Probe blames chairman for raiding reserves

An internal investigation at Zurich Financial Services (ZFS) has blamed chairman and chief executive Rolf Huppi for weakening the company by "raiding" its reserves to fund its purchase of Eagle Star in 1998.

A source close to the company said this had left "borderline" funds to cover liabilities from the 11 September terrorist attacks.

The source added that Huppi was being slowly forced out of the company.

Late last month, Huppi agreed to relinquish his position as ZFS chief executive after intense shareholder pressure over the company's inability to meet its growth targets.

The move did not surprise the market because ZFS had mooted the idea of splitting the chairman and chief executive roles at its AGM last year.

News of the internal investigation comes after ZFS last week gave shareholders another fright when it scrapped its annual profit growth target of 10% to 15%.

That news followed four profit warnings in 2001. No fresh objective was stated.

The insurer reported a net loss of $387m (£271m) and cut its dividend by 50%.

It said it had been hit by the terrorist attacks of 11 September, asbestos claims and depressed stock markets.

However, the group's gross premium volume rose 12% to $56.2bn (£39.4bn), compared to a 4% rise in 2000.