Insurance company FBD posted a solid performance over the first six months of 2012, which included a marginal increase in pre-tax profit and a rise in market share.
However, it wrote off its investment in the collapsed stockbroking firm Bloxham and made a significant outlay in Treasury bills.
Profit before tax for the first six months of 2012 was €22.19m, a 1.5% increase on the €21.8m pre-tax profit posted in the first six months of last year.
An operating profit of €28.7m for the first six month of the year was also a marginal increase on the €28m seen over the same period in 2011.
Gross written premium was €174.7m for the first half of 2012, a 1.5% decrease from last year. There was a slight increase on the net earned premium of €150m.
“The difficult economic environment in Ireland has led to reducing insurable values and risk in the market. Prices in the market for certain insurance products have also moved lower due to competitive pressures and to reflect the lower risk,” the company said in the trading update.
FBD said it has reduced the cost of car insurance when there has been a “genuine reduction in the associated risk”.
“The direction of future claims expenses and market rates are likely to be determined by economic factors such as vehicle usage as well as safety measures and driver behaviour,” FBD said.
NCB Stockbroker analyst Emmet Gaffney said: “Overall, (these) results represent a solid performance in what is a difficult operating environment.
“The group continues to gain market share without diluting its underwriting discipline, as evidenced by an improved combined operating ratio of 92.2%.
“Management expects the loss ratio in the second half to be similar to that of the first half (66.9%) and believes that potential growth opportunities in the group’s multi-channel offering and urban areas can help the company outperform its competitors once more.”
FBD has launched a series of initiatives to gain market share, including increased use of insurance brokers, greater reach of its online offerings such as FBD.ie and NoNonsense.ie, and greater penetration of urban markets.
The firm’s solvency level was 63.3% at the end of June compared with 60.4% a year earlier.
At the end of June, 90% of its investment assets were in bank deposits, and government and corporate bonds.
In response to a query by Bloomberg, FBD said it bought up €50m in the Government’s Treasury bill auction last month, 10% of the overall issue.
Moreover, the firm wrote off its €2.6m investment in the now defunct stockbroking firm Bloxham, which collapsed in May.
“These are excellent results in difficult economic conditions,” said FBD chief executive Andrew Langford.
“We believe that gross written premium is well ahead of a contracting market and that FBD’s market share has again increased.
“A further fall in domestic demand is expected to limit premium income growth in the second half,” Mr Langford added.
“The group’s market position continues to be strengthened through our multi-channel distribution strategy. Prudent management of risk and reserving is being maintained.
“In the current unpredictable investment environment, FBD’s investment allocation prioritises capital protection. The board is confident that FBD will continue to outperform its peers in delivering superior returns to shareholders.”
Additional reporting Bloomberg