FBD warns insurance costs to rise

Insurance giant FBD has returned to profit on a pre-tax basis for the first time in four years, but has warned that insurance costs for customers will be higher this year.

Speaking yesterday, FBD chief executive Andrew Langford said that the Government’s 2% levy on all non-health insurance customers, to cover the collapse of Quinn Insurance, will add to costs this year and is likely to affect prices for the next 10 years or so.

He added: “Premiums are, ultimately, driven by claims costs and where we have seen positive trends in claims, we have reduced rates ourselves towards the end of 2011 — especially on car insurance; and we’ll continue to do that, where possible.”

Low levels of large claims, coupled with favourable weather conditions, allowed FBD record a pre-tax profit of just over €59.7m last year; up from a loss of nearly €3.1m in 2010.

The group’s latest set of full-year figures, published yesterday, also show a 60% increase in operating profit to €64.9m.

Gross written premium fell by 2% to €351.1m; although this decline was still well below the industry average for 2011 of nearly 5%. Group revenue, meanwhile, fell from €413.7m to €402.5m.

Mr Langford called the showing “an excellent performance”, with the group making “significant progress” in advancing its strategic priorities.

“The growth in profits, achieved in 2011, puts the group in a very strong position to progress its plans,” he added.

Last year also saw FBD continue to gain market share, reaching 12.2% of the general insurance market, having made gains in ten of the last 11 years.

The company said it saw a 14.1% fall in net claims last year to €201.1m — due to “hardening premium levels” and “a range of claims management initiatives”.

Last year’s total dividend amounted to 34.5c, up from 31.5c, after a final dividend of 23.25c was declared. In terms of outlook for this year, management said that it’s committed to achieving profitable growth by constantly evolving its business to reflect customers’ needs.

But without a repeat of such favourable claims and weather conditions, the group expects claims costs to revert to normal levels. That said, analysts expect operating profits of between 145c and 155c per share.