AM Best Affirms Credit Ratings of FMG Insurance Limited

SINGAPORE--(BUSINESS WIRE)--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.

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 FMGIL’s 100% ownership by Farmers’ Mutual Group (FMG).

FMGIL’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which is expected to remain at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company continues to demonstrate prudent capital management to support a sizable buffer above the minimum regulatory solvency. FMGIL is considered to have a comprehensive reinsurance programme that provides protection against high-severity modelled catastrophe events in New Zealand. AM Best views the company’s investment portfolio 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 FMGIL’s limited financial flexibility, given its ultimate ownership by FMG, a mutual organisation.

AM Best assesses FMGIL’s operating performance as adequate. The company recorded robust underwriting profits over the last five years, albeit exhibiting a level of volatility due to catastrophe-related losses in New Zealand. Following the adverse impact of claims cost inflation and several large weather events in fiscal-year 2023, FMGIL’s underwriting performance improved significantly in recent years, as a result of favourable loss experience. Investment income continues to be a key contributor to overall earnings. Prospectively, AM Best expects the company’s robust pricing strategy and positive investment returns to support the adequate operating performance assessment.

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 modest market share of the overall non-life segment. FMGIL has a strong direct distribution 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 diversify its insured risks across the country.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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