FBD plans to pay out €36 million in regular dividends to shareholders for a third straight year after posting a strong set of results that were in line with a recent sharp increase in guidance.
This equates to a dividend yield of about 7.8 per cent. The Republics only indigenous general insurer is also seen by analysts as well placed to pay a special dividend later in the year, having distributed a €36 million top-up to shareholders last October as it looked to reduce its surplus capital reserves.
FBD said on Friday that pretax profit last year rose 24 per cent to €81.4 million. The company said three weeks ago that the result would amount to about €80 million, way higher than the consensus estimate of almost €55 million among analysts at the time.
The better-than-expected results had been driven as the group released €44.4 million of reserves that had previously been set side for claims, as costs turned out to be less than feared, as well as €19.1 million of investment returns. The company had booked €10.8 million of investment losses in 2022.
Gross written premiums rose by 8 per cent to €414 million, with over 70 per cent of the increase coming through from farmer and business customers. Commercial premiums increased by an average of 5.3 per cent, “driven by a combination of sums insured increasing due to inflation in construction costs and customers increasing liability cover levels”, the company said.
Private Motor average premiums increased by 2.9 per cent. This followed a 7 per cent reduction by FBD in 2022. All told, motor premiums had declined across the industry by 22 per cent between a peak in late 2017 and the end of 2022, according to Central Bank data, helped by an industrywide decline in claims costs after new personal injury guidelines were approved by the Judicial Council in early 2021. Commercial motor premiums rose by 3.6 per cent last year.
FBD, led by chief executive Tomás Ó Midheach, said the rate increases were “applied to offset the increased cost of motor damage claims stemming from inflation in labour, parts and paint costs, and the higher costs associated with repair and replacement of advanced technology on newer vehicles”.
Average tractor premiums rose by 9.1 per cent due to a higher proportion of newer tractors, the increasing value of existing tractors and modest rate increases to offset inflation in the cost of damage claims.
FBD said that while there was an increase in named storms in 2023, the number of “attritional” weather events actually fell, resulting in weather losses being flat year-on-year.
Aside from paying a regular dividend last year, FBD paid out a €36 million special dividend to shareholders in October as it looked to distribute excess capital on its balance sheet.
“Given the surplus capital position of almost €120 million at end-2023, this bodes well for future special dividends, we think,” said John Cronin, an analyst with Goodbody Stockbrokers. He’s estimated the surplus capital off the midpoint of the capital reserves target that FBD has set for itself.
