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.
Vienna Insurance Group has again presented a very good result for the first half of 2022. What are the main reasons for this positive development?
We are very satisfied with our results in a very challenging time, which is primarily characterised by the war in Ukraine, high inflation and the pandemic that is still present. Although these influences, which also apply to the insurance industry, are dampening the economic outlook, VIG Group continues to demonstrate very strong resilience, which is once again manifested in improved key figures. Improving premiums and profits, as well as the combined ratio, cannot be taken for granted. The success of our group is built on a long-term oriented and broadly diversified business model, which shows its strengths especially in particularly challenging phases. Also, digitalisation plays a very important role. We have the great advantage that in many of our markets digital literacy is considerably higher than in Austria for example, and we have launched most innovative projects in CEE.
How well did the markets in the SEE region perform?
We are making profits in all our companies in this region and are showing rising premiums. With the annual report of the results for 2021 we have reduced our segments from twelve to six. All SEE markets are represented in the segment Extended CEE. We have particularly striking double-digit growth rates in premiums in Romania, Serbia and Bulgaria, with growth coming primarily from the non-life business.
VIG is represented by three companies in Ukraine. How does the Ukraine war affect VIG’s operations and business expectations?
We have been present in Ukraine since 2004 by three companies that generated a premium volume of around 100 million euro in 2021. We are number 3 on the market. In relation to the total premium volume of 11 billion euros, the share is small, but before the war we defined Ukraine as a market with disproportionate market growth. We are fortunate to have no presence in the embattled regions of eastern Ukraine. At the beginning of the war, all activities were suspended, but our Ukrainian colleagues are very committed and are now maintaining business operations again. Even employees, some of whom have fled with their family members, are working from abroad with their laptops and want to be there for the company and the customers. We have great respect for the loyalty and commitment of our Ukrainian colleagues. This allows us to make the best possible use of the potential in the insurance business, but above all to be there for our customers.
At the moment, however, our focus is not on the economic aspect but on the human aspect and the situation for our approximately 1,400 employees. Immediately after the war began, we started coordinated aid and support activities within the group, especially in the countries neighboring Ukraine. Our companies set up apartments for employees and their families. We were thus able to provide housing for more than 500 people. We initiated the “VIG Family Fund” with a basic endowment of 5 million euro. Our companies and employees have paid into this fund and currently we have about 7 million euro to provide direct support to affected families of our Ukrainian companies for the reconstruction of destroyed apartments and houses, as well as for personal hardship caused by the war. The solidarity within our group is fantastic.
How do you think the war in Ukraine will continue to affect the economies of Central and Eastern European countries?
Economic growth is slowing down for the time being, not just because of the Ukraine war, but also because of the associated rise in inflation and supply chain problems. However, according to economic forecasts, a recession remains avoidable for most countries. At present , it is very difficult to make estimates about growth opportunities, because there are far too many influencing factors. If oil and gas have to be rationed in the winter, the whole region could slide into recession. A very negative factor is high inflation, which is currently in double digits in most countries and clouds growth prospects because it reduces people’s real incomes. This affects purchasing power, and we could also feel this as an insurance company in the form of less demand for insurance products. We will probably still be confronted with elevated inflation in 2023. However, we must generally assume that the catching-up process of CESEE with Western Europe will slow down in the near future.
I dare not predict when we will return to the situation we had before the pandemic, when the rule was that economic growth in the CESEE region was on aver age at least twice as high as in Western Europe. But I am convinced that we will find this situation again, because there is still a lot of growth potential in this region, also for insurance companies. Insurance penetration in CEE is on average less than one
tenth of that in Western Europe.
Your insurance company is focusing on this growth region and is expanding its market leadership in CESEE. What consequences do you expect for your business?
We showed a high level of resilience during the pandemic and are continuing to do so. We were already able to return to our pre – Corona level in our operating business by the middle of 2021, and this means compared to our very good year 2019. I at tribute this, among other things, to our successful diverse positioning of the group and the ability of our local operating companies to act quickly. We operate in 30 countries with around 50 companies under different brands and we stringently pursue our approach of local entrepreneurship. We continue to see ourselves in a position to manage the challenges well. But of course , the geopolitical and economic situations also affect our business, to which we have to respond. For example, to the increased cost pressure resulting from the low real interest rate and the pressure on margins due to ongoing inflation. We also need to anticipate lower demand for insurance due to inflation-related loss of purchasing power mentioned earlier, for which we will more strongly position ourselves on plat forms and in ecosystems to drive new customer access. We are countering rising costs and market pressure as part of our VIG 25 strategy programme, where we continue to implement numerous measures to increase our profitability and productivity. Digitisation plays a very important role here, making a major contribution for increasing cost efficiency, and on the other hand, offering customers faster, easier access to their services and additional benefits, such as with our assistance services.
Will you change your CESEE strategy due to the Ukraine war, inflation and other factors?
In the VIG 25 strategy programme, we have set the goal to maintain and further expand our market leadership in the CEE region. To this end, we have redefined our core CEE market, which comprises 20 countries, and screened them according to local market situation, growth potential, earnings opportunities and other KPIs. Based on this, we are planning corresponding local targets and activities. We have reviewed our strategic plans due to the war in Ukraine and see no reason to change them. The
initiatives launched in VIG 25 support the very positive current outcome and will continue to be implemented after being evaluated regarding the current challenges. VIG pursues a long-term strategy in its markets, and has only left one market: Russia, and that already in 2012.