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Shareholders reap the rewards after an 'exceptional' year

IN the volatile battleground of Irish financials, FBD's shareholders have a lot to be grateful for. Not only are their shares up about 33pc so far this year, they're also getting full-year dividends worth about 4pc of yesterday's share price.

The future, though, is eminently more important than FBD's past and the insurer is already cautioning that the immediate future may be a bit less rosy than the "exceptional" 2011, with this year's earnings per share expected in the 145c to 155c against 2011's 170c.

The likely negatives include more "normal" levels of large claims than 2011's unexpected trough and lower investment returns, as FBD sacrifices profits for the safe haven of investments like cash.

FBD is also facing into a more competitive market next year -- fresh from its acquisition of 123.ie, RSA is rapidly growing, while Quinn Insurance's new owner Liberty is keen to make its mark and Aviva will be a more coherent force in the market once its restructuring is done.

Add into the mix that general insurance sales fell 4.9pc across the market last year and you see how difficult it will be for FBD to grow top-line revenue even without the challenge of zealous competitors (in fact FBD's sales fell 2pc in 2011).

This will also be the full year of the 2pc insurance levy triggered by the collapse of Quinn -- insurers insist they will pass it on in its entirety, but the existence of the levy is likely to curb insurer's ability to pass on other rate hikes.

The other thing that could upend 2012's results is the fact that FBD's guidance assumes no exceptional weather events -- a repeat of the floods and snow from 2010/2011, and the numbers slide downwards.

On the plus side, FBD is finally (almost) all about the insurance. The volatile property and leisure business -- so long a drag on results and a distraction on results day -- is now a footnote after being hived off in a joint venture (€500m loss attributed to FBD for the seasonally-weak fourth quarter).

The other positive is that FBD's cost base has improved in recent years, and its core base is strong.

FBD is now insuring more farms and selling more products to farming families than ever before -- with one analyst suggesting as much as 40pc of the insurer's revenue is now farm-linked.

Since farming is wearing the recession better than almost every other sector, that's a major plus.

The true test of slimmed-down FBD's success will be whether it can leverage that farming base, and management's other strategic initiatives, as the cornerstone of a company that can grow profitably despite a pretty adverse external climate. 2012 promises to be a telling year.

Irish Independent