Zurich Financial Services has scrapped its profit target for 2001, as a result of losses related to the September 11 attacks in the United States, and lower investment income.

The company said its revised estimate could reflect the largest payout in its history.

Zurich raised its estimate for losses from the terrorist attacks on US landmarks to $700-$900 million from a previous estimate of less than $400 million.

Shares in Europe's third largest insurer fell sharply in early trade to levels last seen in 1995. The stock was down almost ten per cent at SFr316.00 in morning trading. It recovered some ground later to close four per cent down at SFr335.

The scrapping of the earnings target range was effectively Zurich's third profit warning this year. The shares had already lost more than 64 per cent since the start of the year before Monday's decline.

The company said that in addition to the insurance losses, performance was likely to be further hurt by lower capital gains and investment income, reduced earnings from businesses closely linked with equity markets and the general economic slowdown.

Unforeseen losses

Asked whether a target range of $1.8 to $2.0 billion for normalised
net profit was still within reach this year, a Zurich spokeswoman said: "No...it is no longer feasible...these are unexpected losses."

"It is difficult to give a serious range at this time...it is depending on how the (financial) market will recover," she added.

She said the costs would be charged directly to the results and not taken from equalisation reserves.

"While this is the largest insurance loss experienced in the group's history, it represents less than two per cent of the group's $55 billion gross annual premium income," Zurich said in its statement.

Zurich also said it expected underwriting results to improve in the months and years ahead on the back of efficiency gains and premium increases.

swissinfo with agencies

In compliance with the JTI standards

More: SWI swissinfo.ch certified by the Journalism Trust Initiative