FBD shares climb on profits outlook

Shares in FBD rose almost 5% as the insurer signalled it was on course to boost profitability as claims conditions had improved and premium prices had increased in recent months.

Chairman Michael Berkery told shareholders that profitability had improved “helped by strong underwriting actions and favourable weather year to date.”

He said: “We have maintained excellent levels of retention of key customer groups through our strong customer relationships and the level of service we provide.

“The hardening of insurance rates has continued into 2017, albeit at a more moderated level as we maintain our focus on underwriting discipline and profitability. The group’s low-risk investment allocation has provided a return largely in line with expectations since the start of the year.”

FBD had posted an increase in its combined operating ratio — a measure of profitability across the group — closer to its target of the mid to high-90s, he said. The shares rose at one stage to €8.50, a 12-month high. The shares have now risen over 20% since the start of the year, but remain much lower than the €19 level reached in early 2014 before FBD and the Irish insurers were rocked by financial troubles.

Merrion capital analyst Darren McKinley said it had increased its FBD price target to €9.50 over the next 12 months because profitability had risen since FBD posted full-year earnings this year. “We believe it is well positioned to generate more earnings growth and we are confident about their outlook,” he said.

Mr McKillen said FBD had increased premium prices modestly, while clement weather had helped cap claims and help boost profitability. Davy Stockbrokers analyst Emer Lang said: “In relation to pricing, the statement notes that hardening of insurance rates has continued into 2017, albeit at a more moderate rate.”

The costs of car and home insurance premiums have soared in recent years, though official figures show that the annual increases have been more modest in recent months. FBD said, however, that that “the injury claims environment remains uncertain”.

It again welcomed the recommendations made by the Government in its working group on industry costs, published in January.

In March, Financial Services Minister Eoghan Murphy said there had been “substantial” progress made in implementing the 33 recommendations in the Report on the Cost of Motor Insurance.

The recommendations that insurers set out their reasons for large premium hikes was under discussion.