Another Swiss Opening

Martin Senn has said goodbye to Zurich Insurance.
  • Why it matters

    Why it matters

    The ex-CEO Martin Senn failed to achieve several goals to raise the profits of Switzerland’s largest insurer.

  • Facts


    • The chairman of the board and interim chief executive, Tom de Swaan, said only external candidates are being considered to replace Mr. Senn.
    • Mr. Senn lowered the objective for return on equity in 2013, from 16 percent to between 12 and 14 percent — but Zurich has yet to achieve the lower goal.
    • To keep investors happy, Zurich has paid annual dividends of 17 Swiss francs since 2010. Questions on whether that will continue sent shares lower Tuesday.
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At the end of the day, only the timing of chief executive Martin Senn’s departure from Zurich Insurance Group was a surprise.

Times have been tough for Switzerland’s largest – and one of the world’s largest – insurers. Ever since Mr. Senn was forced to issue a profit warning in September, his days as boss have seemed numbered.

The Swiss national, who headed the insurance group since 2010, resigned from office on Tuesday, effective immediately. Zurich’s chairman of the board, Tom de Swaan, will run the business until a successor is found. According to Mr. de Swaan, the company is only looking at external candidates and he hinted that a new chief would be announced “in the near future”.

That might indicate the board was actually looking for a new chief executive for some time, as had been reported by Swiss business magazine Bilanz.

“In the last few years, Martin Senn has not managed to put Zurich Insurance on a growth course.”

Georg Marti, analyst at Zürcher Kantonalbank

It’s a role that Mr. de Swaan is used to. The former central banker and Dutch national has had to step in during crises before, the last time when Josef Ackermann abruptly left Zurich’s chairmanship in July 2013 following the suicide of its chief financial officer Pierre Wauthier. He’s known as “Turbo Tommy” in his home country.

Mr. Senn’s resignation may have been expected, but the timing wasn’t. Taking journalists’ questions during a telephone conference, he avoided any real explanation for his hasty departure. He said the timing was right because management was currently preparing a strategy plan for the coming years.

“And of course, we had a few setbacks,” admitted Mr. Senn.

In September came the shocking news that Zurich would post a third-quarter loss in its core property insurance division. The reasons included costs from a massive explosion in the Chinese port of Tianjin, in addition to insufficient reserves in U.S. liability policies for auto fleets.

The new problems reduced net profits by 80 percent, to around €190 million. As recently as May, however, Mr. Senn had held out prospects for improvement in the core division.

Because of the property insurance crisis, Mr. Senn also had to call off the takeover of British insurer Royal Sun Alliance, even though talks were at an advanced stage.


Once more into the breach. Tom de Swaan will take over for the time being as Zurich Insurance CEO. Source: Picture Alliance / Sven Simon


However, Mr. Senn’s departure is not the result of one bad quarter, but a whole series of disappointments.

After failing to achieve several goals outlined in his first strategic plan when he took office, Mr. Senn lowered his targets in 2013. The goal for return on equity was cut from up to 16 percent to between 12 and 14 percent. So far, Zurich has not even managed to achieve the lower figure. Last year it was only 11.1 percent. And analysts have doubts that the company will meet its goal this year.

“In the last few years, Martin Senn has not managed to put Zurich Insurance on a growth course,” said Georg Marti, an analyst at Swiss bank Zürcher Kantonalbank.

Unlike its rivals, like Germany’s Allianz or France’s Axa, Zurich is heavily involved in business with big clients – especially in the United States. Organic growth is difficult and risky if policies are not properly priced, as the third quarter has shown.

And Zurich was always cautious with regard to acquisitions. Mr. Senn’s biggest deal was a majority takeover of the insurance subsidiary of Banco Santander in South America.

So revenues have stagnated in recent years. And now that unprofitable contracts in the core property management division are being canceled, income from premiums in this area can again be expected to decrease in 2015.

To keep investors happy, Zurich has paid annual dividends of 17 Swiss francs since 2010. If that is factored into the development of the share price, then the performance is respectable.

But news of Mr. Senn’s departure has spurred concerns that a new chief executive might have to cut the dividend. As a result, the share price fell 0.5 percent on Tuesday.

Apart from operational problems, Zurich often makes headlines with news of board members leaving. Since 2011 seven board members have left — three in this year alone, including Mr. Senn. By contrast, only three board members have left Allianz since 2010 for reasons other than reaching retirement age.

The high turnover could prove to be an advantage — because there are ex-Zurich managers all over the industry who could be possible successors.

Mr. de Swaan is also well connected. Until 1998 he was a board member of the Dutch central bank, and has also led the Basel committee in charge of coming up with global financial regulations. He has also worked as chief financial office of Dutch bank ABN Amro.

One possible successor is Inga Beale, the chief underwriter at Zurich between 2009 and 2011. Since last year she has headed the British insurer Lloyd’s of London. As diversity is important to Zurich chairman Mr. de Swaan, analysts think that Ms. Beale is a real possibility.


Holger Alich is Handelsblatt’s correspondent for Switzerland and is based in Zurich. To contact the author: alich@handelsblatt.com

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