Health, SMEs insurance hold untapped growth potential

Elisabeth Stadler has been chairwoman and CEO of Vienna Insurance Group since January 2016. She has been working in the insurance industry for more than 35 years now. She was member of the managing board of various companies of UNIQA Group, CEO of ERGO Austria International AG, CEO of Donau Versicherung, a member of Vienna Insurance Group. Stadler holds several positions on the supervisory board of companies of VIG Group and Austrian groups OMV and voestalpine.

Elisabeth Stadler, CEO Vienna Insurance Group

The merger and acquisition scene in Southeast Europe (SEE) remained quite active last year and in the first months of 2019. How does this dynamics affect your operations and do you see room for expansion?

Last year, we made an acquisition in Bosnia and Herzegovina and significantly strengthened our position there. As the market leader in Central and Eastern Europe we have been represented in 25 markets, so nearly in every market, even in Southeast Europe. While the fundamental focus is on this region, we are always looking to exploit any opportunities that those markets present. We are following the clear goal to maintain our leading position and to improve our performance in the countries where we have not yet achieved our targeted market position. That is why we look at several options for potential acquisitions every year. In all our reflections we are always keeping a close eye on profitable growth.

Which market segments do you see as top-performing in SEE and where do you see untapped potential for growth?

Currently the main business comes from non-life products, especially from the motor insurance business. Even though there has been improvement in the last years, life insurance is still far below Western European countries in terms of penetration and share in total market. We see also room for improvement in private property insurance. This type of insurance in the SEE region is perceived as an expensive service, while that is really not the case. This puts a great responsibility on all the players on the insurance market to educate people and raise the awareness of the importance of insurance. Another segment with potential is the insurance for small and medium sized enterprises. If SMEs are considered as a leading force of the local economies in the forthcoming years, they need adequate insurance coverage and support. We have to be prepared to educate them on this need and to provide them with such type of coverage. Last but not least, we believe that health insurance also has a great growth potential in view of demographic developments.

What are your expectations about your financial performance in SEE?

As much as 56% of the premiums and 53% of our profit are earned in CEE. Our results clearly show the benefit of maintaining our investments in this region. Also, in nearly all parts of SEE we see stable growth and falling unemployment. The markets where we operate are growing, on average, twice as fast as the eurozone countries. We intend to continue investing in this region and our more than solid solvency ratio of 238% provides the necessary financial resources. In general, the forecast for VIG’s premium volume is 10.2  billion euro and profit is expected to range between 530 and 550 million euro in 2020.

What are the key factors for the successful development of VIG and what makes you different compared to other insurance groups?

We have about 50 companies with different brands in 25 countries. I think our diversity is one of our main competitive advantages. We follow the strategy of multibrand and local entrepreneurship. This strategy makes VIG totally different from international competitors. We believe that it is an advantage to have a wide diversification in markets, products, sales channels and brands. This makes us less dependent on the changes occurring in individual markets. We also follow a sustainable and long-term strategy in our markets. We have not come here for a short term. That is why we want to be seen as a stable and reliable partner in times of dynamic change.

Is climate change affecting your operations?

Yes, of course, because the ability to fulfill all commitments we make to our customers today and to take responsibility for future generations is core to our business. Accepting responsibility is an important part of VIG’s business orientation and forms the basis of its sustainability strategy. The environment is also a key element of this strategy, with particular importance given to adjusting the business model to climate change. As a part of this effort, VIG has decided to implement a dedicated investment and underwriting strategy to support green investments and a low-carbon future. In particular, VIG clearly reduces investment and underwriting policies in the coal sector.

Insurers are traditionally among the early adopters of new technology. How would you comment on the penetration of new technologies in insurance services in SEE and what are your plans in this area?

I think that after global warming, the digital transformation is the trend with the greatest effect on society and the economy. The whole insurance industry and also VIG have to work on the digital agility as a necessity in order to be prepared for the changed requirements of the future. More than 150 digitalisation projects are currently underway in a variety of areas within the VIG Group, most of which are scheduled to be completed within the next two years. We are investing on average 50 million euro per annum in digitalisation. We see two stages of digitalisation. We are currently in the first stage, which is concerned with digitalising today’s business models. To achieve this, we apply technologies intelligently to improve the products and services offered at customer contact points. The second stage concerns the use of new business models, including those with new products and services that are not typical for the insurance industry, such as assistance services. We have already performed some activities very successfully for example in Romania and Bulgaria and we are now planning to set up our next assistance company in Serbia.