ZAIL's outlook stable, reflects parent Zurich Insurance's status

ZAIL’s capital adequacy remains strong at the 99.99% stress level.

Zurich Australian Insurance (ZAIL) was perceived to have a stable outlook, mirroring that of its parent, Zurich Insurance Co., S&P Global Ratings said.

ZAIL is Australia's eighth-largest property/casualty insurer with a 3% market share in gross written premiums (GWP) as of June 30, 2023. 

It is expected to grow by about 7% annually over the next two years across travel insurance, SME, mid-market, and corporate segments, supported by investments in digitization and automation.

In fiscal 2023, ZAIL's net profit after tax rose to A$90m from A$21m the previous year, driven by better underwriting risk selection and the reversal of unrealized investment losses. Prudent risk selection should continue to support underwriting performance.

ZAIL’s capital adequacy remains strong at the 99.99% stress level, expected to persist through 2026 due to sound underwriting and higher investment yields. 

As of 31 Dec. 2023, ZAIL had a mid-tier capital size of about A$750m. Its financial risk profile is bolstered by comprehensive reinsurance and prudent reserving practices.

ZAIL is likely to maintain its strategic importance to ZIC over the next two years, contributing to the group's earnings and geographic diversity. 

In fiscal 2023, ZAIL's GWP accounted for about 38% of ZIC's Asia-Pacific business, although its standalone earnings have been volatile. 

ZAIL benefits from risk-sharing with ZIC and is expected to expand through its travel insurance and Australian life business.