Zurich Insurance Co. Ltd.’s financial strength rating of A+ (Superior) and issuer credit rating of “aa-” remain unchanged, following preliminary news of more losses to come in the insurer’s general insurance business, A.M. Best said.

The outlook for the ratings for both the insurer and its rated affiliates is negative, the ratings agency said.

Zurich announced on Jan. 20, 2016 that its general insurance segment – representing approximately two-thirds of consolidated gross written premium and 50 percent of operating profits in 2014 – will produce an operating loss of $100 million for the fourth quarter of 2015, A.M. Best noted.

These results are due to large losses mainly affecting the global corporate and European portfolios as well as the impact from a number of catastrophic events in the quarter, particularly the U.K. and Ireland floods, the ratings agency affirmed.

Additionally, A.M. Best said, Zurich’s overall performance in the fourth quarter is expected to be hampered by a charge of around $475 million associated with the group’s accelerated efficiency program and a $230 million impairment charge related to the write-off in goodwill arising from its Germany life business.

The persistent large losses, which affected Zurich’s performance during 2015, continue to generate concerns about the extent of the problems within the company’s general insurance segment and the effectiveness of Zurich’s underwriting risk management framework, A.M. Best added.

A.M. Best previously cited the performance of the general insurance segment to be a weakness for Zurich’s rating level, as per a rating action issued on Oct. 2, 2015 when the outlook on the ratings of ZIC and some of its main rated affiliates was revised to negative from stable.

“Given the short-term nature of the affected contracts, a material improvement in technical results is anticipated during 2016 and beyond, although A.M. Best recognizes that remedial actions taken to restore profitability are expected to take time to materialize into a better quality insurance portfolio,” the ratings agency said in a statement.

A.M. Best expects Zurich to continue to meet performance targets for its other business segments.

With the more recent changes to Zurich’s management structure, execution risk arises with the group’s strategy to turn around performance, which may have some negative implications for prospective results.

Reported earnings that are materially outside of A.M. Best’s expectation will likely result in a downward rating movement.

Zurich’s consolidated risk-adjusted capitalization is anticipated to remain at a strong level into 2016, although a continuation of the lackluster results reported will erode capital buffers that are in place to cushion against further unexpected losses.

A.M. Best will continue to monitor Zurich’s consolidated risk-adjusted capitalization in view of the group’s acquisition of the leading U.S. agricultural crop insurer, Rural Community Insurance Services, which is expected to close in the first quarter of 2016, as well as its plans to deploy the remaining unutilized portion of $3 billion of excess capital by 2016.

Source: A.M. Best