Zurich Financial Services became the latest insurer to double its preliminary loss estimates from the September 11 attacks when it stated that it expected they now would be between $700 and $900 million, net of reinsurance and reinstatement payments, rather than the $400 million it had originally set.
The Anglo-Swiss financial group also indicated that due in part to the much higher loss figures, nearly 2 percent of its annual earned premium, it “was no longer feasible” to maintain this year’s profit target at between $1.8 and $2 billion. It also sited the general decline in equity values and related businesses and the general downturn in the world economy, which is expected to be prolonged by the fallout from the attacks on the U.S., as reasons to abandon its previous earnings forecast.
Analysts have also indicated that the disaster might affect Zurich’s plans to spin off its third party reinsurance subsidiary, Zurich Re, into a separate company, to be called Converium. Initially it planned to launch the company before the end of the year with an initial public offering, but the depressed market for reinsurance stocks, and the fact that Zurich’s reinsurance liabilities might have to be retained by the parent company have combined to raise questions.
Zurich’s shares fell almost 14 percent following the news, dragging the entire sector down with them. The projected losses will be the largest in its history and could represent as much as 5 percent of Zurich’s equity capital.
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