The board of FBD Holdings is coming under increased pressure to explain the ongoing turmoil within the business.
The announcement last Friday that CEO Andrew Langford had resigned coincided with the share price falling to a three-year low. Investors, many of whom are farmers, have seen the value of their shareholding fall almost 50% in the last 12 months alone.
Chief finance director and board member Fiona Muldoon has taken up the role of interim CEO. The board will be hoping that Muldoon will draw on her extensive experience in the industry to put in place a strategy that will quickly turn the fortunes of the business around.
However, the scale of the challenge is becoming increasingly clear. While the insurance industry as a whole is struggling to come to terms with new solvency regulations, FBD has the added challenge of liquidating its property and leisure assets into a form that will be recognised by the regulator. The expectation that this would be facilitated by FBD Developments buying out the insurer’s remaining stake in the business has run into difficulty around valuations.
While an agreement between both parties is expected, it is unlikely that the move alone will provide the insurance business with adequate capital to meet the new requirements. This will force Muldoon to seek to refinance the business through alternative means.
Meanwhile, farmers are now questioning the growth and dividend strategy adopted by the board in recent years. While it was announced this week that FBD has become the biggest insurer in the country, there is concern that increased market share was delivered through FBD absorbing high-risk motor and broker business that was offloaded as competitors moved to de-risk their loan books.
This unprofitable business is expected to put a severe drag on profitability again this year.
Interim results, due to be released on 25 August, are likely to confirm that the insurer will record a loss for the second year in succession.