Gluckstern, chief executive of its Zurich Centre Investments unit, will step down as senior managers and set up their own investment venture.

Cheng, 50, who was appointed chief investment officer in December 1996, and Gluckstern, 49, will remain "affiliated'' to Europe's fourth-largest insurer, and Zurich will provide some of the money for their venture, the company said.

Zurich Chief Financial Officer Markus Rohrbasser will also take charge of investments from July 1, and take on responsibility for Zurich Centre Investments, a Bermuda-based money management unit. Rohrbasser, 43 and a former head of Union Bank of Switzerland's North American business, joined Zurich in December 1996.

The changes come as Zurich is preparing its $18.7 billion purchase of BAT Industries Plc's financial-services divisions, which will lead to a shake-up of Zurich's current management. Zurich said it plans to appoint BAT managers Martin Feinstein, 50, Alexander Leitch, 51, and David Allvey as additional managers of the company that will be called Zurich Financial Services Group.

Zurich's shareholders have yet to approve the purchase. Zurich also said it appointed Dirk Lohmann, currently head of its reinsurance business in Cologne and Zurich, as a member of its senior management board from July 1.

Zurich announced the changes as it reported a 1997 net profit increase of 36.7 percent to 1.79 billion Swiss francs ($1.18 billion). The announcement came after the Swiss market closed.

Gluckstern and Cheng will set up Capital Z Partners, an investment partnership. A "substantial'' part of the money will be provided by Zurich, the company said. Gluckstern will also be non-executive chairman of Zurich Reinsurance (North America) and Zurich Centre Group, Zurich said.