FBD, the Republic’s only indigenous general insurer, is likely to pay an almost €19 million special dividend later this year as it continues to distribute excess capital on its balance sheet, according to Davy.
That would bring total payments since early 2022, between ordinary and special dividends, to almost €234 million – the equivalent of 44 per cent of the group’s current market value.
Davy analyst Diarmaid Sheridan estimates that FBD had a solvency capital ratio, a measure of reserves to ensure it can withstand a shock loss, equating to 200 per cent of its regulatory requirement at the end of March.
“This is materially above FBD’s risk appetite of 150-170 per cent and incorporates the €30 million of adverse weather claims in January,” Mr Sheridan said, referring to claims mainly stemming from Storm Éowyn.
“At 200 per cent, FBD has capital to support growth in gross written premiums and to continue to pay attractive dividends.”
The analyst estimates that FBD will follow up its planned €1-a-share ordinary dividend payout next month on last year’s profits – totalling almost €36 million – with a 50 cent special dividend later in the year. Still, the expected special reward for shareholders is half the level of special dividends distributed in the second half of each of the last two years.
The combination of the planned ordinary and expected special dividends this year equates to 11.5 per cent of FBD’s current €13 share price – a dividend yield that is more than double that on offer from some other European insurers, such as Allianz and Zurich Insurance Group.
Still, shares in the company have advanced less than 3 per cent so far this year and remain flat over a 52-week period.
FBD is not alone on the large dividends front in the sector. Allianz Ireland has paid €300 million to its German parent since the Covid-19 pandemic. Axa Ireland has handed €270 million to its Paris-based owner over the same period, though it decided to hold off making a payment on last year’s earnings as it builds capacity to underwrite health insurance for its Laya Healthcare brand this year.
FBD had come out ahead of scheduled annual results on a number of occasions in recent years to say that its earnings would be better than the market had been expecting, often boosted by releasing reserves that had been set aside for claims that proved to be too pessimistic.
Its €77 million pretax profit for 2024 was almost 40 per cent above what the market had been expecting, before it moved in February to guide analysts’ expectations higher.
The chief executive of FBD Insurance, Tomás Ó Midheach, said last week in a trading update on the day of its annual general meeting (agm) that “progress is being made” in settling claims related to Storm Éowyn. Insurance Ireland estimates that the industry-wide claims from the cyclone will amount to about €300 million.
He said that FBD’s profitability, excluding the impact of the storm, has been “solid” so far this year and “in line with expectations”.
“FBD remains a strongly capitalised business with a solvency capital ratio in excess of our stated risk appetite,” he said. “Our intention is to move closer to target capital levels over time, while preserving the sustainability of our annual ordinary dividend and maintaining a robust capital position for our growing business.”
