Operating profit at insurance group FBD declined last year as increased competition and falling premiums put pressure on its underwriting business.
In its annual results released yesterday, Dublin-based FBD said operating profit fell 2.5 per cent, to €158.5 million - roughly in line with expectations. Overall, however, profits increased, boosted by an exceptional gain from the sale of land and higher-than-anticipated returns on investment income.
Pretax profit rose 60 per cent to €296.8 million. The sale of land at FBD's La Cala development in Spain contributed €81.7 million to that figure.
Chief executive Philip Fitzsimons said the company had put in a strong performance in what was a difficult environment for insurers.
Like its rivals, FBD is suffering as premiums decline, eating into the group's margins. Competition increased towards the end of last year and has remained strong in the first two months of this year, he said.
Andrew Langford, FBD's finance director, said customer premiums had, on average, fallen by between 6 and 7 per cent in the personal insurance business, with an even larger drop in commercial product premiums.
He said he expects premiums to remain under pressure.
On the whole, the figures came in ahead of analysts expectations, though NCB said the underwriting business was slightly behind.
The shares initially rose as much as 1.3 per cent, before falling back to close down 2.2 per cent, or 86 cent, at €39.14.
During the year, gross written premiums amounted to €407.3 million, 4.6 per cent ahead of the prior year. The company attributed the increase to strong new business volumes - as of December 2006, FBD had 11.8 per cent more policies than a year earlier - and in particular the addition of new house and car insurance customers. FBD said it had increased its share of what was a pretty static market, by focusing on so-called metro regions, city centre areas that it hadn't targeted in the past.
Operating profit from the underwriting business declined 7.6 per cent, to €124.6 million.
Leisure and property interests, which include the La Cala and Sunset Beach resorts in Spain and the Tower Hotel Group in Ireland, contributed €10.1 million to overall operating profit, 26 per cent down on the prior year. The financial services division meanwhile saw its profits increase 30 per cent, to €4.3 million.
