November 16 (SeeNews) - The Vienna Insurance Group sees a very big lever for sustainability in the insurance sector in the investment area and plans to further increase its investments in rail, wind and hydropower, as well as in green bonds, its CEO Elisabeth Stadler said a recent interview.
"Our business model is fundamentally a sustainable one, as we preserve values, primarily financial values that create security from one generation to the next. However, for us acting sustainably means more than just creating financial security," Stadler told SeeNews in an interview for the latest issue of the SEE TOP 100 annual ranking.
Another key area in which the insurance group will focus its efforts is its ongoing digital tranformation and strengthening its digital offerings, Stadler also said.
Following is the full text of the interview:
Q: The performance of the Vienna Insurance Group (VIG) during the pandemic showed strong resilience to unforeseeable events. What were the fundamentals of your strategy and did the pandemic make you revise your strategic goals?
A: It’s true, we can really say that we have navigated well through this extraordinary situation so far. I have already mentioned this in an earlier interview for SeeNews. It has been shown that people particularly appreciate protection and security in crisis situations. Our business model therefore proves its worth especially in such situations. People appreciate being well protected at such times, which is why we were confronted with almost no cancellations of insurance policies and we registered an increased interest in health insurance. What has also proven successful is that we have been pushing the digital transformation within our group for years. The already extensive range of digital services and products has been a great benefit for us during the pandemic. We have also consciously continued to strengthen digital offerings and will continue to do so. Another factor is our strategic orientation with a high level of diversity. It has been confirmed that our business model, with its broad diversity across countries, brands, distribution channels and products, is proving successful even in difficult times. We therefore did not have to, and do not have to, rethink our strategic goals.
Q: Extensive digitalisation activities paid off for all market players, VIG included, during the past year. Going forward, how do you plan to develop your digital services?
A: As part of our VIG 25 strategic programme, we plan to establish competence teams in the areas of innovation and digital technology within the Group and to encourage the active exchange of Group examples, thereby offering support in implementing initiatives in this area. We also want to use the rise of digital customer platforms as multipliers for us and address insurance needs there and thus also gain new digital customers. These can be car dealers, energy suppliers, communication providers or special online communities or similar platforms, where an insurance need is relevant.
Q: The performance of the Vienna Insurance Group (VIG) during the pandemic showed strong resilience to unforeseeable events. What were the fundamentals of your strategy and did the pandemic make you revise your strategic goals?
A: It’s true, we can really say that we have navigated well through this extraordinary situation so far. I have already mentioned this in an earlier interview for SeeNews. It has been shown that people particularly appreciate protection and security in crisis situations. Our business model therefore proves its worth especially in such situations. People appreciate being well protected at such times, which is why we were confronted with almost no cancellations of insurance policies and we registered an increased interest in health insurance. What has also proven successful is that we have been pushing the digital transformation within our group for years. The already extensive range of digital services and products has been a great benefit for us during the pandemic. We have also consciously continued to strengthen digital offerings and will continue to do so. Another factor is our strategic orientation with a high level of diversity. It has been confirmed that our business model, with its broad diversity across countries, brands, distribution channels and products, is proving successful even in difficult times. We therefore did not have to, and do not have to, rethink our strategic goals.
Q: Extensive digitalisation activities paid off for all market players, VIG included, during the past year. Going forward, how do you plan to develop your digital services?
A: As part of our VIG 25 strategic programme, we plan to establish competence teams in the areas of innovation and digital technology within the Group and to encourage the active exchange of Group examples, thereby offering support in implementing initiatives in this area. We also want to use the rise of digital customer platforms as multipliers for us and address insurance needs there and thus also gain new digital customers. These can be car dealers, energy suppliers, communication providers or special online communities or similar platforms, where an insurance need is relevant.
With beesafe, we have also founded our first purely digital insurer in our group with high future potential. It is our answer to a growing, digitally affine customer segment that I find difficult or impossible to reach through the usual contact channels. According to current analyses, this customer segment will reach an attractive size with considerable growth potential in the next few years. The pilot project was established in Poland with motor vehicle insurance, and once a customer base has been built up, it is planned to expand it to include other non-life products. Parallel to the implementation in Poland, other markets are to be jointly identified for the roll-out of the model, which can be based on an already tested digital model and an existing technological platform.
