Chairman of the Supervisory Board
EUROHOLD - the majority shareholder of EUROINS Insurance Group
XPRIMM: As global re/insurance groups are struggling with low interest rates, currency fluctuations and a more challenging geopolitical climate, which are the most important challenges the insurance industry has to currently face and how do you plan to tackle them?
Assen CHRISTOV: Firstly, the uncertain geopolitical climate does not affect EUROINS Insurance Group's business directly due to our geographic footprint. Southeastern Europe is not exposed to major external shocks, conflicts and, hopefully, natural disasters. From this point of view the region does not pose any extraordinary risks.
Secondly, extremely low interest rates and increased volatility on the financial markets are challenges that all insurance companies worldwide have been facing for several years. On one side, returns on financial instruments, bank deposits and debt instruments in particular, have dropped on average, and it is expected to last for some time. We had predicted such a situation, however, and adapted our business model accordingly to be able to cover our liabilities with our existing assets structure. On the other side, inflation rate remains very low in spite of the expansionary monetary policy which central banks have been keeping for the last couple of years.
This specific market situation allows us to stay focused on low-risk and low-yield securities in our investment portfolio. We will maintain a relatively conservative investment structure with an emphasis on fixed-income financial products, mainly government bonds and bank deposits. We will continue to invest in financial instruments that ensure adequate liquidity, diversification and expected return.
XPRIMM: What is the group's view on the CEE countries, considering that your presence here has been increasing steadily during the last years?
A.C.: The macroeconomic conditions are improving. The SEE and CEE countries are returning to steady growth amid rising consumption and a favorable fiscal environment. The prospects for the CEE and SEE insurance industry remain optimistic as the positive business environment and conditions for convergence towards the markets of other EU countries are expected to persist.
The penetration of insurance products in the region is still very low, the insurance market is largely seen as relatively underdeveloped and therefore holding untapped potential. The CEE and SEE insurance sectors are forecasted to grow at more than twice the rate of Western Europe or North America and EIG is ideally positioned to exploit this growth potential through its broad market coverage, diverse insurance portfolio and product range tailored to clients' needs and its diversity of sales channels.
XPRIMM: Do you plan on entering other markets in the CEE region in the near future? What is the current state of the Romanian subsidiary? There were several capital increases. Has the process been finalized or is there any more capital required?
A.C.: EUROINS Insurance Group (EIG) acquired businesses in the region in the past few years and we are looking to make more acquisitions. Acquisitions are a part of our way of life and help us diversify and improve the quality of our insurance portfolio in order to increase the share of the non-motor segments and achieve a more precise and detailed segmentation.
EIG has subsidiaries in Bulgaria, Romania, Macedonia and Ukraine. This year we acquired the business of Germany-based TALANX Group in the Ukraine - HDI Strakhuvannya. Prior to this, we purchased their activities in Bulgaria that have already been fully integrated legally and operationally in our business.
In 2013, EUROINS acquired the businesses of QBE in Bulgaria and Romania and INTERAMERICAN in Bulgaria. The group is currently reaping the benefits of these acquisitions through portfolio diversification and shared best practices. We now cover all insurance segments - life, health, property and casualty.
Apart from these acquisitions, EIG has existing operations in Greece. Along with strengthening the group's position in the insurance market in Southeastern Europe, we are foreseeing an expansion towards Central Europe. We have already set up branches in the Czech Republic and Slovakia. EUROINS is planning to expand into the other CEE countries by acquiring non-life and life insurance businesses with strong balance sheets. Our goal is to make EUROINS the largest independent insurance player in Eastern Europe.
Regarding EUROINS Romania, in April 2016, EIG paid the full amount of RON 200 million (EUR 45 million) for the capital increase of its Romanian subsidiary, complying with the business plan for improving its financial performance approved by the Romanian financial regulator (ASF). According to this plan, EIG's shareholders accepted to provide for a second capital increase in November 2016 in case it is necessary and depending on the financial results. Our estimation is that we will need additional RON 50 million worth of new capital, but for more certainty we plan to increase it by RON 100 million so that at the end of the November we would have covered our restructuring plan successfully.
