New Zealand’s largest rural mutual insurer posted a $69.3 million net profit after tax for the year ended March 31, 2026, down from $119.2 million the prior year. The headline number, however, is not the most important part of this story. For brokers placing rural risks, the more pressing questions are about pricing direction, accumulating regulatory costs, and what a record catastrophe year signals for a segment of the market navigating simultaneous pressures.
Farmers’ Mutual Group (FMG) released its 2025/2026 Annual Report in August 2026, reporting a near-30% surge in insurance service expenses – from $474.2 million to $614.1 million – driven by what it described as the most significant year for catastrophic and weather-related events in the mutual’s 121-year history. That result sits in contrast to broader market conditions: the Insurance Council of New Zealand’s (ICNZ) data, covering around 95% of the general insurance market, shows the industry’s average combined ratio improved from 97.9% in December 2023 to 78.6% in December 2024. FMG, which does not report through ICNZ, closed its own year with a combined operating ratio of 92%.
FMG’s elevated claims year was not isolated. Three events drove much of the increase in weather-related losses locally: the October 2025 South Island windstorm, the February 2026 lower North Island storm, and ex-Tropical Cyclone Tam in April 2026, each affecting thousands of businesses simultaneously and overwhelming suppliers, tradespeople, and loss adjusters. IAG’s Wild Weather Tracker for the 12 months to the end of February 2026 recorded 46 storms – up from 29 the previous year – and 33,174 storm-related claims across IAG brands. FMG recorded four catastrophe-classified events during the year, generating approximately $51.9 million in net catastrophe claims, managed within its reinsurance programme.
For brokers placing rural risks, the widening gap between FMG’s insurance revenue and insurance service expenses is worth watching. Insurance revenue rose 5% to $709.2 million, while insurance service expenses increased 29.5% to $614.1 million, reflecting a much more challenging claims environment that included four catastrophe-classified events and about $51.9 million in net catastrophe claims. Across the broader market, ICNZ data shows gross written premium fell from $10.79 billion in 2024 to $10.55 billion in 2025 – the first decline in at least four years – with both IAG and Suncorp reporting declines in New Zealand gross written premium. New Zealand’s general insurance market remains in a soft phase, with Gallagher warning of a possible profitability “tipping point” within the next six months.
FMG’s results represent a counterpoint to that broader softness. How the mutual responds to the claims environment over the coming renewal cycle will be a key signal for brokers managing rural client portfolios. Chief executive Adam Heath framed the year in terms of long-term sustainability. “Like farming, insurance has its ups and downs. This year brought some significant challenges, including four major weather events, but the strength of the Mutual meant we were there to support our clients and members when they needed us most,” he said. Board chair Sarah von Dadelszen pointed to capital discipline as the underlying mechanism. “While profitability will fluctuate from year to year, FMG must operate commercially to ensure it can absorb volatility and remain solvent throughout the insurance cycle,” she said, adding that the board continues to target further strengthening of capital over time.
Beyond the claims environment, two regulatory developments are adding cost pressure across the market – and both land directly on rural policyholders. The FENZ levy restructure, which took effect on July 1, 2026, materially changes the cost equation for rural clients. The July 2026 framework extends the levy’s scope to asset types previously exempt: livestock, forestry, and growing crops now carry a levy for the first time, with livestock and forestry assessed at 0.0194% of sum insured. FMG noted in its own client guidance that livestock and forestry are now leviable, with the impact for each client depending on the type of cover held and the information on file about property, contents, vehicles, or other insured assets.
Separately, the Reserve Bank of New Zealand (RBNZ) opened consultation on August 11 on a proposed prudential levy, to take effect in August 2027, with the insurance sector’s proposed share set at 39% – approximately $27.3 million annually across an estimated 66 licensed insurers. For a mutual insurer that reinvests profits for member benefit rather than returning them to shareholders, absorbing that cost without flow-through to premiums is a governance and pricing judgement brokers should be tracking.
Despite the claims pressure, FMG’s capital position improved. Capital reserves increased to $593.6 million from $524.3 million, and the Adjusted Solvency Ratio rose to 2.49 times the Reserve Bank’s Prescribed Capital Requirement, up from 2.45. FMG Insurance Limited retained its A (Excellent) AM Best financial strength rating, reaffirmed on February 12, 2026. The RBNZ’s May 2026 Financial Stability Report noted that while insurance coverage of residential property in New Zealand remains high, emerging pressures from insurance affordability, underinsurance, and insurance retreat from areas exposed to elevated flooding risk indicate financial stability risks may increase. Rural properties in flood-prone farming regions are not peripheral to that concern.
One disclosure requiring attention from compliance-focused brokers is FMG’s ongoing remediation provision. First recognised in 2023 following issues identified through internal reviews, it stood at $22.6 million as March 31, 2026, down from $25.8 million the prior year. During the year, $8.7 million was utilised while an additional $5.5 million was recognised, covering estimated client refunds, attributable interest, and administrative costs. FMG’s annual report noted that key uncertainties remain around the incidence of issues and the cost of resolution, and that the final outcome may differ from the current estimate. The programme remains open. FMG ended the year with 129,961 clients and members, net growth of 6,782, and a client retention rate of 94.4%.
