VIG, 1H2013: a EUR 205 million profit despite tripling of severe weather claims

5 September 2013 — Daniela GHETU
vig6With an operating result increase of 9.5% y-o-y in 1H2013, to EUR 330.7 million, VIENNA Insurance Group showed a "continuing sound performance", proving the Group's ability to cope with difficult market conditions, as Peter HAGEN, Chairman of the Managing Board and CEO of VIENNA Insurance Group recently stated. VIG's profit before tax amounted to EUR 205.7 million (-31.9%) due to precautions and impairments, while the Austrian group reported premiums of more than EUR 5 billion. Despite precautions and severe weather claims, the combined ratio remained below 100%.

Key Group data for 1H 2013


In a challenging market environment VIENNA Insurance Group achieved a sound premium development. Consolidated premiums written amounted to EUR 5.0 billion (-4.8%). The premium income was influenced by the restraint in the short-term single-premium business in Poland. Without this special effect, premiums grew by 2.2%.

Despite tough competition in the property/casualty insurance, the premium volume remained at a stable level of EUR 2.6 billion. The life segment was impacted by the restraint in the short-term single-premium business in Poland.

In this segment the Group earned premiums of EUR 2.2 billion (-10.3%). Adjusted for the Polish effect, a significant growth of 5.4% was achieved. Regular premiums in the life insurance segment increased by 1.2%. Also health insurance continued to grow steadily to EUR 199.1 million (+2.5%).

The operating result rose by 9.5%, to EUR 330.7 million. In line with the conservative accounting policy of VIENNA Insurance Group, goodwill impairment amounting to EUR 75 million and precautionary measures of EUR 15 million have been taken in Romania. Additional precautions of EUR 35 million were recognized for the insurance business of DONAU Versicherung in Italy. Hence, the profit (before tax) of the Group amounted to EUR 205.7 million.

The financial result of the Group for the first half of the year 2013 totalled EUR 593.0 million, growing by 1.9%. The investments of the Group - including cash and cash equivalents - amounted to EUR 29.4 billion as of 30 June 2013.

Tripling of severe weather claims - compensations paid to customers add up to about EUR 230 million

In the first six months of 2013, VIENNA Insurance Group paid approx. EUR 230 million to its customers in compensation for weather damage. This means that damages were three times as high as in the same period of the previous year. The net impact - after reinsurance - accounted for more than EUR 70 million for VIENNA Insurance Group.

The largest event was the flood of the Danube and Vltava as well as of various tributaries of these rivers in June 2013 with more than 22,000 damage reports. Vienna Insurance Group was affected predominantly in Austria as well as in the Czech Republic - and to a slighter extent in Germany, Poland, Slovakia, Hungary and Romania. The customers of VIENNA Insurance Group received compensation for damages amounting to about EUR 180 million to support fast post-flood cleanup and recovery.

Despite the high expenditure related to severe weather claims and precautionary measures, the Group succeeded in keeping the combined ratio (after reinsurance and excluding investment income) below 100%.

Highlights from the markets of VIENNA Insurance Group

Austria - stable business growth

In Austria the Group delivered a sound performance. The Group companies reported growth - in non-life as well as in the life single premium business. Due to an increase of 2.1%, the Group earned premiums totalling EUR 2.4 billion in the first six months of 2013. The Austrian Group companies therefore remain the unrivalled leaders on the Austrian insurance market.

The Czech Republic - improved results despite flood and difficult market conditions

The Czech Republic was hit particularly hard by the flood in June 2013. About 50% of the net damages paid by VIG as a whole are attributable to the Czech Group companies Kooperativa as well as CPP. Nevertheless, the profit (before tax) was increased by 2.0% to a total of EUR 90.2 million in the first six months of 2013; the combined ratio stood at an excellent level of 93.7%.

Slovakia - an increase in market share, a significant growth in the life segment

In Slovakia it was the motor insurance market in particular that had to face strong competition. Nevertheless, the VIG companies posted a gratifying total growth of premiums of 4.6% to EUR 375.0 million. Profit (before tax) amounted to EUR 24.6 million. The combined ratio improved by half a pp to 95.2%.

Poland - an almost 50% increase in profit in a highly competitive environment

The VIG companies significantly increased their profit (before tax) by 46.6% to a total of EUR 33.2 million. In parallel, the combined ratio dropped by more than 3pp points to an excellent level of 95.5% - despite the flood damages.

The premium volume in Poland amounted to EUR 609.7 million (-36.0%). Adjusted for the clearly reduced short-term single premium business, this corresponds to a plus of 3.4%. In non-life the Group earned premiums totalling EUR 293.9 million.

Romania - no signs of recovery of the insurance market

The continuing difficult market environment has been adversely affected by the downturn of the markets for new cars and car leasing. In general the car sector remains exposed to a highly competitive pressure. VIENNA Insurance Group continues to pursue a risk- and income-oriented pricing policy to restructure its portfolio.

In the first half of the year 2013 the premiums of the Group totalled EUR 196.3 million, declining by 16.8%. The non-life sector contributed EUR 154.1 million to this amount. Premiums totalling EUR 42.3 million were earned in life. In Romania the Group posted a loss of EUR 17.9 million, EUR 15 million of which are attributable to precautionary measures.

The full VIG interim report is available at www.vig.com.

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