Underwriting loss fall fails to prevent a rise in FBD premiums

Increases in premiums and gains on the sale of investments helped FBD Holdings produce a 17 per cent rise in pre-tax profits to £16.7 million (€21.2 million) for 1998.

Despite the performance, the chief executive of the insurance group, Mr Paul O'Callaghan, warned that increases in motor and liability premiums were likely later in the year. Rising claims and legal costs made increases inevitable especially when the investment income which offset losses on underwriting was falling due to lower interest rates, he said.

He described current trading as buoyant and said FBD planned to grow by expansion into the larger urban markets where it did not currently operate. It plans to open operations in Cork and Limerick this year, adding to its network of 46 branches. The 1998 results "fully met our expectation of continued strong growth", said Mr O'Callaghan, who added that profit growth was achieved in highly competitive markets.

Direct underwriting losses at £16.9 million were down from £18.1 million.

This loss was offset by investment income of £19.7 million (1997: £21.2 million), other income of £7.5 million (£7.4 million) and gains on the sale of investments of £6.4 million (£5.5 million) to produce the pretax profit of £16.7 million. Turnover rose by 6.3 per cent to £167 million (€212 million).

Earnings per share were 14 per cent ahead at 35.1p (44.6 cents), with profits after tax of £14.7 million, up 15.8 per cent.

Shareholders will get an 18 per cent increase in their 1998 dividends, with a second interim dividend per share of 5.907p (7.5 cents) bringing the full dividend for the year to 10.36p per share (13.15 cents)

In the core insurance underwriting operation, premium income was 10 per cent higher at £105.3 million (€133.7 million). The underwriting result in motor and property improved but employer and public liability losses rose. Increased reinsurance of risks meant that the 1998 storms did not have as great an impact on the latest results as the 1997 storms had on the 1997 property underwriting results.

Motor underwriting losses were down to £12.1 million from £14.2 million, helped by higher premium income after a 5 per cent during the year. Premium income was higher at £65.7 million from £59.5 million. But claims rose to £67.6 million from £65.5 million and expenses rose to £10.2 million from £8.3 million.

In liability insurance, underwriting losses increased to £8.5 million from £7.2 million. Premium income was marginally ahead at £17.9 million but claims rose to £23.5 million from £21.91 million and expenses went up to £3 million from £2.5 million. Profits from fire and property underwriting increased to £4.1 million from £2.5 million, again boosted by higher premium income which at £19.17 million was up from £16.8 million. Claims rose to £13.7 million from £13 million and expenses to £1.9 million from £1.3 million.

Income of £7.5 million (€9.5 million) from other operations - mainly insurance broking, the IFSC business and property investment - was only marginally ahead. Falling interest rates through 1998 meant lower investment income for FBD, down 6.9 per cent to £19.7 million.

Net assets per share rose by 30 per cent to 268.8p (341.3 cents) with shareholders' funds - £113.7 million (€144.4 million) at the end of 1998 - boosted by the strong rise in share prices during the year and the group's decision to increase investment in equities early in 1998.

The dividend was covered 3.4 times by earnings. After a £60,000 payment to minority interests and dividends of £4.5 million, FBD retained profits for the year of £10.15 million.

After the deduction of £1.8 million for currency exchange adjustments - for the book value of its Spanish property - revenue reserves at year end were £8.33 million stronger at £54.7 million.

Unrealised gains on investments of £17.4 million were recognised and added to revaluation reserves, bringing them to £32.2 million at the end of 1998.