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A.M. Best Affirms Credit Ratings of Zurich Insurance Company Limited and Its Main Rated Affiliates
[December 01, 2016]

A.M. Best Affirms Credit Ratings of Zurich Insurance Company Limited and Its Main Rated Affiliates


A.M. Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "aa-" of Zurich Insurance Company Limited (ZIC) (Switzerland) and its main rated affiliates. ZIC is the main operating company of Zurich Insurance Group Ltd (Switzerland), the ultimate parent of the Zurich group of companies (together known as Zurich).

At the same time, A.M. Best has affirmed the Long-Term ICR of "a" of the holding company, Zurich Insurance Group Ltd. The outlook of these Credit Ratings (ratings) is negative. (See below for a detailed list.)

The ratings 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. Additionally, the ratings of Zurich's main rated subsidiaries reflect 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 weak technical performance of the General Insurance (GI) segment (representing approximately two-thirds of consolidated gross written premiums and 50% of business operating profits [BOP] in the first nine months of 2016) remains a negative rating factor. This was demonstrated by the 70% decline in GI BOP in 2015, which significantly fell outside of A.M. Best's expectations. Since then, management has taken actions to restructure the insurance portfolio in order to restore the profitability of this business segment.

For the first nine months of 2016, the GI segment produced a combined ratio of 98.4% relative to the 101.9% and 103.6% reported for the comparable period and full year of 2015, respectively. Early improvements arising from management's turnaround actions were apparent, with the overall attritional loss ratio improving t 65.9% (first nine months of 2015: 66.6%). Additionally, technical results benefited from favourable prior-year reserve developments and a lower frequency of large and catastrophe losses that affected earnings in the previous year. Nonetheless, further actions are required within the GI segment to restore its profitability, particularly for the Global Corporate account.



In November 2016, Zurich announced its strategic objectives for the period of 2017-2019. In particular, Zurich plans to undertake a comprehensive review of its information technology systems, contracts and shared services, and procurement processes to generate efficiencies across the organisation, whilst strengthening technical excellence across its operations to improve the group's underwriting performance. The group will target a BOP return on equity (net of tax) in excess of 12%.

Zurich also is expected to focus on reducing its earnings volatility through the tactical rebalancing of its insurance portfolio, optimisation of its reinsurance programme and the de-risking of its investment asset allocation. A.M. Best believes that there is significant execution risk associated with the group's business transformation initiatives and hence its ability to improve and sustain its earnings at levels demonstrated prior to 2015. The negative outlooks therefore remain for the ratings of Zurich's main subsidiaries.


The FSR of A+ (Superior) and the Long-Term ICRs of "aa-" have been affirmed for Zurich Insurance Company Limited and its following property/casualty affiliates. The outlook of these ratings is negative:

  • 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

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.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.


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