Royal & Sun Alliance shares made one of the biggest gains in the FTSE 100 on Monday as investors welcomed an announcement that the general insurer would shrink its UK workforce by 10 per cent with 1,000 job cuts.

The move is part of a cost-cutting plan that supplements radical restructuring initiated three-and-a-half years ago, when RSA’s repeated failure to meet improvement targets had left its reputation in tatters and its future in doubt.

The general insurer on Monday unveiled ambitious growth targets alongside the cost cuts and stressed that its attention was turning to expansion as the bulk of its restructuring had been completed.

RSA shares rose 2.85 per cent to 126.5p on Monday, the third-best performance in the blue-chip share index and one that left the group with a capitalisation of £3.7bn ($6.8bn). RSA vies with Friends Provident for the title of being the UK’s fourth-biggest insurer by market value, behind Aviva, Prudential and Legal & General.

RSA said it was aiming to carve out cost savings of £130m, equal to 9 per cent of its cost base, by the middle of 2008. It said that £270m of savings targeted in its original restructuring plan had been achieved already, six months ahead of schedule.

“It’s quite punchy stuff,” said Roman Cizdyn, analyst at Oriel Securities. “The other general insurers have been asleep at the wheel. RSA is approaching it from a different angle and taking out huge costs.”

In addition to 1,000 job cuts in the UK, RSA is to scrap 550 positions elsewhere. It said it had consulted unions and would work closely with them over the next two years to minimise the number of compulsory redundancies.

Andy Haste, group chief executive, said: “The decision to reduce headcount is always a difficult one but [is] necessary to ensure we remain as competitive as possible and to continue to deliver on our objective of sustainable profitable performance.”

RSA has been underwriting at a profit for nine successive quarters.

The job cuts did not signal the company was reining in its ambitions in the UK, Mr Haste said.

RSA also set itself the goal of doubling premium income by 2010 in both Latin America – primarily Mexico, Brazil, Chile and Argentina – and the Baltic states.

In the UK it said it wanted to grow its white-label business by more than 50 per cent by the same year.

The UK generates approximately half of RSA’s premiums and profits.

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