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[ZURICH] Zurich Insurance AG's new chief executive officer, Mario Greco, is shaking up the largest Swiss insurer after an unexpected jump in claims last year forced it to abandon a takeover and prompted his predecessor's exit.
Zurich is merging its biggest units, global life and general insurance, and reorganizing along geographical lines. The four regional heads - for Europe, the Middle East and Africa, North America, Latin America and Asia Pacific - will report directly to Greco. The company's business with its global corporate clients with remain in a separate division.
"This structure is more efficient than the previous one," Mr Greco, 56, said on a conference call with reporters on Friday. "There will be a contribution to cost savings, but we need to quantify that precisely and we're not ready to do that today." Greco took over at Zurich in March after three years running Italy's largest insurer, Assicurazioni Generali SpA. Martin Senn, who beat out Greco for the top job at Zurich in 2012, stepped down in December after unexpectedly high claims in the general-insurance unit led the company to scrap a takeover bid for RSA Insurance Group Plc. Senn committed suicide last month.
Zurich shares fell 0.7 per cent to 226 Swiss francs (US$234.27) as of 11:03 am, compared with a per cent decline in the Stoxx 600 Insurance index. The stock dropped 15 per cent in the past year, versus a 14 per cent slump in the index.
Zurich, along with European rivals, has struggled to improve profitability amid lackluster economic growth, stricter regulatory requirements, record-low interest rates and subdued prices in some markets. The company's complex and opaque structure has been criticized by analysts as an impediment to improving efficiency and earnings. The insurer will provide an update on savings in coming months, while confirming the existing targets "for now," Greco said. Zurich previously said it plans to cut costs by more than US$300 million this year.
The revamp "absolutely makes sense," said Stefan Schuermann, a Vontobel analyst with a hold rating on the stock. "We expect Zurich to overachieve on its costs savings targets and improve its sales dynamics." The insurer also appointed Kristof Terryn to the new role of chief operating officer. Robert Dickie, chief operations and technology officer, will leave in the coming months after a transition period, the company said. Terryn was previously head of the general insurance business.
During Mr Greco's tenure at Generali, he cut costs, revamped businesses, reduced debt and sold units to focus on the company's main business. He raised about 4 billion euros selling assets, including a US reinsurer and Swiss private bank BSI Group.
"This is similar to what he did at Generali, simplifying the structure," said Rene Locher, an analyst at MainFirst in Zurich. "Of course it also opens the door to get some costs out. Zurich has grown way too complex over the years."