Zurich Insurance Group Receives Elevated Credit Ratings from AM Best

Zurich Insurance Group's Credit Ratings Improved by AM Best

AM Best has recently upgraded the Long-Term Issuer Credit Ratings (ICR) of Zurich Insurance Group Ltd, raising it from "aa-" (Superior) to "aa" (Superior). This change also includes affirming the Financial Strength Ratings (FSR) of its main rated subsidiaries at A+ (Superior). Notably, the non-operating holding company, Zurich, has seen its Long-Term ICR upgraded to "a+" (Excellent) from "a" (Excellent). The outlook for the Long-Term ICR has changed to stable from positive, while the outlook for the FSR remains stable.

Significance of the Upgrades

These credit ratings are indicative of Zurich's robust consolidated balance sheet strength, which AM Best categorizes as very strong. Moreover, this assessment considers the group’s superior operating performance, highly favorable business profile, and effective risk management practices.

The recent upgrades underscore the ongoing resilience of Zurich's balance sheet, bolstered by excellent financial flexibility and consistent operating returns from a diverse range of profit centers. Over recent years, Zurich has successfully implemented strategic pricing, improved risk selection, and managed natural catastrophe exposure effectively, leading to a more stable performance within its property and casualty portfolio. The life insurance operations, alongside fee-based businesses, have further strengthened its earnings profile.

Analyzing Zurich's Risk-Adjusted Capitalization

Zurich’s financial stability is reflected in its risk-adjusted capitalization, as noted by Best’s Capital Adequacy Ratio (BCAR), which stands at the highest level. This assessment takes into account the group's financial leverage, which is expected to remain stable in the foreseeable future, along with its strong capital management capabilities and solid regulatory solvency.

The group reported a Swiss Solvency Test coverage ratio of 224% by September 2024, demonstrating continued fiscal soundness (compared to 233% at the end of 2023). AM Best's evaluation of Zurich's capital position includes an analysis of the economic capital embedded within its long-term business and equity credit associated with hybrid debt, which are acknowledged as weaker components in its capital structure.

Diverse Earnings Profile and Operating Performance

The strong operating performance of Zurich is underpinned by a highly diverse earnings profile, spread across multiple lines of business and geographic markets. This was evidenced by a net combined ratio of 94.5% for 2023. The insurer has enjoyed significant growth in its protection and savings products, notably a 24% increase in life present value of new business premiums for 2023. Additionally, consistent fee-based income from non-claims management services for Farmers Exchanges, a leading insurance entity in the United States, amounted to USD 1.9 billion in 2023.

Zurich Insurance Group's Global Presence

As one of the largest insurance entities globally, Zurich exhibits an admirable level of diversification by geography and product. The group holds strong market positions in Europe and the United States, alongside a notable presence in Latin America and targeted roles in the Asia Pacific region.

With the recent upgrades, the Long-Term ICRs are now positioned at "aa" (Superior) from "aa-" (Superior), while the FSRs are affirmed at A+ (Superior). The stable outlook reflects the ongoing strengths seen within Zurich's operating subsidiaries.

• 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

Frequently Asked Questions

What does the upgrade in Zurich's credit ratings mean?

The upgrade signifies improved assessment of Zurich's financial strength and stability, confirming its strong market position.

How often are AM Best's credit ratings updated?

AM Best continuously reviews and updates credit ratings based on changes in financial strength and market conditions.

What factors are considered in the credit rating process?

Factors include balance sheet strength, operating performance, business profile, risk management, and market conditions.

Is Zurich Insurance Group publicly traded?

Yes, Zurich Insurance Group operates as a publicly traded company, making it accountable to market pressures and investor expectations.

Where can I find more information on Zurich's credit ratings?

Additional information can be accessed through AM Best's official ratings website, which details the performance and ratings of various insurers.

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