FBD posts losses of €38.6m and predicts rise in cost of insurance

INSURANCE COSTS are set to rise this year as companies attempt to recover the cost of rising claims, Dublin-quoted FBD predicted yesterday.

Rising claims costs – partly a result of the bad summer weather – and tumbling financial markets left FBD with a loss of €38.6 million before tax in 2008.

Falling share and property prices meant it had to write down the value of its investment portfolio by €126.5 million.

The severe weather resulted in an increase in the cost of claims from its home, farm and commercial insurance businesses. The company said yesterday that heavy rain and flooding in August alone cost it €7 million.

Yesterday, FBD chief executive, Andrew Langford, said there were signs that insurers were starting to increase what they charge consumers and businesses for cover.

In its statement, the company said average premiums began to increase in late 2008. “Early in the current year, a number of market participants increased rates on certain business lines and further increases are anticipated,” the group said.

Mr Langford said FBD has begun gradually increasing some charges, but added that it was not going to introduce radically-increased charges. He pointed out that charges have fallen dramatically in many areas of the business in recent years.

The company yesterday produced Government figures showing that the average cost of motor cover fell from a peak of just over €1,000 a year in 2002 to between €500 and €600 last year.

Mr Langford pointed out that the levels reached last year were lower than those paid in 1997 “in pure cash terms”.

The net cost of paying out on claims made by FBD customers against their insurance claims came to €263 million last year, compared with €231 million in 2007. Its payout came to 79 per cent of its net income from premiums, which was €343 million in 2008. The previous year it paid out 68 per cent of its €350 million net income.

FBD also reported yesterday that operating profits halved in 2008 to €65.8 million from €127.9 million the previous year, although it said that this was a solid performance in a period of “unprecedented economic volatility”.

FBD is a general insurer with motor, home, farm and commercial businesses. It also owns resorts in Spain and the Tower Hotel group, whose properties include the Temple Bar Hotel in Dublin’s city centre.

FBD HOLDINGS: 2008 results

Gross written premiums:€385.6 million (-5.5%)

Adjusted operating profit:€65.8 million (-48%)

Pretax loss:€38.6 million

Adjusted operating EPS:171.5 cent (-45%)

Full-year dividend per share:40.25 cent (-55%)

The insurance group said that market turmoil hit investment returns last year, leaving it with a €38 million loss before tax, but pointed out that all its divisions generated operating profits totalling €65.8 million.

This was a little over half the company’s 2007 operating surplus. The lower profits were principally the result of higher claims costs and lower long-term investment returns. Gross written premiums were down 5.5 per cent, and the company began gradually increasing the cost of its policies in some areas. However, it said, despite this, the business grew market share to 11.6 per cent from 11.3 per cent.