FBD profits rose by 41%to €40.7m last year

AN 11 per cent drop in claims and a slight rise in gross written premium boosted FBD’s performance last year, with the insurance company posting a 41 per cent rise in operating profits to €40.7 million.

Results for 2010 were ahead of expectations with the insurer posting earnings per share of 106 cent.

However, the company warned that future premium hikes were inevitable, as costs associated with severe weather conditions took their toll on margins.

Pretax losses narrowed to just under €3.1 million in 2010, compared to losses of €34.6 million a year earlier. The loss was due to a €50 million writedown in asset values – primarily related to property revaluations – with the result that future writedowns are unlikely, according to the company.

While warning that the opportunity for premium income growth in 2011 will be limited in light of the continuing strains on the economy, chief executive Andrew Langford said he expected FBD to return to profit in pretax terms this year due to the lower asset impairment charges. The company is forecasting operating earnings per share of 130 to 140 cent for 2011.

A breakdown of the €40.7 million operating profits figure show that €36.1 million related to the company’s underwriting business – a 61 per cent jump from the €22.4 million posted in 2009.

However, operating profit from FBD’s non-underwriting operations fell from €6.5 million in 2009 to €4.6 million last year.

This was due mainly to challenges faced by its four Irish hotels – Tower Hotel and Faithlegg House Hotel, Waterford; Castleknock Hotel and Temple Bar Hotel, Dublin. The performance of its property interests in Spain improved, however.

Overall, FBD’s hotel and property businesses generated an operating profit of €1.3 million, down from €2.8 million in 2009, while FBD’s financial services divisions – FBD Brokers and FBD Financial Solutions – saw operating profits decline from €3.7 million in 2009 to €3.2 million last year.

The group’s combined operating ratio improved from 104 per cent to 99.8 per cent in 2010, the company said, though home insurance continued to be under pressure. FBD announced a final dividend of 21 cent yesterday, bringing its total dividend to 31.5 cent, a 5 per cent increase on 2009. It said its capital position “continues to be robust” with solvency strengthening to 61 per cent of NEP (net earned premium).

Some 88 per cent of FBD’s total investment portfolio was invested in government gilts and cash at year end, though the company did sell Irish government debt in the second half of the year, contributing to a loss of €8 million.

The remainder was held in property and equity.