ANALYSIS: FBD insurance upped its market share to 11.3% in 2007 - despite a sector drop of 5.7%, writes Simon Carswell

INSURANCE GROUP FBD has said some of its competitors "definitely are losing money" on discounted premiums they are offering customers in a smash-and-grab for new business in a bid to increase their share of the market.

The group, repeating the comments of market leader Hibernian last week, said premiums could fall no lower without eating into operating profits, having fallen by about 33 per cent between 2002 and 2007.

FBD chief executive Philip Fitzsimons said: "There are a lot of special offers and short-term premiums breaks. Anyone would have to ask about the sustainability of it. Existing customers who are not getting the same discounts will be paying for it. It is not real."

The insurance market has become highly competitive in recent years, falling from €3.9 billion in 2002 to €3.6 billion in 2007.

However, FBD said it has avoided "the race to the bottom" on premium prices and increased market share in 2007 - from 10.7 per cent to 11.3 per cent - despite the value of its average premiums falling by 6 per cent and the market dropping by 5.7 per cent.

FBD has reduced its exposure by half to volatile stock markets in 2007. It held equities of €164 million at the end of the year, having booked a €69 million loss on stocks, compared to a profit of €61.3 million a year earlier.

Despite a more challenging market in 2008, FBD believes it will increase premium income at the same level as 2007 if the value of premiums rise. Income will remain flat if premiums don't increase.

FBD has been the best performing financial stock on the Irish market over the last six months.

Its share price has risen 12 per cent during those six months, bucking the 29 per cent fall in the Iseq financial index in that time.

FBD said it had "made hay while the sun shone", but was prepared for leaner times with a new call centre to help free up its 50 branches and by growing its No Nonsense insurance website, a joint venture with Ryanair.

The group intends to continue showing generosity to shareholders with payouts from its reserves.

"Our policy is not to sit on any more capital than is needed to achieve the growth for our business," said Mr Fitzsimons.