LON:FBH | FBD Holdings - CEO Resigns Without Warning Friday Afternoon 31st July 2015 . Holiday Plans Unclear!

2nd Aug '15 by Dearg Doom

2 comments 8027 reads

FBD Holdings PLC FBD Holdings (LON:FBH) London Listing
FBD – FBD Holdings (ISE:EG7) Dublin Listing

Share Price €7.65 - Market Cap €265m

(Disclosure. I do have a long position - Dublin Listing )

Andrew Langford CEO of FBD Holdingsresigned without warning on Friday afternoon last. Many investors might have been packing for their two week holiday, and missed the key announcement.

Background

FBD is a Irish based insurance company with a share of 20% of the Irish Market. The company has dual listing in London and Dublin. Few shares however are traded on London quotation.

The financial crisis in 2008/2209 saw its share price fall from over €40 down to around €6. This had more to do with its high p/e, its speculation on foreign properties and purchasing Irish Hotels which gave the market some concerns. Those issues have long been dealt with satisfactory, and shareholders must have been looking for to good underwriting and future profits with some growth. Despite the Irish economy improving, matters at FBD have gone from good to bad in a matter of two years.

FBD lead by its CEO Andrew Langford for last 7 years has failed to put the company back on a solid footing. The company has had multiple profit warnings in last two months due to larger number of personal claims in number and cost in settlement, as well as bad luck with weather claims over last few years. We know the car insurance market was very competitve and FBD were forced to increase premiums at aloss of some renewals from existing customers.

FBD has re-insurance policies in place for many years, but they only kicks in when a individual claim is above a certain limit. One weather storm a year is fine, but multiple storms mean a load more pay outs.

The share price fell precipitously on Thursday for no reason and then again on Friday from €9:30 to €7.65. Rumours must have been about on Thursday for the share price to drop so
much to a newer lower level. 210k shares traded alone in Dublin on Friday . When market opens next week, it is going to be interesting which direction the share pice moves.

Why have things changed…

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Dearg Doom

8th Aug '15

FBD Update.

Trading Ticker FBD Holdings (ISE:EG7) on Irish Stock Exchange. Rarely traded on London Stock Exchange

FBD is an Irish insurance company traded on the Irish Stock Market. Andrew Langford (CEO) resigned with immediate effect on Friday afternoon July 31st 2015. One week on and the worry is still why had he resigned and the repercussions for the FBD share price.

The week's trading in FBD saw increased volume as would be expected. Monday was a public holiday in Ireland so trading was light that day. Small shareholders sold into a falling market, fearing the worst. The share price fell from €7.65 down to €6.75 on Wednesday having been at €9.30 a fortnight ago. Even at €11.00 plus a few months earlier, but falling on potential underwriting losses increases news.

Some buying support coming in on Thursday and Friday brought up the share back to €7.20 in Dublin. Encouraging to see Prudential plc. (group of companies) increase its shareholding in the company during the week.

FBD had previously been considered a prudently managed insurance business. The net asset value of FBD was €6.98 in 2014 having declined from 2013. The company's own profit forecasts for 2015 had been for 20c - 40c e.p.s.

What size of loss would be needed to make the CEO resign immediately is the question? Losses of €30 million might be enough or maybe worse. Let us write off one euro off the net asset value to €6.00, as well as reckon that profitability will be low for next two years, what would be the new valuation? Don't expect dividends to be announced.

FBD could be worth investing in when compared to other similar second tier insurance companies in UK and value the company on price to net asset value. Give yourself some margin for comfort.

FBD has a well recognised and trusted brand name in Ireland. If FBD cannot fix the business than someone else certainly will very quickly. Takeover possibility perhaps. Place stop losses at €6.60.

13th Aug '15

FBD Update 13/8/15 Currently €6.36 (Down 7% today) main quote on Irish stock exchange.

The word solvency issues was mentioned in the press, coupled with a capital requirement of €100m necessary, and the predicted two years in a row annual losses to be announced knocked 40c of the battered share price of FBD today.

The "F" in FBD stands for "Farmers" in case you were in doubt, as the company has been serving farmers' insurance needs in Ireland for over 40 years. Diversification from this core market has been poor and casts doubt over the direction of company for last 10 years. Hence need for the previous CEO to go. His sudden departure a little worrying. Some board of directors may also consider an early departure for themselves for the current state of company.

Hopefully with the latest news, the market may be possibly misreading the actual news. The news could be read as positive. The €100m mentioned refers to the capital buffer that the regulator will require from Jan 2016 to meet new solvency requirements. This should apply to all other insurers in the irish market

The company had assets of circa 50m in a joint property venture abroad. Property is not liquid enough for the capital buffer for an insurance company, so the property asset needed to be sold. News suggest they have indeed sold the balance of their investment for circa €50m near book value of property subject to FBD shareholder approval.

If the speculation is correct, this wold leaves a manageable balance of €50million left to be financed by either rights issue or through a bond issue. It is possible that mere mention of €100m capital need spooked the market into thinking this was an actual €100m loss.

2014 was indeed an awful year in which a €40m profit forecast ended up as a €4.5m loss. The loss for 2015 will be higher, with no dividends likely to be paid in the near future to help strengthen balance sheet. Also the company will begin further reducing its market share to ensure profitability on whatever premium it does write at better margins.

Results expected Aug 25th. Some comfort taken that results have not been rushed out as yet. Presumably some kitchen sinking by new CEO will be in the statement and also a new strategy going forward. Current shareholders would hope this would finally put a floor under the price.

When the market falls through your stop loss of €6.60 due to what you perceive as positive news as distinct from negative news, what do you do? Yep buy a little more! Fools do rush in where angels fear to tread!

FBD Holdings - CEO resigns without warning Friday Afternoon 31st July 2015 . Holiday Plans Unclear!

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Dearg Doom

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