FBD reports profits in line with estimates

Insurance group FBD has reported a slight decline in profits, with profit before tax falling by 2 per cent to €51.5 million, but it reported a return on equity of 17 per cent as it grew its market share to 13.4 per cent, a new high for one of Ireland’s largest property and casualty insurers. However, the impact of this year’s storms will increase the cost of claims for the insurer leading to lower than forecast earnings for 2014.

Andrew Langford, chief executive, said that FBD produced "excellence results" in the twelve months to end December 2013.

“Our strong position and continuing investment in the Irish market, leaves us well placed to progress our strategic plans and to take advantage of market opportunities that arise as the economy recovers,” he said.

Pointing to “initial signs of a recovery” in the Irish economy, the insurer said that this will be “very positive” for FBD in terms of premium income.

The insurer grew its gross premium written by 2 per cent to € 351.2 million, increasing FBD’s market share from 12.6 per cent to approximately 13.4 per cent. Policy volume grew by 2.6 per cent for the full year, although average rates were 0.7 per cent lower with a reduction in the first six months offset by an improvement during the second half of the year

While the weather was benign for most of 2013, storm and flood claims in the last weeks of 2013 cost € 4.5 million, net of reinsurance, and the group also experienced a small number of very large accident and liability claims (costing more than € 1 million each) in 2013. The combined cost was 18.7 per cent of net earned premium, “significantly higher than the 13.1 per cent cost in 2012 and two percentage points higher than the seven year average cost of 16.7 per cent”.

February’s wind storm is likely to cost the industry €130 million FBD said, adding that while the group budgets for such weather events, “the persistent bad weather over the preceding month, whilst not amounting to a catastrophic event, will lead to an increase in the cost of 2014 claims.”

As a result, the group is now guiding full year 2014 operating earnings per share of between 120 and 130 cent, below estimates such as Davy Stockbrokers’ forecast of 145 cent.

FBD will increase its final dividend by 10.8 per cent to 33.25 cent, representing full year dividend growth of 16.0 per cent to 49 cent.

Looking to 2014, FBD expects to increase penetration of key urban markets, in particular Dublin, and of the business insurance market, in partnership with brokers.