No. 105, March 27th, 2008

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Will the international crises affect the Romanian insurance market?

The Romanian economy is quaking... The GDP growing rate is surpassing the European average.
The EUR and USD are losing battles with the national currency.
These are some of the headlines that described, in the last year, the economic realities of our country.
But in 2008, on the grounds of the USA recession and the European stagnation, the optimism seems to leave the financial analysts and not only them, while the news are becoming more and more pessimistic, sometimes even alarming.

Thus, from the beginning of the year, the Stock market is collapsing, the national currency is rapidly devalued, and the inflation is rising to increased levels, while the real-estate market is on the edge.

Will these tendencies affect the Romanian insurance market?

The answer is NO... and the trumps are revealing from the emerging market statute of the insurance in our countries...

In this way, despite the Romanian National Bank warnings, the Romanians' indebted degree is still quite low, compared with the European average. In the same time, the amounts of money that have to be paid are still at a low value, while the growing rhythm of the arrears is not alarming.
This is why, even in the case of a stronger devaluation of the RON, we can conclude that the claims ratio on this line of business (credit and warranties insurance) will not grow with higher rates than now.

We consider, in the same time, that the economic context also offers development opportunities, at least in what concerns the unit-linked insurance. This mainly because an economic principle says that when the stock market is going down, you should buy. Therefore, the insurers may record sales increase on this line of business...

We express our belief that the Romanian insurance market has the maturity to face successfully the world economic crises and to still register a healthy growth, especially taking into account the competition for supremacy.

by mihaela.circu@mxp.ro

sus up

BCR Asigurari de Viata




Interview with Mr. Boris SCHNEIDER,
General Manager,
ASIROM-VIENNA Insurance Group

XPRIMM: What plans for development does the company you run have, considering that the "family" relation with the other companies from Romania, members of the VIENNA Insurance Group, raises a lot of questions?
The VIENNA Insurance Group has a vast experience in operating by a multi-brand strategy. We believe there is still enough room on the Romanian insurance market for all VIG member companies. Also, competition can only lead to excellent results; thus, given that we have a very good communication across the group, we can even learn from our "sisters". For instance, OMNIASIG has some very good parts to it, and the same applies to ASIROM, so we can only learn from each other. In the end, may the best one win!
Looking from a different perspective, we must admit that we discuss about totally different companies, with different market approaches. As a group, however, we build synergies that can be achieved in departments like back-office, IT etc. But these are plans on very long term, which means that, for the time being, there won't be any major changes.

XPRIMM: Is there any initiative of collaboration between VIG member companies in Romania, such as setting common policies and strategies for market approach?
B. S.:
We don't discuss about our commercial strategies; as I said, the competition is free. But if one of the VIG companies in Romania sells a product at half the price of another group company that provides a similar product - I imagine that someone, in Vienna, will start asking questions and investigate the case.

XPRIMM: What do you think is the main threat for the Romanian insurance market?
B. S.:
The price should no longer be the main criterion that differentiates between insurance companies in Romania. I believe this is the only thing we need to make sure it happens on the market as a whole. In fact, this was a stupid mistake we made the previous years and even last year, on the motor third party liability insurance market, when at least one company sold MTPL policies almost for free. This company, just like the other ones adopting this strategy, only managed to achieve a planned loss. In case ASIROM would start selling MTPL at extremely low prices, no one would be left on the market but us, because we have the strongest sales network.
When the Romanian insurance market convenes on official occasions, discussing the problems of the relevant market, everybody agrees that franchise on Motor Hull must be introduced and that MTPL prices are still low. Immediately after these meetings we can see the same companies displaying a behavior that is totally the opposite of what they defended in the official statements made during those meetings. And prices do anything but increase, although the increase would only be normal and healthy for the market.
Moreover, the market is really faced with a problem related to claim rate, especially on the motor segment. At ASIROM we have taken many measures in this respect, the most important one being the introduction, beginning with November last year, of a mandatory franchise for Motor Hull policies. We planned to maintain the portfolio of ASIROM traditional clients and avoid those clients who, every year, shift from an insurer to another. Eventually, Motor Hull doesn't have to pay for damage amounting to EUR 100 or less... the fixed costs are already too high.
Nevertheless, I do hope it won't be long until the Romanian insurance market is truly strengthened. I am fully confident that better times are yet to come. Clients will understand that they shall get only best quality services, as they pay for it.
Things cannot change in just one year, but I am sure we are on the right track.

