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Munich Re unit to dismiss 1,800 workers in restructuring

Posted On: Jun. 1, 2016 12:00 AM CST

Munich Reinsurance Co.'s ailing primary insurance unit, ERGO Insurance Group, said Wednesday that it plans to lay off 1,800 employees as part of a $1.1 billion restructuring plan.

The plan, which is scheduled to be completed by 2020, also includes exiting 18 locations in Germany and bulking up its digital capabilities, Duesseldorf, Germany-based ERGO said in a statement on its website. The company said it is targeting gross cost savings of roughly €540 million ($600.2 million).

“By 2021 at the latest,” the company said, “ERGO expects annual net profits of over €500 million ($555.8 million), thus making a sustainable contribution to the result of its owner Munich Re.”

ERGO, which underwrites both property/casualty and life and health insurance businesses, said next year it will launch a stand-alone digital company for customers who conduct their insurance affairs exclusively online. The first product will be auto insurance.

Last month, Munich Re reported a lower first-quarter profit, partly due to troubles at ERGO, which posted a first-quarter loss.

At that time, Munich Re Chief Financial Officer Jorg Schneider said in a statement that it was unlikely that ERGO would post a profit for the 2016 year, in part because of high costs related to the new strategy program at the unit.