FBD cuts half-year dividend as it reports pretax loss of €21.7m

INSURER FBD cut its half-year dividend by two-thirds as the company reported a pretax loss of €21.7 million in the first six months of the year after writing down the value of hotels, property and land in Ireland and Spain.

Operating profit fell by 69 per cent as gross premiums written dropped by 9 per cent to €180.7 million and gross claims climbed by 5 per cent to €162 million. FBD’s share price fell by 3.9 per cent.

Andrew Langford, chief executive of FBD, said the company had no plans to increase premiums.

The insurer took early action by raising prices at the start of 2008 and earlier this year, he said. The company had increased premiums by 4 to 5 per cent this year, while rivals had raised their prices by a higher level but may have to increase them again, he said.

Despite falling sales, FBD has become the second largest general insurer in Ireland, moving up one place with a market share of 11.6 per cent, said Mr Langford.

“We believe that it’s a pretty good performance given the market that we are in.”

He expects FBD’s combined ratio, a measure of underwriting profitability, to improve to 100 per cent for the full-year from 105 per cent for the first half of the year.

FBD cut its interim dividend to 10 cent from 30.25 cent as operating earnings per share dropped to 34.95 cent from 105.43 cent.

Mr Langford said the company’s decision to pay a dividend was “prudent and certainly well within the resources of the group”.

A revaluation of the company’s hotels and lands in Ireland and Spain led to a writedown of €11.4 million, reflecting the slump in property prices in the countries.

“We had budgeted for larger markdowns than these by the year-end, with none taken at the half-year stage,” said Anna Lalor, analyst at Goodbody Stockbrokers. “It appears the company has taken a relatively aggressive approach.”

The company also took a €2 million restructuring charge as the insurer closed 15 of 49 branches, while 136 of 1,741 employees accepted voluntary redundancy.

Mr Langford said the changes would lead to a 2 per cent cost saving, amounting to €6.4 million for a full year.