FWD Indonesia seen to improve in the next two years

The insurer said it will focus on selling protection products and unit-linked policies to enhance margins.

Fitch Ratings assessed PT FWD Insurance Indonesia’s (FWD Indonesia) National Insurer Financial Strength (IFS) Rating to have a stable outlook.

This was attributed to the company’s strong capacity to meet policyholder obligations compared to other obligations or issuers in the same country.

According to Fitch Ratings, FWD Indonesia is an essential subsidiary of FWD Group, which owns 79.05% of the Indonesian arm.

This relationship is expected to provide synergies and technical know-how to strengthen FWD Indonesia's business.

The insurer held a market share of about 1.5% of domestic life gross premiums in 2023 and aims to grow its value-in-new business through higher-margin protection products and unit-linked policies.

Fitch anticipates FWD Insurance's financial performance to improve over the next two years as it focuses on selling protection products and unit-linked policies to enhance margins, supported by the expansion of distribution channels in tied agency, bancassurance, and e-commerce.

In 2023, FWD Insurance's net loss increased to IDR1,797b from IDR255b in 2022 due to a one-off impairment loss from a bancassurance partnership, and high costs for brand building and network expansion.

The insurer recorded this impairment following the acquisition of PT Bank Commonwealth by PT Bank OCBC NISP Tbk, finalized in 2024.

Fitch expects FWD Insurance to continue receiving capital support from FWDGHL as it grows.

The insurer's regulatory risk-based capital (RBC) ratio fell to 259% by the end of December 2023 from 362% in 2022, due to premium growth and higher net losses.

Over 70% of FWD Insurance's investments are in cash equivalents and fixed-income securities, ensuring liquidity to meet insurance obligations.

The exposure to risky assets is manageable, and Fitch does not foresee significant changes in the investment mix over the next three to five years due to the insurer's prudent investment strategy.