By Jason Rhodes

Swiss Re said on Thursday Jacques Aigrain, who led the group's foray into investment banking, had been replaced as chief executive by his deputy Stefan Lippe, a reinsurance expert with 25 years' experience at the group, with immediate effect.

Aigrain will support a transition until February 19, when the group is scheduled to update on its strategy and give its full results for 2008, having already revealed last week a net loss for the year of about 1 billion Swiss francs ($865 million).

"Stefan Lippe's appointment is in line with the lower risk 'back-to-basics' approach that was outlined last week and we expect his presentation at next week's results meeting to reinforce this strategic shift," Helvea analyst Tim Dawson said.

"His background is in non-life underwriting, which he headed from 2005 and which is, in our opinion, the one area of the group that has remained untarnished by recent developments."

Last week, the world's second-biggest reinsurer was forced to go to U.S. investor Buffett for 3 billion francs of new capital after it reported a 6 billion franc writedown on toxic assets for 2008.

By 6:19 a.m. EST, Swiss Re shares, which fell to a 16-year low after the company announced preliminary results last week, were up 5 percent at 19.89 francs, against a 2 percent weaker DJ Stoxx Euorpean Insurance index <.SXIP>.

"The fact they're bringing in an insurance man who can start cleaning up the company is really big, bold news," said Kepler Capital Markets analyst Fabrizio Croce. "We can see light at the end of the tunnel, even if it's a long way off."

Swiss Re said last week it would disband its financial markets activities that had invested in the risky assets, which forced the group to make writedowns. It also said it would consider raising further equity of up to 2 billion francs.

On the bright side, Swiss Re said last week that demand for reinsurance has increased, as many clients want protection to offset the erosion of their capital in the crisis and it expects the reinsurance premium cycle to harden further.

CHALLENGES

Lippe took over as deputy CEO and chief operating officer in September 2008. Before then he led Swiss Re's property and casualty and life and health underwriting units.

"I am clear about the challenges that Swiss Re needs to address," Lippe said in a statement.

"Our core re/insurance portfolio is sound. We are focused on meeting our clients' needs, creating shareholder value and providing quality career opportunities in a stimulating business environment."

Lippe has serious, immediate problems to deal with; further writedowns on the company's toxic assets cannot be ruled out and it will take time to clean up the balance sheet, analysts said.

"We are not certain that a change in the CEO is enough to fully reinstall investor and client confidence." Vontobel analyst Stefan Schuermann said.

Aigrain, a former JP Morgan investment banker who joined Swiss Re in June 2001, became CEO at the start of 2006 in a bid to boost Swiss Re's share performance, which had been unspectacular during his predecessor John Coomber's reign.

Swiss Re's foray into investment banking products brought the wrong kind of dynamic to the stock after a succession of writedowns dating back to November 2007.

The shares have lost almost two thirds of their value since the start of 2009, underperforming bigger rival Munich Re , down 6 percent, and fourth-biggest player Hannover Re , up 15 percent.

Under Aigrain, Swiss Re also made several big acquisitions, including buying the insurance solutions operations from General Electric .

Buffett's capital injection could ultimately raise the stake of his Berkshire Hathaway investment firm in Swiss Re to about 24 percent to 25 percent, from the 3 percent he took in the group just over a year ago. Back then, he also bought 20 percent of its property and casualty reinsurance business.

Swiss Re said last week that Berkshire Hathaway had agreed not to use its increased stake to influence strategic decisions at the group.

Berkshire is best known for its insurance holdings, which generate about half of overall results and include the reinsurer General Re Corp.

(Additional reporting by Sven Egenter and Emma Thomasson; Editing by Greg Mahlich and Andrew Macdonald)