Banks aren't the only financial services institutions cutting costs and trimming staff. Zurich Insurance is cutting 800 jobs globally in an effort to save itself $250m. This follows a series of other 'restructurings' since 2012.
Zurich's travails offer the following insights for anyone eyeing the insurance sector as a less lucrative but less stressful cousin to banking.
The insurance industry isn't always a big payer. However, Zurich's $250m savings from the elimination of just 800 jobs suggests the seat cost of every role is $312k (£187k). That's high - although it's even higher in banking where Barclays said it saved around £430k for every investment banker it made redundant.
Insurers have capital management issues, just like banks. This is why they need ex-banking professionals to manage their regulatory capital profiles. Zurich has reduced its ROE target from 16% to 12-14% by 2014. It's currently 12%. That's still better than the 3% ROE achieved at Morgan Stanley's institutional securities business last year.
Low interest rates are an issue for insurers. In the presentation accompanying its results, Zurich said it would be placing more focus on 'in-force management' in the life insurance market and that it was setting up a special management team to deal with this. Briefly, 'in-force management' refers to the value of life insurance issued and outstanding. Insurers have used securitisation to monetize 'in-force' policies in the past and employ teams of actuaries to manage their risk and return profiles more effectively. The implication is that more actuarial and modelling talent will be required in future.
In a low yield environment, investment income at Zurich declined by $300m last year. The company expects this to flatten out, but may nonetheless be interested to hear from any portfolio managers who can deliver good returns with a very low risk profile.
As at HSBC and Citigroup, it's the middle managers who are eliminated in organisational restructuring. Zurich says it wants to cut complexity. Guess whose jobs are being targeted?