Zurich Insurance Group AG hired Assicurazioni Generali SpA’s Mario Greco as chief executive officer, giving him the task of turning around the company, after losses in its general insurance business forced the Swiss insurer to abandon a takeover bid.
Greco, 56, will start on May 1, the Zurich-based company said in a statement on Tuesday. Generali said earlier in the day that Greco wasn’t planning to serve another term.
Greco returns to the company where he was employed for five years before joining Generali. His experience at Zurich includes stints heading up global life as well as the non-life unit. He had been shortlisted for the top job when Martin Senn was promoted in 2010, people with knowledge of the matter said at the time.
“His intimate understanding of our company and our industry and his track record as a leader make him a unique candidate for the role,” Tom de Swaan, Zurich’s chairman, said in the statement.
Senn stepped down Dec. 1 after Zurich’s non-life unit posted a third-quarter loss that forced the company to abandon a takeover bid for RSA Insurance Group Plc. Its troubles deepened later in December when three storms pummeled parts of England, Scotland and Ireland. Thousands of homes were flooded, leading the company to warn shareholders last week that it expects a second straight quarterly loss in general insurance.
‘Market Challenges’
The Swiss company, one of the world’s largest insurers with about 55,000 employees, is counting on Greco to pull off the same feat at Zurich that he accomplished at Generali. The Naples native has cut costs, reduced debt and sold non-strategic units to revive profit that stood at a nine-year low when he took over in 2012.
“I am honored to be asked to join Zurich at this critical juncture for the insurance industry,” Greco in the statement. “The company has faced market challenges in recent times, but I know that Zurich’s strong global franchise, the breadth of talent and the powerful brand provide all of the ingredients for our future success.”
Greco told Generali’s board that he was unable to find an agreement with the Italian company’s shareholders on his future role after months of discussions, according to a letter seen by Bloomberg. The company needs certainty to meet its targets, and the conditions for Greco to stay on weren’t there, he said.
Dividend Cuts?
A key question for investors is whether Zurich will cut its dividend and how it will use about $2 billion in excess capital that it had before the latest profit warning. While Chief Financial Officer George Quinn has said he would prefer to spend the money on acquisitions, Zurich could also return it to shareholders.
“Mario Greco would be clearly positive for the stock,” Georg Marti, an analyst at Zuercher Kantonalbank, said before the appointment was announced. “Greco is a doer and investors would trust him to achieve a turnaround quickly.”
The Swiss insurer has paid out 17 francs a share every year since 2010 and has the highest dividend yield among Swiss stocks and European insurance companies. Critics have questioned the company’s ability to sustain the dividend in the face of near- zero revenue growth over the past two years.
The company posted a 79 percent drop in third-quarter profit after booking an operating loss of $183 million in general insurance. That reflected an estimated $275 million in claims from the mid-August explosions in China’s port city of Tianjin and $367 million needed to plug a hole in reserves for mainly North American auto and construction liabilities.
The company abandoned its offer for RSA in September, saying it preferred to get the business back in shape before pursuing further acquisitions. Kristof Terryn took over as CEO of the general insurance unit that same month, replacing Michael Kerner.