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CNBC Transcript: Interview with Zurich Insurance CEO, Mario Greco

Following are excerpts from a CNBC interview on Squawk Box Europe, with Geoff Cutmore and CEO of Zurich Insurance, Mario Greco.

GC: You have a 1 billion dollar cost saving target at the moment, that's the current programme. We'll get an update in November, I know, but as you look at the programme at the moment, is your, perhaps, inkling or desire to take that cost reduction number up?

MG: There is definitely cost issue in the insurance industry and Zurich is not outside of this issue. So our target of 1 billion is something that we have to achieve and we're looking at ways in which we can exceed the target.

GC: And what were those ways of exceeding the target be? You've already been involved in a disposal programme. You've talked about head count reduction. What other areas might you be looking at inside the business?

MG: We're trying to simplify as much as we can our business, our organization, in order to be readier with the customers but also, in order to be more competitive and more efficient.

GC: Can I ask you then in terms of the disposal programme that you've implemented so far, what has been the driver for the sales that you've made and how are you assessing other business units for their prospects?

MG: We have a very wide franchise, Zurich is a global organization and we will remain a global organization. But this doesn't mean that we can be committed equally to every country, every place in the world. So we've decided to step out of some markets where we could not have the same commitment and the same desire to develop these markets that we have in other ones. And that's the way we look at the markets. Wherever we feel that this is not a place where we can throw capital, where we can throw resources, where we can commit Zurich resources there, we'll look for opportunities to exit their markets.

GC: Is it as simple as saying: we need to be in the top 5 insurers in this country, or in this segment, otherwise we don't feel that we can ride profitable enough business to stay there?

MG: Not necessarily. I don't think it's just about how big we are, but it's also about how connected the markets where we are, among them, and we decided to step out of some markets which were not critical for the rest of our business.

GC: The combined ratio in the general insurance business, moving in the right direction here, I'm sure investors are very happy to see that. How much more progress do you think you'll be able to make before the end of the year?

MG: This is a very difficult question. I wish I have the knowledge of it, but we're committed to make further progress, we're very pleased with improvements. This has been the best quarter over the last two years, so we look with optimism to the rest of the year but of course, we will also have to see the weather and the natural catastrophes in the second part of the year.

GC: And can I ask you about the life business. One of the challenges at the moment as we know is these incredibly low returns that we're seeing on businesses. We've also had a lot of volatility in markets. What's your view on markets from here and how do you feel about the actions that central banks have taken, that have driven down these yields?

MG: The life market is of course hit by these very extreme financial conditions. First of all, Zurich has very special life portfolio because we stopped years ago, selling guaranteed products. Our current life portfolio is mainly protection business which is pure risk or unit link business. So we feel, I cannot say good, but we feel quite safe even in these market conditions. I think the financial authorities are trying to do their best to revamp the world economies. The issue there is that the restart of the world economies cannot just be on their backs and it also needs fiscal policies, political actions which have been not effective so far.

GC: That issue of reform is fascinating, and having come out of Generali and the Italian situation… Prime Minister Renzi is staking his reputation on a very critical referendum in October. How important you think this could be for Italy and for achieving the reforms that that country needs to get growth back?

MG: Italy needs thorough reforms. Everybody agrees on that, and I think the government has tackled it and the Prime Minister has been incredibly energetic and decisive on taking these reforms. The referendum is an important step and definitely, to stop the process, would not be good news for Italy.

GC: Do you think he should have staked his job on the right referendum outcome? He seems to have been stepping back in recent days and suggesting maybe he won't need to resign if the referendum doesn't go his way. But do you think he may have overstepped the mark initially by suggesting it was a positive outcome or his future?

MG: I think Mr Renzi is an extremely good politician and I don't dare to consider if I can give him any advice on these things. I just stay on my duties to run Zurich, to improve the business, but I do hope that Italy continues fast and decisive on reforms. This has improved the situation of the country in the past two years and if this continues we'll have a chance to see Italy coming back as a strong European economy.

GC: The politics has been important around the European economy. We obviously have seen the Brexit result in the referendum in the UK, what impact do you think that's going to have on your business going forward. How concerned are you about the downstream knock on effect from Brexit?

MG: Brexit, of course, has introduced a new risk and a new volatility in the European scenario. We don't know exactly what's going to be the consequence of Brexit, actually the process hasn't even started yet. For us, we have a good business in the UK and that business has no risks after Brexit, but in broader context we need to understand that this is just a simple country's decision to get out – and a special country like the UK was in Europe – or if there will be a broader impact on the European set up and on the European agreements.

Definitely we hope that Europe stays as it is, we hope that Europe grows and that continues to strengthen the ties and develops in to a stronger region of this world. But we will have to see later what the political process brings to us.

GC: Do you think it makes insurance assets in the UK look less attractive at this point?

MG: I'm not sure of this, really. We need to see through the process. We're interested to keep growing our business in the UK. UK is a very important market, the UK economy is a strong economy and we grow our business and we're very pleased with our business there. I hope that there will not be a recession in the UK, which is what's being debated now among the macro economists; I hope that the central bank and the finance minister can take the economy back on growth soon and I hope that the UK will remain as a very interesting country to invest.

GC: And just a last question really on capital position, let's just return to the business for a moment, a lot of analyst speculated when you came in that you may kitchen sink the business and top up reserves. Neither of those things have really happened at this point. Should we then take it as read that you are happy with the direction the company is moving in, you are also not likely to top up reserves at any point in the near future?

MG: Of course, yes. Thanks for this question, that's an important clarification. Zurich is a great company. Zurich has a very solid capital position and Zurich is adequately reserved. There are things to fix and we're fixing these things and we will continue fixing what needs to be done. But it's not about capital and it's not about reserves caps. The company is in a very good shape and will get much better soon and these results show that we're right in having confidence in the company.

GC: Mario, real pleasure, thanks for giving us so much time this morning.

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CNBC

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Sarah.Whiteacre@cnbc.com

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