Management Turnover as Change Agent

Thursday, February 12, 2009

Back to Basics Mantra - Swiss RE Turns to New CEO

Swiss RE RUKN (VTX - Swiss) the large Swiss based reinsurance company that over the last number of years ventured into investment banking and fancy investment related vehicles today announced the resignation of its CEO Jacques Aigrain who become CEO back in 2006.  Aigrain, a former JP Morgan investment banker, took the firm in a similar directJacques Aigrainion followed by American International Group (AIG).  The unfortunate moves by Aigrain resulted in Swiss RE encountering serious problems and large losses.  The dirStefan Lippeection followed by Aigrain ultimately resulted last week with the company going hat in hand to Warren Buffett for an infusion of capital and increased ownership of the firm.  According to a story in the Insurance Journal by Jason Rhodes of Reuters,

Last week U.S. investor Buffett stepped in with CHF 3 billion ($2.58 billion) of new capital for the world’s second biggest reinsurer after the group reported a CHF 6 billion ($5.156 billion) writedown on toxic assets. 

 Swiss RE’s new capital injection and a recent announcement by the firm to go back to basics was still not enough for shareholders.  Aigrain had to resign.  According to a story by Liam Pleven and Neil Shah of The Wall Street Journal stated,

Jacques Aigrain, whose push for growth at Swiss Reinsurance Co. ended with big losses and a plummeting share price, said faltering investor confidence in his leadership left him little choice but to tender his resignation as chief executive. 

In an interview, Mr. Aigrain said he offered to step down because it was in the best interests of the firm, adding there was a risk shareholders would “not automatically trust” that he could “facilitate the full turnaround” of the Zurich-based reinsurer.

The company has turned to the firm’s deputy CEO Stefan Lippe.  Lippe has been in that position since 2008.  More importantly unlike Aigrain, Lippe is an insurance executive focused on reinsurance.  He will woSwiss RE One Year Stock Performancerk to take the company back to its roots.  His appointment has been hailed by a number of analysts.  So far, Buffett has remained silent about the change but there should not be any problem on his part with the shift in firm direction and newly appointed CEO.  The company and its new CEO are far from out of the woods.  They have taken appropriate steps to get the business in order and move forward.  According to the Reuters story in The International Herald Tribune,

On the bright side, Swiss Re said last week that demand for reinsurance has increased, as many clients want protection to offset the erosion of their capital in the crisis and it expects the reinsurance premium cycle to harden further.  

… Lippe has serious, immediate problems to deal with; further writedowns on the company’s toxic assets cannot be ruled out and it will take time to clean up the balance sheet, analysts said. 

Anyone following the reinsurance industry should keep close tabs on what Swiss RE and its new CEO do over the next few months.  

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