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CNBC Live On Air: Martin Senn, CEO Zurich Insurance Group

WHEN: LIVE ON CNBC, today Wednesday 21st January.

Following are highlights of the unofficial transcript of a CNBC Live on Air interview with Martin Senn, CEO Zurich Insurance Group from Davos 2015 – World Economic Forum.
Following is a link to an embeddable video clip of the interview on

All references must be sourced to CNBC.

Q1. Rarely has Davos hosted the business and political world's elites and Switzerland has been at the centre of it. Switzerland has normally been so reliable. Mr. Jordan is so calm about everything. What has happened to Switzerland, has confidence taken a shot on the back of that SNB announcement?

Senn: Well it definitely has been a shock and surprise to business people in Switzerland and around the world. But frankly, I think Switzerland didn't have another chance then to take this action. Particularly as well they always have been saying this peg is not going to be a peg and intervention point for good.

Q2. It reminded me of a capitulation that I saw when I was a young man in the trading pits in '92 and '93 where the likes of Mr. Soros and others piled so much money into currency that forced central banks into action. This time round it was led by people looking for safe havens. And then the speculators descended got on top of the trade as well. So there's a combination of interests was it a capitulation as well by the SNB?

Senn: You're still a young man by the way, a part of that, no, look. The SNB they have been massively intervening. And with that the currency reserve in Switzerland about more than 80 percent of GNP. More than twice as much as the United States. And with that, the diverging of economies, and different currencies, the US and particularly the euro, they have no chance but to think about how to do it, rather than continuously intervening against such a strong capital push which was impossible to do.

Q3. Had a viewer email me last week, and every time we had an expert on to say this is what it means in layman's terms. Why is it good for Switzerland, we gave an analysis, and they say, no, but why is it good for Switzerland? And every time he came back. And he was right, why is this good for Swiss corporates? You yourself said it was only a translation effect, but what about corporate Swiss then? It's going to suffer isn't it?

Senn: Switzerland is going to suffer in the short term, without any doubt because it has been a very drastic move it has been a very abrupt move. And the businesses didn't have time to adjust to this in the short period of time. In the longer term, it means that one has to look for more efficiency, and focus basically on the strength of the country. The country in the exports has always been driven by quality export products and not by price. So it's very important to stay on top of the curve. And continuing doing that, seeing where this ends up. In the short term, not very good, and in the long term, I'm not as pessimistic because the strength of Switzerland is not disappearing.

Q4. You've been disposing assets, restructuring the group, and you've been laying off workers. In the light of this, do you have to make further disposals and headcount reductions?

Senn: We always have to look on how to improve efficiency across the organisation. But now we have to see first how this is rolling out. We have to find an equilibrium of the currency, and do a good analysis of where everyone stands. Just as a reaction to this, we will not have to layoff people.

Q5. Can I ask you, we're anticipating full blown QE from the ECB on Thursday? If we get that announcement, and we get bond purchasing pushing European yields lower. What are the implications for your insurance portfolio?

Senn: The implications are naturally fairly challenging for the industry as a whole. For the insurance industry, for pension funds, for anyone who has a liability driven investment approach simply because interest rates continue to go lower, and the forecast now is for interest rates to stay low for quite some time. And that's for insurance companies, for pension funds, a bit of a challenge because a big part of the income is through fixed income, i.e. through bonds.

Q6. But you're not going to want to sell those bonds are you? This is something that's been raised to us a few times. Which financial institution… banks, insurers, pension … would actually want to sell these bonds to the central banks. And when they had been made to sell them because they've come to the market aggressively what are they going to do with the money? They are not going to put it in a -2 or -0.75 on deposit are they?

Senn: We will not sell these bonds. Naturally, as we do have a long term approach to our portfolio, we typically buy bonds on average, hold till maturity. So this is going to be a longer term approach as we roll over the portfolio to maturity to dispose these bonds.

Q7. Does this mean that the ECB's bond buying will not work? It will not find willing sellers. And it will end up with a portfolio eventually by buying high yield and the transmission mechanism will not do the rest?

Senn: It will work in as much as interest rates, particularly at the long end of the curve will go down. And the forward curve is already showing that. The other thing is that I think I've seen yesterday, Spain issuing substantial amount of bond with good demand, which is of course helping, to bring long term rates down.

Q8. General insurance market for 2015 - you feel optimistic or pessimistic?

Senn: I think I am balanced, naturally, the market altogether and the outlook in 2015 as well after being here one day in Davos is maybe a little more mixed, a little more careful relative to last year. We have a rise in geopolitical risk and to make a good assessment on geopolitical risk is very difficult. We are well positioned, we have a good balance sheet, a strong balance sheet which generate good cash flows and that's the basis to be successful.

Q9. One factor in 2015?

Senn: You don't make it easy but I go for policy.

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