FBD premiums to rise after €33m losses

INSURANCE premiums will increase this year as FBD posts losses of more than €33 million for 2008, compared to €140m profit reported the previous year.

FBD paid out close to e7m on claims resulting from bad weather in August.

It said premiums for car and house insurance will rise about 5% to 6% this year.

FBD stock fell 5.4% or 38.5 cent to close at e6.72 in Dublin trading yesterday.

The company, which is the only insurer on the Dublin exchange grew its market share in 2008 to 11.6% and is now the third-largest insurance firm in the Irish market.

FBD chief executive Andrew Langford said premium rates had started to harden across the market after six years of decline, adding it may be difficult to raise prices too much in the face of a deepening recession.

“It will be a difficult enough environment to increase rates the way consumers are feeling at the moment and we are conscious of that,” he said.

FBD nearly halved its dividend for the year to 40.25 cent from 79.5 cent.

Mr Langford said the long-term goal remained a payout ratio of about 40-50% of operating earnings after interest. This year’s dividend was around 25% of earnings.

It also said stiff competition in the local market and weaker investment returns could hit this year’s results after rising claims and lower returns hammered last year’s performance.

“We would see our underwriting result at this stage of the cycle a little bit lower than the 2008 figure,” said Mr Langford.

“Our longer-term rate of investment return may be slightly lower as well because the longer-term outlook for interest rates is lower,” he said.

For 2008, FBD reported adjusted operating earnings per share of 171.5 cent, just shy of the 175.5 cent to 184.5 cent range it flagged last year following a spike in claims in the aftermath of bad flooding and volatile investment markets.

The group wrote off e126.5m from its balance sheet, mainly on equities, corporate bonds and its hotels, golf resorts and investment properties.

“You can’t rule out any further writedowns but certainly we have taken quite a lot of our medicine, we feel at the moment,” Mr Langford said.

He said FBD cut its exposure to equities from 15% of assets to less than 4% without which “the result would have been far worse”.

FBD have 400,000 customers in Ireland.