TOBACCO and financial services group BAT Industries is looking for annual savings of at least #247m in the third year of its financial services business BAFS, which includes household names Eagle Star and Allied Dunbar, with Swiss company Zurich Insurance.

Much of this will come through job losses amounting to 1600, mainly at Eagle Star, where a review of the general insurance operations is already taking place.

BAT stressed, however, that ''the combination of businesses is not simply a cost-cutting exercise, although there will inevitably be job losses''.

While there will be significant savings, it said, the main purpose was to create additional opportunities for long-term growth in a strong business that will be well positioned to take advantage of the likely developments in non-life insurance, life insurance, re-insurance and asset management. The pooled financial services operation is to be called Zurich Financial Services Group (ZFSG).

The deal is due to be completed in September or October, when trading will start in shares of the two new companies.

Most job losses were expected to hit London head office BAFS staff, where there would be duplication with the corporate Zurich headquarters. The information technology department has already been singled out for job cuts, although other areas have not yet been identified.

Zurich also stated its desire to keep compulsory redundacies to a minimum.

A major restructuring at BAFS has been under way for some months, with the main aim of shifting the balance of Eagle Star's business towards its ''core'' general insurance strengths.

There would also be some job losses at the tobacco arm of the business, as it was moving its head office functions from Staines, Middlesex, and Woking, Surrey, to London.

In tobacco, the group unveiled plans to become the biggest company in the world, and behind global brands such as Lucky Strike and 555, announced it would be looking for ''financially attractive acquisitions'' as well as growing its existing businesses.

BAT Industries is to receive a #700m payment from its former financial services division to repay loans made to it before the demerger.

BAT shareholders are to vote on the proposals on June 12. They will receive shares in a pure tobacco group, to be named British American Tobacco, and shares in Zurich Financial, a holding company owning 43% of ZFSG.