The capital cover ratio of FWD Group Holdings Limited (FWDGHL) saw a big drop in 2024, falling to 260% at the end of the year from 292% in the previous year, according to a commentary by Fitch released on Thursday.
Despite this, the credit ratings agency affirmed the Hong Kong-based group’s Long-Term Issuer Default Rating at ‘BBB+’ and the Insurer Financial Strength (IFS) Ratings of its operating subsidiaries at ‘A’ (Strong), with a stable outlook. The rating covers FWD Life Insurance Company (Bermuda) Limited (FWD Life HK) and FWD Life Insurance Company, Limited (FWD Japan).
The affirmation comes as FWDGHL posted a net profit of US$10m in 2024, supported by steady new business and CSM generation, favourable investment results, and a reduction in one-off expenses.
The new business contractual service margin (CSM) and value of new business (VNB) rose by 31% and 14% year-on-year, respectively, based on consistent actuarial methods and assumptions. The group’s fixed-charge coverage ratio also improved to 1.9 times by end-2024, from -1.3 times a year earlier, backed by stronger pretax operating earnings.
However, net profit attributed to shareholders remained in negative territory, resulting in a return on equity (ROE) of -1.3% in 2024. Fitch expects growth in its Hong Kong distribution channels and its business presence in Thailand to support earnings in 2025.
FWDGHL’s risky-asset ratio, meanwhile, declined to 92% in 2024, down from 99% a year earlier, due to lower fair values of below-investment-grade bonds and equity-related investments in the numerator.
The group issued US$325m in 10-year medium-term notes in December 2023, US$900m in five-year subordinated notes in April 2024, and US$600m in seven-year subordinated capital securities under its medium-term note programme in July 2024. The group also had undrawn revolving credit facilities of US$1.9bn at end-2024, backing up its liquidity.
On the balance sheet side, the company recorded a capital cover ratio of 260% in 2024, down from 292% a year earlier. This is measured using the local capital summation method (LCSM) on a prescribed capital requirement basis. Its financial leverage ratio stood at 25% at the end of 2024, slightly higher than the previous year’s 24%.
FWDGHL is reportedly eyeing a public listing in Hong Kong as early as next week, aiming to raise up to US$500m in its IPO, according to Reuters sources speaking on background. The deal, if it goes ahead, would mark the firm’s third attempt to list. The company, however, declined to comment on the news.
The group operates in 10 markets across Asia-Pacific. Its company profile is assessed by Fitch as ‘Favourable’, based on a ‘Favourable’ business profile and ‘Neutral’ corporate governance relative to other life insurers in Hong Kong.
