Allianz said in a statement it would axe 5,000 jobs at its German insurance division. A further 2,480 jobs would be shed within its Dresdner Bank unit. The number of company locations worldwide will also be cut -- from 21 to 10 -- as part of a new business model to be implemented by 2008.

"These are painful but necessary steps to ensure a sustainable increase in Allianz's competitiveness," said Gerhard Rupprecht, head of Allianz Deutschland.

"For years, Allianz has been losing market share. The restructuring of the insurance business in Germany that was begun last year is intended to reverse this trend and respond to growing pressure on costs in the insurance sector," he added.

Calculated growth

The expected results of the restructuring, which is designed to position the company for further profitable growth in Germany, had already been taken into account in the company's outlook for 2006- 2008, Allianz said.

"The measures are aimed at producing further improvement in client service in Germany so as to lay the foundation for further profitable growth," the company said in its statement Thursday.

The restructuring measures are expected to result in cost savings of upwards of 500 million euros ($630 million).

No redundancies before 2007

The announcement to slash jobs was not unexpected. Allianz has long said it planned to revamp its German insurance activities, without providing any details on the consequences until now.

Management has agreed with unions not to make any forced redundancies before the end of 2007.

At the same time, Dresdner Bank also announced a streamlining of its business model. Out of the 2,480 jobs that the bank plans to cut, 1,980 are on the line in Germany and around 500 overseas, the bank said in a separate statement.