Insurance premiums set to jump 15%

INSURANCE premiums are likely to increase by up to 15% having already soared around 20% over the last year.

The is according to FBD chief executive, Andrew Langford, who said because his company took early action by increasing premiums in early 2008 any further FBD premium increases will be “less severe than likely increases elsewhere”.

He said FBD has no immediate plans to increase premiums, but he does, however, expect premiums to rise by between 10% and 15% in the overall insurance market over the coming year.

According to the latest figures from the Central Statistics Office, motor cover is up 13.6%, health insurance is up 21% and house insurance is up 26.2% over the last year.

Since the start of the premium hikes in 2008, FBD said its rates have gone up about 8%.

FBD yesterday announced it cut its dividend by two-thirds after its first-half loss widened on restructuring costs.

It reported pre-tax losses of €21.8m for the six months to the end of June, up from a pre-tax loss of €5.2m for the same time last year. The insurance provider cut the dividend to 10c from 30.25c.

FBD shares closed down almost 4% – 30c – at €7.40 in Dublin. The company’s valuation stood at €262.41m at yesterday’s close.

FBD announced late last year that it was cutting 150 jobs and closing 13 branches as part of a re-organisation.

It estimates savings from its cost cutting measures will be €6.4m in the full year.

The company is not ruling out further job cuts, but it said if it does reduce staff numbers further the cut will be “nowhere near the same level” as what was previously announced.

Senior managers and directors have agreed to a pay freeze and some have taken a 15% pay cut.

He said that to date there has been no change in staff wages but if there is any change the company will consult with workers.

FBD wrote down the value of hotels and golf courses it owns by €11m to reflect the slump in Irish and Spanish property prices. It is not ruling out further write-downs in the second half of the year.

Goodbody analyst Anna Lalor said: “We had budgeted for larger markdowns by the year end, with none taken at the half-year stage. It appears that the company has taken a relatively aggressive approach to the valuation of property assets.”

At the end of 2008 the company’s pension scheme had a deficit of €16m and Mr Langford said its scheme was under less pressure than other companies.

FBD is the only general insurer on the Dublin bourse and it has an 11.6% share of the Irish insurance market.