CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - SEPTEMBER 06, 2002 12:00 AM (EDT)
A.M. Best Co. has downgraded the financial strength rating of Zurich Financial Services (ZFS) and its core operating subsidiaries (see list below) to A (Excellent) from A+ (Superior). A.M. Best has also downgraded the ratings on debt issued or guaranteed by Zurich Insurance Company to "a" and "a-" from "a+" and "a" respectively and the debt issued by several subsidiaries within the group (see list below) to "bbb+" from "a-". All ratings have been placed under review with developing implications. (See detailed debt issues below.)
These actions follow the confirmation of A.M. Best's concerns with the group's ability to restore earnings momentum to levels commensurate with a Superior-rated company and to replenish its capital base. (See the March 22 press release when a negative outlook was assigned.) Reported half-year losses of USD 2 billion and the need to strengthen non-life insurance and reinsurance reserves will significantly erode the overall group's risk-based adjusted capital. A.M. Best is currently discussing with management a series of proposed measures, including raising up to USD 2.5 billion of new equity, divesting non core operations and cutting its equity exposure to 10%. Resolution of the under-review status will be predicated on the outcome of the proposed capital raising and A.M. Best's view of the group's ability to complete the proposed re-structuring in a timely manner. A.M. Best is currently reviewing the core status of group subsidiaries following the announcement of the revised strategy.
The financial strength ratings of the following companies have been downgraded to A (Excellent) from A+ (Superior) and placed under review with developing implications:
- Zurich Financial Services Group
- Foremost Corporation Group
- Farmers Insurance Group
The A (Excellent) financial strength ratings for the following companies have been placed under review with developing implications:
- Centre Solutions (Bermuda) Ltd
- Zurich International (Bermuda) Ltd
- Zurich Specialties London Ltd
The following debt ratings have been downgraded and placed under review with developing implications:
Zurich Insurance Company -
-"a" rating on CHF1 billion 3.875% senior notes, due 2011
Zurich Finance (USA), Inc.
(guaranteed by Zurich Insurance Company) -
- "a" rating on USD 300 million 6% senior notes, due 2003
- "a" rating on CHF 300 million 3.5% senior notes, due 2008
- "a" rating on USD 150 million 4.75% senior notes, due 2003
- "a" rating on CHF 500 million 2.75% senior notes, due 2006
Zurich Capital Trust I
(guaranteed by Zurich Insurance Company) -
- "a-" rating on USD 1,031 million 8.376% Capital Securities, due 2037 (issued 1997)
Zurich Financial Services Inc. -
- "a-" rating on CHF 600 million market index-linked equity securities (MILES), due 2005
Zurich Financial Services (Jersey) Ltd
(backed by subordinated support agreement from Zurich Financial Services) -
- "bbb+" rating on EUR 300 million 7.125% perpetual subordinated non-cumulative preferred shares
Zurich RegCaPS Funding Trust I -
- "bbb+" rating on USD 200 million trust capital securities, due 2031
Zurich RegCaPS Funding Trust II -
- "bbb+" rating on USD 150 million trust capital securities, due 2031
Zurich RegCaPS Funding Trust III -
- "bbb+" rating on USD 225 million trust capital securities, due 2031
Zurich RegCaPS Funding Trust IV -
- "bbb+" rating on USD 125 million trust capital securities, due 2031
Zurich RegCaPS Funding Trust V -
- "bbb+" rating on USD 200 million trust capital securities, due 2031
Zurich RegCaPS Funding Trust VI -
- "bbb+" rating on USD 225 million trust capital securities, due 2031
Farmers Group Capital
(guaranteed by Farmers Group, Inc.) -
- "bbb+" rating on USD 410 million 8.45% quarterly income preferred securities (QUIPS), due 2025
Farmers Group Capital II
(guaranteed by Farmers Group, Inc.) -
- "bbb+" rating on USD 90 million 8.25% quarterly income preferred securities (QUIPS), due 2025
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.