Swiss Re Plans to Slash 10% of Jobs After Record Loss (Update3)

By Warren Giles
Bloomberg News
April 2, 2009

April 2 (Bloomberg) -- Swiss Reinsurance Co., the world's second-biggest reinsurer, plans to cut 10 percent of jobs within a year after posting a record loss that forced it to turn to Warren Buffett for capital.

Swiss Re, which employs 11,560, said today the steps should save 400 million Swiss francs ($350 million) by the end of 2010. Agostino Galvagni, born in 1960, will take on the role of chief operating officer, Swiss Re said in a statement from Zurich.

The cost-cutting "looks a bit more ambitious than they've indicated in the past," said Tim Dawson, an analyst at Helvea in Geneva who has a "neutral" rating on the stock.

Chief Executive Officer Stefan Lippe, who replaced Jacques Aigrain in February after a strategy of trading securities led to a 1.75 billion-franc loss in the fourth quarter, has promised to invest premium income "more conservatively." The company, which got a 3 billion-franc capital boost from Buffett's Berkshire Hathaway Inc., said today it plans to streamline its branch network and centralize support functions to save costs.

Swiss Re rose 2.06 francs, or almost 11 percent, to 21.44. The stock has lost 57 percent of its market value this year, making it the worst performer in the 34 member Bloomberg Europe 500 Insurance Index.

Walter B. Kielholz, slated to replace Chairman Peter Forstmoser May 1, is stressing a return to reinsurance and has said the company was slow in reducing risky assets. Swiss Re said last month that it expects the value of investments in its 160 billion-franc portfolio to rebound.

Swiss Re is disbanding its financial markets unit as part of a "derisking" strategy after losses on contracts sold to protect clients against declines in fixed-income securities.

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