Q: VIG’s financial results so far this year show a return to pre-crisis levels. What are your expectations regarding your premium levels and profit in Southeast Europe (SEE) for 2021?
A: We do not split and publish expectations of our business developments for different regions. We have defined CEE as core market with 20 countries including SEE markets. We expect that the premium volume remains stable at the level of 2020 of about 10.4 billion euro and profit before taxes to be in the range of 450 to 500 million euro. It is quite clear that due to the economic expectations in the next years, the percentage of CEE participation will grow steadily.
Q: What are the financial parameters for SEE set in your programme for the next four years?
A: We have set the following goals for VIG 25 as a Group and thus for all our markets, both CEE and our special markets. Overall, we are aiming for a premium volume of around 12.3 billion euro by the end of 2025, which corresponds to an annual premium growth of 380 million euro, starting from the base of 10.4 billion euro in 2020. The combined ratio should remain below 95% until 2025. The solvency ratio of the VIG Group is expected in the range of 150% to 200% annually.
Q: VIG has said it aims to be among the top three actors in each market in SEE, except Slovenia, by 2025. How do you plan to achieve this?
A: We are already among the top three in most markets in the SEE region. We are considering both organic growth and possible acquisitions to achieve this goal. Here we will follow our strategy to buy only companies with a profitable outlook and fitting well into our business portfolio. In Croatia and Serbia, we are very optimistic we will reach the top three through organic growth. We currently rank fourth in both countries, we are very well-positioned in the markets and we have very successfully operating companies there. We see also growth potential both economically and in the insurance sector.
Q: The pandemic has sharpened companies’ focus on social responsibility. What environmental, social, and governance-related goals do you target?
A: Our business model is fundamentally a sustainable one, as we preserve values, primarily financial values that create security from one generation to the next. However, for us acting sustainably means more than just creating financial security. We see a very big lever for sustainability in the insurance sector in the investment area. We are increasing our investments in the direction of rail, wind and hydropower as well as in green bonds. We have also issued a sustainability bond in the amount of 500 million euro, where we invest in ecological and social projects.
The VIG Group is gradually withdrawing from the coal sector by 2035, thereby supporting the transition to a low-carbon future. We have adjusted our underwriting guideline and have not concluded any new insurance contracts for coal-fired power plants or mines since May 2019. Existing contracts will expire or can only be renewed in those countries where there is no governmental exit strategy from coal energy supply, if a credible exit plan from coal energy can be presented by the policyholder. In relation to the total number of corporate clients, our clients with coal risks account for less than 0.1%. Starting from this very low level, we have reduced coal risks by 74% since 2019 and this trend will continue.
VIG Group has also committed not to invest in any companies that produce or trade in outlawed weapons. These include biological and chemical weapons, cluster munitions including possible launching, firing and dropping systems, anti-personnel mines, nuclear weapons and uranium munitions. This is strictly checked, because even if a company’s involvement in the production of or trade in outlawed weapons is not clearly proven, the Group refrains from investing to be on the safe side.
The VIG Group’s own climate goals include making office operations in all of the Group’s approximately 50 companies climate-neutral by 2030 at the latest. To this end, each company is called upon to define and implement measures in its own office operations to avoid, reduce or compensate for CO2 emissions.
As part of the VIG 25 strategy programme, we want to develop new offers for inclusion in the product area that also include social and ecological goals.
We have also specified in the VIG 25 strategy that we want to create sustainable value for society, customers and employees. For society, for example, the social aspect includes promoting equal opportunities by supporting disadvantaged population groups. We grant every employee who is committed to a good cause or social institution one working day per year for this purpose, our Social Active Day. In 2019, our Group companies provided over 6,000 working hours for employee social engagement.
On the topic of customers, we have set ourselves a very specific goal. The decreasing solidarity within the population increases the importance for our customers to identify and be able to cover their personal risk and pension needs. We notice a lack of knowledge and understanding of the benefits of insurance in many of our CEE markets. This is linked to a low level of risk and protection awareness. The idea is to play an active role in promoting financial literacy through initiatives to raise awareness and knowledge, build networks and provide individual risk solutions, such as financial literacy training and apps, risk education in schools, employee programmes for companies. To this end, we aim to initiate awareness programmes in three quarters of our CEE markets by 2025.
To ensure that our employees remain appropriately qualified in ESG topics, an annual budget of up to least the average premium of the respective country of residence per employee will be invested in their education and training until 2025.