FBD expected to hike premiums as bad weather hits its earnings
ANALYSTS said FBD may raise premiums more than forecast this year after the insurer said bad weather at the end of 2013 has hurt its earnings.
The home and casualty insurer issued an update to its earnings guidance for 2013 yesterday, revealing that unexpected storm damage in the last fortnight has cost it between €4m and €5m, reducing operating earnings per share by between 10 and 13 cents.
The company has been hit by a slew of claims from unforeseen bad weather in recent years; it raised rates by 6pc in 2010 and 5pc in 2009 after claims spiked by hundreds of millions of euro as a result of two very snowy winters.
Earlier financial forecasts had assumed that there would be no exceptional weather events during the remainder of this year, but Ireland experienced storm force winds and, in certain areas, hurricane force winds during that period.
"They will probably seek to recover those losses through premium rates," said one analyst, who asked not to be named.
FBD said yesterday that any extra costs will be offset by better-than-expected investment returns for the year as a whole, thanks to a strong performance in the group's equity investments. It expects to achieve market expectations for full-year pre-tax profits.
However, its premium rates are not set according to this overall group financial picture. They are set according to operating earnings per share, which following the update are now forecasted to reach 135-140 cents per share, compared to the previous range of 145-155 cents per share.
Goodbody stockbrokers is currently forecasting that the insurer will hike premium rates by 0.5pc next year. In a note to clients, it said it expects a further hardening of rates in 2014 as a result of the earnings update, though it said there will be no material change to the company's 2013 results.
Shares in FBD were down 1.34pc to €17.66 by yesterday afternoon.
One of Ireland's largest property and casualty insurers, it has about 600,000 Irish policyholders.