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FBD reports dip in profits as market volatility impacts investments

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Insurer FBD recorded a dip in its pre-tax profit for the first half of the year as it reported that rising inflation and interest rates had impacted investment returns.

BD reported a profit before tax of €19m in the six months ended 30 June 2022 compared to €22m for the same period last year.

It also reported an underwriting profit of €34.5m.

The firm had gross written premiums of €193m in the first half of 2022, a figure which rose by 3.3pc on the year prior, excluding the impact of Covid-19 related rebates.

The policy count increased by 3.1pc in the first six months of the year, while business retention levels are at the highest in five years.

Average premiums remained flat across the portfolio, with private motor insurance down 8pc.

FBD noted the impact of interest rate rises and market volatility as it reported negative investment returns of €15.2m, with group chief executive Tomás Ó’Midheach saying this had impacted the insurer’s results.

“Investment markets had an exceptionally challenging first six months to the year, the increase in inflation and resultant higher interest rates is impacting our returns and reducing the valuation of the FBD bond portfolio. Spreads have also widened which increased bond yields further,” he said.

Net claims were reduced by €21.9m to €85.6m. The volume of claims rose 5pc year on year, with motor damage notifications rising by 29pc as traffic volumes returned to pre-pandemic levels.

FBD said that inflation on parts and labour is impacting the cost of repair of cars and as a result, claims have risen as people do not wish to pay for repairs outside of their insurance.

Property damage claims remain in line with 2021 figures.

FBD also said that there is an expected reduction in claim costs as a result of the new Personal Injury Guidelines.

“The Personal Injury Guidelines appear to be having the desired effect of lowering costs for minor injury claims justifying the premium reductions given to our customers,” said Mr Ó’Midheach.

He also added that a further hearing is scheduled for FBD’s Business Interruption test case in November to discuss two remining issues – “to determine the quantification of partial losses in respect of the bar counter and the treatment of Government subsidies.”

The net best estimate in respect of Business Interruption reduced by €1m to €43m since end of 2021, according to FBD.

In March, it said It paid out €30m in interim payments of for business interruption claims following a High Court ruling in January that it must cover losses for pub customers even when venues were allowed to partly open.

“The economic conditions in general are challenging as our customers and all businesses face higher inflation impacting purchasing power and more subdued growth rates. Inflation is feeding into the cost of settlement of Motor Damage and Property claims. Market risk will remain high for the foreseeable future, although we expect to benefit from higher yields on bond reinvestment,” Mr Ó’Midheach said.