New Zealand's FMG Insurance Rated Excellent - AM Best

KUALA LUMPUR, March 1 (Bernama) -- Global credit rating agency, AM Best has affirmed New Zealand’s FMG Insurance Limited (FMGIL) financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” (Excellent).

In a statement, AM Best said these credit ratings (ratings) which have a stable outlook, reflected FMGIL’s balance sheet strength, was assessed 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).

FMGIL is considered to have a comprehensive reinsurance programme that provides protection against high-severity modelled catastrophe events in New Zealand, with which its investment portfolio was viewed by AM Best to be of moderate risk with a 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.

The rating agency assesses FMGIL’s operating performance as adequate, with a five-year average return-on-equity ratio of 6.7 per cent (fiscal years 2019-2023). For fiscal year 2023, the company reported negative underwriting and operating results, due to a combination of claims cost inflation and the impact of several large weather events in New Zealand.

Notwithstanding this, AM Best expects the company’s robust pricing strategy and positive investment returns to help maintain its adequate operating performance assessment over the medium term.

FMGIL has a strong direct distribution business model that is built on long-standing customer relationships and supported through its ownership by FMG, which has a long history and strong brand recognition in New Zealand’s rural sector.

Whilst operating solely in New Zealand, FMGIL’s premium base is better diversified geographically compared with other domestic general insurers, as its focus on the rural sector helps to spread its insured risks across the country.

-- BERNAMA