Zurich Financial Services To Seek New CEO

by Ulrika Lomas, Tax-News.com, Brussels

27 February 2002

The announcement on Moday by Swiss insurance group Zurich Financial Services, Europe's number three insurer, that Rolf Hüppi, Chairman and Chief Executive, would scale back his responsibilities and move to be chairman only, was well received by markets - but only temporarily, as the Swiss insurance regulator yesterday voiced concern over the health of ZFS's finances following the falls in global equity markets in the wake of 11 September, and the company announced that Steven Gluckstern, a US financier who had once been regarded as a successor to Mr Hüppi, was leaving. The company said it had launched a search for a new chief executive, with an external candidate not ruled out.

Shares in ZFS, which vacated the London stock market in 2000 and remain quoted in Zurich, initially rallied on news of Mr Hüppi's change of role but later fell sharply. ZFS shares have fallen 60 per cent over the last year.

"This is good news ... but it is only half of what investors wanted," said Charles Coyne, an analyst at WestLB Panmure. "They wanted Hüppi to go altogether."

Over a ten year period Mr Hüppi has transformed a conservative Swiss insurance company into a large financial conglomerate through large acquisitions of asset managers, such as Kemper and Scudder in the US, and UK insurers, such as Eagle Star and Allied Dunbar. But latterly Mr Hüppi has angered investors with a series of profit warnings and disappointing financial results. In December he said the group was heading for a £276m loss, against expectations of a £1.2bn profit, putting himself under renewed pressure to abandon his dual-role position.

This month, Standard & Poor's, the US credit rating agency, downgraded the group's credit rating because of concerns about the consistency of managements's strategies, earnings underperformance, reduced capitalisation and financial flexibility. S&P said management had not been able to fully leverage Zurich's "impressive business position".

Mr Hüppi is to remain chief executive until the middle of this year. The company also appointed David Wasserman as the new head of its asset management operations, replacing Steven Gluckstern in the wake of the divestment of ZFS's Scudder business to Deutsche Bank. Mr Gluckstern, who had been in the position only 16 months, wanted "to pursue other interests outside the group". Other recent senior management changes include the departure of Constantine Iordanou, formerly head of ZFS's US business and and also perceived as a possible successor Mr Hüppi.

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