The downgrade reflects the diminished importance of ZSL within the Zurich Financial Services Group (ZFS) (Switzerland). (See "Rating Members of Insurance Groups" at http://www.ambest.com/ratings/membergroups.pdf.) It also reflects the company's declining business profile, as evidenced by the continuing reduction in gross written premium. In addition, ZSL's weak financial performance has resulted in the deterioration of its risk-adjusted capitalization.
A.M. Best believes that ZSL's business profile in the London insurance market has weakened as a consequence of its decision to exit several lines of business, resulting in the continuing decrease in gross written premium (for 2004 a 25% reduction in gross written premium). A.M. Best believes ZSL's importance to ZFS will continue to diminish; its contribution of premium to the group is likely to continue to decrease; and the company's contribution to consolidated group earnings is expected to be minimal as it is unlikely to generate significant profit in 2005.
A.M. Best anticipates that the current year loss ratio will remain stable at approximately 70%. At the same time, A.M. Best believes that there remains the potential for reserve strengthening during 2005 which would result in a loss ratio of above 100%. A.M. Best expects management expenses to reduce as a consequence of a decrease in underwriting expenses as several lines of business have been exited.
A.M. Best expects that ZSL's risk-adjusted capitalisation will be partially restored in 2005 as a result of the continuing reduction in gross premiums.
For Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com. CONTACT: A.M. Best Co. Public Relations Jim Peavy, 908-439-2200, ext. 5644 james.peavy@ambest.com or Rachelle Striegel, 908-439-2200, ext. 5378 rachelle.striegel@ambest.com or Analysts Simon Martin, +(44) 20 7626 6264 simon.martin@ambest.com or Miles Trotter, +(44) 20 7626 6264 miles.trotter@ambest.com http://www.businesswire.com