XPRIMM: What objectives did ASIROM set for this year and what has been achieved so far in this respect?
B. S.:
We've already introduced a dual management system, which shall be put in place through a Supervisory Board and a Board of Directors. The decision was already made at the General Shareholders Assembly, organized at the end of February. All VIG companies implemented this system and it works, based on this solution. Practically, the main advantage is that the company management becomes 100% responsible for development - thus making ASIROM more flexible for the client.
Moreover, at the beginning of May, we shall start a major rebranding process to mark the affiliation to the Austrian VIENNA Insurance group. Also, we plan to improve the positioning of ASIROM as retail insurer.
We also intend to expand the brand's awareness to the small and medium-sized enterprises, which actually represent one of our main targets for 2008. The total investments shall be considerable, and they are still to be budgeted.

XPRIMM: What is the strategy of ASIROM this year, market share or profits?
B. S.:
We are not interested in reaching a significantly higher market share. It would only help if we wanted to impress some financial analysts, but the clients are not at all interested in our market share; the shareholders either, they want profit. For us, the main objective for 2008 is gaining profit, especially since 2007 was a difficult year because of the increasing claim rates we had. At the same time, we intend to complete the ASIROM restructuring process in 2008 and reach a modest increase in the company's underwriting, similar to last year, of about 6-7%.
Another measure concerns the savings at administrative level, in a context where, last year, we had a major increase in costs for workforce remuneration, due to the fact that we offered the employees numerous seniority bonuses. When added to the losses caused by flooding throughout the country, our profitability was clearly affected, hence the need for a capital increase.
The investments for the company's development will, obviously, continue, as in October-November this year we' shall implement the new IT solution - SAP.

XPRIMM: Why was this capital increase necessary?
B. S.:
In my opinion, ASIROM experienced some difficult times with the restructuring, shifting from the old organization system to the VIENNA Insurance group, while maintaining the market share, which was one of the aspects of the strategy adopted at the time. We had to support the development and the restructuring with the appropriate capital. We also took this measure to compensate for the losses of the previous period, and not because we did not have the solvency limit.
ASIROM must become strong again. The capital increase is also a sign for all our employees - showing that we appreciate them and we are a resilient company, part of a strong international group -, and for our clients.

XPRIMM: Can we expect a change in the ASIROM values and brand orientations in the future?
B. S.:
We are the strongest insurer in terms of sales network and we intend to stay that way. We also plan to jump on the SME sector's development train. Moreover, we have already achieved results by winning several tenders, so we are encouraged to continue in this direction as well. We shall equally get involved in insuring Austrian investments in Romania. Vienna will not intervene in this, whoever offers better conditions and services shall win those accounts. Everything will happen in the spirit of the free competition I was mentioning earlier.

XPRIMM: Thank you!

by alexandru.ciuncan@mxp.ro,

sus up

General Manager,
ASIROM-VIENNA Insurance Group


ERSTE Bank gives up insurance
ERSTE Bank sells insurance operations for EUR 1,445 million and signs 15 year distribution agreement with Vienna Insurance Group.
Subject to competition authorities and the local insurance regulators' approval, ERSTE Bank will sell its insurance investments in Austria and in the countries of Central and Eastern Europe to Vienna Insurance Group (VIG). The agreement was signed yesterday by the two CEOs Andreas TREICHL and Gunter GEYER after the resolutions were passed by the respective supervisory bodies.
Click here to read more!
by mihaela.circu@mxp.ro, 27.03.2008

PartnerRe, Official Partner of FIAR 2008
The reinsurance company PartnerRe has become the Official Partner of the 2008 edition of FIAR - International Insurance and Reinsurance Forum - taking place in Sinaia, May 19-23.
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by andreea.ionete@mxp.ro, 18.03.2008

WILLIS Re, Principal Reinsurance Broker Partner of FIAR 2008
International reinsurance broker WILLIS Re is Principal Reinsurance Broker Partner of the 2008 edition of FIAR - International Insurance and Reinsurance Forum - taking place in Sinaia, May 19-23.
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by andreea.ionete@mxp.ro, 19.03.2008

AIG Life: leader in five years!
Insurer AIG Life aims at reaching the top position of the Romanian life insurance market within the next five years.
"This is a realistic perspective, accordingly to our profitable growth strategy", Theodor ALEXANDRESCU, General Manager of the company has declared for XPRIMM Newsletters.
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by mihaela.circu@mxp.ro, 21.03.2008

