AM BEST AFFIRMS FMG INSURANCE LIMITED CREDIT RATINGS

KUALA LUMPUR, March 3 (Bernama) -- Global credit rating agency, AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of ‘a’ (Excellent) of FMG Insurance Limited (FMGIL) (New Zealand). The outlook of these Credit Ratings (ratings) is stable.

According to a statement, the ratings reflect FMGIL’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. In addition, the ratings factor in a neutral holding company impact from the company’s 100 per cent ownership by Farmers’ Mutual Group (FMG).

The company’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation being at the strongest level in fiscal year 2021, as measured by Best’s Capital Adequacy Ratio (BCAR), with the expectation that it will remain at the same level over the medium term.

In addition, FMGIL is considered to have a comprehensive reinsurance programme that provides protection against very high-severity modelled catastrophe events in New Zealand, whereby, AM Best views the company’s investment portfolio to be of moderate risk with focus on cash and high-quality fixed income securities, albeit with some exposure to equities.

A partially offsetting balance sheet strength factor is the company’s limited financial flexibility, given its ultimate ownership by FMG, a mutual organisation.

AM Best assesses FMGIL’s operating performance as adequate. The company has generated a five-year average return-on-equity ratio of 8.4 per cent (fiscal years 2017-2021). Operating results over this period were largely driven by robust investment returns. Although the company’s investment performance in fiscal year 2020 was affected adversely by financial market volatility driven by the COVID-19 pandemic, the investment result improved significantly in fiscal year 2021, arising from the rebound of equity markets.

For the first nine months of fiscal year 2022, the company has continued to report positive operating and underwriting results. Prospectively, AM Best expects a robust pricing strategy and positive investment returns to support the maintenance of adequate operating performance.

AM Best views FMGIL’s business profile as neutral. The company benefits from its established profile as a leading rural insurer in New Zealand, despite having a relatively small market share of approximately six per cent of the overall non-life segment, based on 2021 gross premiums written (GPW).

FMGIL has a strong direct distribution business model, aided by its close relationships with customers and its ownership by FMG, which has a long history and strong brand recognition in New Zealand’s rural sector.

For more information, visit www.ambest.com.

-- BERNAMA