FBD stock plunge as cost of winter storm pay-outs grows
Published 21/06/2014 | 02:30
Shares in insurance firm FBD plunged almost 9pc at one stage yesterday after it slashed its earnings forecast and said claims from last winter's storms and floods will hit €44m.
That's €4m more than it previously forecast.
The insurer expects its earnings this year to be between 70 cent and 80 cent a share. That compares to the 120-130 cent range previously estimated by FBD.
The revised figure sent FBD's shares into a tailspin. The stock later recovered some ground, closing 2.6pc lower.
Davy analyst Emer Lang said the revision from FBD was "extremely disappointing" given the solid update the company had given at the end of April.
Goodbody analyst Eamonn Hughes also described the update as disappointing and said he's cutting FBD's expected earnings per share to 75 cent for 2014 and 134 cent for 2015. He had expected earnings per share of 146 cent next year.
FBD, whose chief executive is Andrew Langford, also said it may raise premiums further as increased economic activity results in busier roads and more claims.
The company expects overall claims this year to be €16m higher than previously forecast; of that €4m is related to weather events and €12m to motor claims.
It said that retail sales of vehicle fuel – a barometer for increased road usage and motor insurance risk – is up 6pc so far this year compared to the corresponding period last year.
That's more than FBD said it expected. It said this has had an impact on the frequency of "attritional" motor claims, which have risen sharply in recent months. Those claims are spread across its customer base, according to FBD.
But the company said that while it has taken "appropriate rating action" in light of the higher claims, it has continued to win policy volume and market share.
"The group will continue to monitor claims to ensure that risks are adequately priced and take further action, if necessary," it added.