Premier global reinsurer
Munich Re revealed that its insurance unit, Ergo, would undergo a sweeping restructuring, involving a downsizing of its German workforce by a net 13%.
The move is a bid to restore the unit’s profitability despite low interest rates in Europe, reported
Reuters.
Munich Re is looking to spend approximately $1.1 billion over the next five years for the restructuring. On top of the proposed overhaul, the funds will be used to bolster Ergo’s IT capabilities and improving its product portfolio.
Ergo plans to cut 1,835 jobs from its current workforce of 14,320 by 2020. According to unit head Markus Riess, most of the cuts will affect the sales division.
“We have a duty to make Ergo fit for the future,” Riess remarked.
Riess said that the insurance unit’s restructuring could help it save $312 million in costs from 2020. He also added that Ergo should be profitable once again in 2017 after posting a minor loss this year.
Last month, Munich Re warned that it had anticipated high costs in the restructuring of Ergo.
Taking into account the costs to overhaul its insurance unit, Munich Re’s forecast for this year’s group net profit was set at 2.3 billion euros. Previously, the reinsurer projected a group net profit range of 2.3-2.8 billion.
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