By Nevena Krasteva
Slovenian insurance-financial group Triglav Group posted a consolidated net profit of 82.3 million euro in 2016. Gross written premiums from insurance and co-insurance grew 2% to 936 million euro in 2016. The group, listed on the Ljubljana Stock Exchange, is active in Slovenia, Croatia, Bosnia and Herzegovina, Serbia, Montenegro, and Macedonia. Zavarovalnica Triglav, the controlling company of the Triglav Group, evolved from Vzajemna Zavarovalnica, a Ljubljana mutual insurer established in 1900.
Member of the Management Board, Zavarovalnica Triglav
The Triglav Group achieved premium growth and maintained a high capital adequacy for a second year running in 2016. What were the pillars of your strategy?
Last year, Triglav Group achieved premium growth for the second consecutive year, and the trend has continued this year. I believe that the good results are the consequence of our strategic focus on core businesses and profitability, on safety of our operations and on maintaining the financial stability of Triglav Group. These were the cornerstones of our former strategy, and we have brought them forward also in our new four-year strategy period. All insurance and asset management subsidiaries of the group consistently carry out client-oriented sales activities, increase effectiveness, develop both internal and external sales networks, and implement a proactive marketing strategy. In general, the situation on the insurance markets of the region is slowly improving, mainly as a result of more favourable macroeconomic conditions.
This year, we have recorded growth in our insurance portfolios, gained new clients and expanded the scope of insurance coverage with existing clients. This is partly a consequence of the improvement of the environment, but it is also a result of our consistent work. Our growth in Slovenia, the largest and the most developed market of Triglav Group, was higher than market growth. In the new strategy, an additional emphasis has been given on business development and digitalisation of our processes, whilst a greater focus is on present and future needs of our clients. As the leading insurance/financial group in the region, we exploit our competitive advantages and use experiences gained through our long-standing presence on the local markets. We know them well and, therefore, we are able to tailor our range of new and innovative products and services, upgraded with assistance services, to each individual market.
Demographic changes, record-low interest rates and volatility on financial markets continue to constrain the operations of insurers in Southeast Europe (SEE). How do you plan to offset their adverse impact?
Yes, our environment is changing and bringing new challenges. We see them more as opportunities for our future development and growth than threats to our current market position, though. Our vision is to dynamically develop new ways of doing business as the foundation of the group’s responsible long-term development, while at the same time operating profitably and safely. In SEE, our aim is to continue to establish ourselves as the leading provider of innovative and comprehensive insurance and service products and asset management services, while having a well-regulated and efficient management and governance system of the group, effectively managing the risks and ensuring the financial stability of the group. In the new strategy period, special attention is given to the development of the group into a modern, innovative and dynamic insurance/financial group.
As regards the situation in the capital markets, no improvement is expected in the short term. The group will maintain its existing relatively conservative investment policy, placing emphasis on fixed-rate investments. Furthermore, it will continue to invest on financial markets that ensure adequate liquidity, diversification and the expected return.
Triglav Group’s operations are very dynamic and impacted by the demographic changes such as the ageing population and migrations, uncertainty of the economic environment, as well as by rapid technological, business-ecosystem, regulatory and broad social changes. As a result of the ageing of the population, new reforms in mandatory pension and health insurance are expected, which will lead to further limitation of social benefits. For insurers, a longer life expectancy brings not only threats but also opportunities, and the fact is that client needs will change significantly.
In addition, insurers are also faced with challenges posed by young generations, who require faster and easier access to our services, which are adapted to their needs by taking a comprehensive and personal approach. Therefore, in accordance with the new strategy, the group is developing omni-channel sales, services tailored to the clients throughout their whole life span and upgraded with broad scope of assistance services.
Which segments – both on the domestic market and outside Slovenia – do you view as the most promising in terms of premium growth?
We see opportunities for growth in health and pension insurance market. Due to the relatively low level of development of the pension system in Slovenia and the increasingly unfavourable age structure of the population, I believe that further pressures on the public pension system can be expected and consequently the second pension pillar needs to be strengthened. The growth dynamics of the Slovenia market depends on the dynamics of the changes to the existing pension system.
We expect that in the long run our markets outside Slovenia will grow faster than the Slovenian market, primarily due to the current differences in the development of individual insurance markets. We will continue to actively develop the insurance markets in the region as our interest is long-term. The markets of SEE represent foremost potential growth in the non-life insurance segment (excluding motor vehicle insurance) and various life and health insurance classes.
Triglav has been the top insurer by gross written premium in SEE over the past decade. What were the biggest challenges you faced during this period?
