Vienna Insurance : VIG 3M 2024 VIG Transcript Teleconference

VIENNA INSURANCE GROUP (VIG)

3M 2024 Update

Q&A-Session Conference Call

29 May 2024

Transcript

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This transcript may not be 100 percent accurate and may contain misspellings and other in- accuracies. This transcript is provided "as is", without express or implied warranties of any kind. Vienna Insurance Group AG Wiener Versicherung Gruppe (VIG Group) retains all rights to this transcript and provides it solely for your personal, non-commercial use. VIG Group, its suppliers and third-party agents shall have no liability for errors in this transcript or for lost profits, losses, or direct, indirect, incidental, consequential, special or punitive damages in connection with the furnishing, performance or use of such transcript. Neither the information nor any opinion expressed in this transcript constitutes a solicitation of the purchase or sale of securities or commodities.

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Operator	The first question today comes from Bhavin Rathod from
	HSBC. Please go ahead with your question.
Bhavin Rathod	Hi there. Thank you for taking my questions. So I have three
	on my side. The first one would be on the GWP development
	that we have seen in the first quarter. Would you be able to
	provide some additional colour, as in what kind of pricing we
	are able to get in the first quarter vis-à-vis the kind of volume
	growth we are seeing, especially in the P&C book? So any
	details around the pricing versus volume mix would be really
	helpful.
	The second one would be on the topic of inflation.
	Obviously, we are seeing some improvement in the headline
	inflation. Are you able to say what level of improvement or
	increase we are seeing on the claim inflation side?
	And the third one would be on the premium growth that we
	have seen in Poland. Reading the comment for Poland, I get
	an impression that the premium growth in the motor part
	was rather more subdued. So are you able to say what kind
	of dynamic you are seeing in the Polish motor market in the
	first quarter? And would you say you are being more
	conservative on the Polish motor premium growth, given the
	challenging market that we have been seeing for quite some
	time? I guess these are the three questions that I have.
	Thank you.
Peter Höfinger	Thank you very much for your questions. All the three are
	on my side. Starting with premium growth pricing P&C, you
	will have to a little bit differentiate here corporate business
	with retail business.
	Corporate business in our region, the main renewal is 1
	January. So the renewal is in the last quarter of last year.
	We were able in corporate business last quarter, last year,
	for this year, to further increase our pricings and/or change
	our conditions.
	This also has to do with the hardening of the reinsurance
	market. We also have seen here specifically, with more local
	competitors, that they have more realized during the
	renewal changed terms and condition in reinsurance, and
	therefore also the market was going up in prices.
	In retail business, the renewal is throughout the year. And
	depending on the market there is sometimes automatic
	index clauses. So if inflation goes down, so also indexation
	goes down. But this is reflecting then also the basis for the
	claims inflation, which leads me to the next question.
	When we talk about the claims inflation, also here, we have
	to differentiate very much between motor business and
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	property business. In motor business, it is important to
	notice that in relation to maybe the rest of Europe, our cars
	which we are insuring have a much higher average age. We
	are talking here between 13-15 years, which means also
	that the spare parts are not so sensor-driven, and also, the
	inflation on the spare part is not comparable with new cars'
	spare parts.
	At the same time, we are having since years a quite
	sophisticated garage management all over the place. So we
	feel quite comfortable with the claims inflation in motor in
	relation to the indexation of our motor premiums.
	Property claims inflation is very much correlated to the
	construction price developments. Here we see, over the last
	six to 12 months, a quite flattish development. Therefore, we
	also believe that we are able to well manage the claims
	inflation in this area.
	When it comes to Poland, yes, we are underperforming in
	growth in the motor business. This is quite intended on our
	side. We still do not feel comfortable in all the segments in
	the motor market in Poland from the risk-adequate pricing
	and are therefore not very much on the growing side in
	motor business. We do believe that maybe throughout the
	year, we will see some changes on the Polish market, and
	then our risk appetite in motor business will change
	accordingly. I hope I have answered your questions.
Bhavin Rathod	Perfect. That's very helpful. Thank you so much.
Operator	The next question comes from Rok Stibrič from RBI. Please
