Zurich’s Rolf Hüppi admits he made mistakes

Rolf Hüppi, chairman and chief executive of Zurich Financial Services Keystone

Zurich Financial Services chairman and chief executive, Rolf Hüppi, has told swissinfo that he failed to communicate properly with shareholders and the markets, after he survived a no confidence vote at the group's annual general meeting last week.

Shares in the group, which is Europe’s third largest insurance company, dropped sharply after the company shocked the markets by posting a 5.5 per cent slide in net profit to SFr3.63 billion ($2.1 billion) for 2000.

“It’s not that we haven’t operationally or strategically done the right things,” Hüppi told swissinfo. “The mistake is we left the markets believing that we would live up to their expectations, and we didn’t heed some of the signals that were out there. We did make communication mistakes.”

Only last week Rolf Hüppi had to face up to a vote of no confidence at the group’s AGM, as investors continued to rail against what some saw as the company’s poor communication skills regarding the downturn in the group’s fortunes.

However, Hüppi came through the motion with a large majority in his favour, despite fierce criticism from many shareholders upset by the drop in earnings in 2000 and poor prospects for the current year.

“When you’re the captain of the ship, you take the brunt, you stand in the sun when things are great and you stand in the storm when things are not so great – I knew this would be quite stormy,” he added.

Net profit for 2001 is expected to come in slightly lower than the figure seen last year, with high spending on new Internet technology being cited as one of the reasons for weaker growth. But Hüppi remains convinced that in the longer term growth will return to between 11 and 15 per cent per year.

Hüppi insisted that from a business perspective the rejection of the no confidence vote confirmed that he was steering the company in the right direction.

However, he also admitted that the very fact there was a vote of this nature reaffirmed that the company had to communicate better with its investors.

At last week’s meeting Hüppi did not hide the fact that the company faced further challenges ahead. He told shareholders that although its insurance arm had performed well in the first four months of the year, asset management continued to be a problem.

Hüppi has blamed the strength of the dollar for the company’s woes, as well as a one-off charge for severe weather damage and extraordinary additions to reinsurance reserves.

“We are with great determination and with very great focus doing what we said we would do – that is build the new Zurich,” said Hüppi. “Given our market positions – we’re very strong in the US, the UK and in Europe, particularly in Switzerland – we believe this is a period where we can achieve extraordinary growth.”

The US subsidiary of the group is, according to Hüppi, leading the way in the company’s efficiency drive, becoming more web-enabled as it pushes towards a paperless way of doing business.

“We’re trying to set new standards and through our cost cutting and efficiency drives we’re beginning to see results,” said Hüppi.

Zurich Financial Services has now embarked on a series of divestments and cost-cutting measures, including shedding 600 jobs at its Zurich headquarters over the next two years. That amounts to more than half of all staff.

Another 170 jobs are to be lost in Britain.

Despite the setbacks, Hüppi insists the company is on the right track. “What went right [last year] was we unified our shareholder structure, we introduced a new strategy and organisational concept which takes into account what the future brings us and the opportunities technology offers us.

“We still had a high level of earnings in the year 2000 so that actually puts us among the six richest companies in Switzerland.”

Hüppi remains firm in his belief that the markets should give him another chance.

“The market has not appreciated that there were reasons why we couldn’t give them earlier indications about the worse than expected performance,” he explained. “We certainly didn’t meet the market expectations or even our own expectations.”

Zurich Financial Services was formed three years ago by the merger of Zurich Insurance and the financial services arm of British American Tobacco.

by Tom O’Brien