“The sustained resilience that was regained was anything but a sure-fire success.”

Ergo Germany boss Kokkalas also wants to play the role of stabilizer in the Munich Re Group in the future. Reinsurers could achieve high margins in years with low claims. As soon as there are major natural disasters, however, this puts an above-average burden on the results. Primary insurers usually fluctuate less: “With consistently high and increasing profitability, we want to do our part to ensure that the entire group is stable,” explains Kokkalas.

The 58-year-old is convinced that in the next three years he will achieve similarly high profits as in the current year. Stick to that, even when times are challenging. According to the corporate strategy, Ergo, like Munich Re, should achieve a return on equity of 14 to 16 percent by 2025. In 2023, Ergo should contribute 700 million euros to the targeted group result of four billion euros – then without special income.

With premium income of 19.2 billion euros in 2021, the Ergo Group is one of the larger German primary insurers after Allianz, which is by far the number one in the industry. Most recently, in Germany alone, she had sales of 38.8 billion euros and a profit of almost 1.5 billion euros.

Ergo was not always as solid as it is now. Around 2016, Kokkalas, who was born in Greece, emphasized that the situation was “quite challenging”. Ergo was considered a restructuring case and made losses on the bottom line. In life insurance in particular, the company found it difficult to establish a functioning business model during the low-interest phase. In addition, the insurer had to struggle with outdated IT systems.

Kokkalas was in demand as a crisis manager from the start

Markus Rieß, head of the Ergo Group, therefore set up a strategy program to restructure the insurer. When Kokkalas became CEO of Ergo Germany in May 2020, the turnaround seemed complete: “I was prepared to help a well-positioned company in a stable environment to achieve more growth and profitability,” says Kokkalas.

Then came the corona pandemic, the Russian war of aggression against Ukraine and the associated economic challenges. Contrary to what was originally expected, Kokkalas was therefore in demand as a crisis manager: “We also had to react accordingly at Ergo Germany and reassess our scenarios in order to be able to continue growing profitably. The sustained resilience that was regained was anything but a sure-fire success.”

The law graduate had already experienced difficult times in the past – for example at the then Gerling Group in Greece and later as CEO of the Ergo unit there. Kokkalas, who particularly enjoys being able to cycle to work in Düsseldorf, emphasizes that every crisis is different: “You always have to learn to assess situations correctly.”

However, the sharp rise in prices over the last few months was nothing new to him. Even if the current situation does not allow any relaxation, Kokkalas tries to remain optimistic: “The experience from my international work is that people learn to deal with increased inflation.” The most difficult phase is always at the beginning when inflation rises.

Ergo does not want to cushion inflation with premium increases alone

Ergo will be able to offset part of the rising damage costs through higher insurance premiums. Bafin insurance supervisor Frank Grund also demanded this from the industry. It is inevitable that higher inflation in 2023 will result in higher premiums in property and casualty insurance, Grund said recently.

“However, we cannot cushion the rising prices by increasing premiums alone,” emphasizes Kokkalas. Instead, people are currently thinking a lot about how “we can make prices more flexible or offer products with less coverage”.

It is important to closely monitor customer behavior over the next few months and to react quickly to changes in behavior. “We are already hearing from other providers that customers are becoming more cautious and are reducing additional coverage – i.e. in car insurance, for example, are increasingly opting for partial instead of comprehensive insurance,” says Kokkalas.

The Ergo Germany boss now considers cost discipline to be particularly important

In his opinion, the winners of the crisis will be the companies that adapt to the new circumstances the fastest – for example “with appropriate products and with cost discipline via digitization and automation”. The Ergo Group therefore intends to invest over one billion euros between 2016 and 2025 to further modernize processes, products and sales.

First results: At Ergo Germany, 104 robots now carry out around 2.5 million transactions a year. For example, you create damage claims in the system after hailstorms and commission experts. In addition, the insurer uses 71 artificial intelligence (AI) applications. Among other things, the telephone chatbot handles 5,500 calls a day, about half of all incoming calls. As a result, employees have more time for their customers’ more complex concerns.

According to Kokkalas, they expect simpler products and processes from insurers. It is therefore no longer necessary to measure oneself only with direct competitors, but also increasingly to compare oneself with companies from other sectors.

More: Munich Re is increasing its profit forecast for 2023.