FBD’S SHARE price jumped 4 per cent yesterday after the insurer announced a return to profitability in the first half of 2011 despite continued challenges in the insurance industry.

The group also announced the establishment of a joint venture with Farmer Business Developments to own and manage its Spanish and Irish property and leisure interests, thus enabling it to focus on its core insurance 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. Operating profits soared 150 per cent to €28.7 million.

Management lifted the group’s full-year operating earnings guidance by more than 10 per cent to 155 cent per share.

“This would see an exceptional performance from the group this year, in some of the toughest economic conditions in Europe,” Bloxham stockbrokers said.

The group recorded an underwriting profit of € 10.7 million for the first half, compared with a loss of €7.8 million a year earlier.

The level of gross premiums written in the first half was down 3 per cent year-on-year at €177.5 million, which FBD believes to be in line with or slightly ahead of the market. Net premiums earned were steady at just below €150 million.

Net claims fell to €103.2 million from €124.4 million a year earlier. The weather experience for the period was relatively benign, it said, with the freezing conditions in January costing €2.5 million (net of reinsurance), down from €12 million in January 2010.

The frequency and average cost of motor and property-related claims also fell during the first half, which FBD attributed to factors such as a reduction in economic activity, improved road safety enforcement and better risk selection and claims management.

A spokesman said that while there may be some upward pressure on premiums, FBD has no plans to increase premiums across its range of products for the remainder of 2011.

The group’s non-underwriting operations generated an improved operating profit of €2.2 million, up from €1.9 million.

The joint venture announced yesterday, which is subject to shareholder approval, will allow FBD to concentrate resources on its core insurance underwriting business and will leave the group less exposed to fluctuations in property valuations.

It expects the transaction will be marginally earnings enhancing.

“The restructuring of its property assets puts it back as a clean, pure insurance play,” a Dublin trader said.

Farmer Business Developments owns a 29.7 per cent stake in the the group.

FBD’s interim dividend has been raised to 11.25 cent per ordinary share, from 10.5 cent.