February 24, 2009

Commercial Property Insurer FM Global Reports 2008 Financial Results

JOHNSTON, R.I.—Despite the tumultuous economy, FM Global, one of the world’s largest business property insurers, maintained a solid balance sheet with strong liquidity in 2008, the company announced today, citing the continued strength of its policyholder surplus, stable underwriting capacity, high client-retention rate, workforce growth and superior financial strength ratings.

The mutual insurance company reported it followed through on providing its mutual policyholders, who are its owners, with US$360 million in membership credit for those who renewed their policies in 2008, marking a total of US$1.3 billion returned to clients since 2001. FM Global also finished the year with a cash and short-term investment portfolio valued in excess of US$900 million.

Gross premium in force fell by 5 percent to US$4.5 billion, due primarily to the stronger U.S. dollar in the second half of 2008, yet, the company generated an underwriting profit, finishing the year with a combined ratio of 99.3 percent.

Net income from operations was US$308 million before realized investment losses and income taxes. However, due principally to the impact of the financial markets in 2008 on the market value of its investment portfolio, the company recorded a net loss of US$318 million and policyholder surplus declined by US$1.6 billion to US$4.6 billion.

FM Global’s client-retention rate remained at a historically high level—nearly 95 percent—substantially higher than the industry average.

“Even during a period of economic turmoil, FM Global’s 2008 results prove our business model works,” said Shivan S. Subramaniam, chairman and chief executive officer. “The client retention numbers alone show that FM Global’s policyholders have a great level of confidence in our ability to deliver our products and services on a worldwide basis, in a smooth and seamless manner, regardless of economic conditions.

“As we enter 2009 and our 174th year in business, FM Global continues to be an oasis of stability for our clients—and our employees.”

Among the company’s 2008 highlights:

• FM Global’s “A+” (Superior) financial strength rating was affirmed with a “stable” outlook by insurance ratings company A.M. Best.
• FM Global increased the size of its insurance-based workforce by approximately
  3 percent, predominantly driven by the company’s expanding global reach, in support
  of its policyholders.
• The company established an insurance subsidiary and office in Monterrey, Mexico, to serve its growing number of clients in the region and to enhance the availability of its products and services.
• FM Global received numerous awards from independent third parties including: being named “Best Property Insurer in the World” by Euromoney magazine; rated number one “for overall product and service quality” according to Strategic Risk magazine; and recognized for “Outstanding Claims Handling Performance” by research firm Greenwich Associates, based on high survey ratings from mid-market and large corporate insurance buyers.
• Approximately 93 percent of FM Global’s policies were delivered to clients within 30 days of inception, and more than 60 percent of those were delivered before the policy’s inception date—well above industry averages.

Looking ahead at the insurance industry in 2009, Subramaniam expects insurance buyers will see that the reduction in industry capital will impact pricing and availability of insurance capacity. He noted that, with expected increases in commercial property-related risks and the frequency and severity of natural catastrophes, coupled with companies’ lean 2009 risk management budgets, the business continuity preserved by making risk improvement a priority is especially important in these difficult economic times.

“FM Global’s mutual structure allows us to maintain a confident and optimistic outlook,” added Subramaniam. “With our very solid balance sheet, committed and professional workforce with an average tenure of 14 years, proven long-term working relationships with our clients and unique products and services that create value, FM Global can responsibly and patiently work with our policyholders to better protect their business operations successfully from property risk and navigate through these difficult economic times.”

Established nearly 175 years ago, FM Global ranks 583 among FORTUNE Magazine’s largest companies in America. More than one out of every three FORTUNE 1000 companies and similar-sized organizations operating in more than 130 countries work with FM Global to develop robust property insurance and engineering solutions to protect their business operations from fire, natural disasters and other types of property risk. The company also has a financial strength rating of AA (Very Strong) from Fitch Ratings.

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