2008 - The awareness year
As a part of CREDIT EUROPE GROUP N.V. (Holland), together with reputable Romanian entities like Credit Europe Bank or Credit Europe Leasing, Credit Europe Asigurari aims to become a quality benchmark for the local non-life insurance market in 2008 - according to Radu MANOLIU, Deputy General Manager of the company.
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by mihaela.circu@mxp.ro, 20.03.2008

And the claim was paid...
Insurance company ASTRA-UNIQA has completed on 21st of March the payment for the USD 10 million claim produced at TAROM aircraft on 30th of December 2007, on "Henri Coanda" International Airport from Bucharest. On February 27, the company has paid the first rate of the claim that worth USD 5 million.
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by mihaela.circu@mxp.ro, 24.03.2008

PPF asks for EUR 78 million for ARDAF and RAI
PPF Investments group intends to sell the two Romanian insurance companies, ARDAF and RAI Asigurari, to the GENERALI PPF Holding.
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by mihaela.circu@mxp.ro, 24.03.2008

GENERALI places its stake on unit-linked
Insurance company GENERALI has launched a new unit-linked life insurance product - Easy GENIUS (GENerali Investment Unit Solution).
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by mihaela.circu@mxp.ro, 25.03.2008

ASITRANS-EUROINS grows 46% in 2007
ASITRANS-EUROINS posted gross written premiums of RON 91.17 million in 2007, growing 46% on an annual basis.
The companies' portfolio is dominated by the motor insurance class, with a 88% share.
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by mihaela.circu@mxp.ro, 21.03.2008

Exponential growth for QBE in Romania
"QBE Insurance, the Romanian unit of Australian insurer QBE, posted gross written premiums of over EUR 200,000 from the beginning of this year", Gabriel SAUER, General Manager of the company, declared for XPRIMM Newsletters.
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by alexandru.ciuncan@mxp.ro, 19.03.2008

OMNIASIG Life aims at 6% of the market
Romanian life insurer OMNIASIG Life has set for its 2008 objective a 45% growth in gross written premiums, up to EUR 23 million. At the same time, the insurer intends to increase its markets share from present 3.4% to 6%.
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by oana.necula@mxp.ro, 25.03.2008

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AEGON buys a Turkish company
AEGON has entered into an agreement to acquire 100% of ANKARA EMEKLILIK, a Turkish life insurance and pension provider, from Polis Bakim ve Yardim Sandigi. The move is AEGON's first step in the fast-growing Turkish life insurance and pension market. The transaction is subject to regulatory approval in Turkey, and is expected to close in the first half of 2008.
Turkey offers attractive long-term growth prospects for AEGON. The country, with its population of 74 million, has a low life insurance penetration and the private pensions market has an attractive growth potential. Don SHEPARD, AEGON's Chairman and CEO, said: "We have consistently identified Turkey as a market where we believe we can leverage AEGON's broad capabilities in life insurance and pension products. This acquisition provides AEGON an ideal platform to pursue growth in this increasingly important market. We will rely on the strong expertise that we have developed in the broader Central and Eastern European region to serve customers in Turkey with innovative and need-specific products and services." The acquisition of ANKARA EMEKLILIK will complement the recent expansion of AEGON's business in Central and Eastern Europe, where AEGON has operations in five countries: Hungary, Poland, the Czech Republic, Slovakia and Romania.
ANKARA EMEKLILIK has a well-established presence in the Turkish life insurance and private pension market, with over 54,000 pension fund members and approximately EUR 35 million in assets under management. ANKARA EMEKLILIK sells its products and services through a variety of different channels and has an agreement in place to distribute through a nationwide network of 236 branches belonging to SEKERBANK.
As part of its overall growth strategy, AEGON is aiming to further expand its businesses in Central and Eastern Europe over the coming years. AEGON expects to more than double its number of pension fund members in Central and Eastern Europe by 2010 to 2.5 million. Value of New Business from Central and Easter Europe - a key measure of the Group's future profitability - is expected to rise over the same period to EUR 100 million, up from EUR 46 million in 2006.
by oleg.doronceanu@mxp.ro, 17.03.2008

