Triglav bet­ting on life in­sur­ance seg­ment at home, non-life abroad

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What were the un­der­ly­ing trends that shaped the de­vel­op­ment of the Slove­nian in­sur­ance market in 2013?

The in­sur­ance busi­ness in Slove­nia in 2013 was af­fected by dif­fi­cult eco­nomic con­di­tions. The eco­nomic in­sta­bil­ity, cor­po­rate bank­rupt­cies, a ris­ing un­em­ploy­ment rate, illiq­uid­ity and the de­te­ri­o­rat­ing pur­chas­ing ca­pac­ity of the lo­cal pop­u­la­tion damp­ened de­mand for in­sur­ance prod­ucts.

On this back­drop, the in­sur­ance com­pa­nies op­er­at­ing in Slove­nia in 2013 col­lected 3.7% less in in­sur­ance pre­mi­ums than in 2012 and less than 2.0 bil­lion euro for the first time since 2007. The main rea­son for this is the lower num­ber of life in­sur­ance poli­cies that were sold. In­sur­ance pre­mi­ums last year amounted to just 5.6% of the coun­try's gross do­mes­tic prod­uct, the low­est in the last five years. On av­er­age, a Slove­nian cit­i­zen spent 960 euro on in­sur­ance, which is 39 euro less than in 2012.

How did Triglav per­form against the back­drop of this market en­vi­ron­ment in Slove­nia last year?

In 2013, Triglav con­tin­ued the im­ple­men­ta­tion of its de­vel­op­ment strat­egy, fo­cus­ing on its main in­sur­ance busi­ness, on its prof­itabil­ity and on en­sur­ing safe busi­ness oper­a­tions. In these tough eco­nomic and market condi-

In­sur­ance busi­ness in Slove­nia was af­fected by dif­fi­cult eco­nomic con­di­tions in 2013.

tions, Triglav Group man­aged to achieve a net profit of 69.9 mil­lion euro. By pru­dently han­dling busi­ness and fi­nan­cial risks, we also man­aged to re­tain a high level of fi­nan­cial sta­bil­ity.

The on­go­ing eco­nomic cri­sis con­tin­ued to be re­flected in the de­cline in col­lected in­sur­ance pre­mi­ums, which were 6.0% lower than in 2012 and failed to reach the planned goals. The di­min­ish­ing pur­chas­ing ca­pac­ity of the pop­u­la­tion re­sulted in a lower level of in­sur­ance and both trends were ac­com­pa­nied by a grow­ing un­em­ploy­ment rate, a de­crease in the ac­tiv­i­ties of busi­ness en­ti­ties and in the de­mand for cer­tain prod­ucts and an ex­tremely in­tense com­pe­ti­tion.

What market con­di­tions did Triglav face on its mar­kets abroad in 2013?

The in­sur­ance busi­ness in the re­gion of South­east Europe (SEE) faced many chal­lenges in 2013 such as a slow­down in eco­nomic ac­tiv­ity, ris­ing un­em­ploy­ment, a de­crease in pur­chas­ing ca­pac­ity and po­lit­i­cal in­sta­bil­ity in some ar­eas. All this led to weaker de­mand for in­sur­ance prod­ucts. In Slove­nia and Croa­tia, the eco­nomic cri­sis con­tin­ued and other coun­tries in SEE ex­pe­ri­enced only mi­nor spurts of eco­nomic growth. How­ever, the busi­ness of our sub­sidiary com­pa­nies is sta­bil­is­ing. The Croa­t­ian market was also af­fected by the com­plete lib­er­al­i­sa­tion of the in­sur­ance market, which has a sig­nif­i­cant ef­fect on the terms of busi­ness of all the in­sur­ance com­pa­nies op­er­at­ing on this market.

De­spite the chal­leng­ing en­vi­ron­ment, Triglav Group per­formed well in this re­gion and re­in­forced its main ac­tiv­ity, which can be seen in the growth of the in­sur­ance pre­mi­ums that were achieved in Mon­tene­gro, Croa­tia, the Czech Repub­lic, Bos­nia's Serb Repub­lic and Ser­bia. The group posted a drop in in­sur­ance pre­mi­ums in Bos­nia's Mus­lim-Croat Fed­er­a­tion and in Mace­do­nia, which re­flects our strate­gic pol­icy of max­imis­ing value in­stead of the in­sur­ance premium.

What is your view on the chal­lenges fac­ing the in­sur­ance in­dus­try in SEE over the medium term?

