The Irish insurance market shrank in the first quarter of the year, but FBD said its premium levels were in line with 2011, and policy volume grew.

The group's growth in policies came despite tough competition in the market .

"The market continues to be very competitive as evidenced by the level of advertising spend and the pricing of business insurance risks," FBD said in a statement.

Average revenue per policy was lower, but costs were also reduced as a combination of milder weather in the first three months of the year, a reduction in road travel by consumers and cost management initiatives by FBD helped reduce claims over the period.

Road fatalities were down 21 per cent in the quarter compared with a year earlier, and FBD said there was an improvement in both the frequency and average cost of property related claims.

"However, the frequency of large claims reverted towards the norm from a particularly low level in the first quarter of last year and was in line with expectation," FBD said.

In its underwriting operations, operating profit was just head of expectations, while the financial services business was in line with predictions.

The company said it expects domestic demand to fall further in the months ahead, although the decline will be at a diminishing rate.

"However, our continued focus on a buoyant agri sector, the opportunities provided by NoNonsense.ie and the expansion of FBD's broker channel will together provide FBD with the potential to outperform the market again in 2012," FBD said.

The group reaffirmed its previous guidance of operating earnings per share of between 145 and 155 cent for the year.