Zurich Financial Services plans to cut its global costs by $US500 million ($505 million) over the next three years, with around 70% of the savings from its general insurance arm.

The head of the group’s global general insurance operations, Mario Greco, has been charged with arresting a slump in earnings which saw operating profit decline 22% to $US1.96 billion ($1.98 billion) between January and September 30.

CEO Martin Senn says Zurich is well positioned to perform in a challenging global environment.

“We believe that our agility, superior financial strength and strategic focus allow us to meet the industry challenges of low investment returns and new regulatory capital regimes,” he told an investors’ meeting in Zurich last week.

He says the group remains committed to achieving an after-tax return on equity of 16% over the medium term – a figure some analysts have already voiced doubts about in an environment where European and US insurance companies are locked in tough competition.

The targets announced by Mr Senn include reducing total global expenses across the life and general insurance operations by 5% or $US500 million by 2013 – with general insurance taking cuts of $350 million ($353.7 million) – and “holding market position without compromising profitability”.

The Asia-Pacific, Middle East and Latin American life operations have also been charged with generating new business value of 30% by 2013.

Mr Senn says Zurich is “accelerating our global approach to how we run our businesses”.

“Central to this acceleration is intensifying ‘the Zurich way’ as our umbrella program for driving global capabilities to support growth and competitiveness of our customer-facing businesses.”