FWD Group's earnings set to improve, says Moody's

Geographic diversification of VONB sources has also improved.

Moody’s Ratings expects FWD Group's earnings and capital generation to gradually improve, bolstered by its “expanding profitable in-force book, improving cost efficiency and current high interest rates”. 

Despite reporting net losses in 2023 due to one-off reinsurance transaction and bond disposal losses, FWD Group's underlying profitability rose, with a 27% increase in adjusted operating profit after tax. 

This was supported by an 18% growth in annualized premium equivalents (APE) and a 22% rise in the value of new business (VONB). 

Geographic diversification of VONB sources has also improved, with operations in Hong Kong SAR, China, Thailand, and Japan.

FWD Group’s Group-Wide Supervision (GWS) coverage ratio stood at 292% as of December 2023. 

The group has issued $1.83b in medium-term notes and capital securities since the start of Q4 2023 to refinance existing debts. This has extended its debt maturity profile and slightly reduced interest expenses.

However, challenges remain, including a weak earnings track record and low interest coverage relative to expenses. Additionally, increasing exposure to less-developed markets like Thailand, Indonesia, and Vietnam introduces higher operational risks.