The greatest challenges are the diversity of markets, various consumer habits, different regulatory frameworks and specific risks. We are aware that we are operating in a highly competitive and demanding environment, in which the specificities of individual insurance markets of Adria region play an important role. We strive to continuously transfer good practices among the group members. In the markets where the group holds a high market share and a leading position, the consolidation strategy has been and will continue to be pursued, whilst on the remaining markets, where our presence is still being built, focus will be on strengthening the group’s market position. In all markets, however, our goal is to make good use of the group’s competitive advantages, such as effective and rapid claim settlement, a strong and trusted brand, our size and capital strength, a broad portfolio of products, services and clients, branched and developed sales channels. An important distinction from our regional competitors is our attitude towards the market, while ensuring a long-term return on invested assets and increasing productivity through synergistic effects.
What key factors do you expect to impact your development by 2020 – both at home and on the wider SEE market?
The insurance industry embodies stability, but at the same time the environment requires us to change, to be dynamic. The penetration of digitisation of business, integration with other sectors of the economy and the development of methods of use of various data open up new possibilities. The environment in which we operate is characterised by rapid market changes and low interest rates. Financial stability, profitability, increasing the value of the group, effective management of assets of the policyholders and the company remain the continuous focus of our operations.
The insurance industry is increasingly faced with various challenges, such as additional regulations, digital business models, the need to connect with complementary players and technological development, e.g. smart homes, self-driving cars. Of course, not all this will be a reality by 2020, but some client needs in connection with the above are already emerging. Changes will not happen overnight; however, our long-term competitiveness would be threatened if we believed that we could adapt to them overnight. A necessary step for our future success is therefore the realisation that the current favourable market situation does not ensure long-term success and that we must now begin with the transformation of our business operations by adopting modern and innovative approaches.
New mergers and acquisitions took place on the regional insurance market in 2016. Are you considering potential takeovers?
Our goal is to grow organically in the region, however potential takeovers are not ruled out should an appropriate opportunity present itself.
The share of gross written premiums booked by the Triglav Group on the markets outside Slovenia has been increasing. Do you expect to sustain this trend? Do you expect Serbia to continue to pace growth in premiums by 2020?
We operate in six countries of Adria region. Our growth and development are more and more recognised in markets outside Slovenia, where Triglav Group booked 17.3% of total premium in 2016. We are pleased that macroeconomic conditions are improving, resulting in growth in insurance markets, which we as the leading insurance/financial group in the region have also recorded. This trend is expected to continue. Attention is also paid to other factors of our business environment, such as significant changes in the regulatory environment and the political and economic situation. Triglav Group assesses and evaluates all these potential changes in the environment in terms of risks and duly takes them into account in its operations.
In general, the insurance markets of SEE, including Serbia, have an enormous potential for development, therefore strengthening the group’s position and increasing the volume of business in these markets is important to us. In total written premium, by far the largest segment remained non-life insurance, the bulk of which was accounted for by motor vehicle insurance. The life insurance market continues to increase gradually and consistently. As a consequence, the awareness about safety is rising and thereby the need for insurance, which people increasingly perceive as an investment in a safe future.
Serbia is one of the most promising insurance markets in the region. Total premium in the overall market increased by almost 44% in the last three years, because with the approximation to the EU the need for insurance services in Serbia is growing and thereby the market. Since the group recognised this potential in due time, it appropriately responded to it. Over the last three years, we achieved an 88% growth in written premiums, which is significantly higher than the average growth of the insurance market. As a result, the group’s share in the Serbian insurance market went up from 1.8% to 5.7% as at 31 March 2017, ranking us fifth among the 19 insurers registered in Serbia.
Triglav has been developing advanced telematics solutions over the past years. In what ways will new technologies affect your operations in the short and medium term?
The insurance industry follows innovations but in the areas where this is feasible. I estimate that digitisation will be one of the most important future elements of operational efficiency. Through the development and introduction of advanced technologies, we can optimise business processes and promote their transparency and simplicity. The digital environment also enables us to continuously improve our services. In cooperation with start-ups, we develop and transfer to practice advanced solutions in telematics, traffic safety promotion, etc. for the benefit of our policyholders.
In Triglav Group, we are very open to all technological solutions that improve our operations and provide the opportunity to offer our clients better services. Therefore, they are systematically introduced into our operations, with priority given to e-business. On the Slovenian market in particular, and gradually on other markets, we continuously expand options of concluding insurance contracts and reporting claims online, managing insurance policies (i.triglav) and other forms of interactions with our clients.
Furthermore, modern technologies are being introduced into other parts of the group’s operations. For example, in 2015 Triglav, as the first insurance company in the region, entered the world of telematics with its DRAJV mobile application, which enables drivers to improve their driving; last year DRAJV was introduced in Croatia and this year on the Serbian market. The penetration of the digitisation of business, integration with other sectors of the economy and the development of the use of big data open up new possibilities and opportunities for further development of the Triglav Group.