Zurich Financial Doubles Loss Estimates

by Ulrika Lomas, Tax-News.com, Brussels

09 October 2001

Zurich Financial Services, the Swiss-based insurer, yesterday said it believed pre-tax losses relating to the US terrorist attacks, net of reinsurance and inclusive of reinstatement premiums, will be between $700m and $900m. On September 12, Zurich estimated its losses at less than $400m.

Company spokeswoman Iris Roth said the effect on Zurich Financial's accounts of the attacks was hard to gauge, but based on experience up to 85% of the pretax losses could ultimately hit company profits. This would mean that attack-related payouts could chip away $560 million to $765 million of this year's net profit. Before the attacks, the company said it expected to earn $1.8 billion to $2 billion this year, down from $2.1 billion in 2000.

Though Zurich pointed out that the increased figure represented less than 2 per cent of its $55bn gross premium revenue, analysts said it was close to 5% of the group's equity. The company's shares closed down 4.3% at SFr335, having touched a low of SFr299.50.

Despite the losses, the group said it would not delay the demerger of Converium, its reinsurance arm that has borne much of the pain stemming from the disaster. It hopes to list Converium on the Swiss and New York exchanges in the fourth quarter of this year, in a move which analysts had believed would value the reinsurer at up to $1.8bn. This estimate is sure to be affected by the US claims, though Zurich refuses to reveal how the losses are split between Converium and its non-life operation. Zurich says that it has sharply increased premium rates in an effort to shore up support for the issue.

Last month Zurich also sold the bulk of the group's asset management businesses, which had been acquired over the previous five years, to Deutsche Bank.

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