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ERGO is investing €1 billion and making itself fit for the digital transformation

Press release 1 June 2016

  • CEO Markus Rieß: “We are laying a solid foundation for a sustainable and successful future at ERGO.”
  • Top priority for digitalisation
  • Creation of a pure digital player
  • Modernisation of the IT landscape
  • Sales organisations to be bundled
  • Cost savings of approx. €540 million gross by 2020
  • Unavoidable job cuts of some 1,800
  • Separation of new business sales and classic life portfolio 

ERGO Group AG is strengthening its role as a leading international primary insurer and moving forward with the digital transformation of its business model with its new strategy. ERGO is investing approx. one billion euros and targeting cost savings of approx. €540 million gross. ERGO will be making a comprehensive cross-channel offering available to customers and sales partners. By 2021 at the latest, ERGO expects annual net profits of over €500 million, thus making a sustainable contribution to the result of its owner Munich Re. ERGO plans to grow faster than the market from 2019. The Company’s Supervisory Board approved the strategy programme at a meeting on 31 May 2016. Subject to agreement with the co-determination bodies, all measures are to be concluded no later than 2020.

“ERGO is taking its brand promise ‘To insure is to understand’ to the next level. We will be orienting ourselves very systematically to customer needs. To do that we must become leaner, more efficient and digital. That is how we will realise the transformation of the insurance business model”, Markus Rieß, CEO of ERGO Group AG and Member of the Board of Management of Munich Re, underscored.

ERGO is laying the foundations for that by making net investments of €1 billion. At the same time, the Company will be making annual cost savings of some €540 million gross. This will result in unavoidable jobs cuts in Germany amounting to some 1,800. It is planned to make these cuts as socially compatible as possible. “We are imultaneously saving and investing. Both are necessary for our future”, Rieß said.

Strengthening competitiveness by consolidating sales

ERGO is first and foremost streamlining sales. Measures include consolidating agency sales, which will result in exiting 18 locations in Germany. ERGO will retain a resence in all regions. In addition, ERGO will be intensifying the interaction between special sales business such as broker or partner sales and the business fields. In parallel, ERGO will be strengthening headquarters support for sales partners through a stringent new organisational structure. “Strengthening sales also means making sales more competitive. Today we have several sales organisations and complex processes throughout administration. That increases administrative costs. At ERGO, these costs are significantly above the market average”, Rieß stressed.

High investment creates opportunities in digitalisation

Markus Rieß is convinced that “the diversity and close interaction between sales channels is a prerequisite for our business. The insurance market is undergoing far-reaching change: customers take it for granted they will be offered the same kind of services as they receive in other sectors, and they switch between the online and offline world depending on the situation.” That is why ERGO is backing offers and products for these hybrid customers. The Company will be developing appropriate offers; online, intuitive, with fast and efficient administration and short response times – complemented by personalised services either online or locally. For customers who conduct their insurance affairs exclusively online, ERGO will be launching a pure digital player as a standalone company with its own brand from 2017. The first product will be a motor insurance.

ERGO will be investing €432 million net in digitalisation and in harnessing growth opportunities. “People use the internet for all kinds of everyday business, from buying a book to filing their tax return. We do not want to leave this sales channel to others. That is why we are making sure today that our inner clock has a digital mechanism in future”, Markus Rieß said. “With ERGO Direkt we already have a credible footprint in this field.”

ERGO established ERGO Digital Ventures AG for its digital activities back in February 2016. This company will drive the digital transformation at ERGO forward. The ERGO Direkt subsidiary, the pure digital player, and the Mobility Solutions business field will operate under its umbrella.

The future belongs to capital market-oriented old-age provision

ERGO continues to systematically pursue the course it has set in response to low interest rates and volatile financial markets: in the key new business sales market for old-age provision products in life insurance, ERGO will in future be concentrating on nontraditional capital market-oriented products and biometric offers. ERGO VORSORGE will be the legal body for this business. At the same time, ERGO will be intensifying fund-based business and will to that end be establishing stronger integration with MEAG, the joint asset manager of Munich Re und ERGO.

ERGO will be separating the classic life portfolio from new business sales. That will improve governance opportunities, increase transparency in classic life business, and shorten decision-making paths within the organisation.

For ERGO, international business is a key pillar for generating profitable growth outside the domestic market. ERGO will draft the growth strategy for this field in the second half of 2016.


More information:

Key financials

Total € (net)

Total investments until 2020

~ 1 billion

  •  Leaner, more efficient structures

379 million

  •  IT basis for digital transformation

432 million

  • Optimum products and services

197 million

Sustainable annual net profit target from 2021 at
latest

~ 500 + million

Annual cost savings from 2020

~ 280 million
(~540 million gross)

PDF-files:

ERGO Strategy Programme - Media presentation 1 June 2016

PDF-file

ERGO company structure

PDF-file

Pictures:

Dr. Markus Rieß

Dr. Markus Rieß

Picture 300dpi (JPG-file)

Picture 72dpi (JPG-file)

Dr. Christoph Jurecka

Dr. Christoph Jurecka

Picture 300dpi (JPG-file)

Picture 72dpi (JPG-file)


For further information, please contact:

Andreas Lampersbach

ERGO Group AG
Andreas Lampersbach
Corporate Communications and Brand Management

Tel +49 211 477-3316
Fax +49 211 477-1511
andreas.lampersbach@ergo.de
media-relations@ergo.de



About the ERGO Group AG 
ERGO is one of the major insurance groups in Germany and Europe. Worldwide, the Group is represented in over 30 countries and concentrates on Europe and Asia. ERGO offers a comprehensive spectrum of insurance, provision and services. In its home market of Germany, ERGO ranks among the leading providers across all segments. About 43,000 people work for the Group, either as salaried employees or as full-time self-employed sales representatives. In 2015, ERGO recorded a premium income of 17.9 billion euros and rendered benefits to customers of 16.8 billion euros. ERGO is part of Munich Re, one of the world's leading reinsurers and risk carriers.
More at www.ergo.com



Disclaimer
This press release contains forward-looking statements that are based on current assumptions and forecasts of the management of ERGO Group. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forwardlooking statements or to conform them to future events or developments.


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