Vienna Insurance : Earnings Document

VIENNA INSURANCE GROUP (VIG)

Results for the first three quarters 2022

Q&A-Session Conference Call

Nov 15th, 2022 | 15:00 CET

Transcript

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Operator	First question is from the line of Youdish Chicooree with
	Autonomous Research. Please go ahead.
Youdish Chicooree	Good afternoon, everyone, and thank you for taking my
	question. The first question is on the combined ratio. You have
	guided to a combined ratio of around 95 for this year. I was
	wondering whether you could talk about the sustainability of this
	level going into 2023, given inflationary pressures and the fact
	that already in the third quarter it was, I believe, 96.5. That's my
	first question.
	My second question is on the Czech Republic. If you could just
	remind us of what's driving the strong premium growth and the
	deterioration in combined ratio in the Czech Republic, and
	whether going forward, you believe that you can adjust prices to
	offset some of the issues you've seen around severity and
	frequency in motor? Thank you.
Peter Höfinger	Thank you for your question. The increase of the combined ratio
	in the third quarter this year to 96.5 is on the one hand side
	driven by the first-time consolidation of Aegon and, therefore,
	also the including of the insurance tax, which has an impact on
	the combined ratio. Secondly, and this is also relevant for your
	second question, we had quite a higher number of weather-
	related claims in Czech Republic, which also had an impact on
	the combined ratio for the third quarter.
	Looking forward to next year, maybe starting at that point, and I
	think one has to keep this in mind, in the region where we're
	operating, Central Eastern Europe, inflation is not something
	which is new, which is appearing the first time in the last 50
	years, as it is maybe in Western Europe. All of our manager in
	Central Eastern Europe in their respective countries had already
	times of high inflation. Therefore, we do have experience in how
	to deal with these issues, and mechanisms are in place for
	dealing with it.
	On the one hand's side, depending on the country, we do have
	automatic indexation for long-term contracts, which is not always
	linked to consumer price index, but also linked to construction
	price index or sometimes on the motor side, it's linked to motor
	repair costs index or the relevant price increases. Secondly,
	where we have not long-term contracts, it's annual contracts,
	where we always evaluate at the renewal of this contract the sum
	insured, adopt the sum insured and, therefore, also the premium
	beside rate increases. We feel quite committed also for the year
	to come, that our target will stay around 95, if there is not very
	exceptional NatCat events or significantly higher frequency of
	NatCat events that we'll be able to keep around this target which
	we are putting ourselves.
Youdish Chicooree	Thank you. Just to clarify, if we focus just on your main markets,
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	you don't think there are competitive pressures or maybe
	regulatory pressure that could prevent you to do the pricing
	changes you want?
Peter Höfinger	We do have the competitive pressure already today.
Operator	As a reminder, that's start followed by one two after the question.
	Next question on the line is from Thomas Unger with Erste
	Group. Please go ahead.
Thomas Unger	Good afternoon. Thank you for taking my questions. The first
	one, I would like to touch upon the financial results in Q3 alone.
	The current income was very high, you mentioned in the
	presentation that this was affected also by the first-time
	consolidation of the Aegon assets. But also on the expenses
	side, it was quite a bit higher than in previous quarters with the
	depreciation of investments higher, other expenses higher. What
	is behind those developments? In the P&C in the business line,
	P&C alone was negative in Q3. If you could explain that, I would
	appreciate it.
	Then, looking at Austria only, and also only in Q3, premiums
	were down. Is that due to single premium life? Also, the
	combined ratio was up compared to previous quarters, so if you
	could explain that, that would be helpful.
	Then, lastly, you mentioned the windfall tax in Hungary to be
	booked in Q4 and already booked now in Q3. What about 2023,
	will it be booked in the first quarter already or do you spread this
	out evenly across the quarters?
	Then I'd also be interested in your feeling, whatever you can give
	us, about 2023 in terms of premium growth in this environment.
	Thank you very much.
Liane Hirner	Thank you for your questions. I will start regarding the financial
	result in Q3. This was in the other income area (Note: in the
	P&L), mainly impacted by the first-time consolidation of Aegon
	Türkiye with FX gains due to the US dollar portfolio there. Other
	expenses are more seasonal effects, nothing special.
	Regarding Hungary, the windfall tax was booked in 11 million as
	announced in the third quarter and another 11 million is expected
	to follow in the fourth quarter. For next year the tax will be booked
	by each quarter and expected to be at the same amount as this
	year, so we'll spread it over the year.
Nina Higatzberger	Thomas, I guess it was the last two questions, the financial result
	Q3 is answered, is this okay?
