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INTERVIEW - Bulgarian insurer Euroins eyes acquisitions in Poland, Czechia

INTERVIEW - Bulgarian insurer Euroins eyes acquisitions in Poland, Czechia Eurohold Bulgaria/All Rights Reserved

SOFIA (Bulgaria), June 13 (SeeNews) - Bulgaria-based Euroins Insurance Group (EIG), a subsidiary of Eurohold Bulgaria [BUL:4EH], is looking for acquisitions in key central European markets, like the Czech Republic and Poland, as part of its strategy to become a leading insurer in eastern Europe, Asen Christov, Eurohold Bulgaria's chairman said on Monday.

"Along with strengthening the group's position in the insurance market in Southeastern Europe, we are foreseeing expansion in Central Europe - Czech Republic, Poland. Our goal is to make Euroins Insurance Group the biggest independent insurance player in Eastern Europe," Christov told SeeNews in an interview.

Presently, Euroins operates in Bulgaria, Romania, Macedonia, Greece, and Ukraine and hopes to expand into central Europe in the short to medium term.

"Acquisitions are part of our way of life and help us diversify and improve the quality of our insurance portfolio in order to increase the share of the non-motor segments and achieve a more precise and detailed segmentation," Christov added.

In July 2015, EIG bought Greek life insurer Credit Agricole Life. In February 2015, the insurer purchased the business of Germany-based Talanx Group in Bulgaria and Ukraine. In 2013, it acquired the businesses of QBE in Bulgaria and Romania, as well as the operations of Interamerican in Bulgaria.

"The company is currently reaping the benefits of these acquisitions through portfolio diversification and shared best practices. Actually, we cover all insurance segments - life, health, property and casualty," Christov said.

He noted that Euroins' market share in Romania is almost 15%, in Bulgaria – about 7%, and in Macedonia – 9%, but provided no market share figures for Ukraine and Greece.

Acquisitions outside the insurance segment remain also an option for the company and the broader Eurohold group. In April, Euroins' affiliate brokerage Euro-Finance, also a subsidiary of Eurohold, together with UK-based Hanson Asset Management filed interest in buying Bulgaria's Victoria Commercial Bank, a wholly-owned subsidiary of bankrupt Corpbank.

"Euro-Finance is just a minority partner in this tie-up," Christov noted. "The goal is to develop Victoria Commercial Bank in the sphere of investment banking. The bank holds a license for operation in Luxemburg and the UK, which presents a good opportunity for the UK-based company and could provide Euro-Finance with addition revenue from the fees it will charge for its services."

REGULATORY ISSUES

Asked about his expectations for the outcome of the planned stress test of the insurance sector this year, Eurohold's chairman called it premature, saying that the regulator has not adopted two key law provisions that are crucial for the insurance companies - the provision about the financial reporting and the one about the technical reserves.

"This causes additional administrative chaos and does not correspond to the provisions of the Asset Quality Reviews' methodology and the new Insurance Code."

Following a similar system-wide stress test in Romania last year, the local financial regulator, ASF, recommended that Euroins, along with several other insurers, should strengthen its financial and solvency positions.

"During the last three years in Romania, the company has expanded and as a result some additional funds have to be paid in. Some data have been presented in Bulgaria that this is a result of insufficient capital. This is the truth. There is always a capital deficit in case of such business expansion and we did our best to provide it rapidly."

EIG has already paid 200 million lei (49.9 million/45 million euro) for the capital increase of Euroins Romania, complying with the business plan for improvement of its financial performance, approved by ASF.

According to this plan, Euroins Romania's shareholders might need to provide a second capital increase in the second half of 2016, depending on the company's financial results. If additional capital is needed, the funds will come from the capital increase of EIG by 100 million euro ($112.7 million), which has already been entered in the Bulgarian Trade Register.

At the end of last year, Eurohold's shareholders approved a proposal for an up to 100 million euro bond issue, with the proceeds to be used to raise the capital of Euroins. Eurohold is still in the process of finalising the private placement of the bond abroad, but in the meantime it secured an 82 million euro bridge financing to fund the capital increase of its fast growing subsidiary.

EIG expects a double-digit growth in premium income and net profit for 2016 on the back of a pick-up in southeast Europe's economy, which boosts the demand for insurance services.

"The economic environment and the insurance market are correlated. Strong growth of the insurance business is hardly possible without strong economic growth," Christov said. "Certainly, we are an example for an expanding business that grows much more rapidly than the average GDP growth of the region."

Eurohold Bulgaria shares closed 4.8% lower at 0.495 levs per share on the Bulgarian Stock Exchange (BSE) on Monday as 910 changed hands. The blue-chip SOFIX index, which tracks the 15 most liquid shares on the Sofia bourse, added 0.67% to 448.25 points.

($=0.8872 euro)

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