Muenchener Rueckversicherungs-Ges. AG : Munich Re CEO Repeats Primary Insurer Ergo Crucial Part Of Group
04/26/2012| 09:06am US/Eastern
German primary insurer Ergo Versicherungsgruppe AG, whose reputation was tarnished by a prostitute scandal last year, is "a crucial part" of the Munich Re AG (MUV2.XE) group, Munich Re Chief Executive Nikolaus von Bomhard said Thursday.
Von Bomhard, responding to criticism by a number of shareholders at the annual general meeting over Ergo, also said the scandal cost about EUR4 million in "external costs" and that it tied many resources at the primary insurer. He said about 1,000 insurance policies were lost due to the scandal, but that there was no significant impact on new business.
The scandal erupted after last year's AGM when it was revealed that in 2007, Ergo's sales force hired prostitutes for a company party at Budapest's historic Gellert spa as a reward for some of its top salesmen. A manager and a management-board member who approved the party left the company before the full details emerged.
In addition, Riester pension products were miscalculated when a form was reprinted.
In the aftermath of the scandal, the company imposed strict corporate governance guidelines, restructured its sales force and appointed a new management board member for sales and marketing, who is expected to restructure the unit further.
Von Bomhard said the measures are ongoing to restructure the sales organization, train staff, improve the consulting quality of insurance agents and simplify insurance policies.
Ergo said at the end of March it expects an after-tax profit of around EUR400 million for 2012, up from EUR349 million in 2011. That figure includes minorities.
-By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500; email@example.com