Reinsurance broker Benfield Group blamed added spending on new staff for an expected fall in profit for 2005, knocking its shares almost 10percent lower on Friday.
"The profits for the year ... will be reduced because of the size of the investment that we are making for future years because of changes in the market," chief executive Grahame Chilton said.
Benfield shares had fallen 9.7percent to 250 pence by 0800 GMT, making it the top midcap faller on Friday.
The firm warned at the time of its year-end results in March that 2005 would be challenging for the core business and on Friday said group revenues on a sterling basis were expected to be flat, although higher in constant currency terms.
Chilton added that analysts were "in the right zone" in predicting full year pretax profit of around £76m.
Benfield, which derives around three quarters of its income in dollars, said in addition to a six percent increase in costs, current and future recruitment would add around £12m pounds to costs this year.
Chilton said that in the year to date, the company had recruited 140 staff, bringing its total headcount to around 1,850 employees, as it sought to take advantage of a shake up in the US insurance market.
The insurance broking industry's reputation has been tarnished by allegations of price-fixing and unethical kickbacks levelled at it by the New York Attorney General Eliot Spitzer and other U.S. prosecutors.
"The market almost came to a halt in terms of opportunities ... we've now started to see that kick start through the year and Benfield is well positioned as we weren't involved in any of those practices. We've been taking the opportunity to invest in people and infrastructure," he said.But he warned that investment opportunities in both the United States and its international division would not produce significant extra revenue until 2006 and 2007.
The firm also announced that it had appointed Paul Karon, formerly president of Benfield Inc., as chief executive of its US Division. Chilton had covered the position since March when previous incumbent, Rodman Fox, was granted leave of absence.
