Mutual grows farm business

By RICHARD BRADDELL

It is not one of the country's big-name insurers, but Palmerston North-based Farmers' Mutual Group is well known in the rural market.

For 95 years a general insurer specialising in rural business, it has 60,000 rural customers throughout New Zealand and around 40 per cent of that market.

But the days when it was satisfied to be a general insurer alone are over.

With the rural recovery of the past two years giving farmers the confidence to plan for the future rather than simply retire debt, the time could not be better to pursue its goal of becoming a broad-based financial group offering services such as financial planning, mortgages and plant and equipment finance.

Gordon Smith, FMG's chief executive of eight weeks, said that although the farm sector recovery has been running for two years, it was only in the past six months that farmers had been looking much beyond retiring debt.

Formerly the national credit manager at rural lender Rabobank, Mr Smith said the rural sector was getting used to the idea that the upswing could last another couple of years.

"Late last year, some of the larger farmers were looking actively at how to develop their properties and diversify their business again."

Even now, the farmers are not rushing to town for a generalised spend up.

But they are replacing old equipment, fences, yards and woolsheds and they are beginning torebuild their stock numbers.

And that is auspicious for Farmers' Mutual, which in the past year has loaned $49 million to finance rural plant and equipment.

While Farmers' Mutual's mortgage business, based on rebranding Southland Building Society, is still minimal, other areas of the group have been expanding rapidly.

In the 2000 financial year, operating revenue jumped 60 per cent to $140 million.

And a fledgling Australian operation saw a 37 per cent jump in premium income to $19 million, helped by a decision to scale down on branches in New South Wales, Victoria and the Australian Capital Territory and rely on broker distribution instead.

Farmers' Mutual is also introducing new rural-specific insurances, such as a catastrophe cover that would have replaced fences on Marlborough farms that were destroyed in recent grass fires. Specialised cover for the growing army of lifestyle block owners is another typical innovation.

But Farmers' Mutual's move into workplace insurance in the privatisation of ACC suffered the same fate as its competitors'. A promising market which reaped $26 million in premiums is no longer there because of the move to renationalise ACC.

Until now, Farmers' Mutual has usually been the manufacturer as well as supplier. But it is now looking to partnerships and will resell other brands.

It has also withdrawn from organising a range of forestry, commercial property and vineyard investments.