Insurer Royal & SunAlliance has warned that operating profit for 2001 will be close to zero after it was forced to increase reserves for asbestos claims by £371m and reserves for discontinued operations by £145m.
The insurer, which has already set aside £215m to cover losses from the World Trade Centre attacks, said all three provisions would mean its operating result before tax would be break-even for 2001.
Analysts had been expecting R&SA to report operating profits of £487m on 28 February. It reported operating profits of £476m in 2000.
R&SA said the increase in asbestos provisions was prompted by a flood of claims in the US.
The £371m used to strengthen reserves will see £200m set aside for policies written by UK subsidiaries and £171m for policies underwritten by US subsidiaries.
The reserving will result in a charge of £239m net of discount to 2001 results.
Chief executive Bob Mendelsohn said: "The reserving actions announced today are tough but should reduce a significant element of uncertainty in our future results."
He said that over the past four years R&SA had reshaped its global operations to prepare it for the kind of market expected to develop over the next several years.
He said: "Throughout that period of change we have carried a significant amount of baggage from the past which hurt our reported earnings. Our actions today will reduce much of that burden and will enable us to move forward on a stronger footing.
"I am confident that the cumulative effect of the changes we have made to the business, our strong action on premium rates over the past 18 months plus strong market conditions will give us great opportunities for both good financial results and further operational progress over the next few years."
The company added that current trading was very positive and that the strong rating environment, where it is enjoying huge increases in premiums, was expected to continue.
