AM Best Affirms Credit Ratings of Zurich Insurance Group Ltd and Its Main Rated Subsidiaries
AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "aa-" (Superior) of the main rated insurance subsidiaries of Zurich Insurance Group Ltd. At the same time, AM Best has affirmed the Long-Term ICR of "a" (Excellent) of Zurich Insurance Group Ltd (Zurich) (Switzerland) (a non-operating holding company). The outlook of the FSR is stable, whilst the outlook of the Long-Term ICRs is positive.
The Credit Ratings (ratings) reflect Zurich's consolidated balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, very favourable business profile and appropriate enterprise risk management (ERM).
The positive outlook of the Long-Term ICR reflects the continued resilience of the group's balance sheet strength, underpinned by strong operating returns from Zurich's various profit centres. Over the past several years, the group's pricing actions, risk selection and natural catastrophe exposure management, have led to an improvement in the performance and reduced volatility of its property/casualty portfolio. In addition, the group's life operations provide it with a solid earnings stream, supporting internal capital generation. The group's balance sheet sensitivity to market risk reduced following the sale of its Italian life and pensions back-books in December 2022, and is expected to reduce further once other announced transactions are completed, in particular the disposal of its German life insurance back-book.
Zurich's balance sheet strength is underpinned by its risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), which was at the strongest level at year-end 2022. The group's balance sheet strength benefits from excellent liquidity and good financial flexibility, with demonstrated access to financial markets. The strength of the group's balance sheet, including its robust liquidity and asset-liability management, is expected to continue to provide resilience to external economic pressures.
The group reported a solid Swiss Solvency Test (SST) capital adequacy ratio of 266% estimated at 30 September 2023. Despite recently announced anticipated share buy-back and mergers and acquisitions transactions in the Unites States and India, the group's SST ratio is expected to remain very strong and well-above its minimum target level.
Zurich's strong operating performance is supported by a highly diversified earnings profile by geography across its life, non-life and investment operations. Furthermore, operating results are enhanced by the consistent fee-based income derived from Zurich's non-claims management services for Farmers Exchanges (a leading mutual insurance group operating in the United States), which accounted for over a quarter of Zurich group's net income in 2022. The group had solid combined ratios of 93.5% and 93.4% in 2021 and 2022, respectively (as calculated by AM Best, under IFRS 4). The company-reported combined ratio for the first half of 2023 was 92.9% (under IFRS 17). The group's life insurance operations also are profitable and have benefited from the portfolio shift toward capital-efficient insurance products. The majority of life profits are represented by policy charges and fees, which are stable relatively.
Zurich is one of the world's largest insurance groups, with excellent diversification by geography and product. The group maintains strong competitive positions in Europe and the United States, a strong presence in Latin America and selective positions in Asia Pacific. Zurich's ERM has strengthened in recent years, with an increased emphasis on accountability and oversight across the organisation. In AM Best's view, the group has appropriate mechanisms in place to manage its complex and large-scale operations.
The FSR of A+ (Superior) and the Long-Term ICRs of "aa-" (Superior) have been affirmed with a stable outlook of the FSR and a positive outlook of the Long-Term ICR, for the following subsidiaries of Zurich:
- The 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
- Zurich American Life Insurance Company
This press release relates to Credit Ratings that have been published on AM 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 AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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