VIG 3M 2024 VIG Transcript Teleconference

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 EasteEurope which are working in

WesteEurope, in France, Spain, Germany, Austria,

returned home for the lockdown and not all of them went

back to WesteEurope.

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.