Zurich Financial, Europe's third-biggest insurer, has unveiled a $2bn (�1.3bn) half-year loss and announced a programme of sweeping reforms - including heavy job cuts.

The company said 4,500 jobs would go this year, and underperforming businesses would be disposed of, to try to achieve savings of $1bn by the end of 2002.

Some 2,000 of the job cuts are expected to be in the UK.

Zurich's new internet bank - Zurich Bank - will close next spring. The company said customers would be paid at least �200 compensation and their accounts would be transferred to other banks.

Slashing costs

In the UK, Zurich Financial is best known for its sponsorship of club rugby, as well as being the firm behind insurers Eagle Star and Allied Dunbar.

The firm slumped to a net loss of $2.03bn in the first six months of this year, from the $861m profit recorded a year earlier, mainly because of write-offs and a substantial increase in provisions for poor performance.

Underlying this is the weak performance of world stock markets over the past six months, which has seriously eroded the value of the assets held by insurance companies, generally the world's biggest investors.

In an effort to claw itself back to profitability, Zurich said it would sell $2bn-$2.5bn in new shares next month, and would strive to slash costs across the board.

Ups and downs

Most insurers have suffered in the wake of 11 September, but the losses have more to do with feeble stock markets than direct insured costs.

Indeed, big insurers have been able to raise their premiums: Zurich recorded an 18% jump in premium income during the half-year.

Now, in the hope of boosting its capital base, Zurich is to trim the amount of shares it holds to just 10% of its portfolio, a very low weighting by fund-management standards.

The firm will also make disposals worth up to $1bn, but has yet to give full details of where the axe will fall.