European storms and reinsurance problems caused an unexpected flutter in Zurich Financial Services’ annual profit, which was announced on Friday.

Net income excluding investment gains and losses fell to $4.2 billion, from $4.58 billion in 1999. The Swiss giant warned last month that its profit might fall as much as 5% because the European storms and higher reinsurance reserves have cost it $800 million.

The result was a great disappointment for Chairman Rolf Hueppi, who late last year said he expected a profit rise of as much as 15%.

London analysts say the European insurers, until now regarded as a good hedge against increasingly unstable investments, have now been shown to be vulnerable.

Zurich took a 17% dive on European sharemarkets, taking Axa and Allianz down with it.