainty of both being there in the claim and there in pricing is something that we have been able to provide over a very long period of time”.

Muldoon said she will not react to losing market share at the cost of pricing discipline.

“My responsibility is to have a profitable business that is there to pay out for customers,” according to Muldoon.

She said she is not going to sacrifice the business to chase market share.

She added that while court awards are high, “we cannot expect to have low insurance costs and high court awards”.

She said that while fewer people were claiming last year in FBD, the severity of each claim was still far too high.

She said to lower the cost of insurance you’ve got to lower the amount of payouts in the personal injury space.

Price of insurance

Asked is there any hope for farmers that the cost of insurance will come down, she said she cannot comment on the future price of insurance due to a High Court investigation across the industry.

The board has proposed to double the dividend to 50c per share in respect of the 2018 financial year.