Zurich Financial Services announced on Monday that its beleaguered CEO, Rolf Hüppi, is to step down from his post by mid-year.This content was published on February 25, 2002 - 13:57
However, Hüppi, who announced a series of profit warnings last year, is to stay on as chairman of the board of directors.
A statement from the company's headquarters in Zurich said a successor to Hüppi as CEO would be announced "at the appropriate time".
Hüppi joined the Zurich group in 1963. He became CEO in 1991 and has been the board's chairman since 1995.
Under Hüppi, the medium-sized Zurich Insurance company was transformed into a global financial services group through a string of acquisitions. However, last year Zurich ended its costly expansion into management by selling its United States fund manager Scudder to Deutsche Bank.
Dual mandate criticised
His dual mandate as both CEO and chairman of the board has been heavily criticised and Hüppi survived a vote of "no confidence" at last year's shareholders' meeting.
The Zurich correspondent of the Financial Times newspaper, William Hall, told swissinfo that Hüppi had dominated the company for a long time without any strong questioning of his actions.
"Some companies do very well with having the same person as chairman and chief executive. In the United States, being both chairman and chief executive is quite normal for big companies but what you do need is strong boards of directors who actually can challenge the chairman," Hall said.
Reasons for the profit warnings?
In a related development, the Federal Office for Private Insurance in Bern has confirmed to swissinfo that it is looking into the company's financial position.
"We want to see the reasons behind the profit warnings and look at the next steps the company will make to improve the financial situation," commented spokesman Patrick Jecklin.
He added that he could make no further comment for the time being.
The office has the task of ensuring that private insurance companies are able to meet their obligations towards insured parties at all times.
Steep price drop
The share price in the company has fallen almost 60 per cent over the last year and stood at SFr331 ($195.97) in trading on Monday morning, up 2.16 per cent on Friday's close.
Zurich also announced on Monday that David Wassermann had been appointed to the group's executive committee as the new CEO of Zurich's global asset business division.
In December, the company said it expected losses of $200-400 million in 2001.
In a statement, the company commented that the downward forecast was due to a number of factors, including "the consequences of the September 11 attacks, asset impairment charges, lower investment income, higher than expected non-life insurance claims and the deterioration in the results of discontinued operations".
The company said the estimate includes direct insurance losses from the September 11 terrorist attacks in the United States totalling $760 million.
Zurich also said it expects a so-called normalised net profit figure of $700-900 million.
Normalised net profit, which discounts investment gains and losses at a fixed rate, is the company's preferred profit figure.
Prior to the attacks, Zurich had estimated a normalised net profit of $1.8-2 billion.
News market wanted to hear
Commenting on Hüppi's decision, investment bank Merrill Lynch said that in many respects, this was the news the market had been waiting for.
Zurich Financial Services, and Hüppi personally, have been criticised for failure to execute strategy and a series of profit warnings over the past 18 months, it said in a statement.
It commented that the significance of the announcement was mitigated to some extent by the fact that Hüppi was not leaving outright and a successor had not yet been named.
Hall at the FT agreed with the Merrill Lynch comment. "You cannot just say the chief executive is stepping down and not appoint a successor. It just gives the impression that this company is flying by the seat of its pants, although there are two successors in the wings," he said.
by Robert Brookes with agencies
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