Strong capital position, improved profitability, and reduced financial leverage of the FWD Group, accompanied by its successful IPO listing, were key factors driving the latest ratings action by Moody’s Ratings on 17 July (Thursday).
The ratings agency upgraded FWD Group’s issuer rating to Baa1 from Baa2, as well as the insurance financial strength rating (IFSR) of its subsidiaries, FWD Life HK and FWD Re, to A2 from A3, all with a revised outlook of stable.
The upgrade followed FWD’s trading debut on the Hong Kong Stock Exchange (HKEX) on Monday (7 July), raising an estimated US$442m, which is about 6.5% of its shareholder equity as of end-2024. The group attracted high investor interest in its public offering, oversubscribed by at least 37 times.
Moody’s stated that the listing has improved FWD’s financial flexibility, adding that it “further strengthened capital buffer and enhanced its access to capital markets.”
FWD has also demonstrated sustained growth in its operating profits across key markets, with a 32% year-on-year increase in the value of new business and a 55% rise in new business contractual service margin in the first quarter of 2025.
The company benefits from a lower expense overrun, reflected in reduced embedded value operating expense and commission variance in 2023 and 2024, Moody’s said, adding that further deleveraging would also help FWD control its financing costs.
Profitability likely to see gradual improvement
Moody’s underscored the group’s robust regional presence, reflected in its notional A2 IFSR. Key strengths include bank partnerships and diversified product offerings, alongside good asset quality: over 80% investment funds are in fixed-income holdings, and over 90% of its corporate bond holdings are investment grade.
Notably, its Hong Kong business, backed by billionaire Richard Li, has drawn strong premium growth in domestic and mainland Chinese visitor segments, according to Moody’s.
However, the ratings agency identified several offsetting factors, including FWD’s historically weak earnings track record and low interest coverage, primarily due to upfront expenses for business expansion.
Additionally, FWD’s growing exposures in less-developed markets, Thailand, Indonesia, and Vietnam, introduce operational risks and volatility compared to more developed markets.
Moody’s stated, “While we expect its profitability to improve gradually, its earnings coverage will not materially improve in the next 12-18 months as its financing expenses will stay relatively high compared to its operating profit.”
As such, Moody’s highlighted the strategic importance of FWD Re as it serves as a captive reinsurer, sharing similar risks with the group.
Despite these challenges, FWD remains well capitalised with a Group-Wide Supervision coverage ratio on a prescribed capital requirement basis at 260% as of 2024. From 2023 to the first half of 2025, its operating companies also maintained strong solvency ratios and increased net capital remittance to the company, Moody’s noted.
Looking ahead, Moody’s expects that the company will sustain a steady momentum in earnings and capital generation over the next 12-18 months, driven by an expanding profitable in-force book, enhanced cost efficiency, and a favourable interest rate environment.
