Competition and prices eat into FBD's profits

Premium income rose but operating profits declined over the first half at FBD, as the insurer faced increased competition and its customers enjoyed lower prices.

Results issued yesterday show that gross premiums written by FBD in the six months to the end of June amounted to almost €204 million, up 6 per cent on the previous year.

The company cited strong new business volumes as being behind the increase, which it said "more than offset" the impact of premium reductions for customers.

At the same time, however, margins at the firm continued to "gravitate towards European norms", thus eating into profits.

Operating profits were €75.7 million for the first half, some 13 per cent lower than the equivalent period of 2005, although still ahead of expectations.

Philip Fitzsimons, FBD chief executive, said the operating comparison also reflected a particularly benign claims backdrop last year. He said customer premiums had, on average, fallen by 10 per cent over the first six months, with the drop largest in commercial products. He said visibility was poor but added that margins should stabilise over the coming period. For the year as a whole, he expressed confidence, estimating that FBD's market share was rising from 10- 11 per cent.

FBD's trading results were overshadowed in the first half by an €83.6 million exceptional profit from the sale of lands in Spain. This boost left pretax profits at €157.5 million, almost 50 per cent ahead of last year.

Shareholders have already received an initial special dividend of €1.60 per share in respect of this and can expect a further return when the full proceeds are received. They will also receive an interim dividend of 24 cent, up 20 per cent on last year.

A breakdown of the operating profit number showed that the group's insurance business generated profits of €65.4 million, down from €73.8 million. The firm's other activities delivered a €10.3 million return, which was down from €13 million.

FBD's broker and instalment finance interests saw operating profits rise from €2.5 million to €2.8 million, while general investment returns fell from €4.1 million to €3.8 million.

Mr Fitzsimons said FBD had the capacity to complete acquisitions in insurance if the right one came along. Shares in the group rose by 20 cent to €38.80.