AM Best


A.M. Best Revises Outlooks to Stable for Zurich Insurance Group Ltd and Its Main Rated Subsidiaries


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Salman Siddiqui
Associate Director, Analytics
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salman.siddiqui@ambest.com

Darian Ryan
Senior Financial Analyst–P/C
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darian.ryan@ambest.com

Frank Walko
Financial Analyst–L/H
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+1 908 439 2200, ext. 5159
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Jim Peavy
Director, Public Relations
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james.peavy@ambest.com

FOR IMMEDIATE RELEASE

LONDON - DECEMBER 08, 2017 10:53 AM (EST)
A.M. Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” of the main non-life insurance subsidiaries of Zurich Insurance Group Ltd (Switzerland). Concurrently, A.M. Best has upgraded the FSR to A+ (Superior) from A (Excellent) and the Long-Term ICR to “aa-” from “a” for Zurich American Life Insurance Company (ZALICO) (Schaumburg, IL). The outlook of ZALICO’s Credit Ratings (ratings) is stable. These companies are collectively referred to as Zurich group. (See below for a detailed list.) At the same time, A.M. Best has revised the outlook to stable from negative and affirmed the Long-Term ICR of “a” of the holding company, Zurich Insurance Group Ltd.

The Zurich group’s ratings reflect its balance sheet strength, which A.M. Best categorises as very strong, its strong operating performance, very favorable business profile and appropriate enterprise risk management. The revised outlooks reflect the strong corrective actions management has taken on the group’s property & casualty (P&C) operations, and A.M. Best’s expectation that these actions will lead to sustained improvement in the P&C profitability ratios. The rating actions on ZALICO reflect its strategic importance and integration with the Zurich group.

Zurich group maintains a highly diversified business profile with sustained competitive advantages in Europe and the United States, strong presence in Latin America and selective positions in Asia Pacific. The group’s balance sheet strength is derived from its strongest level of risk-adjusted capitalisation, excellent financial flexibility and liquidity. These are offset by Zurich’s reliance on soft capital components to support its capital buffers, although the use of such components is consistent with the group’s European peers.

Zurich group’s operating performance benefits from a diversified source of profits which have allowed the group to post good returns on equity metrics. These include strong returns from its life insurance operations, stable investment yields and consistent risk-free income derived from its non-claims management services for Farmers Exchanges (a leading mutual insurance group operating in the United States). These are softened by the weaker, albeit improving, results from the group’s P&C operations.

Following effective management actions, the group’s P&C operations have shown improvement in 2016, with the combined ratio improving to 97%, down from 102% in 2015 (under A.M. Best calculations). Excluding the one-off impact of Ogden rate changes, the group’s P&C combined ratio for the first six months of 2017 has demonstrated stability. However, North American hurricane losses incurred in third quarter of 2017 are likely to result in Zurich group delivering a P&C combined ratio in excess of 100% for 2017.

Relative to its peers, Zurich group’s P&C operations suffer from a high expense ratio. The group has implemented an expense savings initiative, which is expected to benefit the group’s P&C expense ratio over the next few years. Changes in the group’s business mix, as it enhances its participation in alternative markets and specialty business lines, is expected to lead to an improvement in the group’s P&C loss ratio, which will be somewhat offset by slightly higher acquisition expenses on these business lines.

The outlooks have been revised to stable from negative and the FSR of A+ (Superior) and the Long-Term ICRs of “aa-” have been affirmed for the following subsidiaries of Zurich Insurance Group Ltd.


  • Zurich Insurance Plc

  • Fidelity and Deposit Company of Maryland

  • Empire Fire and Marine Insurance Company

  • Empire Indemnity Insurance Company

  • Universal Underwriters Insurance Company

  • American Guarantee and Liability Insurance Company

  • American Zurich Insurance Company

  • Universal Underwriters of Texas Insurance Company

  • Steadfast Insurance Company

  • Zurich American Insurance Company

  • Zurich American Insurance Company of Illinois

  • Colonial American Casualty & Surety Company

  • Rural Community Insurance Company

  • Zurich Insurance Company Limited

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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