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The group has a major presence in many mature European markets and the US, and targets emerging markets as an area of growth. Fitch views underlying earnings as strong, primarily driven by ZIC's diversified profit sources. However, ZIG's business operating at bing profit declined 40% yoy in 1H20 to USD1.7 billion, burdened by COVID-19 related claims of USD686 million, larger catastrophe-related losses and negative market movements. Despite the increase in the combined ratio to 99.8% in 1H20 (1H19: 95.1%), ZIG was able to achieve price increases of about 8% in 1H20. This compares favourably with 2019, particularly in commercial insurance, and the positive trend continued in 3Q20. Factors that could, individually or collectively, lead to positive rating action/upgrade: --Positive rating action would be prefaced by Fitch's ability to reliably forecast the impact of the coronavirus pandemic on the financial profiles of both the global insurance industry and ZIG. -- Profitability improving on a sustained basis, as indicated by a return on equity above 12% and a combined ratio of 95% or below, while maintaining a Prism FBM score of 'Very Strong' and a consistently favourable reserve development. Factors that could, individually or collectively, lead to negative rating action/downgrade: --A material adverse change in Fitch's assumptions with respect to the coronavirus impact. --A sustained drop in ZIG's risk-adjusted capital position, as measured by a Prism FBM score, to the 'Strong' range and an increase in the FLR to more than 30%. International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'.

https://www.fitchratings.com/research/insurance/fitch-affirms-zurich-insurance-company-ifs-at-aa-outlook-stable-23-11-2020