AM Best has lifted Zurich’s long-term Issuer Credit Rating (ICR) outlook to positive, from stable, and affirmed the insurer’s A+ Financial Strength Rating with a stable outlook.

Zurich has delivered a five-year return on equity of 11.2%, enhanced by fee-based income derived from its non-claims management services for Farmers Exchanges, a US mutual insurance group, which is expected to increase after acquisition of MetLife’s US property & casualty (P&C) operations by Farmers Exchanges and Zurich’s Farmers Group in April.

Zurich’s “aa-” Long-term ICR rating was affirmed, reflecting Zurich’s consolidated balance sheet strength, which AM Best said was very strong, and its strong operating performance, very favourable business profile and appropriate enterprise risk management.

Zurich’s balance sheet strength was assessed to be at the strongest level, with excellent liquidity and good financial flexibility and demonstrated access to financial markets.

Its strong operating performance was supported by a highly diversified earnings profile by line of business and geography, AM Best says, with the underlying performance of the non-life business improved in recent years on underwriting discipline, favourable pricing conditions and a shift in business mix toward less volatile shorter-tail and specialty lines of business.

The positive ICR outlook reflects expected improved profitability at Zurich’s commercial P&C business and higher revenues from management services for Farmers Exchanges, which AM Best says will support balance sheet resilience.

Zurich maintains strong competitive positions in Europe and the US, a strong presence in Latin America and select positions in Asia Pacific.

Income is supported by solid returns from Zurich’s life operations and stable investment income, the ratings agency said.