Leaders of Zurich Insurance Group defended the quality of its financial reporting on Friday in response to media speculation and analysts’ questions linking financial disclosure issues to recent events surrounding the suicide of the group’s former CFO.
“The results as we have reported them at the half year—and in any other reporting period—they are what they are,” said Martin Senn, Zurich’s CEO. “They are not in any way different than what proper effective prudent accounting requirements are.”
Senn was responding to a question raised by an analyst immediately following prepared remarks he delivered about the financial strength of the company during a special conference call.
Acting Chairman, Tom de Swaan began the call, announcing the intention of Zurich’s board to “look into the question as to whether there was undue pressure” placed on Pierre Wauthier, who died last week, and stating that the board saw this task as “its prime responsibility.”
Vice Chair de Swann, who stepped into the role of acting chairman on Thursday when former chairman Josef Ackermann resigned, also confirmed that Ackermann was mentioned in Wauthier’s suicide note.
Senn followed, saying that he endorsed the need for the board to look into the question of whether Wauthier had experienced too much pressure in his position as chief financial officer, and emphasized that “Zurich remains a great and solid company.” The company then opened up the conference call up to analysts for questions—the first of which centered on the contents of an article in the Swiss newspaper Tages-Anzeiger.
According to the analyst, the article suggests that Ackermann felt that Zurich has been painting a rosier picture of financial results than warranted. Several online translations of the Tages-Anzeiger article, which is written in German, seem to verify the analyst’s description of the article. In addition, an Associated Press article (titled, “Zurich to look at ‘undue pressure’ on CFO, Aug. 30), also indicates that Ackermann thought negative aspects of the company’s performance were being downplayed by Wauthier in recent presentations.
The analyst asked whether the company might consider revising expectations or dividend levels to address investor concerns in the wake of these reports.
“I don’t want to speculate on any media reports. Quite frankly, I haven’t read the article you’re referring to,” Senn said, responding to the analyst about the Tages-Anzeiger article. “The point that I want to make is that everything we have said at the half-year stands,” he said. Senn also emphasized that Zurich continues to pay “a sustainable and competitive dividend,” in keeping with its policy in the past.
“We have stated that our cash flows remain strong, that the balance sheet is strong, and that the financial results and quality of our reporting and accounting has not been impacted by these recent events,” he said, repeating almost verbatim some remarks contained in his prepared statement.
“These results are independently reviewed by our auditors. Any comments made now about bringing this [incident] into them—back into the results, I consider totally unfounded,” Senn responded to the analyst.
In his prepared remarks earlier, Senn said, “With respect to what happened in the last few days, I want to make it crystal clear that there is no link between this news and Zurich’s business and financial performance,” noting that half-year results remained entirely unchanged and that group solvency at June 30 was “comfortably within” Zurich’s target range.
Later, when a second analyst asked Zurich to respond to concerns about financial records, de Swaan interjected— speaking over Senn to say that one of his first conversations after becoming chairman was with the chairman of the Audit Committee of the board. “He [the audit chair] assured me that there was nothing he had to report to me in any connection with this,” de Swann said.
The analyst went on to suggest that there had been more questions on second-quarter results conference call about reporting issues than there had been on previous calls. “In hindsight, this just struck me in the context of recent events,” the analyst said.
“There is no correlation and no factual link to that. [This is] totally unrelated, and one should not have any doubts in the reporting structure and the accuracy of these numbers in relation to what has happened now,” Senn said.
On Aug. 15, Zurich reported that net income for the first half was roughly $1.9 billion, down 17 percent from first-half 2012. Zurich attributed the decline to natural catastrophes and large weather-related events, including severe flooding in Eastern and Central Europe, tornadoes in Oklahoma as well an unusual number of mid-sized, weather-related events in the U.S., Canada and Europe. Senn also noted that challenge of continued low interest rates exerted pressure on our investment income in an earnings statement.
On Friday’s special conference call, a third analyst raised a question about turnover in the senior ranks of leadership at Zurich in the last three or four years, which Senn addressed in a similar manner to the other questions. “Let me make the point that these changes are all unrelated not just this year, but also in the prior years, and by attempting to see patterns in all of this, our view is very clear that no such patterns exist,” he said.