ZURICH/NEW YORK, May 30 (Reuters) - Europe's third largest insurer Zurich Financial (ZURZn.VX) said on Friday it sold a U.S. life business to Bank One Corp (NYSE:ONE) for $500 million, helping it hit a key target in restoring full-year profitability. Its shares rose as the Swiss insurer said the cash sale of most of Zurich Life, one of the top 10 U.S. life insurers, to Chicago-based Bank One Corp meant that it had effectively reached its goal of freeing $1 billion in risk-based capital for future growth. "We are pleased that we have got the $1 billion together well ahead of the year-end target," spokesman Daniel Hofmann said. The Bank One deal, which is subject to regulatory approval, is expected to close in the third quarter.

Bank One, the sixth-largest U.S. bank, said it expected the purchase of Zurich's retail life insurance business, which has annual premium income of more than $600 million, to contribute four cents a share to earnings in 2004. The sale is part of Zurich's profit-enhancement programme, under which the firm is cutting 4,500 jobs and trimming the group back to core non-life insurance. Analysts said the sale showed Zurich was progressing well with its aim of refocusing on property and casualty insurance, currently seen as the most promising areas of the business.

Analysts called the purchase one of Bank One Chairman and Chief Executive Jamie Dimon's first moves to expand the Chicago-based bank into a more diversified firm after spending several years fixing up its existing banking operations. With the new unit, Bank One will add underwriting to it existing insurance business and gain distribution for its products.

Zurich's Hofmann said the fact that Zurich hit its target does not necessarily mean there will be no further divestments. "The year is still young." He had no comment on market speculation that the sale of UK fund manager Threadneedle was imminent. Zurich is retaining some niche U.S. life insurance assets, including Kemper Investors Life Insurance Co, which specializes in investment-linked fixed and variable annuity products. It valued the retained assets at over $500 million.

Analyst Georg Marti at Zuercher Kantonalbank said: "The restructuring is quickly advancing as planned. In addition to the positive news-flow, the valuation (of the share) remains attractive." He rated the share "market outperformer." Zurich's Hofmann said Zurich Life had $70 million in operating profit in 2002, but like life insurers around the world, it had been hit hard by the impact of falling financial markets on its investments. It had suffered $400 million in asset impairment charges last year, Hofmann said. Zurich Life employs 950 people.

The Zurich group lost a net $3.4 billion in 2002 as it took special provisions, strengthened reserves and booked large charges related to plunging equity values. The sale of the U.S. business -- formerly known as Kemper Life -- has long been on the cards. Former Zurich CEO Rolf Hueppi told Reuters in December 2001 that the firm was reviewing "various alternatives" including a sale. (Additional reporting by Chris Sanders in New York) Back to Top