BAFS to axe 1,600 jobs after merger

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The Independent Online
BRITISH American Financial Services is to shed 1,600 jobs as part of what the company called "a ruthless drive for efficiency" when it completes its pounds 32bn merger with Zurich Financial Services.

Eagle Star, a subsidiary of BAFS, will bear the brunt of the job losses, which represent 10 per cent of BAFS staff in the UK. Most redundancies will take place in the company's general insurance wing.

Sandy Leitch, BAFS chief executive, said: "It is inevitable that there will be job losses in those parts of the organisation where jobs and efficiencies overlap, or where competitiveness and efficiencies are needed most. You have got to do them in a fair, neutral and fast way."

The company said the job losses would be carried through "as quickly as we possibly can" after shareholders vote on the merger on 12 June.

Mr Leitch said by the end of three years, the company hopes to save $400m a year (pounds 245m), much higher than earlier expectations of $250m. He said it was "too early to be specific" about exactly where the job losses would fall, but indicated that most would be in general insurance. "Most savings will occur in the UK. That is where the greatest level of integration occurs," he said.

News of the job losses came as BAFS' parent group, British American Tobacco, gave details of a giant restructuring programme. BAT will become a stand- alone tobacco company, retaining a 43 per cent stake in the merged financial services group, to be called Zurich Financial Services.

Zurich is paying a $1.4bn charge linked to the financial services merger, which is due to be completed by September. Most of this money will be used to build up the new company's reserves.

The combined group, Zurich Financial Services, will be one of the largest insurers in the Western world, second only to Axa-UAP, the French insurer. Its income from insurance premiums will come to $36bn (pounds 22bn). With 30 million customers in more than 50 countries, it will manage more than $375bn of customers' assets. The company will be Britain's third largest life insurer.

Separately, BAT's chief executive, Martin Broughton, insisted the group was not vulnerable to further legal action over damage caused by smoking. "The US really is different. I don't believe the US style litigation will spread to other countries."

Mr Broughton attacked a recent decision by a Minnesota judge who found in favour of a plaintiff claiming damages over smoking. He said BAT would have fought the decision, but US companies had capitulated. He said BAT only joined the settlement, costing the company $200m (pounds 120m), after other cigarette companies backed out.

"We thought it was not in shareholders' interests to risk a judge who was so one-sided. Frankly I don't think we will find another judge who will run a case in the same manner as the judge in Minnesota," Mr Broughton said.