ERGO Strategy Programme - Media presentation 1.6.2016

Media presentation

Düsseldorf, 1 June 2016

ERGO Strategy ProgrammeERGO 2021 – Fit, digital, successful!

All measures and figures stated in this

presentation are based on current planning,

and may be subject to approval by various

bodies and authorities.

1Press conference ERGO Strategy Programme, Düsseldorf, 1 June 2016

ERGO is in a good starting position …

Starting position

Significant market share in all business fields

Broad base in sales with various sales channels including direct sales

“To insure is to understand” – customer-oriented and set apart from competitors

Strong position in Germany

Present in over 30 countries – numerous top 10 positions

(Poland, the Baltic States, Greece, Austria, Belgium, India)

High digital know-how – e.g. in Poland and India

International presence

Access to international know-how with a strongly capitalised and innovation-oriented Group

Affiliation to Munich Re


… to achieve its ambition …

Ambition

Strengthen role of leading international primary insurer with strong domestic market

• Comprehensive offering of products, advice and services across

all distribution channels

• Move decisively forward with the digital transformation of the business model

Convince with good results

• Make more customers “promoters”

• Modern and attractive partner for employees and sales partners

• Sustainable contribution to Munich Re‘s result > €500m

Ambition

Systematic evolution of “To insure is to understand”


… and act consistently

Overview

ERGO is making net investment of €1 billion

Fit: Establish leaner and more effective structures

Digital: Lay the foundations for transforming the business model

Successful: Offer convincing solutions in all customer segments

Three fields of activity


Overview of the ERGO strategy programme

Overview

ERGO strategy programme

€ 379 m

Successful!

€ 432 m € 197 m

Digital...Fit…

Sales – Elimination of

redundant structures

Administration – Efficiency

improvement

International – Strengthen

setup

1

2

37

8

10

11

5 Foundational IT – Reliable

serviceFundamental optimisation of

product portfolio

4Life Germany – Separation

of traditional back book

and new businessInternational B2B2C

partnerships12

International growth13

Strengthening of international

commercial/industrial business

6 Digital IT – Flexible and

quick implementation

Processes – Strengthen

resilience and

automation

Solutions for pure online

customers

9 Integrated offerings for

hybrid customers

Net investment of ~€1 bn (2016-2020)


Improve efficiency in sales

Maintain widespread presence and customer centricity

Strategic objective

Improving sales effectiveness

Sales – Elimination of redundant structures1

Consolidate to create one tied agents’ sales organisation

Productivity-oriented support model

Optimised ERGO Pro multi-level business model

Broker Sales and Cooperation Sales organised in product divisions

Key topics


Sustainable development of competitive processes and structures

Costs at market level

Optimum quality and high speed of processes

Strategic objective

Process efficiency saves costs

Administration – Efficiency improvement2

Process optimisation

Process efficiency based on benchmarking

Capacity deployment in line with market

Organisational adjustments

Bundle organisational units

Adjust management-to-staff ratios and central staff activities

Reduce non-personnel costs and external services

Key topics


Efficient governance at Group level with simultaneous regional proximity

Competitive cost situation

Strong and modern IT architecture

Strategic objective

International – Strengthen setup3

Strengthen international governance

Regional hubs

Strong mandate for Group CFO

Global governance for products and portfolio

Improve efficiency

Develop regional IT platforms

Key topics

Hubs for proximity to markets and customers


New business sales to concentrate on investment-type and biometric products

Effective, separate organisational entity for classic life

Strategic objective

4

Organisational separation of new business sales and traditional back book

ERGO VORSORGE will be risk carrier for new business sales

ERGO Leben, Victoria Leben and ERGO Pensionskasse will concentrate

on traditional back book of classic life policies

Key topics

Life Germany – Separation of traditional back book and new business

New organisational structure for classic life


Modern IT landscape characterised by high stability and faster implementation speed

