IT started in the “green room” at the World Economic Forum in Davos.
Tony Blair, who was still prime minister at the time, was rubbing shoulders
with German chancellor Angela Merkel and James Schiro, chief executive of
Zurich Financial Services, at the annual schmooze-fest of the world’s
political and business elite.
Eventally the conversation turned to climate change, said Schiro. “We had some
time together and discussed some of the issues in our global risk report. He
had a fascination with lots of issues which we as a company had been talking
about. We discussed how he could help elevate them.”
It would take a year of wooing by Schiro before Blair’s “fascination” would
pay dividends. The Swiss insurer made overtures to Blair’s people after he
left office in June. Then a few months later, the two men met in New York at
the Clinton Global Initiative.
Thirteen days ago, it all paid off handsomely – for both sides – as
Blair was unveiled as Zurich’s most famous adviser, bagging more than
£500,000 a year for his services.
For sceptics it is another giant pay-day for the former British premier.
Unsurprisingly, Schiro sees it rather differently. Blair will provide
general guidance on “developments and trends in the international political
environment”. But his key interest is in Zurich’s climate initiative,
announced at the same time, to develop products and research to tackle
global warming.
“Climate change is not only one of the big long-term social issues, but a
business issue,” said Schiro, a dapper, sun-tanned 61-year-old American.
Blair’s role will range from serving on Zurich’s advisory council to
participating in seminars for chief executives of the insurer’s clients to
“explain the risks we see now and in the future”.
“Having someone who is as high profile, and is as passionate and excited about
an issue as Tony Blair makes a real difference,” said Schiro.
Luring such a major political figure is undoubtedly a coup for Schiro, who
took over the helm at Zurich almost six years ago when the company was in
financial turmoil.
Some are cynical about Schiro’s motivations: “The Blair appointment is as much
about Jim’s ego. He is obsessive about image and reputation,” said one
senior insurance executive.
The high-profile appointment comes at a crucial time for the Swiss group as it
bids to expand and innovate. About 12 months ago, Schiro signalled a new
zeal for growth. This came after a five-year marathon of restructuring,
asset sales, slashing costs and a root-and-branch overhaul of processes and
underwriting.
The company’s initiative to find solutions to combat climate change is all
part of the attack on growth and Schiro’s vision that insurers need to
innovate. Its American business Farmers already offers discounts for users
of hybrid-fuel cars.
As a relative outsider who spent almost 34 years at the professional-services
giant Price Waterhouse, latterly as chief executive, and who was the
architect of its 1998 merger with Coopers & Lybrand, Schiro can afford
to be scathing about the insurance industry.
“This is a business that sends all the wrong messages to customers. It has
lagged because you need to have products – you need insurance to drive
a car. If you lead with products, they become commoditised. The industry has
not spent enough time focusing on customers’ needs.”
For Schiro, Zurich has made progress. He rattles off examples – the
group’s creation of a “catastrophe bus” during the California wild fires of
last year, which travelled to the state and doled out cash to customers who
had lost their homes.
Zurich is a very different beast to the stricken group of six years ago. The
insurer was fighting for survival after a disastrous expansion and
undisciplined underwriting under Rolf Huppi, the chairman and chief
executive who had dominated the Swiss group for a decade.
Four profit warnings within a year led to the ousting of Huppi in May 2002 and
forced Zurich to launch a $2.5 billion (£1.3 billion) rescue rights issue.
Schiro, who had joined the group as chief operating officer only two months
earlier, was promoted to sort out the mess.
Nobody questions that Schiro has pulled off a remarkable turnround. Profits
have risen sharply, shareholders have gained bumper returns and a first ever
buy-back. Noncore assets, such as fund managers Scudder and Threadneedle,
were sold off.
Zurich’s expansion plans look aggressive. Schiro is targeting the “next
generation of emerging markets”, including Turkey, Hungary and Ukraine,
while last year the company took a 66% stake in Nasta, one of Russia’s top
10 insurers. Like its rivals, it is racing into Asia. It was a latecomer in
China, but has snapped up a 19% stake in New China Life Insurance Company.
Zurich is now a clean, well-run insurance giant with operations in 120
countries, 55,000 staff and is expected to increase 2007 operating profits
by 10% to $6.4 billion when it reports this week. But there are still doubts
about its growth prospects.
For a start, the bulk of its business is in mature, lower-growth markets. In
America, Zurich appears to be bucking a weaker market. However, many are
sceptical. “Given that the nonlife market is slowing, you have to have
doubts,” said one analyst.
Others argue it is weaker than some rivals in Asia and sub-scale in leading
European markets. Such fears have fuelled speculation of major acquisitions.
Zurich has been linked as a possible buyer of embattled UK insurer Friends
Provident. Schiro said deals in America, Europe, Japan and emerging markets
were on the agenda.
Some are surprised that Zurich has survived. When Schiro took over, many
expected him to dismantle the group. “A year ago he was a hero who could
have crowned his achievement with a hugely value-enhancing break-up. Now he
seems to want something else,” said one senior banker.
Part of the answer may lie in Schiro’s desire to establish a legacy before his
contract runs out at the end of 2009. One view is that he is determined to
pull off a big American deal and erase the memory of his exit from Price
Waterhouse Coopers. What will not happen is a return to the “flag planting”
expansion under Huppi.
But with rivals such as Axa, AIG and Generali on the prowl, the long-awaited
wave of consolidation in the sector looks set to break. All Schiro will say
is that Zurich will be involved, but will not be a “victim”. “We have to be
masters of our own destiny.”
Put another way, the climate is changing.
BLAIR WILL TALK HIS WAY TO A £40M FORTUNE
EIGHT MONTHS after leaving 10 Downing Street, Tony Blair is on course to
becoming the wealthiest former British prime minister.
As well as the advisory role with Zurich, which is worth more than £500,000 a
year, Blair has bagged another advisory role with the American banking giant
JP Morgan Chase, which could pay him as much as £2m a year.
He has also become one of the highest-paid stars on the international lecture
circuit. He can charge between £100,000 and £200,000 per speech and earns
about £500,000 a month from such events. Last November he was reportedly
paid £240,000 to address a group of Chinese businessmen.
Blair is also understood to have a £4.6m deal with the publisher Random House
for his memoirs.
Some experts believe that he could earn £40m from his various roles.
As a policy holder with Zurich i just wish that more money was invested increasing the returns to long suffering investors instead of filling the boots of a failed politician.
Andy james, Bristol, Great Britain