Zurich Insurance Group AG’s CEO Martin Senn said an above-average dividend is no longer enough for investors and that now is the time to expand his business as the economy rebounds.
“The world is a bit more stable,” Senn said yesterday during an interview at Bloomberg LP headquarters in New York. “We’re going to be a bit more on the offense in terms of how and where to grow our market share.”
Zurich, based in the Swiss city of the same name, climbed 6.3 percent in the past year through yesterday, lagging behind the 16 percent advance of the Bloomberg World Insurance Index. Shareholders have benefited from the company’s 6.3 percent dividend yield, which is more than twice as much as the average for the 83 insurers in the benchmark.
“The dividend gives a good downside protection when the market becomes more volatile,” Senn said. “The world is much more in a growth mode.”
Senn has sought to build investor confidence in Zurich, Switzerland’s largest insurer, after executive departures and the suicide of Chief Financial Officer Pierre Wauthier last year, which prompted Chairman Josef Ackermann to resign. The CEO has signaled his willingness to scale back or exit underperforming businesses to bolster earnings growth.
The company said in December it expected as much as $600 million in restructuring costs over the next 12 months. It lowered its profit goal to a range of 12 percent to 14 percent return on equity for the three years through 2016. That compares with the previous target of 16 percent.
The area of focus for Zurich is insuring risks for large, global firms, Senn said yesterday. He cited opportunities covering businesses in the U.S., where his company is one of the biggest sellers of policies for the construction industry.
“Economic activity has significantly picked up,” he said. “The growth pattern in the U.S. is clearly ahead of Europe.”
Zurich is also one of the largest sellers of home and auto policies in the U.S. through a management relationship with Los Angeles-based Farmers Insurance.
Car coverage will evolve as new technologies allow for self-driving vehicles, Senn said. Such a change would mean carriers like his would have to reassess their business models.
“The question is moving from property risk to liability risk,” Senn said. “Who is liable when things go wrong? If everything is automated in the world and every car drives itself, who is liable when things go wrong? Is it Google Maps? Is it the telecom signal provider? Is it the car manufacturer?”
–With assistance from Cordell Eddings in New York. Editor: Josh Friedman