Q&A with Martin Senn

Martin, how would you rate the company’s performance in 2010?

We performed well in a challenging environment and our full-year results are a testament to the hard work and energy of our 60,000 colleagues around the world. Economic conditions were difficult in several of our major markets, though the outlook definitely improved in the final months of the year. We were confronted with an above-average frequency of significant loss events, including severe weather events. We had to make loan provisions in a non-core banking business and take a charge for a settlement of a U.S. class action lawsuit.

Our business segments delivered solid operating results, and despite the one-off items we remained profitable in each quarter and for the full year. I am especially proud that we ended the year in a strong financial position with a Solvency I ratio of 243 percent, up 48 percentage points from last year, and shareholder equity of USD 32 billion, up 9 percent.

Our strong balance sheet leaves us well positioned to ride out future economic dips. More importantly, our financial strength allows us to take advantage of opportunities as they arise while continuing to invest in existing businesses where we can grow profitably.

Since taking over as CEO in January 2010 you have instituted a number of changes. Can you provide some insight into the key developments and the thought process behind them?

I am privileged to lead a diversified and profitable business with a globally recognized and trusted brand. In fact, our brand continues to develop and we were named for the first time one of the top 100 global brands by Interbrand.

Many of the challenges we face are external, including the economic environment and very competitive insurance markets in many of our key countries. But some of our challenges are internal.

After taking a good look at the company we concluded we were too complex, and needed to be much more agile. We announced a new, streamlined organizational structure in May (see diagram in pdf) and the Group Executive Committee has been working hard to simplify how we run the company from a top-down perspective. In 2011 these streamlining efforts will reach more of the company, including the front-line  colleagues who do such a great job serving our customers.

We realized we have an opportunity to achieve greater economies of scale and improve the consistency and quality of some of the things we do by further extending our global approach to running the company. We grouped together many of our internal operating functions to identify synergies and develop best practices, and we continue to seek out efficiencies in underwriting and claims handling. In December we announced a renewed focus on expense control and have set a target of reducing expenses by USD 500 million on a run-rate basis by 2013.

What are your key objectives for the company in 2011 and beyond?

We reaffirmed two key objectives in December at our Investor’s Day meeting. We remain committed to our business operating profit after tax return on equity target of 16 percent over the medium term. This is a challenging but achievable target. And we remain committed to paying a sustainable and attractive dividend. Our dividend policy is supported by our strong ability to generate cash, which in turn is supported by our business segment strategies: General Insurance is managed for profitability; Global Life’s growth strategy is self-funded; and Farmers’ fee-based model continues to be successful and attractive.

Beyond specific objectives, in 2010 we made a step change in our long-term ambitions. We decided as a company that our aspiration is to be the best global insurer as measured by our shareholders, our customers and our employees.

We must keep doing what we do well – looking after our customers, engaging with our employees, managing risk with care and rigor, and focusing relentlessly on operational excellence. Above all else we must continue to safeguard Zurich’s reputation.

Regulatory uncertainty was very much in the news in 2010. How concerned are you by changes in the regulatory environment?

We support strong and effective regulation. Governments should define clear principles for the supervision of insurance and broader financial services sectors, and should have strong institutions to enforce these principles. Regulation should be coherent and appropriate. At Zurich, we strongly support economic risk-based solvency regimes, such as the Swiss Solvency Test (SST) and Solvency II.

Finally, what are the growth prospects for the insurance industry and for Zurich?

The insurance industry has attractive growth potential. Insurance products have very low penetration in many developing markets, which is why in 2010 we made strategically important acquisitions in Indonesia and Lebanon and increased our presence in Turkey. We continue to seek out opportunities to build our presence in emerging markets.

We believe we can also grow further in developed markets and continue generating good returns. I am excited by the prospects for the insurance industry and I am confident Zurich is very well positioned for the future.