FMG Unaffected by Insurance Sector Turmoil

FMG Unaffected by Insurance Sector Turmoil

New Zealand’s leading rural financial services company FMG remains upbeat while its competitors and the sector are going through major upheaval or feeling the effects of international turbulence.

FMG General Manager Sales and Marketing David Clapperton said the Palmerston North based insurer is overseeing strong growth in its business in both New Zealand and Australia, and recently has had its credit rating reaffirmed to A- (Excellent), emphasising its ability to meet its claims. FMG’s Australian business is growing at 25 percent per annum while New Zealand is achieving growth of around 15 percent.

“Several listed insurers have suffered credit rating downgrades and had to bear the lost of hundreds of millions of dollars in stockmarket value,” Mr Clapperton said.

“We’re one of the few in New Zealand not going through major upheaval, whereas many of our competitors have been restructured, merged, are up for sale or looking to raise capital.

“In 1960 consumers had 100 insurers to chose from - now there’s 25 and with the exception of FMG and a couple of others the rest are controlled by overseas interests.

“We remain a mutual and have stuck to what we know best – the rural sector. It’s been good for us in recent years and we’ve successfully broadened our customerbase to all those businesses that service the rural sector and those who live in provincial New Zealand.”

Mr Clapperton said that the insurance market had experienced considerable upheaval and change following a period of merger and acquisitions in the late 1990s, exacerbated by the tragic events of September 11, 2001. The terrorist attacks cost the international market in excess of NZ$120 billion, impacting significantly on reinsurance and driving up the cost of premiums.

FMG has some 35 percent of the rural insurance market and as a mutual, owned by its members, is not controlled by overseas shareholders seeking the optimum return every year.

Mr Clapperton said that the long-term view of the international insurance sector is unclear, given that there is a threat of a war in the Middle East. However, he was confident FMG would retain its focus on rural communities and continue to provide competitively priced products in New Zealand and Australia.

“FMG has been through some fine-tuning in the 2001-2002 year and operating costs have been reduced. These changes have set FMG on a good growth path as we move toward our centenary celebrations in 2005.”

He cautioned farmers and other rural businesses trying to offset lower returns by cutting their insurance cover.

“Often accountants advise farmers and businesses to look at their costs such as insurance. There is a downside to that because it puts greater risk on the farmer and the floods and fires we’ve seen in Australia show that calamities do occur.

“Farmers and business are better off focusing on productivity growth and letting their insurer carry the risk. We urge farmers and rural businesses to avoid cutting replacement values or hiking up their excesses.”

FMG provides a full range of financial services tailored to the needs of rural communities including fire and general insurance, medical and travel cover, finance, mortgages, financial planning and investments.

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