Zurich Financial Forced to Embrace Change
By Michelle Logsdon - December 26, 2001After months of organizational and financial shake-ups, Zurich Financial Services Group, Europe’s third-largest insurer, announced Dec. 21 it expected to report net losses of $200 to $400 million for 2001. Those numbers are in stark contrast to last year’s profits of $2.33 billion.
Zurich’s stock has fallen almost 54 percent this year.
Reasons for the losses include: asset impairment charges, less investment income, more non-life insurance claims (including property, accident, car and liability), problems with discontinued operations and Sept. 11.
The company saw $760 million after taxes in direct insurance losses from the Sept. 11 attacks.
Zurich’s reduced financial forecast, came on the heels of a management shake-up that began when Constantine Iordanou, the senior executive vice president, resigned unexpectedly. Iordanou was seen by many as the heir apparent to chairman and chief executive officer, Rolf Hüppi.
A Zurich press release said Iordanou “has decided to accept another senior executive position outside the Zurich Group” but no further explanation was given.
The Board of Directors moved James J. Schiro from the CEO position at PricewaterhouseCoopers to chief operating officer – group finance.
Peter Eckert assumed the position of chief operating officer – group operations and business development. Chief Financial Officer Günther Gose is retiring in mid 2002. He will be replaced by Thomas Buess, currently chief financial officer of Zurich North American Corporate.
These managerial changes occurred while Zurich had been attempting to implement a new business strategy focusing on its core activities. As part of that strategy, the company recently sold approximately 21 percent of its shareholding in Bâloise by its subsidiary, INZIC AG. The sale was through JP Morgan to the Strategic Money Management Company B.V. (SMM). Total price of the sale was $1.17 billion.
Also in the name of strategy, on Dec. 11, Zurich completed the initial public offering of 87.5 percent of Converium, its former reinsurance arm.
Zurich expects its 2001 normalized net income to be between $700 and $900 million. And despite all of the financial concerns and executive chair swapping, Zurich projects for 2002 normalized earnings growth over the pre-Sept. 11 estimate of $1.8 to $2 billion.
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