Ratings agency A.M. Best has affirmed the “A+” (Superior) Financial Strength Rating (FSR) and “aa-“ Long-Term Issuer Credit Ratings (ICR) of Zurich Insurance Company Limited (ZIC) and its main affiliates. It has also affirmed the “a” Long-Term ICR of the Zurich Insurance Group Ltd, the ultimate parent of the Zurich group of companies.
The outlooks of these ratings are negative.
In a statement, the ratings agency said the ratings affirmation of ZIC and its main rated affiliates “reflect the group’s excellent competitive position in Europe and the United States, and strong consolidated risk-adjusted capitalisation. Zurich is dependent on soft capital components to support the significant capital buffers inherent within the group’s risk-adjusted capitalisation.”
A.M. Best also said that the ratings of Zurich’s main rated subsidiaries were due to the group’s overall solid operating performance.
“This reflects the strong income contribution derived from its attorney-in-fact relationship with The Farmers Exchanges (a leading mutual insurance group operating in the United States), profitable results from the life portfolio, and positive, albeit declining, yields arising from its conservative investment policy,” the ratings agency said in a statement.
Offsetting the insurer’s strengths is the weak technical performance of its General Insurance (GI) segment, which saw a 70% drop in business operating profits in 2015.
For the first nine months of 2016, the GI segment has produced a combined ratio of 98.4%, as compared to the 101.9% and 103.6% for same time period and full year of 2015 respectively. Due to management actions to restructure the insurance portfolio, the segment’s overall attrition loss ratio has improved to 65.9% (9m of 2015: 66.6%). The segment’s technical results has also benefitted from favourable prior-year reserve developments and less frequent large and catastrophe losses. The ratings agency has noted, however, that further actions are still required to restore the GI segment’s profitability, particularly for the Global Corporate account.
Meanwhile, the negative outlooks for the ratings of Zurich’s main subsidiaries were due to A.M. Best’s belief that the group’s business transformation initiatives are associated with significant execution risk.
The following property/casualty affiliates maintained their “A+” FSR and “aa-” Long-Term ICRs:
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- 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