FBD set to hike premiums as floods and cold slash profits
FBD, the country's second largest insurer, said underlying earnings halved last year as the recent floods and cold snap ate into profits and forced unusually high payouts.
FBD forecast a return to profit this year as it forces through higher charges for customers.
Chief executive Andrew Langford said that the economic environment and poor weather conditions made 2009 an extremely challenging year for the insurance industry but noted that the rate of contraction in the Irish economy has now slowed.
A measure of just how serious the recent floods and storms were can be seen in the €550m cost to the industry compared to total weather-related costs of just €330m for the entire previous decade.
November's floods and December's freeze cost FBD €13.5m, while the freezing weather at the beginning of this year cost another €12m net of reinsurance, Mr Langford added.
Houses built on flood plains and prone to flooding will see an increase in insurance costs to reflect the extra risk, while houses built in towns and cities which have new flood defences, such as Mallow and Kilkenny, will see premiums fall, Mr Langford said.
The company now expects to charge customers close to 10pc more for home insurance this year after smaller hikes last year and the previous year.
FBD reported adjusted operating earnings of €28.8m, or 75c per share, down from 172 cents the previous year. Mr Langford forecast operating earnings per share will reach 95c to 100c in 2010. The company recommended a full-year dividend of 30c, down 10c on 2008.
That means the company will pay out 46pc of operating earnings after finance charges compared with just 25pc the previous year.
"The return to a more normal payout ratio of 46pc is a sign from management that earnings volatility should reduce now that the economy has stabilised," Goodbody Stockbrokers analyst Ken Darmody said in a note.
Mr Langford joined the growing chorus of hoteliers demanding that the Government do something to reduce the oversupply of hotel rooms as developers keep unprofitable hotels open to chase tax breaks.
The company has four hotels -- two in Dublin and two in Waterford -- as well as developments in Spain.
The group's Spanish operations had only seen a 1pc fall in Irish visitors despite the recession but visitors are spending less and staying for shorter breaks.
Back in Ireland, Mr Langford said FBD is gaining a bigger share of the Dublin and commercial insurance markets, despite its origins as the insurer of choice for farmers.
FBD's share of the Dublin market rose from just below 5pc last year.
Mr Langford has a target of raising its share by about one percentage point per year.
The company is now selling half its insurance online compared to nothing three years ago.
It is developing a website to ensure that it can compete with other insurance companies on the web.
Non-underwriting business remained both profitable and cash generative in 2009, with operating profits of €6.5m from the hotels and leisure business and from financial services.