The FINANCIAL -- Dr. Peter Hagen, CEO of Vienna Insurance Group (VIG), the leading insurance company in Austria and the CEE region, visited Georgia on 23-24 April, 2015. Vienna Insurance Group (VIG) is 100% shareholder of the local insurance company IRAO, which currently holds one of the top positions and has been operating on the Georgian insurance market for more than 11 years.
Over the years, IRAO has provided a serious contribution to the development of an insurance industry in Georgia, focused on health and non-health product lines. Moreover, IRAO strives to build its brand platform based on its membership and belonging to the VIG family, sharing its nearly 190 years of business experience and corporate culture. In the year 2010, VIG became one of the largest investors in the insurance sector in Georgia, in the frames of the Hospital Rehabilitation Governmental Program; it has contributed over USD 30 million to the Georgian economy.
The visit of the highest representatives of VIG underlines the significant role of both member companies IRAO and GPIH, and the growing potential of the Georgian insurance market itself."The Georgian insurance market has a lot of potential in terms of developing and introducing a range of business lines. We believe that we can contribute to the region’s strong development, bearing in mind our experience in Central and Eastern Europe. We are fully prepared to transfer our know-how and to provide top-quality insurance solutions for the people of Georgia," said Dr. Hagen, CEO of Vienna Insurance Group, in his exclusive interview with The FINANCIAL.
Q. VIG is the leading insurance company in Austria, and in the CEE region. What is VIG’s long-term strategy, and in particular what are your mission and values?
A. Our Group has more than 190 years of experience as a reliable partner for its customers. When we entered the markets of Central and Eastern Europe 25 years ago, we were strong believers in the potential of the “New Europe”. And our strategy paid off. In the 2014 financial year the CEE-based Group companies contributed 64 percent of Group profit. This trend continued in the first quarter of 2015. If you asked me to summarise our mission and values, I would say VIG stands for Value-Inspired Growth.
Economic success combined with a highly developed awareness of our responsibilities is what sets us apart. In our core markets, VIG’s market share is around 19 percent, putting us well ahead of our competitors.
Q. What are the main features that distinguish your work in each country?
A. Vienna Insurance Group operates in a region with about 180 million inhabitants that stretches from the Baltic Sea to the Black Sea and to the Adriatic. As an economic area, Central and Eastern Europe is made up of many extremely diverse markets. We have a presence in 25 countries, and in each of these markets there are specific issues that we are addressing. We have a long track record in the region, and we also have the knowledge and expertise to tackle any situation as effectively as possible and to achieve sustainable development, regardless of whether the markets are growing or stagnant.
Q. What is the main secret behind the creation of a multinational brand?
A. The multi-brand policy is one of VIG’s key management principles. We are reaping the rewards of a strategy that gives us a market presence with more than one brand in most countries. When acquiring a company, we usually maintain the established brand, which is well known to its customers. As a result VIG, along with its Group companies, is perceived as a local insurer. Vienna Insurance Group is the umbrella brand that gives clients the additional security of a listed International group with an excellent A+ rating with a stable outlook from Standard & Poor’s.
Q. How do you manage to compete on the markets where you have a presence? What are VIG’s main advantages?
A. From the very beginning, we have relied on the knowledge and expertise of our local partners, and have focused on developing our sales capabilities. Our managers have a great deal of organisational freedom and consequently a high level of responsibility. I still believe that local management is the key to catering to each customer’s requirements effectively and quickly, and to enjoy sustained success in so many different markets. This strategy enables us to grow during economic booms and to record solid performance when the economy is weaker.
Q. From an insurance perspective, what reforms would you like to see that will make it easier to do business in Georgia?
A. Georgia is different from many other insurance markets in Europe. The fact that motor third party liability (MTPL) cover is not mandatory and, does not play an important role in the insurance sector, is quite unusual for European markets. The introduction of compulsory forms of insurance would have a positive impact on the Georgian market and raise awareness of the insurance industry in the country. In addition, this could increase Georgia’s attractiveness for foreign investment and foster the development of its tourism industry.
Q. What is your view of the development of Georgia’s insurance sector, especially in connection with legislation on compulsory motor third party liability cover and pension reform?
A. The introduction of compulsory MTPL would be a very important step – both for the country’s economic development and of course for victims of traffic accidents – and socially beneficial for the population. Compulsory MTPL is the norm internationally, not just in Europe, so it would be a logical measure.
Motor insurance is one of the most promising lines of business. At present, only 7% of all vehicles in Georgia have comprehensive insurance and only around 6% have MTPL cover.
Pension reforms are an issue all over Europe, and Georgia is no exception. For insurers, raising awareness of the need for private provision is part of our job. Many people – including in Austria – think that the state is responsible for securing their future. But it will become more and more important that people start to provide for their old age themselves, in addition to government pensions.
Q. Currently we are witnessing quite a difficult situation in the region, in particular with the crisis in Ukraine. Have the recent uncertainties forced you to revise your outlook for the development of the business?
A. First of all I want to point out that we are aware that the Ukrainian people are suffering as a result of the political uncertainties and there are various activities within our Group to support people in need in the affected regions of the country. Business wise, we are quite satisfied with the development of our Ukrainian Group companies. They mainly operate in the west of the country and in Kiev. In 2014 premiums grew by around 16 percent in local currency terms and this trend continued in the first quarter of 2015.
Q. Could you give us a comparison of Georgia’s insurance market with other CEE markets? What are the main differences and similarities?
A. The Georgian insurance market differs from those in other CEE countries because the insurance industry has a specific structure in Georgia. As I mentioned before, it is fairly unusual that motor insurance and other non-life business lines account for such a small share of the market, whereas health insurance is very well developed.
Q. Now that you are one of the market leaders in Georgia, what is your strategy moving forward?
A. Maintaining market leadership is certainly more difficult than achieving it. Our strategy in Georgia – like our overall strategy – is to grow at a faster pace than the market average. We expect our Group companies GPIH and IRAO to remain dynamic players on the Georgian market, offering the best products and services for their customers.
Q. What are your plans for 2015 in the markets where you are represented, particularly in terms of net profit, growth in market share and so on?
A. Growing faster than the overall market is once again our clear objective for 2015. We will continue to concentrate on the CEE region. Even though we are currently in a period of market consolidation, we aim to expand our market share by means of organic growth. And if we identify a potential acquisition that would be a good strategic addition to VIG’s portfolio at a reasonable price, we will be quick to respond. We will remain true to our conservative investment policy in the future.
Q. What was the main purpose of your visit to Georgia?
A. The Vienna Insurance Group entered the Georgian insurance market in 2006 and since then IRAO and GPIH have developed very satisfactorily. It is also fascinating to see the progress of the entire country. So I’m glad that I’ve eventually managed to visit our Georgian companies, and to learn about the country’s rich culture and history.