20% is the Bulgarian insurance market growth
Last year's insurance market revenues are nearly EUR 766 million which stands for 20.1% nominal annual growth. The real growth rate with inflation accounting is 10.8%. This is what the preliminary results, announced by the Financial Supervision Commission (FSC), show.
The insurance penetration for the whole market is 2.73% of GDP, while in 2006 it has been 2.54% of GDP. Insurance density coverage for 2007 is also expected to be higher than the previous year report of EUR 83 per citizen. The non-life written premium income is EUR 646 million, compared to EUR 542 million in 2006. The claims payouts are approximately EUR 232 million, standing for 25% annual growth. Gross technical reserves in non-life insurance are reportedly EUR 460 million. The technical result for the year is in the positive - EUR 19.68 million.
The companies' assets in 2007 have reached EUR 693 million and the total investments for the sector are 426 million. The ceded to reinsurers premiums are EUR 126.285 million. The market share of the biggest 4 companies in the sector has fallen to 52.22%, which shows a slight decrease of the concentration, compared to previous years. The total number of the licensed companies to sell non-life policies in Bulgaria is 20.
The biggest share in the non-life premium income in 2007 is again for the motor insurance business - 68% of the total. The CASCO policies share is 44% of it (36% annual growth) and the MTPL policies - 24% share of the total non-life premium income. The experts are not surprised by those results of the motor insurance. The newly registered cars in 2007 are several hundred thousands and also the price of the compulsory policy has jumped 30% on average in the last few months of the year.
Next in market share comes the real estate insurance (fire and natural hazards - 19% share), the third place is for the financial insurance policies. Both insurance category products have substantially increased premium revenue.
The biggest share in claims payouts again is for the motor insurance: CASCO products generate 57% of the total non-life payouts and MTPL - 27%.
by insurance.bg, 25.03.2008

SOAO Region, purchased by Scandinavian IF P&C Insurance
Scandinavia's IF P&C Insurance purchased the Russian insurance company SOAO Region and thereby enters the Russian market of insurance services.
SOAO Region's main focus is motor insurance with approximately EUR 23.7 million of premium income. The acquisition price will be within the normal valuation range for similar transactions in the insurance industry and the goodwill from the transaction will be insignificant in relation to IF P&C Insurance's annual profits.
The acquisition is conditional upon the approval of the Russian Insurance Regulatory and the Russian Anti-Monopoly authorities.
Last spring IF P&C Insurance opened a subsidiary with branches in Saint-Petersburg and Moscow to provide services to Scandinavian corporate clients doing business in Russia. IF P&C Insurance will continue activities in this area but is now able to operate directly in the Russian insurance market.
Russia is one of the world's most rapidly growing insurance markets, which over recent years has acquired more stability and transparency. The deal is subject to approval by relevant Russian regulatory bodies.
IF P&C Insurance is the leading property and casualty insurance company in the Nordic region, with approximately 3.6 million customers in the Nordic and Baltic countries, as well as to Nordic customers with international operations.
The insurance company is a fully-owned subsidiary of Finnish insurer SAMPO which is listed on the Helsinki Stock Exchange.
by costi.boroda@mxp.ro, 27.03.2008

Insurer GENERALI Pojistovna: profit up by 14% in 2007
Czech insurance company GENERALI Pojistovna showed an after-tax profit of EUR 18.94 million in 2007, a year-on-year increase of 14 percent, spokesman Mario BOEHME told CTK Friday.
The company collected EUR 296.4 million in premiums last year, up 19 percent on the year. The whole Czech insurance market rose by 8.2 percent to EUR 5.09 billion in 2007.
GENERALI's billed premiums in non-life insurance grew by a fifth to EUR 204.24 million, while the market added four percent. Billed premiums in life insurance at GENERALI were 18 percent higher at EUR 92.16 million, and the whole market grew 14 percent.
GENERALI is the fifth largest Czech insurer with market share of nearly six percent.
GENERALI Pojistovna is part of GENERALI PPF Holding, which operates in 12 countries of central and Eastern Europe. GENERALI PPF Holding is a joint-venture of Assicurazioni GENERALI (51%) and PPF Group (49%).
by www.praguemonitor.com, 25.03.2008

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The M&A value will exceed EUR 5.8 billion
The value of mergers and acquisitions will exceed EUR 5.8 billion in 2008 and is expected to reach EUR 8.4 billion by 2012, according to Radu STOICOVICIU, Partner in Advisory Department at PRICEWATERHOUSE Coopers Romania (PwC).
"We can expect acquisitions in the construction material market and some services, especially financial and medical", STOICOVICIU added.
The annual average of transactions will be USD 50 million in 2008. According to STOICOVICIU, there were 14 "mega transactions" in 2007, each exceeding USD 100 million, and most in real estate.
"Western Europe is the main area from which foreign investors will come. However, Central European investors, especially from Poland, will continue to buy in Romania", STOICOVICIU said.
In 2007, there were 211 transactions between private partners, totaling EUR 5.4 billion, and representing 5.1 percent of Romania's GDP. Oil and gas markets dominated the transactions, with a 37 percent market share, and real estate with 17 percent.
STOICOVICIU estimates that transactions already made in 2008 amount to almost half a billion EUR.
by Business Standard, 26.03.2008

