Shares in FBD soared after the insurer surprised the market with a trading update indicating annual profits would be more than twice analyst expectations.
he stock rose as much as 8pc on Wednesday before settling 6.5pc higher at €13 as investors and brokers absorbed the new forecast, making FBD the leading performer on the Irish Stock Exchange.
Davy raised its price target on the company to €15, while Goodbody suggested dividends could rise above the expected €1 per share on the boost in performance.
The excitement in the stock stemmed from a post-market update issued on Tuesday evening saying pre-tax profits for 2022 were expected to be €70m – far ahead of analysts’ forecasts of a result in the €31m-€34m range.
The expected strong earnings come despite investment losses of €10m and a steep writedown of €90m on FBD’s bond portfolio, indicating a robust commercial performance for the insurer.
“The FY 2022 trading update provides further evidence that FBD is conservatively run, with lower claims expenses resulting in a material beat versus prior guidance or market expectations,” said Davy financials analyst Diarmaid Sheridan.
He added that the higher interest rate environment would support FBD’s profitability going forward as yields on its bond and cash portfolios rose and lower yielding holdings rolled over into higher yielding new bonds.
FBD said its performance last year was due to lower claims frequency and benign weather conditions. The company also cited lower claims in its interim results last August, indicating that the trend is continuing.
However, the insurer’s increased profitability and planned shareholder distributions could prove controversial among customers who in some cases are being charged higher premiums despite the fall in claims.
This is the second year in a row that FBD has delivered a positive earnings surprise.
FBD experienced an extraordinary turnaround in 2021, booking a higher-than-expected pre-tax profit of €110m and reinstating dividends that had been suspended during the Covid-19 pandemic.
Chief executive Tomás Ó Midheach said at the time that such a performance was not repeatable because normal claims hadn’t materialised.