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Member, Beacon International Group, Ltd.
ZURICH, Switzerland--Zurich Financial Services Group will eliminate jobs and poor-performing business units in an attempt to turn its results around, the insurer announced Thursday.
At the same time, Zurich said it has made a $1.76 billion addition to its liability reserves.
The announcements come in a year that has seen a drop in the Zurich, Switzerland-based insurer's stock price and the resignation of its long-time chairman and chief executive officer, Rolf Hueppi.
"We were all aware that Zurich needed to take action to provide a platform for sustainable and profitable growth," said James J. Schiro, who took over as CEO in May. The turnaround plan will reduce costs and allow Zurich to focus on its core insurance operations, he said.
As part of its cost-cutting efforts, Zurich will eliminate about 4,500 jobs from its workforce of 75,000. About 2,000 jobs will be cut from Zurich's operations in continental Europe, while staff in the United States and the United Kingdom will account for another 2,000 cuts. The remainder will take place at other units.
Zurich also will exit several noninsurance areas, including asset management and the Internet-based bank it established in the United Kingdom earlier this year. Other noncore businesses and insurance units outside of the U.S., U.K. and Europen markets will be retained only if they produce a 12% return on equity over the medium term, Mr. Schiro said.
Zurich also intends to increase its capital through a $2 billion to $2.5 billion stock issue to shareholders.
The turnaround plan was announced alongside a $2.03 billion loss for the first half of 2002, which compares with a $861 million profit for the same period in 2001. The loss stemmed largely from a $1.76 billion addition to reserves for prior year liability losses, including asbestos-related losses in the United States.
Zurich's gross written premiums rose 18%, to $20.73 billion, for the first half.