Insurers are in the business of assessing risk. No other sector can claim to put as much resources into understanding uncertainty, and making decisions based on risk, as the insurance industry.
But when the epidemic began to gather pace, the leadership team of Zurich Insurance Group, the Swiss giant that is one of Europe’s largest insurers took no chances. The firm took the decision to pull almost all of its 55,000 staff worldwide out of its offices as early as possible.
George Quinn, the CFO of Zurich, says: “I think it was common sense. If you waited long enough to be certain on this topic, the damage could potentially be very serious,” he says.
“There may be a bit of rational mathematical logic somehow implicitly in the decision that you make, but it seemed obvious to me that in the circumstances, that you make the conservative call and don’t try and take an aggressive position,” he adds.
“The biggest risk if we were wrong would be that we would appear too cautious. But that decision doesn’t strike me that it would cost us anything in terms of productivity or relationship with clients,” says Quinn.
In the event, Zurich was able to withstand early concerns around whether the group’s model that is formed of three arms: Property & Casualty; Life and Farmers- would hold up.
The group’s share price, which fell nearly 40 percent across February and March, has continued to recover since, reaching a level of around 27 percent adrift of its pre-coronavirus level by early October, giving it a market cap or around SFr 48bn (£40.7bn) by then.
A big reason for continued shareholder support was a decision by the group to be as candid as possible about the modelling it was undertaking- revealing a hit of $280m for the first quarter of 2020, and forecasting an impact of around $750m in total for the year.
A team that had been assessing the impact of coronavirus to the group from February. Asa result, Zurich was able to lay out the scale of exposure to risks by early May.
“I made the decision to show people more of what we could see internally. I couldn’t promise that this was the absolute limit of what we could face, but it was certainly removed some of the more outlandish theories that were out there around our exposure.
“It was really unusual to give that level of forward-looking elements. But we came to the conclusion that level of information was much better than us saying well we don’t know what we can tell you, because the world is so unpredictable,” says Quinn.
Its in keeping with his desire to be recognised as a straight hitter, “at the less emotional end of the spectrum,” in his own words. “I think it would drive you nuts if your CFO was either playing the hero or falling apart all the time because some things were bad or good or somewhere in between. So, it’s important to be consistent,” says the Brit.
Clarity of purpose
Its also vital, Quinn says, to bring evidence-based reasoning to making decisions. It’s an approach that has been hardwired into his psyche in a career that started after graduating in engineering – “a good introduction to problem solving”- at the University of Strathclyde.
At KPMG he says he was assigned the insurance and reinsurance practice where seniors guided him and clients “devoted quite a bit of time to making sure that you understood their business.”
After making the leap to join a corporate, Quinn spent 15 years at reinsurance giant Swiss Re, joining as chief accounting officer before taking on roles as CFO of the group’s financial services arm and then for its business in the Americas.
Those positions were vital stepping stones to becoming group CFO in 2007, after deciding early on what route would best equip him for the top finance job. “You discover that there is no prompting. You have to go and take the personal risks and make that leap. And that’s a signal to the organisation that you want to do something more,” he reflects.
But while that steady career progression offered growing technical skills, it also raised exposure to the challenges Swiss Re and its peers faced in some of the tumultuous events that hugely impacted the sector.
“It’s those big events that start to shape the things that you have strong views on,” says Quinn, who references 9/11 terrorist attacks, the Japanese earthquake and tsunami in 2012 and the global financial crisis. He says the financial crisis stands out “because I learned what it was to be a CFO through that process”, he says
He says that these huge tremors that send shock waves across the world, and create the potential for economic catastrophe, reinforce the need to “know what you stand for,” in a senior role, says Quinn. “The more you become engaged in the leadership of an organisation, you need to know why you’re there.”
As well as a sense of purpose Quinn is also big on clarity in communication. “I really believe in transparency and telling people as it is, because I think that if we understand exactly where we are, we can map it, and can then move to get to the place where we want to be,” he says.
“But being someone that feels comfortable giving bad news is unfortunately in the job description for a CFO,” he says.
Since joining Zurich, one of Switzerland’s biggest financial services companies- that has been around for nearly 150 years- Quinn had been busy developing the finance function so that it was fit for purpose in helping drive growth.
He started by beefing up its M&A capability, and more broadly “organising it in a way that I felt would fulfil the goals that we had overall as a group,” says Quinn.
This also answered shareholder calls to ensure a well-run organisation could see improvements from a finessed finance function that an outsider “with a different perspective” could bring.
He says the technology side of finance was already in good shape, but he wanted to focus on the human dimension at Zurich’s finance team, which has a staff of 400 in its Swiss corporate centre, in a global finance team numbering 3,500. “It was about organising talent- making sure the right people were in the right jobs,” he says.
Working in harness with a variety of data analytics teams across the group, Quinn, says of the finance professionals at Zurich “We want to deploy them in the best way to perform effective analysis to gain insights that will help improve group performance over time. Decision-making shouldn’t be something that is based purely on gut feel,” he says.
“We also work as part of a bigger team, with risk management, underwriting and claims teams, as well as the legal staff, to try and work out what our risk is around a topic,” he adds.
All these elements were brought to bear when Coronavirus struck. At the time, Zurich had just completed a three-year plan and the group was looking to push initiatives around innovation, customer centricity, sustainability and a product mix focused among others on millennials in its next plan.
In early February Zurich reported 2019 full year business operating profit (BOP) up 16 percent to $5.3bn, with the biggest riser being the Property & Casualty arm that saw an increase of 38 percent in BOP.
Having weathered the storm of the initial impact of the pandemic, the focus of Quinn and the other senior leadership at Zurich is now around understanding the potential scenarios that may unravel and being able to navigate a path through them.
A key issue is maintaining Zurich workers confidence “so they can do their job, whether through allowing them to work from home so they could be isolated, or then moving on to offer antibody and Covid tests to all of our staff globally.”
From a business perspective, Quinn says Zurich has found a flexible approach that reflects the changing customer behaviour that coronavirus is responsible for.
“In some countries including Spain, we have a car insurance business where clients don’t drive as much, so we’ve given them a rebate.,” says Quinn.
When it comes to gaining visibility into the future, Quinn says: “At various points this year, I don’t think it’s ever been worse in my career, trying to work out what 2021 or 2022 would look like.”
As a result, Quinn and his team took the decision to move Zurich to a rolling forecast. “For each of the next few months we will roll the forecast out to the end of 2022.
“It is pretty instructive about where visibility is becoming clearest most rapidly and therefore how you can do things with more confidence. Moving to that approach over the Summer was really important for us,” he says.
Quinn says that despite the challenges of working remotely, its actually stimulating a more open conversation across the group, although he acknowledges that staff can suffer if they feel left out. “You need to over communicate sometimes,” he says.
“With my team, I have twice weekly meetings with all of them. And at one of those meetings on Friday we probably don’t talk much about business but catch up on more social elements.
“Previously I’d go for a walk to get my coffee and feel the reaction of people on an issue. As you can’t do that today, you need to be more curious and interested in other people’s opinions,” he says.
Quinn says provided technology is used effectively there is scope for delivering a fast and effective finance function that can help drive performance across the group.
“There’s a new paradigm around how you can do things. It just requires you to imagine things in an entirely different way. And that for me is the thing that I would like to hang on to the longest, once the pandemic is over,” he says.