Double blow leaves Zurich in the red

THE insurance industry's dreaded double whammy of asbestos claims and compensation for the 11 September terrorist attacks on the US has rocked Zurich Group, leaving the financial services provider with a $387m (£270m) loss for 2001.

It warned in a detailed trading statement that its dividend would be slashed from Swfr17.15 to Swfr8 as it sought to deal with the heavy claims and the impact of weak stock markets on its investments. Group profits were £2.3bn the previous year.

Zurich, Europe's third-largest insurer, foreshadowed much of the loss shortly before Christmas, but it declined then to comment on speculation about its dividend.

Zurich, which owns Allied Dunbar in Britain, said total premium volume rose 13% to $56bn in the year. But the bottom line was wiped out by $706m of insurance losses stemming from the attacks on New York. It said much of this claim arose from the heavy exposure of its reinsurance division to aviation.

The Swiss group also revealed that insurance claims in several other areas were higher than expected, particularly for asbestos-related claims. It refused to reveal the asbestos charge, although it is widely known that a fresh wave of compensation claims in the US has forced many insurers to lift their provisions substantially in this area.

The big claims left Zurich's non-life business with a combined ratio of 111% in 2001 compared with 104% previously. This yardstick is used to measure an insurer's policy income against the amount it pays in claims.

Zurich, which is to lose Rolf Hüppi as chief executive by the end of the spring, has also been hit by poor returns from its life insurance and asset management arms. These triggered a charge for asset writedowns of $838m. It will unveil further details of the losses on 21 March.

Hüppi said last month that he planned to quit Zurich, prompting speculation he would be replaced by UK chief Sandy Leitch, who is also in charge of Zurich's Irish, South African and Australian arms. Ray Greenshields, Leitch's number two, is expected to get the top UK job.