Zurich Defends Account as Ackermann Exits After CFO Death

Zurich Insurance Group AG, Switzerland’s largest insurer, is seeking to dispel concerns surrounding its accounts after Chairman Josef Ackermann quit in the wake of the chief financial officer’s suicide.

“I want to make it crystal clear that there is no link between this news and Zurich’s business and financial performance,” Chief Executive Officer Martin Senn said on a conference call with analysts yesterday. “We continue to be very profitable and we continue to generate very healthy cash flows. We have a strong and resilient balance sheet.”

Senn’s remarks prompted shares to rise for the first time this week after the company’s announcement late Aug. 26 that Pierre Wauthier was found dead at his home erased about 2.2 billion Swiss francs ($2.4 billion) in market value. The CFO’s suicide had sparked fresh doubts about the company’s health after it missed analysts’ profit estimates in three of the past four quarters and announced a surprise write-off in October.

“They were as clear as they possibly could be that there was no link between what has happened and the financial situation,” said Peter Eliot, a London-based analyst at Berenberg Bank with a buy rating on the shares. “That has given people some confidence.”

Ackermann, 65, resigned as chairman on Aug. 29 after Wauthier mentioned him in his suicide note and members of the CFO’s family accused him of sharing responsibility for the 53-year-old’s death. The Swiss national called the allegations “unfounded.” Joerg Neef, a spokesman for Ackermann, said the executive won’t comment further.

‘More Questions’

The stock has dropped 4.9 percent this year, giving the Zurich-based firm a market value of 34.3 billion francs, while the 30-member Bloomberg Europe 500 Insurance Index has gained 11 percent. The Swiss Market Index is up 14 percent.

Thomas Seidl, an analyst at Sanford Bernstein in London, said the management failed to provide the reassurance needed. At Zurich Insurance’s earnings call on Aug. 15, “I at least sensed more questions on reporting than in previous calls,” he told Senn. “This just struck me in the context of recent events.”

Zurich Insurance that day reported a drop in second-quarter net income to $789 million from $1.09 billion a year earlier and said the target for its general insurance business was “challenging” following disaster-related losses. The profit was below the $823.8 million average estimate of five analysts surveyed by Bloomberg, the second-straight miss.

By comparison, Allianz SE, Europe’s biggest insurer, based in Munich, had shrugged off similar losses to report a 27 percent increase in second-quarter net income.


Analysts at Berenberg Bank in a note on Aug. 26 called Zurich Insurance’s second-quarter earnings “disappointing,” saying that their upgrade to buy in June “was too early.” JPMorgan Chase & Co. in June downgraded the shares, a month after Credit Suisse Group AG also cut its rating.

Fifty-nine percent of analysts tracked by Bloomberg recommend holding Zurich Insurance shares, while 33 percent have a buy and 8 percent a sell rating. By contrast, 68 percent of analysts recommend buying Allianz shares.

Weaker-than-estimated earnings were not the only reason leaving investors disgruntled. Five months after Ackermann joined as chairman in June 2012 following a 10-year tenure as CEO of Deutsche Bank AG, Germany’s largest lender, Zurich Insurance’s management was forced to increase provisions at its German general insurance business by about $550 million.


The company said at the time its leadership “is disappointed with this significant financial adjustment,” which prompted shares to drop the most in more than six months. Zurich Insurance in February made further claims provisions of $130 million to cover potential losses at the German business.

Tom de Swaan, who became acting chairman after Ackermann’s departure, also sought to reassure analysts on the call that Zurich Insurance doesn’t face any undisclosed costs, saying that “there was nothing” the chairman of the audit committee had to report, when asked this week.

For their part, some analysts remain unconvinced.

“Quarter after quarter we saw one-offs, negative one-offs,” Patrick Noel, an analyst with Groupama Asset Management said on the call. “Perhaps you’re unlucky. The bad news quarter after quarter makes me think there are perhaps some fundamental problems in your company.”

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