FBD cuts profit hopes by €16m

FBD has lowered its profit expectations for the year by €16m on the back of higher-than-expected weather and motor/commercial claims from customers.

The company’s share price suffered its highest drop in five years on the back of the news, with a near 9% fall witnessed in early trading. That reverse was, however, stemmed in later trading; with the stock closing the day down by 2.59% at €16.

Yesterday’s update saw FBD lower its full-year 2014 earnings per share guidance from a range of 120c-130c to between 70c and 80c.

Last year saw FBD’s operating earnings per share dip 20% from 170c to 136c.

The insurer said, yesterday, that, as expected, the cost — via additional claims — from February’s stormy weather has been greater than expected. Its current estimate of the cost of the severe weather stands at €44m, €4m more than previously thought.

In addition, the cost of motor and commercial claims grew by €12m in the first half of this year.

“The board expects that the combined impact of the increase in claims frequency and the weather-related claims will be €16m in 2014,” the company said in yesterday’s statement.

“The nature of the insurance business is that earnings will be influenced, from time-to-time, by random weather events and the fact that the industry is inherently cyclical.

“The board is confident that FBD is well-positioned to outperform the market and deliver strong returns for shareholders. As a result, the board remains committed to its progressive dividend policy,” it added.

However, the amount of revenue FBD has generated from customers this year, to date, has risen by more than 4% year-on-year — mainly through growth in the motor and commercial insurance brackets.

That revenue rise is on the back of increased rates charged to drivers, increased policy sales and the rise in value of cars that are being insured. While it has increased its own rates — motor insurance premiums have increased across the industry in the past year — FBD said it is continuing to grow its market share.

“Increased economic activity leads to higher claims frequency, with more vehicles driving more miles on increasingly congested roads,” FBD said, adding that it will continue to monitor claims to ensure that risks are adequately priced and will not up prices if necessary. The company said, earlier this year, that it has no plans to increase home insurance premiums.