Pandemic further underlines need for investment in digitisation

By Mario Tanev

David Benedek,
Member of the
Management Board of
Zavarovalnica Triglav
Slovenia-based Triglav Group posted consolidated net profit of 83.9 million euro and 1,076.8 million euro in gross written premiums in 2019. The group employs over
5,200 people in six countries. Zavarovalnica Triglav, the biggest insurer within the group and in Southeast Europe, booked a net profit of 70.6 million euro and gross written premiums of 659.2 million euro in 2019.

How did the Coronavirus pandemic affect your operations and what steps did you take in response to the challenges brought forth by the crisis?

Our mission is to create a safer future. We are realising this aim of our existence even this year when we are faced with the extraordinary circumstances and which marks 120 years of Triglav. The outbreak and spread of the virus have placed us in a situation where we had to employ a way of working that is different to what we had been used to. This has placed challenges in our way which we are jointly able to handle appropriately. When the epidemic was declared, our priority was to ensure the protection of the health of our employees, customers, partners and other stakeholders, which remains a concern in the future as well. We have successfully activated the business continuity plan on the markets that we serve.

Despite the extraordinary dynamics of development of these difficult conditions, we worked as a close-knit team numbering 5,200 associates and managed to put in place a method of work that ensures the maximum possible level of remote or distance process implementation during the epidemic. We are happy with how we were able to adapt to change. We enable customers to use our services via the already developed strategic solutions, e.g. omni-channel sales approach, digital and other remote operations solutions, whereby the pandemic mainly accelerated remote conclusion of insurance policies. This gave an additional impetus to the other planned development activities. All divisions of the company have adapted their processes and the method of work to the changed circumstances. Our mutual coordination and the speed of our response to the needs and wishes of our customers have been thoroughly demonstrated. This is confirmed by the positive responses of numerous associates and, last but not least, the good experience attested by our customers.

Did the pandemic highlight any areas in need of improvement and will it affect your investment strategy?

The Triglav Group pursues a dynamic business activity that is conditioned by the broader environment, e.g. population ageing, financial market conditions, economic and political conditions, and finally the pandemic.

Changes are also coming from the industry itself as competition is becoming increasingly fiercer, risks are on the rise, legislation is changing, and all of this is topped off by the need for digitisation.

The third dimension is dictated by the customers through their needs and expectations. We strive to take these trends into account when devising our strategy. This makes it possible for us to respond even in these challenging circumstances whereby we are focusing on strategic orientations and make sure that our operations remain profitable and safe.

We should point out that the insurance business is highly regulated by stringent rules and supervision geared towards the protection of policyholders and other stakeholders. The pandemic further underlined the need for additional investment in the digitisation of operations.

Will we see any activity on the M&A front from Triglav in the near future, or will you be more focused on organic growth?

Our strategy focuses even more on the customer, further development of more collaborative and agile organisation and culture of the Group, and finally the assurance of long-term stability of operating profit as well as the increase in the value of the Triglav Group. Good results and consistent growth that have a positive effect on the development of the broader economic environment require continuous investment in development, knowledge and innovation as well as the creation of an incentivising and safe environment. It is on such foundations that it is then easier to conquer even the challenges we are facing now in this crisis.

In line with our strategy, we will keep serving markets in six countries of Southeast Europe where we intend to grow organically; however, if and when opportunities for this arise, we do not exclude the option of M&A in the insurance business and asset management.

We continued to grow the insurance premium on markets outside Slovenia organically in the first half of 2020, whereby its share in the total premium of the group at the half-year mark rose to 18.3%.

What are your expectations regarding Triglav’s financial performance this year and in 2021?

The spread of the Coronavirus and the onset of the pandemic brought about the deterioration of the macroeconomic environment and extreme volatility of global financial markets. Our operations remain profitable as outlined in our strategy. In the first half of the year, we generated 40.6 million euro worth of consolidated pre-tax profit. The 3% year-on-year decrease in the said profit is mainly the result of the deterioration of the situation on financial markets and partly also of mass losses and other one-off events. We achieved premium growth in all insurance markets and in all three insurance segments, and we recorded a 7% year-on-year increase in consolidated gross insurance premium, to 673.4 million euro.

Future economic and financial effects of the pandemic remain negative. We estimate that the annual insurance premium and the combined ratio of the Group will reach the planned values of around 1.2 billion euro and below 95%, while the annual pre-tax profit, which was initially planned at between 95 and 105 million euro, will probably be 10 to 25 per cent
lower than planned.

We monitor the conditions caused by the COVID-19 pandemic on an ongoing basis. We estimate that the insurance and investment portfolios of the Triglav Group are sufficiently resilient and that the capital position is adequate for the Group to successfully tackle the elevated risks in the business environment caused by the pandemic.

Your financial performance this year was marked by several major CAT events. What are your expectations regarding the effect of climate change on the insurance market?

The operations of the Triglav Group in the first half of the year were affected by mass loss events, mainly the earthquake in Zagreb and hailstorms in Slovenia. Natural phenomena are normal, but are intrinsically the result of certain short and long-term changes in the environment. This is why it is also impossible to claim that they are only the consequence of climate change. Events that are the result of climate change are characterised mainly by the fact that they occur in “unusual” places, like droughts where there were none before, frost in the beginning of June, flooding in mid-December or January, etc., making them “unforeseeable”.

We are also seeing an increasing trend of natural disasters that reflect climate change, which in turn means an increase in the scope of the resulting loss and poorly thought out man-made interventions into the environment. Owing to the developments in the global economy, population growth and higher concentration of wealth in exposed areas, economic consequences also increase. We are noticing that the average of economic losses resulting from natural disasters is rising faster than the average of insured losses. The first step towards lowering the difference between economic and insured losses is raising people’s awareness about prevention and mitigation of losses and more rational interventions of society into the environment. This is also where the insurance industry plays an essential role in mitigating the consequences of climate change. The insurance industry is striving to incorporate expectations regarding climate change suitably into products so as to mitigate the consequences of natural disasters, make them operationally sustainable and interesting to customers, while at the same time encouraging preventive measures.

On which of the markets where Triglav is present do you see the biggest potential for growth? Is there a market segment where you expect a positive development in 2021?

Triglav Group plays an active role in the development of markets in the region. In line with our strategy, we build strategic partnerships with companies whose activities complement our business model. We also develop new digital business models that enable us to enter markets outside the existing region among other things. In doing so, we create an omnichannel approach by employing suitable activation of all sales channels, including bancassurance and sales between entities within the group.

Insurance markets in the region, i.e. from Croatia to North Macedonia, are regions with growth potential, mainly the largest markets of Croatia and Serbia. We intend to continue to strengthen and consolidate the group’s position outside Slovenia, whereby our actions geared towards growth and development will be more prudent and aimed at growing the value of the group. Over the long-term horizon, we see opportunities for the growth of health, life and pension insurance products. We expect to see long-term growth of insurance markets in the region where we operate and consequently an increase in the share of the total premium that the Group records on markets outside Slovenia.

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