FBD could become a takeover target after its valuation was reduced significantly on the back of heavy losses.
The insurer recorded the worst performance in its history when it posted a €96.4 million pre-tax loss for the first half of this year, compared with a €4 million profit for the same period in 2014.
FBD’s shares were down 25 per cent yesterday after the release of its results and down just under 50 per cent for the year. The stock, which was trading as high as €17 at the beginning of 2014, closed at €5.78 yesterday.
A Dublin-based market source said that FBD would be an attractive takeover target for either an international insurance company, such as Allianz or AIG, or an Irish bank looking for exposure to the insurance market.
“[FBD’s] valuation is cheap, but it has a good brand and could be considered a platform for growth,” the source said.
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KBC would be the most likely Irish bank to make a bid for FBD, the source added.
Permanent TSB is prohibited from conducting a takeover while it is under state ownership as part of its agreement with the Troika of the International Monetary Fund, European Commission and European Central Bank. KBC’s future in Ireland is uncertain as its Belgian parent company, KBC Group NV, reviews its operations, but it is believed that it will look to expand through acquisitions if it stays in the Irish market .
FBD will increase its reserves provision by €88 million in order to meet future potential claims. Fiona Muldoon, the interim chief executive, said the company would not return to profitability until the last quarter of 2016.
“This is a difficult day for FBD, our shareholders and our staff. These results reflect very serious increased claims costs in our industry,” Ms Muldoon told RTE’s Morning Ireland programme.
“We are taking decisive action now to de-risk our strategy and return to profitability by the end of 2016.”
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The company’s operating performance was hit by a significant increase in motor insurance claims and heavy losses relating to storm damage in 2014.
It plans to simplify its organisational structure by integrating its online business, nononesense.ie, into the FBD brand. The company’s defined benefit pension scheme will be closed to new entrants and it will target €7 million in savings each year over the next two years.
FBD is selling its property portfolio, which comprises five hotels in Ireland and two in Spain, for €48.5 million. It also plans to raise up to €100 million through a subordinated bond
These actions will give the company a buffer against new EU regulatory capital requirements, known as Solvency II, which will be introduced on January 1, Ms Muldoon said.