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.
After 30 years of expansion across Central and Eastern Europe (CEE), which markets in the region bring the biggest value to VIG and where do you see the biggest potential for growth?
You have to imagine that we started our expansion to CEE in 1990 from Austria, one country, where we were represented with three companies, premiums of one billion euro and 5,600 employees. Today, 30 years later, we are number one in CEE, represented in 30 countries with about 50 companies gaining more than 10 billion euro premiums and over 25,000 employees. We are earning more than half of our premiums and profit in the CEE region now, which underlines that this region is a big asset for us and we still see a huge potential for growth in all our markets where we are operating. The average insurance density is about ten times lower than in Western Europe. Our biggest markets after our home country Austria are the Czech Republic, Poland, Slovakia, the Baltic States, Romania, Hungary, and Bulgaria. We also note a very good development in the Balkan countries, especially in Croatia and Serbia. Due to the low insurance density we see growth potential in all insurance segments. As I mentioned in an interview for SeeNews before, we expect a special expansion of the corporate customer business and health insurance in the Southeast Europe (SEE) region.
After exceeding the 10 billion euro premium threshold for the first time in 2019, what are your expectations for VIG’s financial performance in 2020?
The corona pandemic has changed everything, including business plans and performance expectations. It must be taken into account that this situation is not a financial crisis, but a crisis of the real economy, which has consequences for the financial sector and thus also for insurance companies. As expected, we recorded a decline in new business in the first few weeks of the corona virus lockdown, but on the other hand more and more insurance policies were taken out online. This shows that our extensive digitalisation activities are paying off. We were able to achieve a quite good result for the first half of 2020 despite the coronavirus outbreak and even record an increase in premiums compared to the previous year. Currently it is not possible to predict how the remainder of the whole year will look like. The pandemic will accompany us for some time and the situation can change from one day to the next. We have decided not to publish any official expectations for this year.
The economic uncertainties affect the capital markets and thus our investments. We have begun to categorise our investments in such a way that we can estimate the real economic impact on our portfolio in sub-portfolios. That is why we have to re-evaluate some investments in some sectors, especially oil industry, automotive sector, tourism, and airlines are seen with higher risks. Apart from this, we are sticking to our investment strategy with a focus on good credit ratings for both sovereigns and companies. Irrespective of the current corona crisis, we intend to continue our strategy of increasing so-called green bonds.
The extent of the impact of the global shutdown on economies and individual companies is still in an evaluation process. In this respect, the focus on quality in the selection of individual investments plays a very special role. We assume that we will see a general wave of rating downgrades and must also expect that the investment portfolio will not remain unscathed. We also assume that the phase of low interest rates will continue at least in the medium term. We believe that the expected recession in 2020 can only be partially compensated in 2021. It can therefore not be ruled out that this will have an impact also on performances next year.
Regarding the development of our Group, I believe that three factors give us reason to be confident that we will deal with these unique circumstances as effectively as possible. Firstly, we have enjoyed great success in recent years and our 2019 balance sheet was strong. Secondly, our capital base is solid. And thirdly, we started the Agenda 2020 management programme in 2017 to enhance profitability and our ability to meet future challenges.
How would you assess your progress under the Agenda 2020 strategic work programme and what will be the priorities of your next programme?
We are well on track with our Agenda 2020 programme and we continue to implement the measures also during the corona pandemic. As I mentioned before, we see now that the extensive digitisation measures implemented in the course of Agenda 2020 are paying off. I think that this field will take on even greater significance due to the coronavirus crisis within the insurance industry. Online transactions have increased during the last months and many of us have now taken advantage of online and digital services. They existed already before the coronavirus outbreak, but many people are now more aware that these simple options are available.
We expect that digital services will get a new push. That is why digitisation is a main topic for us within Agenda 2020. Currently, more than 180 digitisation projects are running within our Group and we are investing about 50 million euros in digitisation every year. We are already working intensively on a follow-up programme until 2025, which we will present next year. Here, too, of course, we are placing a special focus on the digital transformation, but also very much on further strengthening our profitability.
Do you expect the COVID-19 pandemic to create new opportunities for acquisitions in the region, or do you think insurance companies will be more reluctant to invest in inorganic growth?
That is difficult to say at the moment and we are currently not noticing that insurers are looking to withdraw from markets or that there are increased offers to sell. In principle, we are all in the same situation. Every insurance company is currently busy assessing the effects of the pandemic and is certainly somewhat reluctant to expand. At the same time, however, they will take advantage of very good opportunities, especially if they have a strong financial base, like us.
Will you be looking to enter the last few countries in the region in which you are not yet present?
We always look around and are generally interested in lucrative acquisitions. I always emphasize that we only buy if it is a profitable investment for us and fits to our portfolio and strategy. We also have enough opportunities to grow in our existing markets.
Do you see any impact from the EU’s Green Deal on your operations in SEE?
Before the coronavirus outbreak , the environmental criteria have clearly been in the foreground of sustainable investments in the industry and I think that the Green Deal will not lose importance as a result of the corona crisis. I think that there may be delays in implementation, but not in the importance.
We must bear in mind that insurance companies are important providers of capital for national economies, thereby ensuring that the economy and, as a result, society, flourishes. They therefore make an important contribution to modern society. Our business, and the insurance business in general, is aimed at preserving value, primarily financial value, which creates security from one generation to the next.
However, acting sustainably and investing in environmental, social and governance (ESG) criteria means for us more than just generating financial security. Our priorities in that case also take into account future social and environmental trends. This means that we are actively working to create a future worth living. We are convinced that the insurance industry in general has recognised that investments in ESG criteria play an important role in strategic agendas in all of Europe and therefore also in SEE – regardless of whether out of their own strategic convictions or due to regulatory requirements or, above all, stakeholder demands. Investors and customers are increasingly keeping a closer eye on whether companies are active in this area or not. We see it as a positive development, if our activities can be a role model for other insurance companies.