Peter HOEFINGER: We were the first Austrian company to expand eastwards after the fall of the Iron Curtain. In 1990 we invested about EUR 1.15 million in setting up Czechoslovakian cooperative insurance company Kooperativa, based in Bratislava. Back then, Austria was the Vienna Insurance Group's home market. At this time we gained 1 billion premiums with three companies and 5.600 employees. Today we generate around 9.5 billion premiums with about 50 companies and more than 25.000 employees.
So there is no doubt that our step to CEE was the start of an ongoing success story. And we believe it was not only important to be one of the first companies to move into Central and Eastern Europe, it was also the right decision to stay there during the crisis. Today the fall of the Iron Curtain and the end of communism is termed as the most important economic and political transformation process of the late 20th century and the biggest economic success of the EU. For example, the economic performance of Slovakia is more than three times higher now than in the year when we entered the market in 1990. The CEE region had a much quicker period of economic recovery compared to Western Europe after the financial crisis.
We see high potential on account of the very positive economic prospects for Central and Eastern Europe. Economic growth is a driver for prosperity and this goes hand in hand with an increasing living standard which drives insurance demand. For example, a Czech spends about EUR 500 on insurance each year. In comparison, the average Austrian spends around EUR 2,000 on insurance annually, and in the EU-15 countries the figure is close to EUR 3,000. As the figures show, when it comes to insurance density, there is still substantial room for improvement in Central and Eastern Europe.
XPRIMM: How would you characterize VIG's actual position and what is your strategy for the future?
P.H.: VIG is currently the market leader in CEE. At present, the Group countries in the CEE region generate more than 50% of our premiums and more than 50% of our profit. We assume that this proportion will increase further in the next few years. We think that the economic catch-up process in the CEE markets and the improving standard of living increase the demand for insurance products. VIG's compass is still pointing eastwards.
We see our top position and successful development also as the result of systematically pursuing our business strategy. We came to CEE for the long run. We entered our markets with the intention of staying, of taking a position there for the long-term, regardless of economic ups and downs. We intentionally rely on local entrepreneurship and a multi-brand strategy. We live this diversity out of conviction and make use of it in our markets, which increasingly demand rapid decision-making.
XPRIMM: What is your opinion about the opportunities and the risks that can arise from doing business in CEE markets?
P.H.: Average economic growth in the region is twice that in Western Europe, and in certain CEE countries, growth is significantly higher than in recent years. The fact that the German economy - Europe's growth engine, and a hugely important economic and trade partner for Central and Eastern Europe - is also expanding suggests, that the improvement in the CEE countries will continue.
Thinking about risks we are faced in CEE with the same risks as in Western Europe or worldwide. We have currently a lot of global risk factors like an eventual economic warfare with America, Brexit, economic influence of China, environmental development and others. We also recognize a trend to a more sensible national consciousness, but also this tendency is a global one. Due to our strategy of multibrand and local entrepreneurship we have the advantage that our Group companies act local and perceived as a local company. I can say that we really feel home in our markets.
XPRIMM: Do you plan to expand your presence, in the CEE market, through acquisitions or are you focusing only on the organic growth?
P.H.: VIG is looking to further develop its market share in CEE by means of both organic growth and acquisitions. We want to enhance our position on the market and complement the current portfolio strategically. We are looking at areas where consolidation and bundling services and processes make sense and at the same time we further focus on our underwriting capabilities.
XPRIMM: Digitalization is, lately, one of the most debated topics in the insurance industry. What is VIG doing in order to prepare for the future?
P.H.: The digital transformation is one of our key tasks when it comes to expand our position as a leader in CEE. We recognize that people in CEE are more digital affine than for example in Switzerland or Germany. We support and coordinate activities in digital transformation within our Group. Around half of the annual IT investment budget of EUR 100 million is currently being invested in digitization development and measures. This year we have initiated the "VIG Xelerate" program. Group companies can submit digital transformation projects. We provide financial backing if there is a clear benefit for the Group and the relevant market, and if implementation will lead to a significant improvement in performance indicators such as premium volume, costs, market share or earnings.
For us it is also important to enlarge services such as assistance services. We have already performed some activities very successfully in this area for several years. Our companies handled more than 200,000 assistance cases last year. Currently we have assistance companies in Czech Republic, Slovakia, Bulgaria, Romania and Poland. We feel that expanding assistance services also offers great opportunities for the company. In general, we need to supplement our primary service of risk coverage with additional value added. We see this as a necessity for us as an insurance company in the future if we want customers to perceive us as something 'relevant' and important in their lives.
XPRIMM: Would you say that VIG is a company focused on individual consumers or on corporate business?
P. H.: Of course, both our Group companies offer products and services for private as well as for business customers. Our income results from a huge number of individual insurance policies and an impressive total of more than 20 million customers served by the Group as a whole. The Corporate Business department of VIG Holding focuses on a special segment all of its own - the bigger fish in our customer network, each of which have very specific risk exposures. Big fish swim in lots of international waters and need the kind of support and expertise that transcends national boundaries as a result. So VIG Holding is supporting and coordinating the corporate business with our Group companies. The corporate business is an important part of our premium portfolio. Last year the premium income of corporate business segment passed the one-billion-euro mark for the first time.
XPRIMM: Can you describe de USP of VIG towards its customers?
P. H.: We combine the advantages of a significant European insurer with local business guidance. We follow the strategy of multibrand and local entrepreneurship. We see our wide diversification in markets, products, sales channels and brands as an important competitive advantage. This makes us less dependent on the changes occurring in individual markets. We 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. With this strategy VIG is different from many international competitors and we think that will be more relevant in the future.