FWD Group outlook turns positive: Moody’s

Driven by an improved earnings report and partnerships, the insurer shifted from ‘stable’ to ‘positive’.

FWD Group has proven better earnings through expansion, emerging profits from existing policies, strong capitalisation, and market position, whilst a positive outlook is expected, Moody’s said.

Improved earnings and a successful refinancing plan are anticipated to strengthen interest coverage and financial flexibility.

After its acquisitions and bancassurance partnerships, FWD Group has risen to become the second-largest player in Thailand and has notably expanded its distribution network in Indonesia, Malaysia, and Vietnam.

Leveraging the growth in these markets along with well-established operations in Hong Kong, China, and Japan, the underlying value of new business has demonstrated a 33% compound annual growth rate (CAGR) between 2019 and 2022, despite pandemic-related disruptions.

FWD Group's major operating companies in various markets have maintained robust local solvency ratios.

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These strengths, however, are counterbalanced by its earnings track record, which has been influenced by new business strain due to rapid growth and relatively low-interest coverage in comparison to interest expenses.

Moreover, while its earnings trajectory is improving, FWD Group has an expanding exposure to less-developed markets like Thailand, Indonesia, and Vietnam. This brings along higher operational risks and volatility compared to more developed markets.

FWD Group's outstanding debt instruments from FWD Limited and FWD Group Limited are expected to be transferred to FWD Group soon, making it the exclusive issuing entity within the group.

Moody's evaluation of FWD Group's environmental, social, and governance (ESG) risks includes an assessment of its governance.

The group's risk management and governance align with industry standards, overseen by the Hong Kong Insurance Authority. Despite concentrated ownership, governance concerns are alleviated by the presence of five independent non-executive directors on the 11-member board.

Consequently, the outlook for FWD Life HK and FL has also shifted to positive from stable, mirroring FWD Group's outlook.

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