The ratings reflect FMGIL’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect FMGIL’s modest underwriting leverage, prudent capital management policy and direct distribution network capability.
FMGIL has a well-established profile within New Zealand’s farming and rural sector. Due to its rural and provincial focus, FMGIL’s insured risks are spread widely across the country. Hence, FMGIL has less geographic risk concentration proportionally relative to its peers. In turn, FMGIL is able to maintain adequate catastrophe protection, while keeping reinsurance costs affordable through a robust reinsurance program.
Partially offsetting rating factors are FMGIL’s variable operating performance and a deteriorating trend in its underwriting performance in recent years. Operating results in fiscal years 2016 and 2017 in particular took a downturn, primarily due to claims costs from multiple weather events along with the impact of the November 2016 Kaikoura earthquake. In response, the company has implemented price increases across business lines, and prospective underwriting results are expected to improve.
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