Thomas Unger	Yes. Is that also the explanation for the P&C financial result
	being negative in Q3?
Liane Hirner	Let me check.
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Peter Höfinger	Maybe in the meanwhile, I'm trying to answer your last question.
	Premium growth going forward next year, it's difficult to predict
	because it's very much dependent on the overall economic
	development in our region. This combined with the inflation rate,
	clearly the inflation is also a driver of the premium growth as we
	are increasing sum insured and correspondingly, the premiums.
	I would not expect to have this strong growth which maybe we
	have been seeing this year. Then, depending on the overall
	economic development, we will see how generally the markets
	and the premiums will develop. But this is very much depending
	on the overall economic development, and I think for everybody,
	it's quite difficult to assess how GDP growth will develop in
	Europe next year.
Thomas Unger	Thank you. Maybe just on the development in Q3 in Austria with
	premiums softer quarter-on-quarter.
Peter Höfinger	If I look on Austria, for sure, the non-life premiums were growing,
	so the effect, I assume, will be in the lower life single segment.
	This is the reason here in Austria.
Thomas Unger	Any specific reason for the combined ratio being up in the
	quarter?
Nina Higatzberger	97.5 to 97.6, no special reason here. Maybe a seasonal effect,
	but nothing we would flag here.
Thomas Unger	Right, year-on-year it's stable, but compared to the previous
	quarters, probably a seasonal effect. Okay, thank you very
	much.
Liane Hirner	Maybe coming back to the question regarding financial result,
	other expenses. Here included are precautionary measures for
	various projects which we do usually in the third quarter.
Thomas Unger	Thank you.
Operator	Next question is from the line of Bhavin Rathod with HSBC.
	Please go ahead. Mr Rathod, your line is open, please go ahead.
Bhavin Rathod	Hello, am I audible?
Operator	We can hear you now, thank you.
Bhavin Rathod	Good, sorry about that. I have just a couple of questions from my
	side. The first one would be on Romania, given the fact that we
	have seen a significant improvement in the combined ratio and
	it seems like the MTPL market is becoming more disciplined. It
	appears that although you are number one in Romania, but in
	the MTPL market just to note the number, just wanted to
	understand your strategy in terms of how you're thinking about
	growth in the MTPL market, given the discipline that we are
	seeing in the MTPL market. That would be my first question.
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	The second one would be on Poland. Standalone 3Q combined
	ratio again seems to be a bit on the higher side. If you could just
	comment a bit about what we're seeing in terms of competitive
	dynamics over there? That would be really helpful.
	The last one would be on your re-investment rate, if you could
	just provide what is your current re-investment rate compared to
	the current running yield? Thank you so much.
Peter Höfinger	Thank you for your questions. Let's start with Romania. Yes, in
	Romania we are seeing now more risk-adequate premiums in
	motor TPL, therefore, combined ratio is slightly below 100. This
	is not yet a satisfying element, but you also know that Romania
	is a quite volatile market. There are also new market entrants
	coming to Romania, which will maybe again create uncertainties
	within the motor TPL market. Our group has been very
	disciplined also in the growth of motor TPL. We are very much
	targeting in Romania to have a balanced portfolio between the
	different lines of business and not to be purely dependent just on
	one line of business, with different strategies by competitors in
	the market. But currently, I think we are on a reasonable way
	overall in Romania.
	When we go to Poland, in Poland one can see that the
	competitive landscape is currently very intensive when it comes
	to motor TPL. You also see that we do have a negative growth
	in Poland in motor TPL. This is driven that we are disciplined and
	that we are not entering into this price war. Specifically in the
	fleet business we are very restrictive, seen here in our book. I do
	not expect this to change this year, but I believe that maybe next
	year, also due to the pressure of inflation and, therefore, a
	certain increase of average claim will also drive market pricing a
	bit up next year.
Liane Hirner	Coming back to your question regarding the re-investment rate.
	The new money yield in Austria in the first nine months amounts
	to 2.47% and has increased over the past months due to the
	rising interest.
Bhavin Rathod	How does it compare with the current yield or running yield?
Liane Hirner	The average yield on the fixed income in Austria for the nine
	months is 2.48%, so nearly the same.
Bhavin Rathod	Right, understood. And quickly, the last one, if I may. I just
	wanted to understand, should we be concerned about the
	windfall taxes in Czech Republic, does it have any implication for
	Vienna Insurance?
Liane Hirner	The additional tax on premiums relates to Hungary. I think what
	you're referring to is maybe the banking sector. There is no
	additional windfall tax for insurance companies in Czech
	Republic.
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