Upbeat FMG Finishes 2002 in Good Heart

UPBEAT FMG FINISHES 2002 IN GOOD HEART

New Zealand’s leading rural financial services company FMG is finishing 2002 on a high note having had its credit rating reaffirmed and grown its market share.

Last month international ratings agency AM Best reaffirmed FMG as A- (Excellent).

FMG chief executive Gordon Smith said the reaffirmation of FMG’s credit rating was significant in that it showed that the company was in good financial health and well positioned to meet its claims.

More than one in three farmers are customers of FMG, giving the company a market share of 35 percent, the biggest slice of the rural financial services market.

The company’s growth has steadily increased since 1998 with total equity climbing 10 percent to $51,019 million over that period. Group revenues totalled $120 million in 2002, up nearly 36 percent since 1998.

Mr Smith said the insurance sector had been through significant turmoil since the New York disaster of September 11, 2001 when the international reinsurance market was turned upside down. As a consequence, reinsurers raised their premiums significantly in 2002 with some sectors increased by as much as 100 per cent.

“The terrorist attacks of September 11, 2001, changed the insurance market forever. While we’re positive about FMG’s future we are less certain that we’ve seen the last of the turbulence with the threat of war in the Middle East.”

Some insurers in New Zealand have increased the cost of premiums for some types of cover from between 20 per cent and 100 percent this year.

As a mutual, FMG is in the fortunate position of being able to cushion its customers from such price hikes. However, beginning December 2002, FMG will adjust premiums by a modest amount across a range of insurance products.

It is only the second time in seven years that the company has raised its premiums and for the majority of policyholders the increase won’t come into effect until next year.

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“We continue to be highly competitive in the marketplace and that’s across all of our insurances and products. Our mutual status means we don’t always have to increase premiums to create shareholder value like publicly listed companies.”

FMG has this month received repayment of $25 million from AFFCO New Zealand Limited, a short term financing arrangement FMG provided to AFFCO in 1998. While this investment has been a good performer over the past four years the directors of FMG now feel it is timely to seek further diversification and therefore have reduced the Group’s interest in AFFCO by 45 percent.

The FMG board now has two women directors, Marise James and Rita Evans, both of whom have strong commercial backgrounds and an affinity with the land. Rita and Marise join John McCliskie, Murray Donald, Ian McKelvie and Chairman Peter Jensen.

Mr Smith said that while the Group had reduced the number of branches from 32 to 24 over the past year, FMG had increased its sales staff in rural communities by 25 percent.

“We’ve fine-tuned this business and reduced costs. The changes we’ve implemented over the past year have set FMG on a good growth path as we move toward our centenary celebrations in 2005.”

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, and even cover for stock loss in the event of an outbreak of foot and mouth disease.

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