Shares in FBD soar after it upgrades full-year guidance

SHARES IN FBD soared yesterday after the insurance company upgraded its full-year guidance as it benefited from an improved loss ratio in its insurance business.

FBD is now guiding earnings per share of 155 to 165 cent for the full year, an increase of 10 cent on the previous guidance, which had also been raised by 10 per cent at the interim stage. The insurer’s share price closed up more than 7 per cent at €6.55 yesterday.

FBD, which announced plans in August to hive off its property business as part of a joint venture with shareholder Farmer Business Developments, said it delivered strong operating earnings and profit in the second half, primarily due to an improved loss ratio in the underwriting business.

FBD posted a pretax profit of €20.5 million in the first six months of 2011, compared with a loss of almost €7.9 million in the equivalent period a year earlier.

Yesterday, the company said it had continued that trend, increasing policy volume for the first time since the second half of 2008 and benefiting from an increase in average rates, which were up on the same period last year.

The improvement in gross premiums written was offset somewhat by a reduction in insurable risk and values in Ireland in line with the economic downturn.

FBD described the claims environment in the second half as “comparatively benign”. It estimates that the cost of October’s flooding will not exceed €6 million, net of reinsurance, well below FBD’s market share. However, it estimates the cost of the floods to the Irish insurance industry to be between €125 million and €150 million, and this is likely to result in a rise in the cost of industry property insurance.

FBD’s property, hotel and golf businesses delivered an “improved performance” up to the point at which the joint venture was established, the company said.

Following the formation of the joint venture, the company’s property business will no longer be included in group operating results; its share of the result will be included on a single line within profit before taxation.

FBD also highlighted its increasing urban presence, boosted by its two websites, NoNonsense.ie and FBD.ie, and said it intended to maintain its focus on claiming more of the urban market.

FBD said the decision to hive off its property division would “enable the group to focus resources on its core underwriting business”.