INSURANCE GROUP FBD Holdings has bought €80 million worth of Irish Government bonds after initially avoiding them because their yields were too volatile.

When it published its annual results in early March, the company said it had not bought any of the €10 billion worth of bonds issued by the Government in two separate tranches earlier this year.

At the time, chief executive Andrew Langford pointed out that their yields – the interest earned relative to the price paid – were volatile and this meant there was too much uncertainty attached to investing in the instruments.

Since then, the situation has settled. Mr Langford tells The Irish Times in an interview today that the company recently cashed in €120 million worth of equities and used €80 million of that to buy Irish Government bonds.

The company is getting yields of 4.3/4.4 per cent. “We see that as an excellent return for what is a very safe investment,” Mr Langford says in the interview.

Insurers typically invest in a mixture of shares, property, bonds and cash in order to limit their risks. FBD blamed turbulence in financial markets and rising claim costs for the €38.6 million loss it sustained last year.

The company’s investment portfolio includes €466 million worth of German bonds, which are seen as particularly low risk and give returns of over 2 per cent.

The company decided to invest in these instruments two years ago, before the Irish Government was forced to issue new bonds as a means of borrowing money to shore up its finances.

The State raised €4 billion in February through the issue of a three-year bond.

In January, the Government went to the market to raise €6 billion in instruments due to mature in five years.

Since the start of 2009, the Government has raised €12 billion through the issue of bonds. It needs to borrow a total of €25 billion to plug the projected gap in public finances this year.