AM Best raises outlook for Zurich
AM Best has revised the outlooks for the main non-life insurance subsidiaries of Zurich Insurance Group to stable from negative following corrective actions by the management on the group’s property & casualty (P&C) operations.
At the same time the ratings agency affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” of the main non-life insurance subsidiaries of Zurich Insurance Group.
AM Best has upgraded the FSR to A+ (Superior) from A (Excellent) and the Long-Term ICR to “aa-” from “a” for Zurich American Life Insurance Company (ZALICO). Furthermore, AM Best has revised the outlook to stable from negative and affirmed the Long-Term ICR of “a” of the holding company, Zurich Insurance Group.
The Zurich group’s ratings reflect its balance sheet strength, which AM Best categorises as very strong, its strong operating performance, very favourable business profile and appropriate enterprise risk management. The revised outlooks reflect the strong corrective actions management has taken on the group’s P&C operations, and AM Best’s expectation that these actions will lead to sustained improvement in the P&C profitability ratios. The rating actions on ZALICO reflect its strategic importance and integration with the Zurich group.
Following effective management actions, the group’s P&C operations have shown improvement in 2016, with the combined ratio improving to 97 percent, down from 102 percent in 2015 (under AM Best calculations). Excluding the one-off impact of Ogden rate changes, the group’s P&C combined ratio for the first six months of 2017 has demonstrated stability. However, North American hurricane losses incurred in third quarter of 2017 are likely to result in Zurich group delivering a P&C combined ratio in excess of 100 percent for 2017.
Relative to its peers, Zurich group’s P&C operations suffer from a high expense ratio, according to AM Best. The group has implemented an expense savings initiative, which is expected to benefit the group’s P&C expense ratio over the next few years. Changes in the group’s business mix, as it enhances its participation in alternative markets and specialty business lines, is expected to lead to an improvement in the group’s P&C loss ratio, which will be somewhat offset by slightly higher acquisition expenses on these business lines, according to the ratings agency.
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