Writing business

Drinks are on FBD for investors as pubs await full Covid-19 payments

For a company grappling with reputational damage for wrongfully denying pub customers their right to Covid-19 business interruption payments – and a wider accusation from politicians and consumer activists that industry robs households and businesses – FBD’s annual results don’t help its case.

The country’s only remaining indigenous general insurer announced on Friday that it had made a pre-tax profit of 110 million euros, nearly a third of its stock market value.

Its combined operating ratio – which measures claims costs and administrative expenses against earned premiums – fell to 71.5% from 101.4%. (A figure less than 100% indicates that an insurer writes contracts at a profit; and a result of around 90% is generally considered a decent result).

He revealed that an exceptional dividend of 35 million euros which had been planned two years ago on an extraordinarily profitable 2019 – but canceled during the Covid-19 pandemic – had returned. (That equates to a mouth-watering 9.7% dividend yield – and compares to a 0.57% yield currently attached to 10-year Irish government bonds.)

Meanwhile, analysts believe the company will have 100 million euros of excess cash on its balance sheet, even after the planned handover to investors in the coming months. And Tomás Ó Midheach, general manager for just over a year, certainly has no intention of hoarding it.

He told The Irish Times on Friday that the company would “seek to maintain” an annual dividend over the next few years “in and around” 35 million euros. Have investors really started to take this into account?


Last year’s earnings figure was helped by a number of factors. Chief among these was the release of €63 million of reserves that had been built up in previous years for claims that turned out to be less costly than feared.

Such releases have been a noisy factor in FBD results lately. And, to some extent, that’s the flip side of increased caution in initially estimating claims – since the group needed a €70 million investment in a bailout bond from of Canada’s Fairfax Financial in 2015, when the entire Irish general insurance industry was facing big losses.

Earnings were also boosted by lower accident levels and relatively mild weather last year. Even Storm Barra in December resulted in only 4 million euros in claims costs.

The result was also helped as FBD released around €23 million of the €67 million it had previously set aside to cover its expected net costs of pub business interruption claims.

You will recall that FBD, backed by its own “strong” legal advice, initially refused at the start of Covid-19 in 2020 to acknowledge that its three-decade-old pubs policy covered its publican clients for losses while the pandemic has forced the industry to shut down its collective shutters.

Four pub groups who challenged FBD’s ruling won their case in February last year, setting a precedent for a wider group of over 1,000 pubs and bars.

Another 200-page High Court judgment in January provided further guidance on what is in effect when it comes to deciding final payments.

Judge Denis McDonald ruled, for example, that FBD was responsible for “partial” pub closures – including closing bar service counters and earlier closing times – during the pandemic.

Loss assessment

It would be relatively simple to assess the losses resulting from early closing times – as the tills give hourly readings and a comparison could be drawn with the figures for 2019, before the crisis. Assessing losses from closed bar counters was much more difficult.

The court left a lot of work to FBD, the pubs and their legions of lawyers and advisers. Yet the judge agreed when the case was brought before him again in the middle of last month that the best way to move quantum issues forward would be for experts from the various parties to meet in the absence of lawyers and of customers.

Ó Midheach said on Friday he hoped those experts would come to some sort of conclusion by the time all sides are due back in court two days before St. Patrick’s Day – and two years after the crisis began.

While there had been speculation in some quarters at the time of the January decision that the overall cost would rise for FBD and its reinsurers, Ó Midheach said the total figure had fallen from the last estimate – by 183 million euros – which had been given in August. He wouldn’t say by how much, however, because that would give how much his 17 reinsurers have agreed to bear.

In the meantime, pubs have only had to make do with €30m in interim payments – and €11m in compensation on foot from the Financial Services and Pensions Ombudsman who found last year that FBD had been dragging its heels to resolve the whole matter.

Some, in fairness to FBD, didn’t even start the claims process, which limits what he paid.

It’s a safe bet that the shareholders of FBD will have collected the 35 million euros in dividends which are now arriving long before all of its pub policyholders are cured.