Friday, March 29, 2024

FMG ups reserves despite record claims

Avatar photo
A big increase in claims cut into insurer FMG’s earnings but it was still able to increase capital reserves.
Reading Time: 2 minutes

The biggest rural insurer, with about 50% market share of farm cover, had an after-tax profit of $5.3 million in the year to March 31, down from $26.8m a year earlier.

Claims jumped to $129m from $103m and were mainly smaller, unrelated for loss from house fires, flooding, frosts and vehicles rather than from large storms.

That meant FMG had to carry the bulk of claims itself rather than lean on reinsurance cover. Reinsurance income was down to $4.8m from $19.9m.

“They (claims) were up 25% and we can cope with that but we don’t need it every year.”

Chris Black

FMG

The claims figure was the highest in the mutual group’s 111-year history.

“They were up 25% and we can cope with that but we don’t need it every year,” chief executive Chris Black said.

Chairman Greg Gent said the nature of insurance was that claims could vary widely year to year.

The potential for a jump in claims was anticipated and FMG’s strong capital base was well placed to absorb them, Black said.

FMG’s solvency ratio was more than twice the Reserve Bank requirement.

Strong premium growth underpinned the equity increase in the customer-owned mutual. Gross premiums rose to $225m from $209m and though investment income nearly halved to $12.7m, the group equity rose to $229.4m at balance date from $224m previously.

Equity made up 52.6% of total assets. Investment income was largely tilted to fixed interest returns.

The premium increase was based on a high business retention rate of 95%, Black said.

The retention rate for farmers alone was 97%. New clients switched from other insurers and gains were also made from new products such as those aimed at horticulture and viticulture businesses rather than from higher premiums in a competitive market.

As well as its farm focus, FMG had a sizeable lifestyle block and provincial urban business and had also been building up personal insurance products for farmers in recent years.

Client numbers were up 5% over the year and client satisfaction reached 92%, also a record.

A major programme for the group was working with police and Federated Farmers on rural crime prevention.

“We’ve paid out about $21m over the last five years on thefts and burglaries at a rate of about 28 claims a week, averaging about $2800 per claim so we’re making people aware about security for their homes, toolsheds and vehicles.”

FMG was also putting a lot of focus on its Farmstrong programme, set up with the Mental Health Foundation, to help farmers stay in good shape to cope with the ups and downs of farming. The results in the first year were ahead of expectations, Black said.

“Farmstrong is a give-back programme for us and we’re in it for the long haul.”

Total
0
Shares
People are also reading