Exclusive Germany’s Second-Largest Insurer ERGO to Cut Over 2,000 Jobs

ERGO on Wednesday announced it would cut nearly one in seven jobs across the company over the next four years as part of a drastic restructuring at Germany’s second-largest insurer. By the end of 2020, some 1,835 jobs out of 14,320 will be cut in Germany by the loss-making firm, a subsidiary of the world’s largest re-insurer Munich Re. “We have to get leaner and more digital,” ERGO Chief Executive Markus Riess, who took over leadership of the company last fall, said Wednesday in presenting the new plans. ERGO was forced to write down €450 million and contributed a €200-million net loss overall to its parent company in 2015. Cutting jobs in order to return to profitability was “sadly unavoidable,” Mr. Riess said. The plans are aimed at saving some €540 million per year by 2020, but were nevertheless met with dismay by employees and their representatives. “We in the works council are shocked. The extent of the job cuts is severe and will plunge many of those affected into major hardship,” said Mario Nörenberg, a member of the non-executive supervisory board and head of the company’s works council, which represents employees. “I have my doubts that such radical job reductions will lead to growth,” Mr. Nörenberg told Handelsblatt. While ERGO has gone through a number of structural changes over the last few years, the latest program is “the most extensive restructuring that we have ever gone through,” he added. Mr. Riess, a former consultant with McKinsey, is convinced the measures are necessary to remake the company, which was formed out of a combination of a number of German insurers. The restructuring will involve combining business divisions and branches. The insurer will even pull completely out of classic life insurance, an area that has been popular for decades with many Germans but has proved loss-making in recent years in the current enviroment of record low interest rates. Some 18 locations across Germany will be shuttered, ERGO said. The total restructuring is estimated to cost about €1 billion. Picture: Markus Riess. Source: DPA / Rolf Vennenbernd