ZURICH (Reuters) – Zurich Insurance (ZURN.S) will have cut costs by $700 million by the end of the year, nearly halfway to its goal to save $1.5 billion by 2019, Chief Executive Mario Greco said in an interview published on Saturday.
“We’re on track,” Greco told the daily Neue Zuercher Zeitung. “It’s a big challenge, because we must simultaneously cut costs as well as invest.”
Greco, who had engineered a turnaround at Italy’s Generali (GASI.MI) , was brought in last year by Zurich to reduce the company’s high cost base and simplify its business to help boost profitability that had been falling short of its own targets.
Asked if a dividend target of 75 percent of net profit was too high, Greco responded by saying the company is satisfied with its AA debt rating and has no ambition to attain AAA, meaning further measures to strengthen capital is not a priority.
“An excessive build-up of capital reserves weakens our discipline and leads to a situation where money is deployed inefficiently,” Greco said. “Additionally, it puts pressure on the return on equity and doesn’t help us any further.”
Greco told the newspaper Zurich does not need additional capital to support organic growth of its property insurance or life insurance businesses, as these already generate significant cashflow.
But the company needs to invest in internal initiatives including new digital technology to become more responsive to its customers’ changing needs, he said.
“For small purchases, we have enough capital,” he told the paper, adding the company could turn to shareholders to raise cash should it decide to make a large acquisition.
Reporting by John Miller; editing by Clelia Oziel