FBD - bet the farm on this dog??

RizzoJR

anyone's quick opinions on this stock??

simple irish insurance play
or are all those properties an overhang??

someone tried to buy them for e1.2 bil in April 2008
only about 2 years ago!
http://www.independent.ie/business/irish/eureko-plans-buyout-of-fbd-worth-836412bn-1339682.html
http://www.independent.ie/business/irish/bid-for-insurer-fbd-was-engineered-by-claret-1345708.html

this didnt happen (silly management?!)
there was a even more cash returned to shareholders
- better than over-paying for sharebuybacks ( like C&C disaster!)
http://archives.tcm.ie/businesspost/2008/03/09/story31049.asp

In Nov 2009 FBD became owners of 3.3% of INM during their debt for equity "bail out"
http://www.irishtimes.com/newspaper/finance/2009/1120/1224259178189.html

now market cap is only e186 mil

EPS estimates for 2009 dropped from about e1 to 77c
probably because of the FLOODS, which werent their fault...

ESP estimates for 2010 surely will be back around/over e1

right now 2010 forcasted P/E of under 6

Dividend of 30c - looks safe enough

right now yield of 5+%

Can they win more house and car insurance market share, especially
in the cities?

Alot of times a relatively small company returns cash as special dividends, it has soon been taken over?
When global markets stabalise will any big multinationals look for a "quick, cheap and easy" Irish expansion??

and even if they arent bought out (or attempted to)
can FBD grow earnings BIG, especially with no more floods,
and also grow dividends?

do the Farmers Development plc and FBD Trust still own 1/3 of the stock?
they should be kicking themselves for not taking the buy-out deal now...

but they probably would have pumped the proceeds into property and bank stocks

at this price should we bet the farm on FBD??

Speculator

RizzoJR wrote: »

anyone's quick opinions on this stock??

simple irish insurance play
or are all those properties an overhang??

someone tried to buy them for e1.2 bil in April 2008
only about 2 years ago!
http://www.independent.ie/business/irish/eureko-plans-buyout-of-fbd-worth-836412bn-1339682.html
http://www.independent.ie/business/irish/bid-for-insurer-fbd-was-engineered-by-claret-1345708.html

this didnt happen (silly management?!)
there was a even more cash returned to shareholders
- better than over-paying for sharebuybacks ( like C&C disaster!)
http://archives.tcm.ie/businesspost/2008/03/09/story31049.asp

In Nov 2009 FBD became owners of 3.3% of INM during their debt for equity "bail out"
http://www.irishtimes.com/newspaper/finance/2009/1120/1224259178189.html

now market cap is only e186 mil

EPS estimates for 2009 dropped from about e1 to 77c
probably because of the FLOODS, which werent their fault...

ESP estimates for 2010 surely will be back around/over e1

right now 2010 forcasted P/E of under 6

Dividend of 30c - looks safe enough

right now yield of 5+%

Can they win more house and car insurance market share, especially
in the cities?

Alot of times a relatively small company returns cash as special dividends, it has soon been taken over?
When global markets stabalise will any big multinationals look for a "quick, cheap and easy" Irish expansion??

and even if they arent bought out (or attempted to)
can FBD grow earnings BIG, especially with no more floods,
and also grow dividends?

do the Farmers Development plc and FBD Trust still own 1/3 of the stock?
they should be kicking themselves for not taking the buy-out deal now...

but they probably would have pumped the proceeds into property and bank stocks

at this price should we bet the farm on FBD??

No!

Raskolnikov

Good post, one of the rare times when someone actually uses facts and figures to evaluate an investment rather just making up stuff (most people here just make up reasons of their own to invest in a stock).

Firstly, FBD does look extremely cheap (its Price/Book is under 1, this almost never happens with a profitable insurer). However, you have to be aware that it's not just Irish insurers that are trading at historical lows. I think what has a lot of investors spooked is the balance sheet and the possibility of further investment write-downs in insurers. Having said that though, you would need massive write-downs and losses to be sustained for the likes of FBD to be at a historical P/B.

One of the main issues with FBD though, is the rising combined ratio (losses divided by premiums), this basically means that earnings are in a deteriorating trend. While FBD (and the insurance market as a whole) have been raising premiums, it's not certain whether this can cover the insurance they've already underwritten. Another source of concern for me is the balance sheet. Many insurers will refuse to own anything other than government bonds, so it's rather disturbing to see that FBD own several Irish hotels.

