By CYRIL TUOHY, managing editor of Risk & Insurance®
Two well-known insurance and reinsurance carriers, both of whom suffered heavy losses in the subprime mortgage crisis, have rearranged their operating structures in the space of less than 12 months.
The latest industry giant to announce a change was Zurich-based Swiss Re, which on Oct. 1 said it would rename its operating units to more accurately reflect the way the company approaches its customer base.
The company's insurance offerings--formerly grouped under units referred to as "insurance," "specialty" and "industrial risk insurance"--now has a shorter, simpler moniker: "corporate solutions."
Swiss Re's life operating units, previously known as life and health, are now grouped under a unit known as Admin Re, following Swiss Re's 2004 purchase of CNA's individual life businesses.
"We are taking advantage of our company's core strengths to become more nimble and more responsive to the needs of our clients and investors," said Stefan Lippe, CEO of Swiss Re, in a statement.
Agostino Galvagni, Swiss Re's chief operating officer and previous head of its insurance and specialty division, was named CEO of the corporate solutions unit.
Swiss Re took a beating in the subprime mortgage crisis more than two years ago. In November 2007, the company shocked the market after it announced a mark-to-market loss of $1.2 billion.
It posted a net loss of $864 million in 2008. The losses eventually led to a capital infusion by Berkshire Hathaway, which took a 3 percent stake in the company, and to the departure of former CEO Jacques Aigrain.
Swiss Re has since recovered, posting profits of $506 million last year. The company posted second quarter net income of $812 million, up from a net loss of $342 million in the year-ago period. Swiss Re reporting currency was changed to U.S. dollars at the beginning of this year.
Earlier this year, in another move with implications for commercial insurance buyers, The Hartford Financial Services Group Inc. announced it was reorganizing the company into three operating units.
Instead of selling products through separate property/casualty and life/health product channels, the company announced it would sell property/casualty and group benefits through a new "commercial markets" segment. Other products are being sold through the consumer markets and wealth management segments.
As with Swiss Re, the changes at The Hartford came after huge losses, primarily in the company's life and health unit, were announced in the wake of the subprime crisis.
The Hartford posted a net loss of $887 million last year, on top of a loss or $2.74 billion in 2008. The Hartford's top executive, CEO Ramani Ayer, followed the fate of Aigrain at Swiss Re. Ayer retired from the company last October and was replaced by Chairman, President and CEO Liam McGee.
Announcing the changes last spring, The Hartford called them the dawn of a new customer-centric era in which clients would be viewed more holistically than in the past.
So far, the company appears to be on the right track. Second-quarter net income rose to $76 million, from a loss of $15 million in the year-ago period.
"They are trying to focus more on the customer side and broaden their appeal a bit in selling both property/casualty and life products," said Brian C. Schneider senior director, insurance, for Fitch Ratings in Chicago.
October 12, 2010
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