Zurich Financial Services has announced a massive loss of $2.03 billion (SFr3 billion) and is to shed 4,500 jobs to cut costs.
As was widely predicted, the struggling group also revealed plans to issue new shares worth $2-2.5 billion.
In a statement on Thursday, Zurich said this was intended to help pay for special provisions of $2.7 billion to strengthen its capital base.
The company, which has been battered by tumbling stock prices like many other large corporations, said that a $500 million restructuring charge would be booked in the second half.
It added that these measures should boost 2003 profits after tax by at least $1 billion.
Loss way beyond analysts' predictions
The loss, which was way beyond what analysts had forecast, compared with a profit of $861 million in the January-June period last year.
Zurich said that without the costs it would have made a first-half profit of $683 million.
The company said its net written premiums and policy fees increased by 14 per cent in the first half to $16.9 billion.
Like other market players, Zurich has increased policy rates for homes, cars and businesses after last year's terrorist attacks in the United States.
About 2,000 of the job reductions will affect staff at company headquarters in Zurich, as well as employees in Britain, Ireland and South Africa. A further 700 positions will be cut in Germany.
Zurich said that, where possible, job cuts would be made through natural attrition.
More than half of the expected effect on 2003 post-tax profit is expected to come from savings that include the staff reductions, reduced IT, procurement and head office expenditures.
About one third of the earnings improvements is expected to come from pricing and underwriting initiatives, with the balance made up by streamlining the group's claims management processes and cost structure.
Focus on insurance
CEO James Schiro said the group had reviewed its strategy and operations and had decided to sharpen its focus as an international insurance-based financial service provider.
"The initiatives we announced today should create a sound financial and operational platform for Zurich from which to deliver a solid earnings growth."
"We believe this to be in the best interest of the Group, its shareholders, customers and employees," he added.
Commenting on the figures, financial analyst Richard Schreuder at Barclays told swisinfo that although the figures were bad, he thought that the measures management intended to implement would go some way in addressing the situation.
"I think there will be a lot of insecurity going forward but I think the company should be able to improve its profitability," he commented.
Profitability and confidence
Europe's third largest insurer said it was seeking to restore both profitability and investor confidence.
The market value of the company has fallen by more than two-thirds this year to about $7.1 billion, while the company's stock is trading at its lowest level in more than ten years.
Zurich said it would build on its position in its chosen core markets of North America, Britain and continental Europe, in particular Switzerland, Germany, Italy and Spain.
Schiro told a press conference that the group also planned to sell $1 billion worth of businesses, but gave no further details.
Last year, Zurich sold off $5 billion of assets including its Scudder Investments business in the US to Germany's Deutsche Bank.
The company said it planned a "modest payout" this year in a dividend or cash payment and would in future adopt a "flexible dividend payment".
Analyst Schreuder told swissinfo that he thought this could be a turning point for the company and he felt the company was safe financially.
"Zurich Financial is not going to go bankrupt as far as I see it now but from an investment point of view the share will be very volatile," he said.
"I don't think that policy holders need to be that afraid that they're not going to see their money back in the future," he added.
swissinfo with agencies
Zurich's net loss for the first half is $2.03 billion.
Last year's figures for the same period - $861 million profit.
4,500 jobs are to go, representing six per cent of the total workforce of 76,500.
New shares worth $2.0-2.5 billion are to be issued.
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