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The impact on life-insurance activities of Zurich Group’s restructuring likely to remain small

December 2015

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In a  major restructuring effort, financially challenged Zurich Group in December 2015 said it will eliminate or move as many as 1,800 jobs, and announced the resignation of CEO Martin Senn. Tom de Swaan, the Chairman of the Board of Directors since 2013, has been appointed CEO ad interim. Zurich cited the August explosions at the port in Tianjin, China, and a poorly performing U.S. auto book of business as the reasons.

As if to underline its current managerial instability, Zurich only one month earlier had announced a plan to cut 440 jobs in its non-life insurance division. That number now has increased fourfold, to 3.3% of the total workforce of approximately 55,000 employees. Zurich expects to save $1 billion US per year after the plan is completed in 2018. For comparison, Zurich’s operating profit in 2014 was $4.6 billion US.

The plan includes eliminating 500 jobs in Germany and 440 in the United Kingdom; “eliminating or relocating” about 360 jobs at Zurich Global Corporate; moving about 300 group operations and IT jobs from Switzerland to other existing locations; and eliminating 200 jobs in general insurance in Switzerland, Ireland, the United Kingdom, and the United States. In total, 1,140 positions will be closed, 300 will be relocated – presumably to low-cost countries – and 360 more are under review for elimination or relocation. As a result, up to 1,800 people in high-cost countries will be terminated and between 300 and 660 new hires will be made in low-cost countries.

The acceleration of Zurich’s restructuring comes as a reaction to “the weak performance of the general insurance business,” but it also may impact life-insurance and global transnational activities. Whether Zurich’s international programs division will be impacted by terminations and/or relocations remains to be seen; Zebn, Zurich’s employee benefits network, should not be affected. The announcement of Martin Senn’s departure and that of the restructuring will certainly rattle Zurich’s P&C teams – and conversely, competitors, business process outsourcing (BPO) firms, and headhunters should have a field day.

In our opinion, the details in the execution of the restructuring program will determine the impact on premiums written and on critical performance indicators such as loss ratios. It is likely that the $1 billion in internal cost savings will be offset, at least partially, by a drop in Zurich’s technical margin.

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