Zurich CEO Mario Greco: “We are the opposite of banks”

By André Müller and Michael Ferber at NZZ on May 23, 2024. Read original in German here.

The insurer Zurich has been operating profitably for years. In an interview, Group CEO Greco talks about planned dividend payments, the CS collapse and the 10 million Switzerland.

Mr. Greco, you have been working in the insurance industry for 30 years. How has it changed during this time?

Insurance has become a “normal” industry. For centuries, they were over-regulated and protected. I started my career at a time when the authorities set our prices. Nobody cared about the customers. Customers had to buy an insurance policy and they didn’t care who they ended up with. The price was the same with every insurance company. Today, we are still regulated in Europe, but not protected from competition. Customers can leave us anytime. At Zurich, we didn’t want to be overtaken by the competition in this industry, we wanted to be the disruptor.

Isn’t the relationship one-sided? For the customer, insurance cover remains something tedious that they don’t voluntarily deal with.

That’s true of retail and especially of motor vehicle insurance – you can almost only stand out through the price. The customer doesn’t want to deal with it unless something happens. But it is different in the commercial space and even in retail, there are interactive services today. Our LiveWell health program, for example is not about treating illnesses but preventing them. 4.5 million customers already use the program.

Don’t you interfere too much in private lives when you tell customers: “Don’t eat too many sweets!”?

It’s always the customer who asks for the service. For example, when we advise homeowners on whether they should install solar panels or a new heating system, it is because they have asked us for advice or help.

Opening up the market has a downside for insurers. The moat that governments had drawn around their business is gone. From this perspective, who are your new competitors?

We ourselves want to be the challengers in the insurance industry and have added very different skills. For example, we now use drones to inspect numerous claims reports from our business customers. We have colleagues whose job is to be drone pilots.

For crop failure insurance?

Also for flood damage that could not be inspected immediately. Today, thanks to drones, we can tell the customer very quickly what has happened. A digital revolution is taking place and we wanted to lead it ourselves.

But are you satisfied that investors still see you as a reliable, somewhat boring insurance company?

Yes. Investors don’t want to go on a rollercoaster ride, do they? Investors want security.

Well, some would rather invest in Tesla and a CEO who presents unconventional new ideas every few weeks.?

We’re talking about an industry and a product with growth of up to triple-digit percentage range. The insurance industry can’t offer that – it’s not a completely new industry.

But when U.S. government bonds are currently yielding almost 5 percent interest, dividend stocks like Zurich are at a disadvantage.

Of course, investors compare us with government bonds when we offer a dividend yield in excess of 6 percent. Overall, however, the higher interest rates are very helpful for our business. Negative interest rates were incredibly challenging for us. They have been the biggest challenge for us in recent years, despite the pandemic, wars, inflation and a recession.

You have increased the dividend, announced a share buyback program and want to distribute 75 percent of your profits in the long-term. Is there enough left over to invest in the future?

Yes. For nine years, we have been telling our investors that we retain some liquidity with us but distribute three-quarters of our profits to shareholders. We have financed acquisitions worth up to USD 4 billion by ourselves. But we don’t try to keep pocket money ready for possible bigger acquisitions. That is inefficient and not transparent toward our investors. If we will have a major acquisition target in front of us, we will not be afraid to ask our shareholders for capital.

Zurich shares have outperformed the SMI over three and five years, but this year they are lagging behind the index. How did this come about, and how do you plan to move the shares forward?

We don’t manage our share value, but business profitability and growth. The market has reacted positively to results last year. If we beat our record from last year in 2024, I don’t expect us to underperform the market.

Costs in the private customer business are still too high. Have you planned further measures to tackle the problem?

This business was hit by the massive surge in inflation in 2021 and 2022. We knew from the outset that it would take three years to return to normal profitability, i.e. until 2025. Growth is accelerating this year, and profitability is recovering as quickly as we expected.?

But inflation has not yet been conquered.

That’s true, but the problem is not the level of inflation, but a sudden jump, as happened in 2021. In 2020, everything was subdued because of the pandemic – in 2021, when the world started up again, there were double-digit inflation rates in many places.

Central banks still don’t know exactly how the economy will develop. Which scenarios worry you the most at the moment?

The one I’m not yet thinking about today. We are preparing for numerous scenarios: a return of high inflation, disinflation, a new recession, new small wars. But I keep asking myself what could surprise us all.?

One known risk is the break-up of the economic blocs. Both presidential candidates in the U.S. want to escalate the trade war with China. Your customers and their global supply chains would be heavily exposed to such a scenario. How are you preparing for this?

It’s not about preparing – it’s already happened, isn’t it? We are a global insurer, but we act locally everywhere. For example, in the U.S. we are an American company. We don’t run our business there from Zurich, but from Chicago. We do the same in every other country around the world.

Will this deglobalization continue?

Yes, because globalization, as it has been implemented, has improved the living conditions of people in emerging market countries and has benefited consumers everywhere. But it has caused a lot of social unrest in Western countries and has created relevant geopolitical risks. These are the sources of the force that is pushing back against globalization. In the past, most waves of globalization have been stopped by wars. This time it is not a military conflict, but a social one. But I am sure that we will make another attempt at globalization in the next 15 years – and probably do it better.

What does it mean for Zurich to be a Swiss company?

It means that we act as an ambassador for Switzerland all over the world. Switzerland stands for reliability, neutrality and high-quality services. We carry these values out into the world. Recently, we bought the majority of Kotak Mahindra's insurance business in India – a country where we previously had no license. We were perceived as a Swiss company, which was important in winning the contract.

