Voluntary exit is the ‘tool’ for insurers’ restructuring
The restructuring of insurance companies is at the center of their managers’ efforts, making the most of voluntary retirement programs to reduce their operating costs. This, being the sector’s weakest point, is the biggest reason why companies adopt programs to reduce their staff. Ethniki Insurance, Phoenix and recently the Aspis group are putting into practice broad or less extensive programs for staff departure, continuing, some of them, an effort that started earlier and seems to be intensifying now, under the weight of the general stagnation in productive work the sector is facing. Similar programs have been introduced in the past by large companies, such as Interamerican and Allianz. Using mergers as a pretext, the two state insurers, Phoenix and Agrotiki, began significant staff reduction a year ago. Second cycle The cycle, however, is not over yet, as the new administration of the sector’s biggest company, Ethniki Insurance, recently opened the «taboo debate» by working out a program for staff reduction which led to the departure of 230 employees, of a total 1,460. The administration of Phoenix has again begun reducing its staff, proclaiming a program that later expanded, while Aspis followed suit with a voluntary exit program for all three companies in the group: Commercial Value, Aspis AEAZ and Aspis AEGA. In the case of Ethniki, the staff reduction by 17 percent is expected to contribute to shaving expenses by 25 to 30 percent yearly, while its costs will be covered within two years at the latest. As officials note, the main benefit to the company is the age renewal of the staff, an advantage that will be further boosted by the 150-200 hirings planned for 2005. The cost of voluntary exit, estimated at about 25 million euros, will be covered within the horizon of three years, while additional benefits will come by not renewing the staff of Action Plan, contributing to a further reduction of all employed and, of course, the company’s operating costs. At Phoenix, the voluntary exit program under way is the second such effort, realized this time by the group’s new administration. The biggest such program was set out during the merging of Phoenix and Metrolife, leading to a staff reduction of 130 people and costing 18 million euros. So far, the new program has reinforced the management’s expectation of the departures of more than 50 people, from a total of 657, and its cost will exceed 10 million euros, burdening this financial year’s results. The private sector is not exempt from efforts to cut operating costs. Currently under way is a program introduced by Aspis AEGA and AEAZ, which employ a total of 450 staff. The group’s third insurance company, Commercial Value, has recently completed its program, reducing its staff by 40 people from 255 originally. The programs’ success in every case depends on the financial benefits offered to employees; it is no coincidence that in Phoenix’s case, the cost of the departure of 50 people will approach 10 million euros, while at Commercial Value the cost of 40 employees’ departure will not exceed 2 million euros. Workers not interested This partly explains the low interest shown by employees of Aspis’s other two companies in accepting the terms of the voluntary exit programs proposed to them, worrying the management of the company, which does not hide its decisive intentions to cut the group’s staff. The reduction it seeks, it notes, is the unavoidable effect of mergers over the last few years, to the extent that Commercial Value alone is the offspring of the merger of six companies, grouping 380 employees in total. A staff reduction similar to that at Phoenix and Metrolife occurred as Agrotiki Insurance and Agrotiki Life merged. The cost of cutting 140 jobs as the two companies became one was 13 million euros.
