JPMorgan issued a research report indicating that FWD (01828) delivered robust performance for 2025. The bank has revised its forecasts, raising the Contractual Service Margin (CSM) projection while lowering estimates related to free surplus and embedded value to account for Japan’s new solvency framework (ESR) and reduced product margin assumptions in Thailand. The report estimates that FWD’s current valuation corresponds to a 2027 forecast price-to-earnings ratio of 7 times. Based on expected core profit growth over the next three years, the valuation is considered attractive. The target price has been lowered from HK$50 to HK$47, with an Overweight rating reaffirmed.
The report highlighted that the group’s cash generation capacity has improved significantly, benefiting from business scale expansion, strict cost control, and an enhanced product mix. Over the next five years, cash generation is projected to reach $1.8 billion, with high visibility. The bank forecasts free surplus net amounts of $580 million, $746 million, and $817 million for 2026 to 2028, respectively.
The group’s CSM forecast has been raised by 24% to 30%, reflecting better-than-expected 2025 performance, aided by smaller adverse variances than anticipated and significant foreign exchange impacts. In terms of business growth, management guidance suggests that the Hong Kong market will see moderate growth following a high base last year, with sales volumes expected to normalize. Declining interest rates in Thailand continue to affect new business value margins, while the entry into savings-type insurance in Japan is expected to lower margins. The bank has reduced new business value forecasts for Thailand and Japan, projecting group new business value at $993 million, $1.074 billion, and $1.163 billion for the coming years.
JPMorgan expects the group’s solvency ratio to remain above 265%, indicating sufficient capital levels.
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