	go ahead.
Rok Stibrič	Good afternoon and thank you very much for the
	presentation. I will have two questions. I am interested if you
	might have some high-level estimates available for the
	combined ratio, perhaps at group level, of course.
	And the second question is related to the reinsurance
	developments. So have you seen some change in trend in
	comparison to the last year? Because so far, I think 2024
	has been relatively well when it comes to nat cat losses.
	And last but not least, do you have some assessment of the
	reinvestment yield? Has this number now peaked, or do you
	think you still have some potential for further increases
	here? Thank you very much.
Peter Höfinger	Thank you for the question. For the combined ratio, in the
	first quarter, we are not announcing the combined ratio. You
	know our combined ratio last year, which was 92.67. The
	first quarter had less weather-related claims activity. I
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	maybe answered in another question the development of
	pricing and claims inflation, so I think you can have some
	idea about the development of the combined ratio.
	When we come to reinsurance trends, there was a different
	renewal for this year. It was much more structured than it
	was the year before. There was enough capacity available
	by the reinsurance industry. On the other side, the
	reinsurance industry kept discipline and was very much
	focused on reinsurance contracts which were claims-
	affected, to change their conditions. It was not always so
	much the topic of prices. It was also the topic of retentions.
	When it comes to nat cat, we do have a big advantage in
	placing our nat cat programme. On the one hand side, we
	are placing it for the whole group. So before we go to the
	reinsurance industry, we have natural diversification. We
	are having two modelling companies modelling our portfolio.
	We are the market leader in the region.
	So, most probably, it's one of the highest quality
	programmes where large reinsurance companies, with one
	signature, can get the diversification from CEE in their
	portfolios. For this, we are asking for an attractive price.
	Therefore, we do see pressure on pricing in nat cat, but we
	feel comfortable in relation to the prices which we get from
	the primary side.
Liane Hirner	I'm happy to answer your last question, your third question,
	regarding the assessment of the reinvestment yield. I can
	give you the numbers. For 12 months, 2023, the average
	new investment yield of total VIG was 5.5%. And this
	compares to the first quarter 2024 with 5%, total VIG. I hope
	this answers your questions.
Rok Stibrič	Yes, thank you very much. Very helpful.
Operator	The next question comes from Thomas Unger from Erste
	Group. Please go ahead.
Thomas Unger	Hi, good afternoon. Thank you very much for the
	presentation and also taking my questions. I'd like to come
	back to the solvency ratio and the development that you've
	seen in Q1, with the slight retreat. Can you confirm that the
	requirement remained stable also in Q1 and that the decline
	is solely due to the decrease in own funds? And I didn't quite
	get it. Is the dividend for 2024 now included in the own fund
	calculation, so the minimum level for next year? That's my
	first question on solvency ratio.
	Second question would be, you touched upon the weather-
	related claims. What did you see in Q1 in terms of large
	claims and also nat cat events? Anything to date in Q1 or
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	Q2 for the first half of 2024?
	And then, you reiterated your targets, profitability targets for
	2024. Is there anything that you can tell us about the
	operating trends in Q1, and now going into Q2? Anything
	that affects the business operating result materially would
	help. Thank you very much.
Liane Hirner	Thank you for your questions. I'm happy to answer your
	question or to clarify your questions regarding solvency
	ratio. The development in Q1, when we come to the
	solvency capital requirement, this is in line with the increase
	of the volumes and premium growth and business increase
	in the first quarter, so a slight increase in the SCR and also
	in the counterparty default risk we have in the first quarter,
	an increase due to the fact that companies, including the
	VIG Holding, is preparing for interest or for dividend
	payments, so we have more cash in the first quarter usually.
	And when it comes to the own funds, it's correct that due to
	our new dividend policy, which says that the last year's
	dividend is the minimum dividend, we now have to include
	the 2024 dividend already fully in the first quarter. So this
	will flatten out over the year.
	In the last years, with the old dividend policy, we had always
	one-fourth of the planned dividend, or of the planned
	dividend in each quarter. So we had an increase in the ratio
	out of that. And now we had to change how we account for
	the dividends in the solvency calculation.
	And also, not to forget, even in the solvency calculation with
