Adriatic Slovenica eyes 15% market share in Slovenia after merger with KD Zivljenje

Adriatic Slovenica is one of the leading Slovenian insurers and the only company in Slovenia to offer a full range of life, non-life, health and pension insurance services. A landmark event in the history of the company was the merger of two insurance companies – Adriatic and Slovenica in 2005, as a result of which Adriatic Slovenica was formed. The company’s gross written premium in 2012 totalled almost 270 million euro. Adriatic Slovenica is a member of financial holding KD Group, which is currently being transformed into an insurance holding company centred around Adriatic Slovenica. As part of this process KD Group is merging Adriatic Slovenica with KD Zivljenje (KD Life).

 

Gabrijel Škof, President of the Management Board, Adriatic Slovenica

Gabrijel Škof, President of the Management Board, Adriatic Slovenica

 

What is the business rationale behind the merger of Adriatic Slovenica and KDZivljenje?

Both insurance companies are part of KD Group and the merger of the two portfolios is one of the most important steps in implementing the new strategy of the group. By getting stronger in terms of capital, the insurance company will have bigger opportunities for development in the region. Furthermore, we will ensure more successful cross-selling between life and non-life insurance, and will improve business performance by unifying back-office and optimising personnel.

What strategic business goals – especially in terms of regional expansion, is the combined entity eyeing?

KD Group is being reorganised with a goal to become one of the leading insurance holdings in Slovenia and in the Balkans by 2015, with Slovenia as its central market and Adriatic Slovenica as the holding company. We are planning to consolidate the group’s insurance business. Available capital will grow and we will have an insurance company with an annual premium income of 330 million euro and a 15% market share, which means a steady second position in Slovenia. Elsewhere in the SEE region, we are present in Serbia with a non-life insurance business and in Croatia with life insurance operations. We expect only moderate growth in the companies’ premium income due to the economic crisis, which is why we are looking for attractive acquisition targets that will enable portfolio growth. However, all the while we will remain focused on the Slovenian market which will continue to provide significant leverage for develop ment and a capital base for SEE expansion, focused mainly on new EU countries.

What market conditions did Adriatic Slovenica face on its domestic market in 2012?

Slovenia has been witnessing keen competitive pricing, especially in the field of car insurance, over the past years, and shrunken general consumption as of lately. However, 2012 was successful for Adriatic Slovenica, which reported a net profit 13.2 million euro. Despite the restrictive situation, we increased our market share to 13.2% and achieved 1.3% premium growth, outperforming the market. We saw growth in health, fire and other nonlife insurance segments, and steady performance in endowment and term life insurance. Good results were supported by non-life insurance claims figures and investment return.

Could you elaborate on the key drivers behind Adriatic Slovenica’s earnings and insurance premiums performance in 2012? What were some of the key market trends that shaped the company’s business performance last year?

Some of our key advantages are the wide variety of modern insurance we offer, our branch sales force with 372 points of sale across the country and rapid development of new sales channels such as direct marketing, call centre, on-line selling and selling through smartphone applications. Currently, we are focusing on the development of special offers for specific target groups. We are building up relations with insured persons and improving claims handling services. We have also set up an online claims portal. We are facing growing competition in car insurance and other non-life insurance segments. Another notable trend is the growth of online insurance.

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What is your view of how the insurance industry in Slovenia on the whole fared in 2012 and what were some of the main factors that set the tone for its performance in 2013?

Though the Slovenian market weathered the crisis well, its impact on the insurance market will be seen in the 2013 financial results. In 2012, the insurance companies maintained their share of the country’s gross domestic product at 5.8%, unchanged for the last few years. However, these companies represent the most successful part of the financial sector, with a total premium income exceeding 2.0 billion euro. The stagnation of the Slovenian insurance market is the result of the economic crisis and competitive pricing, and their effect will persist in 2013.

How did the life/non-life segments in Slovenia perform in 2012 and what is the near-term outlook for their development? Which of the two segments offers better growth potential?

In 2012, life insurance premiums (pensions excluded) decreased by almost 5.0%. In 2012, premium income in non-life insurance slightly increased, by 0.3%. In the short term, no insurance segment is expected to post growth. Recent legislative amendments, however, have opened up opportunities in pension insurance. Health insurance too holds untapped potential. Consumers, though, are becoming more demanding. They will only buy insurance they really need. Therefore, insurers will be paying increasingly attention to sales channels.

What do you perceive to be the biggest risk to insurance growth in Slovenia going forward?

Further growth of the Slovenian insurance market is contingent on the revitalisation of the entire economy and, above all, the banking sector. An important leverage for growth should be a proactive and development oriented government policy. The implementation of the new pension programmes requires the urgent adoption of certain statutory acts. Debate on the need for reforms in health care and health insurance has been on the agenda for years in Slovenia. If complementary health insurance was abolished, this would threaten the development of the insurance sector and endanger financing of the entire health care. On the other hand, the compulsory contract-based health insurance proposed by the insurance companies would bring long-term stable financing of health care. Demographic and environmental change too will have an impact on the sector, our insurance company including, but we see them as a challenge we are already adjusting to.