Allianz to cut 7,500 jobs in major shakeout
22 June 2006, MUNICH - Europe's biggest insurer Allianz AG said Thursday is to cut about 7,500 jobs as part of a radical makeover of the group aimed at streamlining its operations and facing up to intense competition.
22 June 2006
MUNICH - Europe's biggest insurer Allianz AG said Thursday is to cut about 7,500 jobs as part of a radical makeover of the group aimed at streamlining its operations and facing up to intense competition.
More than 5,000 jobs will be cut from the German-based group's insurance business and 2,480 jobs are to go from its banking offshoot, Dresdner Bank with the new corporate structure to generate annual savings of between 500 million (633 million dollars) and 600 million euros from 2009.
"Unfortunately, the measures that have been announced are absolutely necessary," said Allianz chief Michael Diekmann.
"What we are initiating now will lay the foundation for our companies' future profitable growth in Germany," he said.
"Today, we are able to do this from a position of strength. Anyone who puts off essential decisions until some distant point in time will find themselves coming under far greater pressure in the future and will then be forced to take far more drastic steps," he said.
Allianz shares steamed ahead by more than two per cent to 122.08 euros in early trading following the insurer's announcement with a large part of the restructuring costs of about 500 million euros to be included in the company's accounts for this year.
The chief of Allianz's domestic German operations, Gerhard Rupprecht, described the job reductions as "painful cuts" but said they would help to shore up the group's competitiveness.
As part of the shakeout, Allianz is planning to reduce the number of its administrative offices across Germany from 21 to 10 and to integrate its life, health and non-life businesses. Allianz currently employs more than 30,000 in Germany.
Analysts said insurance premiums have come under growing pressure as competition in the industry has increased with the Munich-based insurer losing both customers and market share in recent years in its key domestic German business.
Alone in the last three years the number of customers had fallen by one million to 19 million.
"It would be irresponsible not to take action in the face of this development," said Rupprecht.
But even before the company's announcement, union leaders were warning that they planned to launch industrial action over the restructuring proposals.
Allianz has struggled to boost Dresdner's financial performance since it acquired the bank for 23 billion euros about five years ago. The bank's payroll has shrunk since then by about one-third.
Dresdner said the latest round of job cuts were aimed at helping the bank reach its 2008 target of 12 per cent after-tax return on equity with the restructuring costs adding up to 400 million euros.
But the bank hopes the restructuring will produce savings of 250 million euros by 2008 and represent a boost to revenue of 350 million euros.
"To remain viable in the future in our highly competitive business, we intend to use these job cuts up to 2008 to keep the overall cost base stable and grow our income at a faster pace than the market," said Dresdner chief Herbert Walter.
Dresdner is also planning to step up integrating its business units while at the same time establishing separate operations for private and corporate clients, investment banking, and business services.
In addition, the bank announced that it was dropping the name Wasserstein from its investment banking unit. Wasserstein was added to its name after it acquired the US investment house Wasserstein, Perella & Co about five years ago as part of a push onto Wall Street.
In the future, it will now on be known simply as Dresdner Kleinwort with Dresdner saying it plans to tackle the investment house's cost-income ratio.
Subject: German news