Loss-making Zurich slashes jobs

ZURICH, Switzerland (CNN) -- Zurich Financial Services, Europe's third largest insurer, plans to cut 4,500 jobs and raise about $5 billion to restore profitability and investor confidence.

The company announced the job cuts and efforts to prop up its ailing balance sheet as it posted a net loss of £2.03 billion in the first six months of this year from a $861 million profit in the year-earlier period.

Zurich has been pummeled over the last 12 months as global stock markets tumbled for a third year. Insurers typically hold large stock portfolios that are used to meet claims in the event of crisis.

The insurer's biggest loss ever reflects a $2.7 billion provision as it increased reserves by a pretax $2 billion and wrote off $954 million.

The company now plans to raise $5 billion, with a plan to sell shares worth as much as $2.5 billion to existing investors and by saving $2.5-$2.7 billion.

Savings would come from cutting jobs, dividends and selling stocks in its investment portfolio.

Zurich plans to reduce its portfolio by 2 percentage points to 10 percent in the next 6-12 months, said Chief Executive James Schiro, adding that the company planned to sell businesses worth about $1 billion to bolster its finances.

Schiro declined to comment on which operations would be sold. Rumours have been circulating around the financial markets that these could include the Farmers insurance management company in the United States or UK fund manager Threadneedle.

"We plan to focus on insurance with an international network in key markets," Schiro told CNN. "We have set a target of making a 12 percent operating profit without capital gains. That's the hurdle and our businesses have to hurdle that, otherwise we have to revisit them."

He also refused to comment on speculation that the company would sell new shares at a 35-70 percent discount on current market levels.

Zurich's stock, which has fallen by about 70 percent over the past 12 months in the wake of four profit warnings which cost CEO Rolf Hueppi his job, dropped 8 percent to 110 Swiss francs in pre-market trading, according to brokers Instinet.

Hueppi's push into the asset management business straddled the company with debts and additional costs.