AM Best has upgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) of Zurich Insurance Group Ltd (Zurich) and its main rated subsidiaries. The Long-Term ICR for Zurich, the non-operating holding company, was raised to “a+” (Excellent) from “a” (Excellent). Similarly, the Long-Term ICR for Zurich’s primary operating subsidiaries was upgraded to “aa” (Superior) from “aa-” (Superior). At the same time, the Financial Strength Ratings (FSR) for these subsidiaries were affirmed at A+ (Superior).
The outlook for the Long-Term ICR has been revised to stable from positive, while the outlook for the FSR remains stable.
Key Factors Driving the Upgrades
The ratings upgrades reflect Zurich’s continued resilience, supported by:
- Very strong balance sheet strength, assessed by AM Best, driven by risk-adjusted capitalization at the strongest level as measured by the Best’s Capital Adequacy Ratio (BCAR).
- Strong operating performance, with reduced volatility in its property and casualty portfolio due to better pricing, risk selection, and natural catastrophe exposure management.
- Diversified and stable income streams from its life operations and fee-based businesses.
- Excellent financial flexibility, demonstrated through stable financial leverage and robust capital management.
Zurich’s improved property/casualty performance and the stability of its life operations have bolstered internal capital generation. Over recent years, the group’s strategic focus on profitability, efficiency, and effective risk management has contributed to less volatile results and enhanced earnings.
Balance Sheet Strength
Zurich’s balance sheet is underpinned by:
- Strong risk-adjusted capitalization, supported by robust internal capital generation and consistent regulatory solvency.
- A Swiss Solvency Test coverage ratio of 224% as of September 2024 (compared to 233% at year-end 2023).
- Effective use of economic capital from long-term business and equity credit from hybrid debt.
These factors highlight Zurich’s ability to sustain a stable capital position despite ongoing challenges in the global financial environment.
Operating Performance
Zurich’s strong operating performance is marked by:
- A highly diversified earnings profile across geographies and lines of business.
- A net combined ratio of 94.5% for 2023, indicating solid profitability in its property and casualty operations.
- Growth in its life business, with a 24% increase in life present value of new business premiums during 2023.
- Fee-based income from its non-claims management services for Farmers Exchanges in the United States, which contributed $1.9 billion in 2023.
These results underline Zurich’s ability to generate consistent earnings, even amid market pressures.
Market Position
Zurich is recognized as one of the largest insurance groups globally, benefiting from:
- Strong diversification by geography and product.
- Leading competitive positions in Europe and the United States.
- A growing presence in Latin America and select markets in Asia-Pacific.
This global reach and product diversity help Zurich maintain a robust and competitive profile in the insurance industry.
Subsidiaries Affected by the Upgrade
The subsidiaries whose Long-Term ICRs were upgraded to “aa” (Superior) from “aa-” (Superior) and whose FSRs were affirmed at A+ (Superior) include:
- 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
- Zurich American Insurance Company
- Rural Community Insurance Company
- American Zurich Insurance Company
- Universal Underwriters of Texas Insurance Company
- Steadfast Insurance Company
- Zurich American Insurance Company of Illinois
- Colonial American Casualty & Surety Company
- Zurich Insurance Company Limited
- Zurich American Life Insurance Company
