Lower investment income reduced Zurich Financial Services' net income by 24% to £928m for the first half of 2000.

Despite this setback, the Anglo-Swiss insurer claimed it has improved its sustainable earnings power from capital gains by 21% over the past five years.

Rolf Huppi, chairman and chief executive of ZFS, said the insurer planned a number of strategic alliances to push into new markets as part of its £700m investment in ebusiness.

The most notable of these alliances is with Bupa International and involves ZFS offering Bupa's 1.5 million UK customers access to ZFS's life, retirement and savings products.

In a reciprocal arrangement, ZFS will allow Bupa to offer its healthcare products to its customers. Another partnership is with the Medical Defence Union for professional indemnity cover.

In personal lines, ZFS said more than 10% of new business at Eagle Star is now generated from the internet.

The general insurance side of ZFS has benefited from rate increases across several markets, particularly in commercial lines in the UK and US.

The company's gross written premiums in non-life increased by 6% for the first half of 2000 to almost £7bn.

This improvement on the underwriting side, combined with greater operational efficiencies, has served to push ZFS's operating ratio down by 2% to 108%.

Moreover, ZFS continues to make cost savings from its merger two years ago with BAT. This dividend increased by another £255m in the six months to June, 2000.

In addition, profit from the insurer's reinsurance activities doubled to more than £97m, following a reallocation of non-life capital to this area.