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UPDATE 1-Munich Re's Ergo sees progress on restructuring
June 1, 2017 / 11:09 AM / 7 months ago

UPDATE 1-Munich Re's Ergo sees progress on restructuring

* CEO Riess reaffirms profit goal of 600 million euros by 2021

* Ergo reaches labour agreements on planned job cuts

* Company takes stock year after major restructuring announced (Updates with details, background)

DUESSELDORF, Germany, June 1 (Reuters) - Ergo, the loss-making primary insurance business of Munich Re, said on Thursday it had reached labour agreements on more than half of the 1,800 jobs it aims to cut by 2021 as part of its restructuring.

A year ago, Ergo announced plans to trim its workforce to become profitable after years of losses. It also launched efforts to strengthen technology, streamline sales and sharpen its international focus.

Chief Executive Markus Riess said the company was on course to post an annual profit of more than 600 million euros by 2021.

In 2017, Ergo expects it will turn a profit of between 150 million and 200 million euros after a small loss last year.

However, a one-billion-euro investment programme and other restructuring costs are still weighing on the bottom line.

“This path costs money,” Riess said.

Investors have argued that its financial weakness has distracted Munich Re from its core reinsurance business.

Riess highlighted progress in unifying a disparate sales force that had previously sold products under individual brands.

Sales teams, which have seen the brunt of job cuts, are focused more narrowly on 55 locations, compared with a previous 66. Ergo is closing 54 of 119 regional offices.

Ergo this year is launching a subsidiary called “nexible” that exists only online and has no call centre or branches.

Ergo also said 550,000 users are registered in its customer internet portals, up 56 percent compared with 2015.

Reporting by Tom Sims; Editing by Maria Sheahan and David Evans

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