Zurich's 'A+' IFS rating affirmed

Zurich Insurance Company's 'A+' insurer financial strength rating and 'A' long-term issuer default rating have been affirmed by Fitch, which cited the insurer's strong capital position and "resilience in the challenging operating environment".

At the same time the ratings agency revised the outlook for the ratings to 'positive' from 'stable'.

The 'positive' outlook is based on ZIC's solid and stable capital position, strong earnings generation and moderate investment risk.

Fitch said that it recognised the substantial improvements in capital adequacy achieved by ZIC since capital dipped during the financial crisis, and the decrease in the volatility of the group's capital ratios.

Operating profit has declined, but overall earnings generation has remained strong despite the high incidence of losses in 2011 relating to natural catastrophes and challenging capital markets.

Fitch views the group's resilience positively, noting that earnings were supported by reserve releases over the past few years, and expects further releases in 2012 although they are expected to be smaller than in previous years.

Offsetting factors are the company's relatively high amount of goodwill and intangibles that negatively affect the quality of capital.

Fitch considers the headwinds the company continues to face due to the difficult macroeconomic environment as the main risk that could negatively affect ZIG and the insurance industry as a whole if conditions deteriorate.

The triggers of a rating upgrade include the continued strong resilience of ZIC's capital position, improved fixed charged coverage commensurate with the 'AA' rating category, loss reserves continuing to produce positive prior year development and business operating profit recovering to historically strong levels.

ZIC is the main operating company of the Zurich Insurance Group.