XPRIMM: How would you characterize 2019 for EUROINS Insurance Group?
Kiril BOSHOV: With the performance and results achieved in 2019 we have sustained the positive trend in the development of our insurance group for the last three years and continued to expand our business in Central and Southeastern Europe (CEE & SEE) as well as in the former USSR republics (CIS). We kept the company on track for sustainable and profitable growth. The gross written premium of EIG increased 32% on the year to 434 million EUR which was in line with our strategic goal to reach a half billion euro in terms of annual premium income. The group's pre-tax profit of approximately 7 million EUR reaffirms the sustainable profitable position on a group level.
XPRIMM: The Coronavirus outbreak has created a huge disruption globally. What does this mean for the insurance sector and for EIG?
K. B.: The coronavirus (COVID-19) by no doubt has shaken the global insurance industry to its core, particularly the sectors in the countries that were hardest hit by the virus and the health crisis that followed - the US, the UK, France, Italy.
Despite the pandemic, Eastern Europe (EE), where we mainly operate, seemed to tackle the health crisis more successfully than the rest of Europe, especially regarding the number of infections and the mortality toll. At the same time, we do not have to forget that Eastern Europe is more fragile than the West in terms of resources and opportunity to aid its economic recovery. In this context, the economic downturn caused by the pandemic is likely to be deeper and longer in the EE countries compared to the recession in the richer and larger western countries. So, from economic point of view, EE would be more affected than the West by the corona crisis. Therefore, I believe that sufficient EU recovery funds inflows in Eastern Europe would be a paramount on the way towards achieving the pre-Covid-19 growth levels.
On a corporate level, the coronavirus crisis was mainly an opportunity for EIG to improve its operations and processes as well as its efficiency and customer services in order to provide our clients with more adequate attitude.
XPRIMM: What has been EIG's response to the pandemic crisis?
K. B.: Firstly, we had to ensure that our insurers would keep servicing our customers despite the challenges we met, particularly at the beginning of the coronavirus epidemic. Insurance services are from first necessity all over the world and an insurer could hardly afford ceasing its operations even for a minute, independently of any obstacles. Insurers are here to cover for risks and to be next to their clients and in the society in moments of crisis.
Since Day One of the pandemic, in each of our jurisdictions of operation our executives and line managers were with their teams and with our clients - being it in the office, if and when needed; being it online. Since that day we were all focused on how to provide better services to our 3 million clients during the times of COVID-19. This brought in calmness and trust among all our employees no matter whether they were home office or at their real business offices. Our slogan during the epidemic was: "Doing business rightly. Business as usual".
Secondly, we moved further with the development and adoption of digital services provided to our clients. Our aim was to let them buy insurance policies and make claims online without requiring their physical presence in the office. In the early days of the pandemic we launched a mobile app in Romania that allowed our million Romanian clients to report claims fully digitally. Today nearly one-fourth of all claims related to MTPL insurance policies are reported, filed and processed online. Furthermore, we are developing a project on a group level that will allow the full digitalization of 10 of our main insurance products. The project is in an advanced stage. We expect we will be able to offer these 10 insurance products to all our customers in SEE online by the autumn. We speak of a significantly improved online experience, where with one click of a button our clients will have full access to their insurance portfolio and will know the status of their policies, claims and others. Our group's digital transformation budget for this year has increased fivefold and we are not renouncing on these investments despite the COVID crisis.
With the thought of contributing to the safety and well-being of our clients, who had suffered months of lockdown and would be open and willing to travel, we launched a Travel Insurance product on the Romanian market providing medical coverage and coverage of other basic needs. The product comes at an extremely preferential price of RON 25 and provides our clients with quality medical assistance and coverage within the whole EU and for the whole summer season, independently of the number of trips abroad. The policy is valid for the whole family if at least one member of this family is a client of EUROINS, independently of the products previously purchased.
Last but not least, we behaved as a responsible insurer towards our business partners and clients that were worst-affected by the COVID-19 epidemic - for example the tour operators and travel agents in Bulgaria. We are among the leaders in this niche in the country. The COVID-19 pandemic has severely impacted the tourism industry which practically stopped its operations due to the lockdown without any help, but we decided to not get submerged in panic and not to cancel the Tour Operator Liability insurance policies as many of our competitors did. Instead of this, we decided to fully support the tourism sector which is important for us and the country.
XPRIMM: How do you consider this crisis will change the insurance sector?
K. B.: The insurance industry is one of the oldest financial industries in the world and if we go back in time, historically it has tackled more difficult and complex challenges than the ones related to coronavirus. In this context, I would not think that this crisis will change dramatically the purpose of insurers or the way business is meant to be done.
The important insight from this coronacrisis is that еvery company should think about it and take decisions that will make its business more sustainable and agile in case of similar future events. Certainly, one of the new normalities is that more employees will work from home during certain periods of the week or month. In my opinion, despite the fact that work from home during coronavirus lockdown was an effective tool, most of the employees will prefer to return to their traditional workplaces because we are all social human beings and the social interaction and working environment provided by the employer are important and many of those interactions cannot be fully replaced by remote work. I do not believe that the online video conferences can fully replace the face-to-face interactions which often yield the best and most creative ideas. The ideas born at a creative meeting, at a team-building or at a brainstorming session in the office cannot be replicated often by working from your apartment.
K. B.: The digitalization of the interaction and relationship with customers are undoubtedly one of the main opportunities for development in the sector. The rise of the online insurance business will probably impact the sales channels with the share of direct sales going up significantly in the years to come. Hopefully, this crisis will change the perception of people for the insurance as a service in the direction that this is not a service that is hard to be accessed or understood. Within our group the sales of health insurance products were one of the few lines that posted growth during the COVID-19 epidemic. This is an indicator that in such times people become more responsible towards their health and safety. Insurance products related to business interruptions are the other line that could register growth in the post-epidemic time.
I also expect a post-pandemic process of deglobalization of the insurance market. The multiple number of exits that large international insurance groups have made in CEE for the last couple of years prove this thesis.
One more thing, in spite of the digital options, the current coronavirus crisis shows that it is a challenge to manage a business remotely and the effects are quite different on the different markets. I believe that in future we will see more regionally-oriented insurance groups that will possess a better and more in-depth view over the concrete market they operate in. In this context, I think that EIG is well positioned in the current changing environment.
XPRIMM: Has the covid-19 crisis determined any changes in EIG's development strategy?
K. B.: No, the crisis has not changed our expansion strategy. We will continue to follow our growth strategy which is focused on turning EUROINS Insurance Group into one of the leading independent insurance groups in CEE and SEE as well as in the CIS countries. With reference to this strategy and despite the virus crisis, we have recently completed the acquisition of ЕRGO Belarus. By this transaction, EIG is operating now in eleven European countries, including its subsidiaries in seven of them - Bulgaria, Romania, North Macedonia, Russia, Ukraine, Georgia and Belarus.
By the way, the acquisition of ЕRGO Belarus was a case study on how a company located in a brand new market could be taken over remotely and digitally. Actually, we added a well-organized company. Belarus is the fourth country in the region of the former Soviet republics in which EIG starts operations and the deal for ERGO's unit is the fifth acquisition that the Bulgarian group made there. EIG has been operating in Ukraine, Russia and Georgia where it has already taken over four companies. By acquiring ЕRGO Belarus, this region is expected to generate 15% of EIG's premium income and 20% of the net financial result of the group.
We expect to finalise the acquisition of ЕRGO Romania in the short-term. This upcoming deal will help us diversify our portfolio. One of our long-term goals is to achieve a balance between our presence in fast growing EU markets and our operations in less developed but with huge growth potential region like the CIS one.