Is Switzerland still associated with these values? We have seen the end of Credit Suisse and the sanctions policy has raised many questions about our neutrality.

Nobody is perfect, but yes, Switzerland is still associated with these values. In India, other foreign companies were bidding too. But Switzerland is perceived as friendly by Indians, and this has no doubt helped us.

It would have made a difference if Zurich had been a British or American company.

Yes, absolutely.

The 13th AHV pension may not be an issue in India, but it is here. We could soon be deciding on even more far-reaching subsidies in the healthcare system without the funding being secured. Have we lost our way?

I don’t think Switzerland is going backward. Every country struggles with healthcare issues. Every country has budget problems and struggles with energy policy. The pandemic and investments in sustainability have stretched the budgets of European countries. Switzerland still has fairly healthy finances.

In the wake of Credit Suisse’s demise, financial market supervision is to be expanded and the capitalization of financial companies is to be monitored and regulated even more closely. Some of the measures could also affect insurers. Are you worried that we are exaggerating?

This can always happen, but I have not yet seen anything that confirms these fears. The insurance industry has no need for further regulation. We are not a problem for the system. We have proven over the years that we don’t need to ask for government help. Banks usually fail due to liquidity problems, that can’t happen with us.

But capital problems can also occur with insurers.

Yes, but we are the opposite of banks: Our customers can’t choose when they get their money back. Switzerland has one of the toughest capital regulations for insurers in the world. We are in competition with American companies, which have much laxer capital rules. I see no reason why we need to make the situation any worse.

Will your voice be heard when it comes to future regulation?

We are trying to explain that we are not banks. They actually had significant problems, also structural ones. It wasn’t just Credit Suisse, we also had the American banking crisis in 2023. Banks failures have happened around the world, insurance companies have not. They are two very different industries that function completely differently. Consequently, they also need to be regulated differently. We are not calling for us not to be regulated, but the regulation must be different from that of banks.

According to media reports, the insurer Swiss Life was interested in buying Credit Suisse Switzerland. Was that also an option for Zurich?

No, absolutely not. We are an insurance company and are generally not interested in taking over parts of banks. We don’t even look into it. That applies in general, not just to Credit Suisse.

Is it interesting for Zurich to take over employees from Credit Suisse? There are a lot of specialists on the market at the moment...

In some cases, we have benefited from the situation at Credit Suisse. We are looking for insurance specialists – but primarily internally. We want to fill at least 75 percent of open positions with internal people. That’s why we have launched a major program in recent years to develop the relevant skills internally.

The shortage of specialists is a major issue in Switzerland. How difficult is it for Zurich to find employees in various areas?

It’s not difficult for us to attract good people. They know that our company is doing well. We also have a strong brand and Switzerland is a very attractive country.

Zurich’s third three-year financial cycle under your leadership will be completed by the end of 2025. Will you be stepping down after that?

The Zurich Group is managed by means of three-year plans, which are confirmed by the Board of Directors. My agreement with the Board is that I will oversee the current plan, which runs until the end of 2025. After that, there will be a new plan and together the Board and I will decide on what I need to do.

Zurich is proud that it often promotes from within. So does your successor also have to come from within the company?

Many important positions at Zurich have recently been filled internally. For example, we sent Raul Vargas from Spain to Los Angeles as the new head of our U.S. company Farmers. The head of the Asia-Pacific region is our former U.K. head Tulsi Naidu. However, not all management positions will be filled internally. Recently, our CFO Claudia Cordioli joined us from the Swiss reinsurer Swiss Re.

It may be easy to recruit specialists in other countries for positions in Switzerland. However, this also contributes to a high level of immigration and causes political discussions.

People love the “Swiss way of life.” I understand when people are concerned that Switzerland could soon have more than 10 million inhabitants. Switzerland is a small country, and it’s not getting any bigger. ?But let’s also look at the bright side: So far, the country has coped quite well with immigration and most immigrants have managed to integrate well.

Is immigration merely a sign of Switzerland’s attractiveness or is it a problem?

Other countries have also changed. Take the U.S., for example, and the increasing division in society. In Switzerland, there is a sense of predictability and security. This is no longer necessarily the case in other Western countries.

What does this mean for Switzerland’s relationship with Europe and the E.U.?

It’s difficult for me to give my opinion here because I am not yet a Swiss citizen. The problem with Switzerland’s relations with Europe is that the E.U. is not flexible anymore after Brexit. The message is: “Either you’re 100 percent in the E.U. or you’re out. There’s nothing in between.”. Personally, I don’t believe that Switzerland can be 100 percent in the E.U.

Switzerland already has a network of agreements with the E.U. The Federal Council broke off talks on a framework agreement in 2021, which was intended to reorganize cooperation with the E.U., due to major differences. What happens next?

Brexit has ruined the previously available options. Negotiations with Brussels were easier before.

So should Switzerland distance itself more from Europe??

I wouldn’t say that. It is in Switzerland’s interest to be connected to Europe and it is in the interest of Europe to have Switzerland aligned. Switzerland is at the center of Europe not only geographically. However, being close to the E.U. but not being a member is a difficult path. I understand why the Federal Council is having problems negotiating a framework agreement with the E.U.

A veteran of the insurance industry

Mario Greco has been CEO of Swiss insurer Zurich since March 2016. He was previously CEO of Italian insurer Generali from 2012 and had already worked at Zurich between 2007 and 2012. The Italian, who was born in 1959, also held positions as CEO of the Eurizon Financial Group, at the Sanpaolo IMI Group, at Allianz and at the consulting firm McKinsey. Greco holds a Bachelor's degree in Economics from the University of Rome and a Master's degree in International Economics and Monetary Theory from the University of Rochester.