National Bank of Romania raises key interest to 9.5%
The National Bank of Romania (BNR) decided yesterday to raise the monetary policy key interest to 9.5 percent, compared to the previous 9 percent. The 0.5 percent percentage points of the key rate did not influence the exchange rate, according to financial market analysts.
"The increase in interest was as expected on the market, and was already included in the exchange rate. If BNR had surprised the market with a higher increase in interest, the market would have been subject to a rise", Ionut DUMITRU, Chief Analyst, Raiffeisen Bank, said.
However, the decision could impact on commercial bank loans and deposits. Most analysts questioned by Business Standard are expecting a new rise on interest for lei-denominated loans and deposits. Yesterday's increase is BNR's fourth consecutive rise in key interest. The National Bank increased key interest by 2.5 percentage points in September 2007, to the maximum high in the past two and a half years. Romania has the highest monetary policy interest of all European Union member states.
by Business Standard, 27.03.2008

GDP per inhabitant, almost 3 times higher than in 2004
Gross Domestic Product (GDP) per inhabitant could rise to EUR 6,200 this year, from EUR 5,000 in 2007, Varujan VOSGANIAN, the Minister of Economy and Finance, said. In percentage terms, the value could be 10.7 percent higher than last year. GDP per inhabitant could be almost 3 times higher than in 2004, when it reached EUR 2,600.
The data presented by VOSGANIAN is higher than that of statistics and prognosis institutes. In a study carried out by the National Prognosis Commission (CNP) estimated GDP for 2008 amounts to EUR 5,450.
In terms of growth rhythm Romania had the most rapid advance of all European Union countries, shows a study by the International Monetary Fund (IMF), of 130 percent in 2006 compared to the year 2000.
Another indicator of positive economic growth was the 27 percent increase in investments in 2007, as was the increase in demand for construction.
Several leaders are expecting sustained economic growth in the coming years. Mugur ISARESCU, Governor of the National Bank of Romania (BNR) estimated an economic growth of over 5 percent a year.
by Business Standard, 25.03.2008

MICROSOFT Romania targets 35% increase in turnover in 2008
MICROSOFT Romania is estimating a 30-35 percent increase in this fiscal year, which will end on 30 June.
"In the past fiscal year we had a 53 percent increase and we are targeting a 30-35 percent increase this year. Our average rhythm in the past 12 years was 50 percent. In a rapidly growing market, such as the Romanian one, we plan to grow faster and boost the market's evolution", General Manager of MICROSOFT Romania, Silviu HOTARAN said.
MICROSOFT launched Windows Server 2008, SQL Server 2008 and Visual Studio 2008, three products for the business area that will sustain the advance of the server division of 30 percent in terms of installments.
"The server market is growing 24 percent according to global provider of market intelligence IDC and our evolution is superior to the market's evolution, which helps us to gain market share. Microsoft owns over 75 percent of the Romanian and global server markets, and we can hope for a market share of over 80 percent in the coming two years", Gabriel NICOLAESCU, Server and Tools Business Group MICROSOFT Romania, said.
by Business Standard, 24.03.2008

FMCG market up 19.5% in 2007
The fast moving consumer goods market (FMCG) increased 19.5 percent in 2007, compared to 2006, when it rose a mere 9.9 percent, according to a study by market research company MEMRB. The beverage segment was the most dynamic, increasing by 24.6 percent. The growth engine and the most important pillar were alcoholic drinks.
The food market increased in value in 2007 by 16.9 percent year-on-year, while the non-food market rose 12.8 percent in the same period.
by Business Standard, 21.03.2008

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FIAR - International Insurance-Reinsurance Forum
May 19-23, 2008
Sinaia, Romania
Organizer: Media XPRIMM
Details: www.fiar.ro

12th All-Russia Conference on Reinsurance
March 27-28, 2008
President Palace, Moscow, Russia
Organizer: Reinsurance Committee of the All-Russia Union of Insurers (ARIA)
Media Partner: PRIMM Insurance&Pensions Magazine
Details: www.re-conference.ru

The Fourth International Risk Management Conference
April 17-18, 2008
Almaty, Kazahstan
Organizer: EURASIA Insurance Company
Media Partner: PRIMM Insurance&Pensions Magazine
Details: www.theeurasia.kz

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XPRIMM Newsletters


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