Vakhtang DEKANOSIDZE
CEO
IRAO (VIG) Ltd, Georgia

13 August 2015 —
Vakhtang DEKANOSIDZECEOIRAO (VIG) Ltd, Georgia
vakhtang_dekanosizeXPRIMM: How do you comment the results achieved by your market in 2014 in terms of development and profitability?
Vakhtang DEKANOSIDZE:
The year 2014 was extremely challenging for whole Georgian insurance market. The total market GWP in 2013 was app. USD 280 MIO, out of which 45% represented the state health insurance program. This program was initiated by the Government of Georgia in 2007 and provided medical insurance of vulnerable groups of Georgian population via private insurance companies. Nevertheless, in 2014 the above mentioned program was canceled. As a result, despite the robust growth in corporate sector, the insurance market shrank by 30 %.

However, if we look at the figures of corporate and retail business standalone (excluding abovementioned government program), we can see that the market has increased by 30%, while the YTY growth of IRAO, was - 38%. As per profitability, I can provide you with the audited figures of IRAO: the company's Profit before tax in 2014 was USD 690 K.

XPRIMM: The Georgian insurance market has a really particular portfolio structure because of the huge share held by the health insurance line. However, as far we are aware, during the last year this peculiarity has cause several problems. What are the latest developments in this respect and how is your company coping with the current challenges in the health insurance field?
V.D.:
I completely agree with your statement that Georgian insurance market has particular structure. Moreover, I would add that market has asymmetrical structure. Because, classical insurance business lines as Motor, Liability, Property and household or life insurance has extremely small share in whole market portfolio compare to developed markets. In addition, we do not have compulsory lines of insurance as MTPL. That affects general market structure.

Since, corporate health insurance is the most demanded product in Georgia, this line is the most dynamic and competitive line of our business. The entire corporate health insurance market is USD 68 MIO, while our company holds market share is 10%. To maintain the leading position on the market, company constantly has to upgrade existing products and develop new ones based on the market needs. Considering the resent circumstances, IRAO has coped with challenges quite successfully.

XPRIMM: How did perform you own company in 2014 as compared with the market general trend?
V.D.:
As I mentioned above, I can say that the year 2014 was quite good for IRAO. The GWP of the year was USD 14,485,333. YTY growth was 38%. PBT USD 690 K. It is very important to underline, that we have growth in all lines of business - motor insurance growth rate was equal to 41%, in MTPL (motor third part liability) - 79%, property insurance - 143% and health corporate insurance growth rate was 8%. As per the insurance supervisor statistics of the year 2014, we hold fourth position among 16 companies operating on the market, with the market share of 8 %. In addition, according to the surveys of 2014, the client satisfaction level in our leading lines is very high. All of the above represents our benchmark to sustain and maintain in the future years.

XPRIMM: Which are the most challenging aspects of the insurers' activity, possibly in need of further improvement? What are the expected measures in this regard?
V.D.:
It is hard for me to distinguish any particular aspect in our business. Successful insurance company is a company that manages to combine all kind of aspects such as brand reliability, strong sales force, accurate claims handling, strict risk management, effective operation and etc. Stemming from above, in order to be successful, we have to concentrate on development of all the aspects important for our business equally.

XPRIMM: Which are in your view the most "promising" business lines in your market and how is your company intending to take advantage of the opportunities offered by these lines?
V.D.:
In my opinion, the most promising business line based on market capacity and potential is the motor line, The point is that, among officially registered 900 000 vehicles, approximately 7 % are insured with motor hull risks and about 6 % are MTPL insurance holders. With the implementation of MTPL Law, which is planned for next year within the EU Association Agreement, the motor insurance has to become the line that fuels whole insurance industry.

To maintain leading position and increase our market share in motor line, as of 2014, we actively focused on empowering retail sales and developing sales channels. Hopefully, within few years range significant results will be achieved.

XPRIMM: The motor insurance segment was affected, in the entire CEE region, by a highly competitive environment leading to an aggressive price war and a scarce profitability of the segment. Which is the current situation in your market in this respect?
V.D.:
Yes I have heard from my colleagues about the situation in the motor insurance sector in CEE region. As far as I know this is more linked with market liberalization of MTPL. The situation in Georgia is different since we do not have compulsory MTPL. However, competition is still high between local insurance companies' in motor segment. Nevertheless, market has plenty space for expansion and we are striving to broadening of our customers number by setting up affordable motor insurance system and reliable reimbursement policy. To answer your question regarding profitability of motor business, yes it is profitable.

XPRIMM: Property insurance has still a low penetration across the Eastern markets, although the frequency and intensity of the weather related events are significantly increasing. Please comment on the current situation in your market.
V.D.:
According to 2014 results, total market share of property insurance in Georgia is approximately 22%, increased by 6% compared to the year of 2013. Moreover this line of insurance is the second largest after corporate health insurance. IRAO's, growth rate in property in 2014 equals to 143%. Still in retail segment, the demand on property insurance is comparably low than in corporate one. The main selling channels for retail property insurance are local banks.

XPRIMM: How do you assess the 2015 perspectives? Do you expect some significant changes in the market ? What are the strategic development targets for your company in the next years?
V.D.:
Considering the rapidly growing market conditions and the fact, that insurance industry becomes more popular in Georgia, insurance products transforms from luxury goods to necessity goods category. Our major challenge is to provide our customers with tailored products and, maintain one of the leading positions on the Georgian market.

Compulsory MPTL law is still on the agenda in Georgia. In the South Caucasus region, Georgia is an only country, where the law is not enforced. This legislation initiative will significantly increase and stimulate the growth of motor insurance market share itself.

Company's main target for 2015 is enlargement of corporate and retail business that will automatically lead to market share increase. It is worth mentioning that the Company uses maximum efforts for development and improvement of its products and services, for constant satisfaction of our customers. Moreover, IRAO is striving to build its brand platform based on its membership and belonging to a VIENNA INSURANCE GROUP (VIG) family.

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