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Standard & Poor's Affirms Zurich Insurance Co. 'AA+' Ratings, Off CreditWatch Negative

LONDON, Sept. 15 /PRNewswire/ -- Standard & Poor's today affirmed its ratings on Zurich Insurance Co. and certain related entities. These ratings are also removed from CreditWatch, where they were placed with negative implications in October 1997 (see list below). The affirmation follows the merger of B.A.T Industries PLC's former financial services businesses (U.S.-based Farmers Group Inc., U.K.-based Allied Dunbar Assurance PLC, and U.K.-based Eagle Star Insurance Ltd.) with Zurich Insurance Co. (the parent company of the Zurich Insurance Group), which has just been completed to form Zurich Financial Services (ZFS). ZFS now is one of the world's largest diversified insurance, reinsurance, and asset management groups. The merger was first announced in October 1997, and caused Standard & Poor's to place various ratings on CreditWatch with negative implications at that time. The affirmation reflects:

-- The capital adequacy of ZFS will not be significantly different from

Zurich Insurance Group's capital adequacy in relative terms and its

financial flexibility will be enhanced by the merger.

-- The merger enhances Zurich Insurance Co.'s already very strong business

position despite the potentially dilutive influence of Eagle Star. The

Farmers Group (Farmers) has a very strong position in U.S. personal

lines and will become responsible for (Zurich Insurance Co.-owned)

Maryland Casualty Co.'s personal lines business. Allied Dunbar

Assurance PLC (Financial Strength Rating: single 'Api') has a strong

position in U.K. life insurance. Eagle Star began a process of radical

restructuring late in 1997 and this will continue.

-- Following initial concerns regarding the underlying earnings capacity

of ZFS, Standard & Poor's now believes that, barring unforeseen events,

reported and underlying earnings growth (excluding 1998 exceptional

charges) should remain strong.

The Farmers Group related ratings today were raised, and were removed from CreditWatch, mainly on the basis of the strategic importance of Farmers to the ZFS group. Standard & Poor's also believes Eagle Star to be strategically important to ZFS. Its ratings have been affirmed. Both Farmers Group and Eagle Star have a stable outlook.

Zurich Insurance Co's rating is based on its very strong position in the Swiss market and, through its branches, subsidiary companies, and the fellow subsidiaries of ZFS, in international insurance, reinsurance, and asset management. It has very strong earnings, very strong capitalization, and extremely strong financial flexibility.

OUTLOOK: Negative

Standard & Poor's believes that there is a risk that planned earnings growth may not be achieved, particularly given the challenge of integrating the enlarged group which will place significant demands on group management's resources. Maintenance of the rating at the double-'A'-plus level is dependent on successful integration and on earnings growth continuing to be strong, Standard & Poor's said. -- CreditWire

RATINGS AFFIRMED AND REMOVED FROM CREDITWATCH:

Zurich Insurance Co.
 Counterparty credit rating AA+
 Financial strength rating AA+
 Senior unsecured AA+
 Preferred stock Foreign currency AA


Zurich Capital Trust I
 Preferred stock (GTD: Zurich Insurance Co AA


Zurich Finance (USA), Inc.
 Senior unsecured (GTD: Zurich Insurance Co.) AA+


Zurich Finance (Bermuda) Ltd.
 Senior unsecured (GTD: Zurich Insurance Co.) AA+


Zurich Capital Markets Co.
 Counterparty credit rating AA+


ZCM Matched Funding Corp.
 Counterparty credit rating AA+


American Zurich Insurance Co.
 Counterparty credit rating AA+
 Financial strength rating AA+


American Guarantee & Liability Insurance Co.
 Counterparty credit rating AA+
 Financial strength rating local currency AA+


Zurich American Insurance Co. of IL
 Counterparty credit rating local currency AA+
 Financial strength rating local currency AA+


Steadfast Insurance Co.
 Counterparty credit rating local currency AA+
 Financial strength rating local currency AA+


Eagle Star Insurance Co. Ltd.
 Counterparty credit rating local currency A+
 Financial strength rating local currency A+


Eagle Star Life Assurance Co. Ltd.
 Counterparty credit rating local currency A+
 Financial strength rating local currency A+


RATINGS RAISED AND REMOVED FROM CREDITWATCH:

Farmers Group Inc.
 Counterparty credit rating local currency AA
 Preferred stock local currency AA-


Farmers Insurance Co. Inc.
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA


Farmers Insurance Exchange
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA
 Subordinated debt local currency A


Farmers Insurance Co. of Arizona
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA


Farmers Insurance Co. of Idaho
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA


Farmers Insurance Co. of WA
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA


Farmers Insurance Co. of Columbus (OH))
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA


Farmers Insurance Co. of OR
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA


Illinois Farmers Insurance Co.
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA


Texas Farmers Insurance Co.
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA


Farmers Texas County Mutual Insurance Co.
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA


Mid-Century Insurance Co.
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA


Mid-Century Insurance Co. of Texas
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA


Fire Insurance Exchange
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA


Truck Insurance Exchange
 Counterparty credit rating local currency AA
 Financial strength rating local currency AA


Farmer's Exchange Capital
 Counterparty credit rating local currency AA
 Subordinated debt local currency A


SOURCE Standard & Poor's CreditWire
 -0- 09/15/98


/CONTACT: Rob Jones, London, +44-171-826-3650, or David Anthony, London, +44-171-826-3553; or Joanne Balling, ACAS, New York, 212-208-1926, all of Standard & Poor's/

/Web site: http://www.ratings.standardpoor.com/

CO: Zurich Insurance Company ST: England IN: INS SU: RTG

SM -- HSSP003 -- 2587 09/15/98 06:19 EDT http://www.prnewswire.com
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