UPDATE 1-Irish insurer FBD's earnings slide; cuts dividend

* Full-year dividend nearly halved

* Write-offs of nearly 127 million euros

* Shares down 15 percent

(Adds more detail, quotes)

DUBLIN, March 4 (Reuters) - Irish insurer FBD (FBD.I) reported on Wednesday a 46 percent drop in full-year underlying earnings, just shy of its own guidance, and nearly halved its dividend sending its shares sharply into the red.

FBD FBD.L, Ireland's third-largest general insurer, also said stiff competition in the local market and weaker investment returns could also hit this year's results after rising claims and lower returns hammered last year's performance.

"We would see our underwriting result at this stage of the cycle a little bit lower than the 2008 figure," Chief Executive Andrew Langford told Reuters.

"Our longer-term rate of investment return may be slightly lower as well because the longer-term outlook for interest rates is lower."

At 0940 GMT, FBD's shares were nearly 17 percent weaker at 5.92 euros in a general market .ISEQ up over 3 percent.

"A lot of investors would have been holding the stock to get the good dividend payout," said one Dublin-based dealer.

"FBD joined the queue of companies doing this (cutting the dividend) but if you look at the state of their balance sheet, it's in really, really good nick."

The group said it would pay out a dividend of 40.25 cents for 2008, nearly half last year's level.

Langford said the company wanted to be prudent with its capital but its long-term goal remained a payout ratio of about 40-50 percent of operating earnings after interest.

This year's dividend was around 25 percent of earnings.

TAKEN THEIR MEDICINE