My thoughts are that FBD could be a decent investment, but I would rather wait for their next set of results to see will there be any further write-downs in the investment portfolio (the hotels are the assets that really concern me).

Smcgie

Someone works for the IR department in FBD

What about listing the negatives along with the positives ie: Floods, Cold Frost Spell, insurance costs, Uninsured driver collisions up due to recession etc etc.

I'm all for researching a company but this is (quite a good) blatant ramp.

S.

RizzoJR

Smcgie wrote: »

Someone works for the IR department in FBD

What about listing the negatives along with the positives ie: Floods, Cold Frost Spell, insurance costs, Uninsured driver collisions up due to recession etc etc.

I'm all for researching a company but this is (quite a good) blatant ramp.

S.

haha, does FBD even have a IR department?

ALL insurance companies deal with your listed so-called negatives,
its part of the game!

I admit more research needs to be done into NAV breakdown, especially any toxic debt exposure,
and major/insider holdings.

If cant find anything AIG-ish,
then you have to admit that FBD is simply beaten down Irish dog
at the bottom of the cycle,
a relatively safe recovery play??

M&A at standstill,
when toxic debt crisis finally blows over, will insurance sector be set
for takeovers galore???

Raskolnikov

Smcgie wrote: »

Someone works for the IR department in FBD

What about listing the negatives along with the positives ie: Floods, Cold Frost Spell, insurance costs, Uninsured driver collisions up due to recession etc etc.

I'm all for researching a company but this is (quite a good) blatant ramp.

S.

Oh come on, that comment isn't remotely fair. If FBD were going to start touting their stock, I'm sure boards.ie would be the last place they would start.

As for the negatives you've listed; they're either exceptional events (the flood and cold snap) or regular events that every insurance company has to deal with (uninsured drivers, costs, etc).

Anyway, they announced results today here.

Like I suspected, book value was going to take a hit as some investments would have to be written down and overall profit came in at the lower-end of expectations. Share price has taken a hit as a result, so if you thought FBD was cheap yesterday, it's even cheaper today.

Although I don't own FBD, I think if you bought it today with a timeline to hold for 5 years, I think you would do quite well.

Raskolnikov

RizzoJR wrote: »

M&A at standstill,
when toxic debt crisis finally blows over, will insurance sector be set
for takeovers galore???

I disagree.

As you've already stated, Farmers Business Developments hold a sizeable chunk of the stock and any takeover can't realistically go ahead without their consent. Given that they were reluctant to sell out at a much higher price only a few years ago, I think it's unlikely they would sell out at a much lower price.

RizzoJR

Raskolnikov wrote: »

I disagree.

As you've already stated, Farmers Business Developments hold a sizeable chunk of the stock and any takeover can't realistically go ahead without their consent. Given that they were reluctant to sell out at a much higher price only a few years ago, I think it's unlikely they would sell out at a much lower price.

But how has EVERYONE in Ireland's psychology changed in last 2 years
wrt money??

Why didn't they sell out 2 years ago?
- was it greed?
- did the bubble cost of land have anything to do with it?
- were they just misinformed?
- pride? ego?

Did the farmers screw up? (Like the Aer Lingus pilots buying at e3)

The sharp share price rise before this takeover attempt
ie approx e10-e40
probably will never happen again.

but any public stock is fair game,
Farmers Business Developments smarting from what was clearly a mistake
probably will use the e25-e30 range as a psychological anchor for future bid considerations (just plain greed)

I'm sure farmers have experienced the suffering more than any caused by the unprecedented winter weather,
but I'm also sure they are being looked after well by FBD....

RizzoJR

up from approx e5.50 to e8
45%
with your dividend as well

nothing fundamental
mainly thanks to quinn debacle.

How much will it rise??

I would say e10-e11 based on e1 2010 EPS

but you could sell some off now to lock in profits

JR.

Raskolnikov

Good call originally, RizzoJR.

Like I said, FBD was a good call at under €6 when you first started this thread. However, at €7.50 the stock is trading at 1.3 times book value, which for a p&c insurer, is fair value.

I'd sell FBD, hope for volatility which would push the price below €6.50 and buy again.