NU Online News Service, April 17, 12:47 p.m. EDT

Zurich Financial Services Group announced today that through a share offering it had raised CHF 1.26 billion ($1.08 billion) towards the $1.9 billion purchase by its Farmers Group subsidiary of 21^st Century Insurance from American International Group.

Meanwhile, Moody's Investors Service said it had affirmed the Zurich Insurance Company and Farmers Insurance Group financial strength and debt ratings.

Zurich said it placed 4.8 million new shares issued under Zurich's authorized share capital and approximately 1.9 million existing treasury shares, bought back in 2008.

The Swiss-based company said the book was comfortably oversubscribed, and shares have been placed at CHF 188 ($161) per share. It said the shares being placed represent 4.7 percent of Zurich's registered share capital prior to the placing.

Besides covering part of the acquisition from 21^st Century, Zurich said the proceeds would be used to pay for the increase in reinsurance related to the purchase.

The remainder of the additional capital requirement for the deal at the Group level will be covered by a $400 million deeply subordinated, euro-denominated debt instrument to be issued to AIG, it was explained.

Moody's said the insurer financial strength rating of Zurich Insurance Company was kept at "A1" (good), and Farmers Insurance Group remained at "A2" (good), with Farmers' surplus notes rated at "Baa2" (adequate).

Commenting on the affirmation of the ratings, Moody's cited the group's maintenance of a strong market position across a broad range of countries, a good balance between retail and commercial lines of business within non-life insurance and an improving balance between life and non-life insurance.

The ratings firm said operating performance has generally remained strong, with 2008 net income after tax of $3.1 billion, albeit non-life underlying loss ratios showing some deterioration.

Asset quality levels, capitalization and financial flexibility all remain consistent with the current rating, Moody's said.

Less positively, Moody's said Zurich retains reasonable levels of exposure to high risk assets and the outlook for 2009 remains challenging across a number of markets in which Zurich operates, particularly on the life-insurance side.

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Zurich Raises $1.08 B To Pay For 21st Century, Moody's Rating Stays

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