Simple and flexible maintainability of IT landscape

Close cooperation between functional and IT sides

Strategic objective

5

Modernise IT landscape

Optimise core IT processes

Accelerate and improve quality and stability testing

Establish new collaboration model for functional and IT sides

Key topics

Foundational IT – Reliable service

Modern and secure IT landscape


High digital competence to implement digital IT solutions

Close and agile collaboration between functional and IT sides for more speed

High customer orientation through new digital IT solutions

Strategic objective

6

Establish digital competence – Focus: develop market-ready customer-oriented solutions

in short cycles

Establish data analytics unit for the intelligent use of database

Key topics

Digital IT – Flexible and quick implementation

IT as a driver of digitalisation


Customer-friendly processes

Increase automation and self service rates

Digital infrastructure for data transmission and communication

Strategic objective

Thorough review of all processes in applications, policy management, claims/benefits

Stable processes: strengthen governance and quality assurance

Optimise infrastructure, e.g. mobile devices, Skype

Key topics

7 Processes – Strengthen resilience and automation

Automation creates scope for action


Property-casualty: full portfolio including commercial/industrial

Health: stable comprehensive insurance, strong supplementary insurance

Old-age provision: strong fund business and integration with MEAG

Strategic objective

Property-casualty, e.g.:

Modular products

New cyber product line

Health: continuous further development of product portfolio

Old-age provision, e.g.:

Life: concentrate on investment-type and biometric products

Expand fund business

Key topics

8 Fundamental optimisation of product portfolio

Growth through new product strategy


Integrated sales channel and product landscape

Cross-channel presence and customer experience

Strengthen ERGO’s brand presence

Strategic objective

ERGO Direkt as online competence centre for all of ERGO

Overhaul of websites and expansion of customer portals

Integrate sales channels – above all online channel and agency organisation

CRM system as the core of an integrated omni-channel approach

Key topics

9 Integrated offerings for hybrid customers

Omni-channel offering for hybrid customers


Participate in growing market for purely digital customers

Strategic objective

10

Create a new, standalone company complete with its own brand

Create a separate IT platform together with a technology partner

Digitalisation rate of up to 99%, distinct self services, no telephony

Start in 2017 with motor product

Growth from further products / international markets from 2018

Key topics

Solutions for pure online customers

Create a pure digital player


More international commercial/industrial business

Interaction Germany – International: good collaboration and strong Group function

Strategic objective

11

New “International Market Underwriting” unit for commercial/industrial in property, liability,

technical insurance, and transport

International Group-internal co- and reinsurance activity conducted by ERGO Deutschland

to support the commercial/industrial business of ERGO’s international companies

Regular and institutionalised best practice exchange on commercial/industrial business

Key topics

Strengthening of international commercial/industrial business

Expand international commercial/industrial business


ERGO as a strategic international partner

Insurance concepts for the growing “shared economy” sector

Strategic objective

12

“ERGO Mobility Solutions” under the umbrella of ERGO Digital Ventures

Set up a competence centre oriented to national and international partnerships

Focus mainly on automobile industry

Key topics

International B2B2C partnerships

Develop ERGO Mobility Solutions


International growth strategy – to be drawn up in the second

half of the year

The international business represents a key pillar for ERGO to generate

profitable growth outside of the domestic market

Building on existing international presence, which is already very strong in

some regions (e.g., Poland, India, and D.A.S.), as basis for further growth

Further market entries and expanding existing positions in selective promising

new markets in Asia

Leveraging opportunistic growth openings in new regions that ERGO can

harness through its affiliation with Munich Re

13 International growth

1

2

3

4


Financial and HR effects

High net investment

of ~€ 1 bn

High investment and …

1,835 jobs to be cut

Sustainable savings

of ~€540m gross / ~€280m net

… significant savings …

Premiums from 2019 higher than market (apart from classic life)

Sustainable annual profit of > €500m from 2021

… will lead to clearly positive growth and earnings effect

Strategy programme leads to premium increase above market

and annual profit of > €500m from 2021


ERGO 2021 – Fit, digital, successful!

Conclusion

ERGO is investing significantly in its infrastructure, product development and new business fields

ERGO is undertaking structural changes and making painful reductions in its workforce

This all leads to high efficiency gains and sustainable cost savings

ERGO convinces customers with attractive product solutions and services

ERGO will thus return to profits which meet the expectations of its shareholder Munich Re

That is why Munich Re fully supports ERGO’s strategy programme

Documents

ERGO Strategy Programme - Media presentation 1.6.2016