FWD Group Holdings' (FWDGHL) bottom line, underpinned by sustained growth through both onshore and offshore channels in Hong Kong and a solid business presence in Thailand, is expected to continue to improve in 2025 according to Fitch Ratings. The group's growth is also expected to benefit from its established bancassurance channel.
The gradual release of contractual service margin (CSM) associated with the Athene reinsurance arrangement completed in 2023 will also contribute to future earnings sustainability, the global credit rating agency adds.
First-time net profit
Fitch Ratings notes that FWDGHL recorded a net profit of $10m in 2024, driven by stable new business and CSM generation, favourable investment results and reduction in one-off expenses. The new business CSM and value of new business (VNB) grew by 31% and 14% year on year, respectively, on like-for-like actuarial methods and operating assumptions. The group's fixed-charge coverage ratio improved to 1.9x by end-2024, from -1.3x a year earlier, with higher pretax operating earnings.
Nonetheless, the net profit attributed to the shareholders of the company remained negative, resulting in ROE of -1.3% in 2024.
Ratings affirmed
Fitch has affirmed FWDGHL’s Issuer Default Rating (IDR) at 'BBB+' and the Insurer Financial Strength (IFS) Ratings of its operating subsidiaries at 'A' (Strong)'. These include FWD Life Insurance Company (Bermuda) [FWD Life HK] and FWD Life Insurance Company [FWD Japan]. The outlook is ‘Stable’.
Fitch has also affirmed the ratings of FWDGHL's US dollar senior unsecured notes and global medium-term note programme at 'BBB' and its dated and perpetual subordinated securities at
'BBB-'.
The rating affirmation reflects FWDGHL's robust capitalisation on a consolidated basis, 'Favourable' company profile, balanced maturity profile and steady generation of new business and CSM.
Aside from financial performance, key rating drivers for FWDGHL include:
Solid capitalisation, balanced maturity schedule: Fitch believes FWDGHL has a sufficient capital buffer to support the ongoing expansion of its operating insurance subsidiaries. Its Fitch Prism Global model remained at 'Extremely Strong' at end-2024. The group's capital cover ratio, measured by the local capital summation method (LCSM) on a prescribed capital requirement basis, was 260% at end-2024 (end-2023: 292%). The group transitioned to the Hong Kong risk-based capital reporting from the Bermuda basis for its Hong Kong business when it determined the LCSM cover ratio in 2024. The financial leverage ratio was 25% at end-2024, similar to the 24% a year earlier.
The group issued $325m in 10-year medium term notes in December 2023, $900m in five-year subordinated notes in April 2024 and $600m in seven-year subordinated capital securities under its global medium-term note programme in July 2024, successfully refinancing all debt instruments with maturity in 2024. The extended and well-spread maturity schedule eases near-term refinancing pressure. The group had undrawn revolving credit facilities of $1.9bn at end-2024, backing up its liquidity.
'Favourable' company profile: Fitch ranks FWDGHL's company profile as 'Favourable', based on a 'Favourable' business profile and 'Neutral' corporate governance compared with that of other life insurers in Hong Kong. FWDGHL has a large operating scale and customer base, sound business franchise and broad geographical distribution coverage in 10 markets across APAC. The geographically diversified revenue basis is one of the group's core strengths.
Risky-asset ratio aligned with rating: FWDGHL's risky-asset ratio declined to 92% by end-2024, from 99% at end-2023, primarily due to the lower fair value of below-investment-grade bonds and equity-related investments in the numerator. The ratio remains commensurate with its current rating.
Below-investment-grade bonds were 16% of its equity capital. FWDGHL could reduce policyholder dividend rates upon a major capital market shock, given the large proportion of equity-related investments in its insurance funds with participating features.
FWDGHL's 'core' subsidiaries: Fitch assesses FWD Life HK and FWD Japan as the group's 'core' operating subsidiaries, based on the credit rating agency’s group rating criteria, and base the subsidiaries' ratings on FWDGHL's financial strength on a consolidated basis. FWD Life HK and FWD Japan contributed about 32% and 19%, respectively, to the group's total weighted premium income in 2024.
Indonesia
Separately, Fitch Ratings Indonesia has affirmed FWD Insurance Indonesia's National Insurer Financial Strength (IFS) Rating at 'A+(idn)' with a ‘Stable’ outlook. The rating reflects the company's synergy with the group, narrower loss and prudent investment approach.
Fitch has simultaneously chosen to withdraw FWD Indonesia's rating for commercial reasons.