Press release 16 December 2016
ERGO Group’s Belgian subsidiary, ERGO Belgium, announced today its intention to stop writing new life insurance business and to close down the sales organisation. In addition to that, the company’s proposed strategic plan sent today to the Works’ Council – a Belgian consultation body – puts a clear focus on servicing the existing customers by aiming for higher efficiency. All intended changes are still subject to the outcome of the information and consultation process with the Works Council in Belgium.
As a consequence of the difficult situation on the capital markets, profitability in life insurance in the Belgian market has significantly deteriorated over the last years. ERGO is a smaller player in Belgium and Luxembourg with a total premium income of 524 million euros in 2015 – all from life insurance – with a market share of 3.2%. The current distribution model with agents and sales partners is unique in Belgium and competes with large established banks and broker organisations that are able to reach more scale and cost effectiveness.
Mark Lammerskitten, CEO of ERGO Belgium, concludes: “Being a smaller player in the Belgian market creates a structural disadvantage on the cost side. New contracts sold in recent years are not profitable in the current context of sustained low interest rates. And we do not expect the situation to fundamentally change over the next years.”
Therefore, the management of ERGO Belgium put forward a proposal to discuss with the Works’ Council. The main points are:
- stop selling insurance policies, since this is loss making;
- focus on servicing existing customers for whom ERGO aims to streamline operations towards higher efficiency;
- invest in operational, risk and financial management to make the company more resilient in the current environment.
In view of the announcement of this proposed strategic plan, ERGO Group will increase ERGO Belgium’s capital position by more than 300 million euros.
The strategic plan is subject to the consultation with the Works Council. Potential consequences of the intended plan would be:
the closing down of the sales organisation in Belgium and Luxembourg;
- a reduction of the workforce by approx. 200 employees.
The proposed termination of new business will have no consequences for customers. In the long term, they will benefit from improved service after the streamlining of operations. Protecting and servicing the existing customers, and keeping the obligations towards them, is at the very core of ERGO Belgium’s proposed strategic plan.
Thomas Schöllkopf, Board Member of ERGO International AG: “The proposal made to the Works Council is a painful one. However, with the current state of capital markets and the special situation we see in Belgium, it is in our view the only viable one. The team in Belgium will now proceed to discuss the plan with the Works Council – in a fair and respectful way and aiming to best serve the interests of customers, employees and sales partners.”
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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
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.