A.M. Best Affirms A+ Rating of Zurich Financial Services Group.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Nov. 16, 2000

A.M. Best Co. has affirmed the A+ (Superior) financial strength rating of the Zurich Financial Services Group, Zurich, Switzerland.

The rating applies to its lead company, Zurich Insurance Company, and its core life and non-life insurance and reinsurance operations in the United States, which include affiliated members of the Zurich U.S. Group (led by Zurich American Insurance Company), Zurich Reinsurance North America Group, Zurich Re (Cologne), Farmers Insurance Group, Zurich Kemper Life and Farmers New World Life. In addition, A.M. Best has extended the group rating to the life insurance affiliates of Zurich Financial Services in the United Kingdom--Allied Dunbar Assurance Company, Eagle Star Life Assurance Company and Zurich UK Life. These operations generate in aggregate more than three-quarters of the group's revenues and are considered core and integral to implementing its business strategies.

The rating acknowledges Zurich Financial Service's global market presence, historically strong earnings, sound balance sheet strength, extensive product offerings and comprehensive array of distribution channels built through organic growth and acquisitions. The group is among the world's five leading insurers, with total premiums and deposits in 1999 of US $38 billion and US $48 billion including the Farmers Exchanges. The group is also a market leader in each of its four core businesses: property/casualty insurance, which accounts for 50% of gross premiums written plus deposits; life insurance; reinsurance; and asset management, with US $435 billion in assets under management at mid-year 2000.

Strong loss reserves, conservative premium leverage and modest net catastrophe exposure support the group's financial strength. It has maintained substantial financial flexibility, while restructuring and refinancing existing debt. The Group also increased its flexibility by unifying its share structure on October 17, 2000, when previously quotes shares of Allied Zurich and Zurich Allied were exchanged into shares of Zurich Financial Services, with a primary listing in Zurich and a secondary listing in London. Surplus also receives some relief from the increasing share of premium revenue derived from investment-oriented life products that place market risk with the policyholders. As a publicly traded company on the Zurich and London exchanges, the group has direct recourse to the public equity markets. Financial performance has been strong and consistent, though in 1998 there was a net US $2.4 billion restructuring charge from the merger with the financial services operations of B.A.T Industries plc. Management has pursued aggressively the integration of the combined entity and has realized a considerable reduction in expenses. Investment results, including substantial realized capital gains, have generally offset continuing pressures in non-life insurance.

Partially offsetting these rating factors are the group's significant investment allocation to stocks and real estate and the proportion of earnings that derive from realized capital gains, a potentially volatile source. This proportion declined, however, in 1999, highlighting the underlying improvement in the group's performance. Competition in property/casualty insurance shows little sign of abating, which suggests the pressure on that segment's margins will continue, except perhaps in the U.S. and the UK where there has been some increase in premium rates for commercial lines.

However, the life units in the U.S. and UK are the primary vehicles for the group's growth in life protection and investment products and are its most quickly growing source of revenues. In addition, Farmers Insurance Group is a source of substantial and stable fee revenues.

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 www.ambest.com.