Shares in insurance group FBD were down by as much as 7 per cent at one point yesterday after the company said intense competition may hurt policy sales.

Analysts and traders said the fall was a little overdone, particularly given the fact that the company had left its earnings target unchanged.

Anna Lalor, an analyst at Goodbody, said the decline was probably more a reflection of the mood in the market at the moment. Dublin dealers agreed, saying that anything with a slightly negative connotation, particularly in the area of finance, was likely to fall significantly in the current climate.

In its pre-close trading update, FBD said it had continued to make solid progress in the year to date, and remained comfortable with the market's expectations for full-year earnings per share of 324 cents. This represented a 14 per cent decline on 2006.

However, it also said that while the group had maintained policy growth, and that gross premium written was marginally ahead of 2006, the outlook was less certain.

"Price competition remains intense, and our full-year gross premium written target will become increasingly challenging unless pricing pressure moderates," the company said.

Despite this pressure, however, it said claims and other costs were running at anticipated levels, and the leisure, property and financial services interests were performing to budget.

FBD also said that while its equity portfolio was performing satisfactorily in the year to date, the weakness in Government bond markets, particularly in recent weeks, had had a negative impact on the short-term fluctuations in investment returns, and consequently on pretax profit.

After their initial drop to €30.70, the shares recovered some ground to end the day down 3.1 per cent, or €1.02, at €31.96.

It is believed the company used this opportunity to buy back as many as 250,000 of its shares.

Ms Lalor said there was nothing particularly negative in the statement as far as FBD's business model was concerned, and that it was positive the group was continuing to win new business. The problem was related to the wider insurance market and the issue of increased competition.