ZURICH (Reuters) – Swiss Re (RUKN.VX), the world’s second-larger reinsurer, said on Thursday it planned to shrink costs by cutting about 10 percent of its 11,560 global staff over the next year, sending shares 7 percent higher.
Swiss Re said in February it was targeting 400 million Swiss francs ($349.6 million) of cost cuts by 2010.
Shares traded up 7.2 percent at 20.78 Swiss francs 0945 GMT, slightly outperforming the DJ Stoxx European Insurance index .SXIP, which was 5.6 percent higher.
Zurich-based Swiss Re also said it would promote executive board member Agostino Galvagni to be chief operating officer.
“The quality of these cost savings is better than I expected, and the market seems to recognize this in today’s trading,” said Kepler Capital Markets analyst Fabrizio Croce, who has a “hold” rating on the company.
ZKB analyst Georg Marti, who has an ‘underweight’ rating on the stock, hoped the move would only have a limited impact on sales.
“The job cuts are expected to focus mainly on back office and similar functions rather than on the company’s relationship managers,” he said.
Galvagni’s appointment is the latest step in a management shake up which saw the ousting in February of chief executive Jacques Agrain in favor of reinsurance expert Stefan Lippe, who vacated his COO role.
“It is good news that the company seems to be pushing on with its stated program to return to the fundamentals of reinsurance,” said Croce.
The management moves are part of Swiss Re’s efforts to reorganize the business after a 2008 loss of 1 billion Swiss francs and a 6 billion writedown on toxic assets forced the company to accept 3 billion francs of new capital from U.S. investor Warren Buffet.
Last month, the reinsurer announced that former Swiss Re CEO and current vice chairman Walter Kielholz, will become its new chairman.
The appointment of Kielholz, who is also the chairman of Credit Suisse, was criticized by investors as failing to break with the past after a disastrous foray into investment banking brought Swiss Re to its knees.
($1=1.144 Swiss Franc)
By Martin de Sa’Pinto
(Editing by Simon Jessop and Jon Loades-Carter)