Zurich Financial Services Group will hold a meeting later today to provide investors and analysts with further details on its strategic initiatives designed to increase growth and profitability.
The bulletin said the changes would be concentrated in the following three areas:
— further improving profitability in Life Insurance by improving operating efficiency and redesigning the segment’s business model;
— fostering profitable growth in General Insurance by focusing on four target market segments and leveraging the Group’s global network in the commercial businesses;
— coordinated approaches to functions essential to analyze and manage the opportunities and risks inherent in the insurance business.
CEO James J. Schiro, stated: “After having delivered on our promise in 2003, I am confident that we have improved the processes and financial discipline and are creating a culture that will allow us to grow profitably in the future.”
Zurich conceived the strategic changes following a comprehensive review of options to increase profitability and ensure growth in both its life and P/C business. “The Group’s aspiration is to become the leading global insurer in its chosen markets, consistently delivering top tier results based on a strong customer focus and a sophisticated global network,” said the announcement.
“Zurich’s realignment marks phase two of the recovery process the Group has been implementing over the last 18 months,” it continued. “This process is focused on improving the Group’s profitability to achieve a 12 percent return on equity based on business operating profit after tax and regaining its AA financial strength rating in the medium term.” It hopes to save $200 million.
Zurich listed the four “General Insurance” target markets as follows:
— Global Corporate Customer Business, which will offer coverage for both international and large domestic risks. In 2003, this business unit achieved a premium volume of USD 7.0 billion.
— Europe Personal and Business Customers where significant expense savings and synergies from the consolidation of the United Kingdom and Continental European business divisions are expected. In 2003, this segment achieved gross written premiums of USD 10.3 billion.
— US Personal Customers where Zurich will capitalize on the strong Farmers brand and its unique reciprocal structure. In 2003, the Farmers Exchanges, which Zurich manages but does not own, achieved gross written premiums of USD 13.8 billion.
— US Small Business, which is the largest commercial segment in the United States. Together, Farmers and Zurich are among the largest providers in this market with a combined premium volume of approximately USD 4 billion.
Zurich’s announcement said that in each of these segments, it plans to “integrate business and service capabilities and improve processing efficiency and delivery mechanisms.” The company also said it would “continue to enhance its market presence by building on strong broker relationships, by optimizing the penetration in other distribution channels, where appropriate, and by developing greater customer insight to offer value propositions satisfying customer needs.”
In addition to the four “target market” segments, Zurich said it would “continue to serve customers in two other business segments:
— The US Other Commercial Business where 2003 gross written premium volume was USD 9.1 billion.
— The International Businesses with gross written premiums of USD 3.0 billion in 2003.
Zurich also announced plans to restructure its life business. The Group writes about one third of its total premium volume (2003 gross written premiums and policy fees of $11.8 billion) with an embedded value in 2003 of $10.4 billion. It hopes to “unlock value through an integrated approach to the business, optimizing resources by driving a leaner organization that is more resilient and ultimately more responsive to customers’ needs. This is expected to translate into a sharper competitive edge for Zurich, supporting stronger and more sustainable earnings.”
Specifically, Zurich said it “will develop and implement common platforms for the Life Insurance segment and maintain focus on financial discipline including freeing up capital by exiting under-performing businesses. The Group will propose new business models particularly in the United Kingdom where the Zurich Advice Network will take advantage of the end of polarizing the market into tied agents and independent financial advisers.”
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