FBD sees profit fall as inflation prompts underinsurance concerns

The group noted that it was a "challenging year" for investment, which saw negative returns in 2022.

Underinsurance has been highlighted as a key concern for FBD, with the company reporting a pre-tax profit of €74m in 2022, down from €110m the previous year.

The group's chief executive, Tomás Ó Midheach noted inflationary pressure had prompted concerns that customers were not adequately insured, with rising prices "impacting rebuild and replacement costs."

Despite falling profits, FBD group saw premium income increase in 2022, reporting a final sum of €382.9m. The group's customer policy count increased by 2.8%, with retention rates rising again by 1.5%, the highest in six years.

The group's operating ratio for 2022 stood at 75%, up from 71.5% in 2021, which FBD said reflected "a very strong underwriting performance and positive development of prior year claims."

The average premiums for commercial businesses increased by 5.6% last year, with farms also seeing premiums rise by 2.6%. Mr Ó Midheach said these hikes were due to "increases in property elements as sums insured were adjusted to reflect inflation in construction costs."

Across the company's portfolio, average premiums increased by 0.6%, with private motor falling by 7.2%.

Claims volumes increased by 6% year-on-year, largely driven by motor damage which rose by 27% on the back of increased traffic volumes and inflation which "hindered policymakers' ability to cover the cost of minor damage themselves." 

Overall, Net claims incurred increased by €8.5m in 2022 to €154.2m.

The group noted that it was a "challenging year" for investment, which saw negative returns in 2022. Total investment return for 2022 fell to -8.6%, with FBD citing "decades-high" inflation and rising interest rates which reduced the valuation of fixed-income assets.

The diluted profit per share was 176 cent per ordinary share, compared to 268 cent per ordinary share in 2021, with the group's dividend remaining unchanged at 100c per share.

Despite significant uncertainty in the external claims environment as the group waits for the outcome of the challenge to the Personal Injury Guidelines, Mr Ó Midheach told investors, "We continue to build strong relationships with intermediary partners." 

"We have launched a Home product in conjunction with Bank of Ireland and successfully renewed our An Post Insurance partnership."

"FBD remains a strongly capitalised business with a Capital Ratio significantly in excess of our stated risk appetite. It is our intention to now engage with stakeholders on taking steps to return further capital in the short and medium term."