AM Best has revised its outlook for Zurich Group to stable from negative and affirmed its long-term issuer credit rating (ICR) at “a”, citing a “very strong” balance sheet.

The outlook for Zurich Insurance Group’s main non-life insurance subsidiaries has also been upgraded to stable from negative and their financial strength rating (FSR) of A+ (Superior) affirmed. The long-term ICR has been revised to aa-.

Zurich American Life Insurance Company’s (ZALICO) FSR is upgraded to A+ (Superior) from A (Excellent), while the long-term ICR moves to aa- from “a” and the outlook is stable.

AM Best says the group’s rating change reflects its balance sheet, strong operating performance and “very favourable business profile and appropriate enterprise risk management.”

“The revised outlooks reflect the strong corrective actions management has taken on the group’s property and casualty (P&C) operations,” the agency says.

AM Best believes this will lead to sustained improvement in P&C profitability ratios.

Its rating action on ZALICO reflects “its strategic importance and integration with the Zurich group”.

AM Best says the group maintains a highly diversified business profile with sustained competitive advantages in Europe and the US, strong presence in Latin America and selective positions in Asia-Pacific.

Balance sheet strength comes from the “strongest level of risk-adjusted capitalisation, excellent financial flexibility and liquidity”.

The group’s combined operating ratio has improved to 97% from 102% in 2015.

However, North American hurricane losses in the third quarter mean it will probably deliver a P&C combined operating ratio in excess of 100% for this year.

Zurich Group has implemented an expense-cutting initiative to counter its high expense ratio relative to peers that should reap benefits over the next few years, AM Best says.