Each of the eight mar­kets we are present on has its own char­ac­ter­is­tics. The biggest chal­lenges are the di­ver­sity of the mar­kets, the dif­fer­ent habits of the con­sumers, dif­fer­ent leg­isla­tive and reg­u­la­tory frame­works and coun­try-spe­cific risks. We be­lieve that the leg­is­la­tion and reg­u­la­tion on all mar­kets will even­tu­ally be har­monised with the stan­dards of the Euro­pean Union, which will make busi­ness a lot eas­ier for play­ers ac­tive on more than one market. We be­lieve that a sta­ble and pre­dictable leg­isla­tive and reg­u­la­tory en­vi­ron­ment is a key re­quire­ment in or­der to be able to count on con­duct­ing sta­ble and prof­itable busi­ness oper­a­tions on a par­tic­u­lar­mar­ket. Equally chal­leng­ing are chang­ing con­sumer habits. The goal is for con­sumers to view the pur­chase of in­sur­ance cov­er­age not as an un­nec­es­sary ex­pense, but as a pay­ment that guar­an­tees the in­sured par­ties that their as­sets will re­tain their value and will en­able a de­cent life in the event of ac­ci­dents or other un­fore­see­able events.

Where do you see growth op­por­tu­ni­ties in the re­gion over the medium term, both in terms of spe­cific mar­kets and in terms of prod­uct cat­e­gories?

The Triglav Group's in­sur­ance mar­kets in the re­gion are rel­a­tively un­der­de­vel­oped. In the struc­ture of the in­sur­ance premium in the re­gion, mo­tor third party li­a­bil­ity in­sur­ance still dom­i­nates premium in­come. In gen­eral, I can say that in the medium term the seg­ment of life in­sur­ance in Slove­nia has greater po­ten­tial, whereas in the wider Adri­atic re­gion, there is more un­tapped po­ten­tial on the non­life seg­ments. I be­lieve that the mar­kets where the Triglav Group op­er­ates are def­i­nitely among the more promis­ing ones in terms of the fu­ture de­vel­op­ment of the in­sur­ance pre­mi­ums. At the same time, the prof­itabil­ity of these mar­kets is an im­por­tant chal­lenge, since market play­ers ex­pect a sig­nif­i­cant growth in the fu­ture and their busi­ness mod­els are adapted to their ex­pec­ta­tions and not to the cur­rent con­di­tions.

SEE in­sur­ance mar­kets were hit by eco­nomic slow­down, ris­ing un­em­ploy­ment in 2013.

Do you see room for con­sol­i­da­tion on the in­sur­ance market in SEE?

Of course, I see this part of Europe as an op­por­tu­nity for the de­vel­op­ment of the in­sur­ance busi­ness and the econ­omy in gen­eral. These mar­kets are still frag­mented, and fur­ther­more, the growth of the in­sur­ance market and the new reg­u­la­tory re­quire­ments will de­mand a scope of busi­ness that some in­sur­ance com­pa­nies will not be able to achieve eas­ily by them­selves.

The Triglav Group will mon­i­tor the op­por­tu­ni­ties on in­di­vid­ual in­sur­ance mar­kets in the re­gion and will, apart from the op­por­tu­nity for or­ganic growth, also con­sider growth through ac­qui­si­tions and through the de­vel­op­ment of part­ner­ships with rel­e­vant in­sur­ance firms and fi­nan­cial com­pa­nies with com­ple­men­tary oper­a­tions. In this re­gion, we see the Croa­t­ian and Ser­bian in­sur­ance mar­kets as hav­ing a lot of po­ten­tial be­cause of their sheer size and the two coun­tries' po­ten­tial for de­vel­op­ment. On both of these mar­kets, the Triglav Group is al­ready present and we in­tend to ad­di­tion­ally strengthen our po­si­tion in ac­cor­dance with our strat­egy.

Triglav's de­vel­op­ment strat­egy fo­cuses on prof­itabil­ity and safe busi­ness oper­a­tions.

Ben­jamin Josar, member of the man­age­ment board

Slove­nian in­sur­ance com­pany Zavaroval­nica Triglav, set up in 1990, is the con­trol­ling com­pany of Triglav Group. Triglav Group posted a con­sol­i­dated net profit of 69.9 mil­lion euro in 2013, down 5.0% from a year ear­lier. The group’s to­tal writ­ten pre­mi­ums dropped 4.0% to 900.9 mil­lion euro in 2013. The com­bined ra­tio of the Triglav Group was 91%. The group, listed on the Ljubl­jana Stock Ex­change, is ac­tive in Slove­nia, Croa­tia, Bos­nia and Herze­gov­ina, Ser­bia, Mon­tene­gro, Mace­do­nia and in the Czech Repub­lic, em­ploy­ing a to­tal of 5,350.

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