Severe storm damage claims across Europe and the Americas knocked a hole in profits at Royal & Sun Alliance, which plunged 6% to £566m in 1999.
The figure was well below the company's publicly-announced 10% target return.
And chief executive Bob Mendelsohn admitted he was "not pleased" with the result.
General insurance was also hit by a number of poorly-performing books of business particularly in the UK.
These were mainly in motor, commercial, personal and the risk managed account.
A spokeswoman said this was principally in line with the industry trend, although a new motor product Drive attracted a lot of young drivers, which worsened the claims experience. This was now being rebalanced, she said.
General business premiums rose 5% in underlying currency terms but was offset by the loss of premium resulting in emergency action to remedy underperforming areas.
Mendelsohn said: "It has not been an easy two years for our employees and shareholders."
He said the strategy unveiled in 1997 to transform the group into an efficient "wired for the 21st century" was hard to achieve.
"Doing it when your industry is suffering through two years of intense price competition, significant natural catastrophes, huge investment in technology and economic turmoil in various parts of the world, makes it harder still," he added.
But RSA was confident it was "on track" to achieve financial goals for 2000 and 2001.
Mendelsohn said: "Looking forward, we expect significant and profitable growth, both in our traditional business and in new businesses."
He added targets would be met by continuing to build general insurance business around the world, "unfashionable as that may be at the moment".
Regarding e-business, he said several new propositions were close to launch and would be announced in the coming months.
"We have a very pragmatic approach to e-business. We intend to make money at it," said Mendelsohn.