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Best’s News & Research Service - January 25, 2019 11:13 AM (EST)

AM Best Affirms Credit Ratings of FMG Insurance Limited

  • January 25, 2019 11:13 AM (EST)
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Singapore //BestWire// - AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” 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 categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

FMGIL’s balance sheet strength is underpinned by its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which AM Best expects to remain at the strongest level over the medium term. The company is viewed to have a comprehensive reinsurance programme, which protects its earnings and balance sheet against very high severity catastrophe events in New Zealand, as well as a prudent capital management policy, which has led to a robust buffer in its local regulatory solvency position and AM Best’s view of capital adequacy. A partially offsetting balance sheet factor is the company’s limited financial flexibility, driven by its 100% ownership by Farmers’ Mutual Group (FMG), a mutual organization.

AM Best views FMGIL’s operating performance as adequate, with the company having generated a five-year average return on equity ratio of 4.5% (fiscal years 2014-2018). Operating results over this period were driven by investment operations, with the company’s five-year average combined ratio having been at a near breakeven position, largely driven by weather and earthquake events in fiscal years 2016 and 2017. Prospectively, the positive impact of recent premium rate adjustments on underwriting performance and continued robust investment returns are expected to support the maintenance of adequate operating results.

AM Best views FMGIL’s business profile as neutral. The company continues to benefit from its position as a leading rural insurer in New Zealand, albeit occupying a relatively small overall market share of 5%, based on 2018 non-life gross written premiums. FMGIL continues to exhibit a strong direct distribution business model, supported 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. Although the company only operates in New Zealand, its premium base is less geographically concentrated when compared with other domestic general insurers as its focus on the rural and provincial sector helps to spread its insured risks across the country.

AM Best views FMGIL’s ERM framework as developed and its approach to managing key risks as appropriate given the size and complexity of the company.

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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.

New Zealand Financial Strength A.M. Best Asia-Pacific Limited Press Release Insurance Issuer Credit Rating Best's Credit Rating Action

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