Since it was founded in 1969, FBD insurance has relied on a customer base of farmers and its new CEO Fiona Muldoon tells Agriland that must continue.
Since taking the role of CEO following the departure of Andrew Langford in July, Muldoon has been busy getting to grips with Ireland’s only publicly listed insurance company.
Needless to say her first few months in the role have been very busy, but she is determined that FBD can be turned around. She’s been in similar, even worse, situations before and says the Irish insurer has a number of key advantages that she plans on using.
Within weeks Muldoon was announcing the insurance company had half-year losses of €96.4m and she pledged to return it to profitability.
Insurance is risky, so any insurance company will have ups and downs. I don’t think anyone knew when I was interviewing last summer (2014) that it was what it has turned out to be.
The fact that FBD is the only publicly listed Irish insurance company, was an attractive point for Muldoon in taking the job, when she left Bermuda for the no-so-sunny Bluebell.
Having worked for a large US multinational, her time in Bermuda gave her the chance to do “all sorts of things in a public company environment that you would not get the chance to do in Ireland because they are so few such companies.
“I liked the independence of it, I like the idea that you have to figure it out yourself, dealing with the stock market and shareholders.” And it’s that experience that Muldoon hopes will allow her turn the fortunes of FBD around.
The challenge for FBD is with a new generation of young farmers is to provide a level of service that will see them as loyal as the people that went before them, who are rightly proud of it.
FBD Office Closures
Muldoon has no immediate plans to shut local offices and take the FBD insurance service totally online. While banks, post offices and other service providers are closing offices all around, she says the service FBD provides through its contact with people is value for money.
“Our experience is that our costumers want hassle free, they want it done quickly and they want it done online with very little pain.
“But, when you’re looking at more complex risks – when you’re talking to a farmer about his multi peril policy or a business owner that’s a little bit special or different, it becomes more difficult to do it online.
“The level of service that our offices have given to our customers has been part of FBD’s service delivery that comes at a significant cost and the point has to be that there has always in business a cost benefit trade. so for as long as the benefit outweights the cost we will continue with the offices.”
“We owe it to the shareholder that we are getting the product to the customer in an efficient way and we are providing a service that will keep the customer. But we have to go through the process of making sure that every one of those offices is worth keeping.”
FBD Relationships
FBD pursued the urban customer in recent years and it’s a policy Muldoon is not giving up on.
“We’re just going to re-target them. Where FBD does best is where we have a direct relationship with the customer. Some of small business and some of out farmers have a lot in common with the urban consumer.”
By joining the two brands together, having it all under the FBD banner and getting very specific about what urban group its targeting, Muldoon says a targeted urban reach is a viable strategy for FBD.
In September FBD and the Canadian company Fairfax enter into a bond agreement to the tune of €70m being invested in FBD.
At the time Muldoon said it was a “significant vote of confidence” in FBD and the convertible bond was a 10-year Solvency II compliant instrument, with a coupon of 7.0% per annum which will be payable semi-annually.
According to Muldoon the 7% is not a high rate, but is priced accordingly. “It’s not the same as putting it in the bank where you can go in and demand the money back. There are very specific criteria, it’s a 10-year note. They can’t get their money back for 10 years unless they convert it to common equity.
“There’s risks for them and that’s priced into the 7%”
Whether the €70m is enough only time will tell, but Muldoon says “where we are right now I think it is enough”.
The demands of Solvency 2, she says, which requires insurance companies hold greater amounts of capital to help avoid insolvency, will not be the real test of FBD, but its return to profitability.
“…will have to get on and settle our claims, be more efficient, look at our costs, get price increases where we need to and return to profitability. That in the end is the real test, when you’re adding to capital year on year instead of losing it.”
Return to profitability
A return to profitability is the key protection from a prudential point of view, according to Muldoon and when FBD is adding to its capital base.
“In insurance that always has to be balanced against trying to do too much too quickly and losing customers in the mix. You can’t just shed all you policies and say we’re never taking a risk again.
“We need to return to profitability but it has to be done in a measured way and in an targeted way and it can’t be done at the expense of losing customers who we would not win back. It’s much better to keep customers than to lose them and try and get them back.”
While she says FBD has an ambition to return to profitability by the fourth quarter of 2016, that means that 2016 is loss making for the year. “So if we only make a profit in the fourth quarter, it’s a loss making year. I think it’s unlikely we will pay a divided in early 2017 and there will be no divided until we have a full year’s profit.”