Zurich spends $1bn to reach 100m

One of Europe's largest insurance groups, Zurich Financial Services, yesterday pledged a radical overhaul of its business strategy - focused on a $1bn (£627m) expansion of its e-commerce business over the next three years.

The group, which spans from Eagle Star and Allied Dunbar in Britain to Farmers in the United States, said it was looking to reach 100m customers - almost three times as many as it has at present - through the expansion of the internet operation. Zurich is also looking to increase the number of products it sells to individual customers from an average of 1.8 now to four.

The move will mean substantial reshaping as Zurich opens up its web sites to other companies' products, beginning with fund management.

"The opportunities offered by the internet will enable Zurich to develop entirely new business models involving the formation of a network of partnerships and alliances. We will separate marketing from production, re-shape our processes and cut costs," chairman and chief executive Rolf Hüppi said yesterday.

The group plans to extend the geographical coverage of its online banking operations and to expand them to include internet brokerage services. Clients would be offered customised web pages with de tails of their policies, investments, bank statements as well as related news and direct broker access.

At present 47% of transactions at the group's US investment manager Scudder Kemper are carried out over the internet. In Britain, 11% of Eagle Star's business is carried out electronically.

Sandy Leitch, chief executive of Zurich's operations in Britain, Ireland and South Africa, said the group was learning from its internet ex perience in the US, which was probably two or three years ahead. "We are taking that experience and applying it in the UK. We are not having to relearn everything. This is the advantage of being a global player."

Allied Dunbar allows customers to track their mortgage application via the web while Eagle Star offers home and motor insurance online. "We now have something like 50 online initiatives in e-commerce in the UK," Mr Leitch said. The scale of Zurich's planned investment is expected to increase the pressure on other financial services providers. With $1bn to spend, Zurich's e-commerce operation is thought to be equal to the combined spending of Britain's three largest insurers.

Zurich acknowledged that in the short run, the scale of its spending on developing e-commerce initiatives could have an impact on profits.

The investment programme might "cause profit growth in the short term to be less than it would have been otherwise," said Mr Hüppi but added that "we will maintain our ambitious targets."

The expenditure was needed to enable Zurich to remain at the top of the industry. "It is an aggressive step forward."

The new e-strategy came alongside full-year figures from the group which showed pre-tax operating income rising by 21.5% to $5.34bn while net income was up by 15.9% to a record $3.26bn.