	transitionals, we also have to decrease the own funds by the
	full effect of the transitionals. We lose about €100 million per
	year on funds due to the decrease of transitionals, and this
	also has to be fully taken into account in the first quarter. But
	this will also flatten out over the year. And no other specifics
	or special topics or trends to be mentioned regarding the
	solvency capital requirement and the solvency ratio.
Peter Höfinger	To your question to weather-related claims, as mentioned,
	there was a lower activity of weather-related claims. Also
	maybe to remind, last year, in the first quarter, there was
	also the earthquake in Turkey. Net figures I can give you.
	The net weather-related claims were €21 million in the first
	quarter this year, in relation to €50 million last year. Maybe
	to your last question, I am not aware of any operational
	exceptional events in the first quarter.
Thomas Unger	Okay. Thank you very much.
Operator	The next question comes from Youdish Chicooree. Please
	go ahead.
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Youdish Chicooree	Good afternoon, everyone. I've got three questions as well.
	The first one is really to just go back on your opening
	comments on the improved economic outlook in the markets
	you operate and the various drivers you talk about. I was
	just wondering, can you talk about how this could impact
	your life business versus your P&C business? Because in
	P&C business, some markets have been seeing higher
	frequency. So I was just wondering if you could elaborate on
	that to start with.
	And then secondly, on the reinvestment yield, was that for
	the total group? And that was just fixed income in, or was
	that the total investment portfolio? And then lastly, in the
	Polish market, you've talked about you pulling back because
	the pricing is not adequate enough. I think one of your major
	peers saw quite a deterioration in Q1 because of a rising
	frequency. Have you seen a similar development? Thank
	you.
Liane Hirner	So I'll take over the second question regarding the
	reinvestment yield. I can confirm that the 5% relates to the
	total investment portfolio of VIG Group.
Youdish Chicooree	Okay. All right.
Peter Höfinger	Coming to your topic of frequency, here again, in the
	property business, frequency is stable. In the motor
	business, frequency, and I'm talking for the group, not for a
	specific market, is also stable, and it's still a little bit below
	pre-COVID times.
	One of the hypotheses on why this could be is that
	obviously, in the COVID time, for the lockdowns, many
	people from Central Eastern Europe which are working in
	Western Europe, in France, Spain, Germany, Austria,
	returned home for the lockdown and not all of them went
	back to Western Europe.
	We see this in Austria in the tourism industry, where we are
	looking for employees, because obviously from our
	neighbouring countries, people found jobs back home after
	the lockdown, which means also that there is less mileage
	driven internationally on weekends or once a month, where
	people were commuting from countries where they were
	working back home, which can be one of the drivers that
	overall frequency in motor is slightly below what we saw pre-
	COVID.
	When it comes to Poland, I think I have nothing to add. Yes,
	our risk appetite in motor business is limited currently in
	Poland for profitability reasons. I think I have mentioned
	that.
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Youdish Chicooree	And on the different outlook for life and health versus P&C,
	based on the macroeconomic outlook?
Peter Höfinger	What I can tell you is that health business is growing all over
	the place, and this has to do also with the macroeconomic
	outlook. If there is more disposable income, they are also
	willing to spend part of their money for a private health
	insurance. This we see all over the place in Central Eastern
	Europe but also in health in Austria.
	When it comes to life, this is different market by market. For
	example, we see a quite attractive growth ratio in Romania
	in regular premiums, which also has to do with a very
	successful banking distribution which we have in Romania.
	We are also quite reasonably developing the life business
	again in Austria. With the rising interest rates of the last two
	years, also classical products are again gaining
	attractiveness, and not yet, but first signs that also single
	premium business can accelerate in the forthcoming future.
Youdish Chicooree	All right. Thank you. Thank you very much.
Operator	Ladies and gentlemen, that was the last question, and I
	would like to hand back to Nina for closing comments.
Nina Higatzberger-Schwarz	Thank you for your interest in this Q1 update of Vienna
	Insurance Group. We look forward to presenting the half-
	year results, then again in more detail, on 28 August. And if
	you have any questions in the meantime, please do not
	hesitate to contact us in the Investor Relations Department.
	Thank you and goodbye.

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