Zurich affirms commitment to large risk and multinational business despite cost cutting

Announcing its new strategy for the next three years, the Swiss insurer said that ongoing changes at group level should make it more profitable and efficient by 2019.

Mr Greco told a media conference call that the insurer has no plans to exit geographies or lines of business. Rather, it will continue to build on its existing strengths, he said.

“We have a strong franchise with opportunities to improve profitability in general insurance and the cost base,” said Mr Greco.

“This is a very strong group and it does not need any fundamental restructuring. It has a strong capital base, strong brand and excellent skills, but it needs to focus on profitability and cost management, especially at its general insurance business,” he said.

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Mr Greco said that Zurich will build on its Global Corporate business, which generated large losses in 2015, to maintain it role as a “global leader” in large corporate risks.

“Insurance customers will have losses and we do not complain or regret that customers have losses. We just regret if we do not price the business properly or that we do not protect ourselves through reinsurance,” said Mr Greco, when asked about Zurich’s commitment to large corporate risks

“It’s a question of price and the coverage we want to have, not about large losses,” he added.

Mr Greco’s assertion that Zurich’s commitment to large corporate risks remains unchanged comes despite an announcement in September that it will no longer maintain a dedicated large commercial risks unit. It is currently merging Global Corporate with the rest of its commercial insurance business under a new Commercial Insurance unit, headed by James Shea who joined from AIG earlier this year.

Under its new strategy Zurich will continue to develop multinational programme capabilities. The insurer is also creating a global specialties team to manage and coordinate its sector- and product-specific speciality insurance offerings.

Zurich said that it will continue to focus on improving the underwriting performance at its commercial lines business.

“The group will enhance underwriting performance to improve profitability in commercial through more disciplined underwriting tools, through initiatives to reduce portfolio volatility by limiting risk exposures and through talent management initiatives, training and career development. At the operating level, Zurich will continue to reduce complexity and improve accountability,” it said.

At group level, Zurich’s strategy will focus on efficiency and customer experience through simplifying its structure and IT systems. According to Mr Greco, insurance companies have become “complex” and costs need to come down across the industry.

Mr Greco said that Zurich’s “high cost base” can be reduced, while the insurer is already addressing “accountability weaknesses”. “The machine has to be refocused and slimmed down and turned to focus on customers in a more direct way,” he said.

Overall, Zurich aims to cut annual expenses by $1.5bn, reducing annual costs from $10.3bn in 2015 to $8.8bn by 2019. According to Mr Greco, Zurich has “started afresh” with its cost saving targets, which replace its previously announced $1bn planned savings.

Some $500m to $700m of this will come from IT-related savings in the next three years, according to Mr Greco. Zurich is to reduce the number of IT systems it operates and increase the use of data analytics to improve pricing, as well as use cognitive computing to improve customer service.

Kristof Terryn, Zurich’s chief operating officer, told media that Zurich plans “digital initiatives around loss cost control, analytics and automation to improve the customer proposition and efficiency in the commercial and retail space”.

However, under Mr Greco, Zurich appears to be taking a softer approach to reducing headcount. The new strategy does not include job reduction targets and the insurer will no longer pursue the previously announced 8,000 potential redundancies.

A spokesperson for Zurich said: “Our strategy is not about reducing employees although this may be an outcome as we streamline the business.”

However, Mr Greco said that some job losses were likely in the coming years. These will be in line with the insurance industry’s trend for reduced staff levels and increased use of automation and technology, he added.

While Zurich sees opportunities to increase profits, Mr Greco is less optimistic about growth that is expected to follow GDP. According to Mr Greco, “top line growth does not matter”, instead the focus will be on the bottom line and developing Zurich’s customer base and loyalty.