UPDATE 1-Insurer FBD sees H1 earnings hit, improving rates

(Adds analyst comment, share price)

DUBLIN, June 26 (Reuters) - Irish insurer FBD (FBD.I) (FBH.L)said on Thursday that volatile financial markets and a weak UK property market has hit its earnings in the first half of 2008, but its forecast of improving premiums lifted shares.

FBD said net earned premiums in its primary underwriting business were in line with the same period in 2007, with an improvement of rates expected in the second half of the year.

FBD, which has also invested in hotels and golf courses, said however that challenging market conditions in Ireland and Spain have resulted in a "behind budget performance" in the year to date in its non-underwriting business.

"The volatility in financial markets and the weakness in the UK commercial property market has had an impact on short term fluctuations in investment return, and consequently on profit before taxation," FBD said of overall group performance.

Shares in FBD traded 3.9 percent higher at 21.5 euros at 0808 GMT, outperforming the wider Irish market .ISEQ which was 0.2 percent higher.

"The main thing is that their outlook for prices is relatively positive, they continue to expect that prices will begin to harden in the second half of the year," said Anna Lalor, analyst at Goodbody Stockbrokers.

She said investors would also welcome FBD's announcement that it had further reduced its investment in equities due to the uncertain outlook for financial markets.

"They have lowered that exposure, so that would be another positive," Lalor said. (Reporting by Andras Gergely; Editing by Erica Billingham and Sue Thomas)