SINGAPORE--(BUSINESS WIRE)--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. In addition, the ratings factor in a neutral holding company impact from the company’s 100% ownership by Farmers’ Mutual Group (FMG).
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 program, which protects its earnings and balance sheet against very high-severity catastrophe events in New Zealand, as well as a prudent capital management policy, with the company maintaining a robust buffer in its local regulatory solvency position and in 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 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 5% (fiscal-years 2015-2019). 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 the impact of weather and earthquake events in fiscal-years 2016 and 2017. Underwriting results have improved since 2018, due to management actions including premium rate adjustments. Prospectively over the medium term, AM Best expects a robust pricing strategy and continued stable investment returns to support the maintenance of adequate operating results.
AM Best views FMGIL’s business profile as neutral. The company continues to benefit from its established position as a leading insurer in New Zealand’s rural market, albeit occupying a relatively small market share of 5% of the overall domestic non-life market, based on 2019 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 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.
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