XPRIMM: What are your future plans for the Romanian market?
A.C.: EUROINS Romania is performing very well and is the strongest company within our group. Last year it generated 63 percent of EIG's total gross written premiums. The company is among the Top 3 insurance companies in Romania. In the long run, we see growth potential on the health and life insurance market and we have already started implementing our life insurance strategy, beginning with health insurance products penetration. As a whole, the market of Romania presents a substantial potential growth in the non-life insurance segment, even regarding motor vehicle insurance, since the number of cars per capita in the country is still under the EU average and the demand for cars and insurance is expected to further increase. On motor insurance, where we hold a high market share, we will pursue a consolidation strategy, while on the remaining segments - non-motor and life insurance - where the group's robust presence is still being developed, focus will be on strengthening the group's market position.
XPRIMM: Which are currently your core markets and how did they evolve over the past 4-5 years?
A.C.: EIG operates in 7 European countries and is a well-recognized brand in 4 of them: Bulgaria, Romania, Macedonia and the Ukraine. Our market share in Romania is almost 15%, in Bulgaria - about 7% and in Macedonia - 9%. As I have already mentioned, as part of its international growth, EIG will expand its operations further within the CEE and SEE countries. In line with our strategic guideline, EIG will continue to consolidate its position in the region and to develop itself as the leading independent insurance group in CEE and SEE. Our goal is to further grow on these markets, both through organic growth and potential takeovers should an appropriate opportunity arise. Therefore, we will continue to strengthen and consolidate the group's position in the region.
XPRIMM: How do investors view the EUROHOLD group and how much support have you managed to draw from international investors?
A.C.: EUROHOLD Bulgaria AD is a publicly traded company listed on both Warsaw and Sofia Stock Exchanges. Being listed on these two markets, we are subjected to all market fluctuations and trends. We rely, however, on constant support from our institutional investors amongst which there are investors from Finland, USA and Switzerland. The fact that over the last 7 years we attracted over EUR 100 million in order to expand our business, to support EIG's subsidiaries and to finance the regional expansion of the group means that investors have a very positive attitude toward us.
XPRIMM: Do you see insurance substantially changing in the near future in the context in which technology will play a much bigger role within the society?
A.C.: The process of digitalization of the insurance services has already started. As, in certain situations, even complex medical surgeries are being conducted from distance, nothing can stop the financial innovations. Even the most conservative financial regulators. Not long ago, when you wanted to buy an insurance policy, you had to go to an office and all the process was managed by employees. Nowadays, you are more likely to interact online.
EUROINS started testing an online platform for reporting claims three years ago without asking customers for any paper documents. Nowadays, 80% of our clients prefer to handle their claims via the online channel. We are not far away from the day when a company similar to Uber will appear in the industry and become the biggest insurance intermediary. Finally, this will bring benefits for both customers and companies. Regulations could be the only barriers for the digitalization of the insurance services because they often lag behind current innovations.
XPRIMM: Which are your main goals for the near future? How do you plan to position yourselves in the CEE area or even in other regions?
A.C.: Our aim is to place EUROINS Insurance Group amongst the top 10 insurance groups in Europe. In the short run, we expect the company to be the only active independent insurance player in the CEE and SEE with activities in 7 countries, over 2.5 million customers, an asset base that exceeds EUR 1 billion and GWP in excess of EUR 350 million annually starting from 2016.
About the EUROINS Insurance Group
Bulgaria-based EUROINS Insurance Group (EIG) is one of the largest independent groups operating on the insurance markets in Central and Eastern Europe (CEE) and Southeastern Europe (SEE). EIG has more than 2 million clients, 1.600 employees and annual revenues of EUR 300 million. The company is focused on providing a full range of insurance products in the areas of general, health and life insurance. The group operates in 7 European countries and owns insurance subsidiaries in 4 of them - Bulgaria, Romania, FYROM and Ukraine. EIG has been operating in Greece since 2014. The insurance group is a subsidiary of EUROHOLD Bulgaria - a leading Bulgarian company, listed on BSE-Sofia and WSE. EUROHOLD Bulgaria operates across CEE and SEE, focused on non-banking financial services and asset management.