JOHNSTON, R.I.–Factory Mutual Insurance Co.’s net income rose in 2006 to $736.9 million, a 16.1% increase from 2005, the insurer, which does business as FM Global, said Thursday.

In addition, policyholder surplus rose 18.2% to $5.2 billion in 2006 from a year earlier. The Johnston, R.I.-based insurer’s combined ratio improved to 75.3% from 77.4% a year earlier, and client retention rate improved to 93% from 92% in 2005.

The company said in the statement announcing its 2006 results that clients would receive a $355 million “membership credit against renewal premium in 2007 as a result of better-than-expected operating performance in recent years due primarily to lower-than-expected natural disaster losses.”