Give profitability a push

18 August 2011 —
Central and Eastern Europe remains, in spite of the financial crisis' effects and the weak purchasing power of its citizens, a source of growth for the major European insurance groups operating in the area. Still, the "growth at any cost" era seems to be off the map and replaced by the "give profitability a push" age. As the recently published half year reports show, ALLIANZ, AEGON, GROUPAMA, GENERALI and VIG have seen mixed results across the region in underwriting, but are almost without distinction reporting a increasing contribution of the CEE subsidiaries to the overall groups' financial results.

ALLIANZ managed to double it's profit in the region, to EUR 120 million, as compared to the first half of the previous year. Still, in terms of written premiums, the Group saw mixed results by country. On the property and casualty segment, which accounted for EUR 1.4 billion of gross premiums, operations in Hungary and Romania had lower revenue levels due to market shrinkage and price competition, while "significant revenue growth" was achieved in other markets, most notably the Czech Republic, Poland and Russia. On the life and health side, premiums were flat overall, except for Russia, where statutory premiums rose 88% to EUR 24 million, and the Czech Republic, where revenue rose 13% to EUR 84 million.

AEGON said first-half operating income growth for its new markets segment, up 35% to EUR 116 million, was driven mainly by the CEE region. Following the successful shift in group's refocus to life insurance, new life sales increased by 25% driven by higher production in Hungary and Turkey.

The total operating result (net of Group expenses and consolidating adjustments) of GENERALI in CEE recorded a 18.5% growth, to EUR 256 million, compared to the group's overall 12.7% growth rate. In terms of underwriting, the life business slowed in almost all the CEE countries, with a like-for-like average change of -2.5%, except for the Czech Republic, where it remained at the high rates recorded in 2010. Conditioned by the motor lines, written premiums on the non-life segment continued to decline, although to a moderate extent (-0.2% on equivalent terms), the only notable exception being Poland. Notably, the technical results in the region improved, with a 88.2 combined ratio, compared to 92.9 in the first half of 2010.

Out of the EUR 25 million contribution of the extra-French markets to the GROUPAMA's net profit in 1H2011, EUR 7 million are coming from the Hungarian and Romanian subsidiaries. In terms of written premiums, the two mentioned markets didn't produce overall spectacular results, but significant results were achieved on specific business lines as agricultural risk, commercial lines or life insurance in Hungary, or property insurance in Romania. The Turkish subsidiaries recorded a +32.0% growth while in the smaller markets, as Slovakia and Bulgaria, growth rates stood at +16.9% and +70.7%, respectively.

VIENNA Insurance Group, probably the European group with the steadiest growth orientation in CEE, reported today that more than half of the profit recorded in the first half of 2011 comes from its CEE subsidiaries. In Poland, Czech Republic and Slovakia, the Austrian group recorded impressive growth rates both in terms of profitability (+140.3%, +35% and +121.6% respectively) and written premiums (+43.7%, +12% and +3.9%). In fact, all of the groups' growth in 1H2011 originates in these three main CEE markets, while in Austria, VIG's home market, premiums slightly went down and profit is almost unchanged as compared to the previous year's first half.

Daniela GHETU

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