Elisabeth STADLER: When I took over as CEO of Vienna Insurance Group or VIG, I wanted to get a complete picture and full insight into the whole Group. Therefore, we conducted an initial review of the strategy, and I am pleased to say that the Group can build on a strong fundament. This is why, we will continue with our proven strategy; firstly, focusing on Austria and CEE. Secondly, local entrepreneurship, which essentially means that local managers are empowered, responsible and accountable. Also, our multi-brand strategy as well as our multi-channel distribution policy stay unchanged. Finally, we will stick to our conservative investment and reinsurance approach.
XPRIMM: It has now been 25 years since VIG took the bold step of entering Central and Eastern Europe. How satisfied with the results achieved so far?
E.S.: The quality of life is steadily improving in the CEE markets, and this also generates an increasing demand for insurance solutions. And, we aim to take advantage of this potential. In some of our markets we recorded double-digit growth in the previous years. These results underline our satisfaction to have been a first mover in CEE. VIG generates about 50% of its premiums and about 55% of the profits in CEE. VIG is well positioned in the region and has established a unique network. This is the basis for making best use of the growth opportunities the various markets have to offer. So, I always mention that we have entered this region to stay - and this with success.
XPRIMM: Are all CEE markets providing the satisfying performance? What is the main differentiating factor between them?
E.S.: Overall, we are represented in 25 markets and all of them are profitable for us. But of course all the markets are different - based on different local economic development and different priorities of insurance business. Basically, the desire to be protected against daily risks, to provide for one's old age or for family is the same in all countries. But the mentality, the priorities, the habits and also the approach of insurance business are different. And of course, competition is also an important factor. Unfortunately, we are confronted with strong price competition in some of our markets, especially within motor insurance.
XPRIMM: What is VIG strategy related to the strong price pressure in many CEE markets?
E.S.: For this, we have a clear strategy. I want to stress that we are focussing on profitable growth. We will not grow for the sake of growing. That's why we avoid price dumping strategies. It is better to accept loss of market share than loss of profit. The motor insurance business, especially MTPL, is a very strong, competitive business in most of our markets. We also have decreasing average premiums in many CEE countries. The aim is therefore to reduce premium volume or restructure portfolio in the area of motor insurance in countries that are dominated by strong price competition. Instead, the potential in the area of property insurance is being utilized. Customers are being made aware of these insurance products by means of targeted sales campaigns.
XPRIMM: Do you plan to further expand your presence in the CEE by making new acquisitions?
E.S.: We have already started to carefully examine our 25 markets for growth potential until the end of the year 2016. That means organic growth or growth by acquisitions. Acquisitions will be made where it appears to make economic sense for us and where it enables us to achieve the desired market position quicker. The focus is also on profitability. If an acquisition does not seem profitable we will simply not invest.
While sticking to the overall strategy, we have decided to make some refinements. They reflect the changed economic environment and framework insurance companies have to operate in today. In our initial review we have identified four markets, which show a strong economic development and where we aim to increase our market shares - either organically or by acquisition. These markets are Croatia, Hungary, Poland and Serbia.
XPRIMM: What are your plans for these markets and other core markets?
E.S.: In each of these countries we aim to reach a market share of at least 10% over the medium term. In some countries, such as Serbia, we are already close to this target, and in others, like Poland, we still have a way to go. In general, we expect, and believe, in further growth in CEE. Insurance density rose by 64 percent in the CEE region from 2004 to 2014, while rising by 25 percent in the EU-15 area. Countries, in which VIG has top market shares, will be consolidated. These include the Czech Republic and Slovakia, each with a market share significantly higher than 30 percent.
XPRIMM: What potential do you see in bancassurance as a distribution channel in CEE?
E.S.: Bancassurance is still a growing sales channel. We are happy to have a very successful partnership with Erste Group in some of our markets. The customer profits from the possibility to get service and advice to all financial matters from one hand. As I have already mentioned we are maintaining the cornerstones of our strategy including multi-channel distribution. Today, customers increasingly expect to be able to reach their insurer everywhere and through any channel.
XPRIMM: VIG made in 2015 a write-down of the IT systems. What are your future plans in terms of IT?
E.S.: The developments within IT are rapid, and systems have to be updated much faster than before. IT also plays a major role for digitalisation, a key topic for our business at the moment. My colleagues and I are convinced that offering digital products and services is extremely important. We live in a digital world, so insurers need to provide customers with online products and services that they can access easily. In some of our Group companies we already provide such solutions. So moving forward, we will work to develop new offers and services, expand existing offers and explore possibilities to transfer existing solutions between Group companies.
XPRIMM: Is the multibranding strategy employed by the Group providing the desired outcome?
E.S.: With this strategy VIG is totally different from international competitors. We believe that it is an advantage to have a wide diversification in markets, products, sales channels and brands. It makes us more independent of changes in market conditions. Using well known and established local brands helps to strengthen relationships with customers, and with employees - It helps to build a stronger trust. This strategy has supported us to successfully satisfy our customers' needs until today. We have achieved a higher level of identification with our local companies and staff, which is very important for business success.
XPRIMM: Management teams are a key part of the success of any business. What is your approach when it comes to local managers vs. experts?
E.S.: I always use the phrase "all business is local". This is our approach and that's why our companies are led by local management. Our local management knows the local customers' needs, and the local habits and circumstances the best. This cannot be achieved out from our headquarter in Vienna. Another advantage is our decentralized structure and the utilization of local knowledge. All our companies are working with guidelines, elaborated by the holding company VIG. The local management is able to handle their local business by following to those guidelines.
XPRIMM: How do you visualise VIG in 10 years from now?
E.S.: To remain a major player in Austria and CEE. We see CEE as our home market and we want to play a leading role for our customers in this region also in the future.