Zurich Insurance Group said it has gained approval to begin a massive renovation project for its Swiss headquarters, even as the insurer continues a broader, wide-ranging effort to cut costs. Executives say that both efforts work in tandem.
The Zurich project involves both preservation of landmark buildings at the insurer’s Zurich headquarters complex and the construction of new ones, with a focus on modernizing the facility for a workforce of about 1,300 people. Once complete, the renovated, expanded and updated headquarters will use lake water for heating and cooling and significantly less energy than the current construction, according to the company. Energy supply will come completely from renewable energy sources, Zurich said.
While it is early to determine final costs, project cost estimates right now are roughly in the “hundred-million Swiss franc range,” Roman Hess, a Zurich spokesperson, told Carrier Management via email. That is just over $99 million, according to current exchange rates.
Zurich is continuing to pursue plans to slash costs from 2015 levels about $1.5 billion by 2019, and there is an ongoing effort to streamline and revamp operations to boost profit. An effort to shed 8,000 jobs to trim costs has been shelved, however, since the arrival of new CEO Mario Greco at the helm of Switzerland’s largest insurer.
Hess said that the strategic planning for revamping Zurich’s headquarters date back to 2009.
“The buildings of the headquarters of Zurich are long overdue for an efficient redevelopment,” Hess said. “The infrastructure, especially in certain buildings, was very old. The goal of the redevelopment is to create the most effective and flexible use of space, which also meets Zurich’s vision regarding sustainability, health and safety, and an enhanced work place for its employees.”
Zurich said that plans also call for using renewable energy sources for the project, with expectations of obtaining sustainability certificates for Minergie-ECO (conversions), Minergie-P-Eco (new buildings), LEED Platinum and the 2,000-watt Areal Certification for the whole project.
Zurich’s action at its Swiss headquarters complex follows similar plans in the U.S. Zurich North America’s new headquarters building in Schaumburg, Ill., has been completed as an LEED Platinum building as certified by the U.S. Green Building Council. The 783,800-square-foot building will house nearly 3,000 employees and contractors, and it includes multiple green roofs, energy efficient technologies, rainwater harvesting and re-use, accommodations for electric and low-emitting vehicles, and native landscape with more than 600 trees on 40 acres.
In Zurich, the insurer also plans to invest in the surrounding neighborhood, with the expected edition of a café, public spaces and courtyards as part of the renovation and construction project.
Executives: Office Space Investment in Sync With Cost-Cutting
Zurich executives see cost-cutting efforts as being very much in sync with its investment in new office spaces. During an Investor Day presentation last month, Group Chief Operating Officer Kristof Terryn discussed how investments in new office spaces dovetail with an overall financial target of reducing annual expenses by $1.5 billion by 2019.
“We are looking to optimize our property footprint and office space design to create more dynamic working environments that are conducive to engagement and collaboration—all the while, reducing costs,” he said. Focusing on the portion of expense savings related to operations (IT and shared services costs rather than costs specific to business units), he said these operational cost savings will amount to $500-$700 million per year, with roughly $150-$180 million of those savings coming specifically from shared services, real estate and procurement activities.
Providing a specific example of what Zurich achieved for an office rationalization project in New York City, he said that management in Zurich worked together with U.S. colleagues and “identified an opportunity to concentrate teams” in the New York area. “We are executing a transformation project to move from aging office space to more modern facilities at an $11 million run-rate savings [level] per year. We will put our customer-facing teams in an improved lower Manhattan location, and the support team members will move to high-quality space on the New Jersey waterfront at a proportionally lower overall cost,” Terryn said.
Giving the bottom line, he said: “We are making a one-time total investment here of $23 million, but the impact is significant. We’re achieving a 30 percent overall reduction in total occupancy costs per head per year.
“This is only one example of the ongoing shared service improvements to build high-quality service solutions at a lower price point.”
Source: Zurich Insurance Group