Manuel BAUER, Member of the Management Board, ALLIANZ SE
The business of insurance companies is a long-term business. We work with forecasts and rely on assumptions that might or might not become true in the future. To help us make sound business decisions a stable political and regulatory environment is essential. People buy P&C insurance today to prevent a potential loss in the future. The business of life insurance is a business where one makes a decision today that will pay off only in 20 or 30 years.
XPRIMM: How would you characterize the CEE's insurance market evolution, as a whole, in 2013?
Manuel BAUER: The
situation in Central and Eastern Europe remains persistently difficult.
Most economies in the region are relatively stagnant, so there is
little room for growth. The region as a whole saw almost two decades of
growth, which is now in jeopardy. Retrospective changes in structures
and increasing tensions could jeopardize the well-being of the region as
has a strong presence in the region, being an important player in most
of the CEE markets. From this perspective, which are the most
challenging aspects of doing business in the CEE markets?
M.B.: The Central and Eastern European countries are a diverse region with different market developments.
to our broad product portfolio we are uniquely positioned to adapt our
business to all of these diverse markets. Our strong presence in the
region gives us a considerable competitive advantage. We offer insurance
solutions that help improve the standard of living for large parts of
But there is a huge need to inform the
population on risks that can be covered by P&C insurance, risks like
natural catastrophes. Many people are not aware that they could easily
prevent financial losses from damage to their property by buying
insurance against floods or storms. People usually affected the most
live in rural areas and are not easy to reach out to.
could be said for life insurance and retirement planning. Societies in
CEE are aging and the more people learn about pension systems, the
clearer they understand the need for private old age provision. State
pension systems have come to a stage where one cannot just rely on money
being paid out by the state. This process of insight and learning
should be supported by governments, their official bodies and private
companies alike. Eventually, a great growth potential could be unlocked.
Another challenge is arising from growing economies. Corporate
insurance will be sought after as economies develop and infrastructure
projects lie ahead. Engineering insurance, transport and property
insurance are key areas of growth for corporate insurance.
CEE markets have been seen for many years as a growth reservoir for the
Western insurers, due to their double digit growth rates in terms of
GWP. However, from the profitability point of view, the CEE markets
proved more challenging. What is your opinion?
insurance companies decided to withdraw from certain markets, a clear
indicator that doing business in CEE remains challenging, with not only
margins under pressure, but additionally downward adjusted growth
expectations. The times of double-digit growth rates are probably a
thing of the past. Still, ALLIANZ is looking to further expand its
insurance activities in the region. Most important for us is that our
underlying business remains solid. This implies we have to follow a
selective approach in underwriting business; and in some cases it might
even mean foregoing a business. We are not willing to take risks that
can affect our profitability. But some markets are in the grip of severe
price competition. The pricing issue is our biggest concern in some of
the CEE market. In countries like Romania or Hungary we noticed a price
squeeze, especially in the motor lines.
XPRIMM: How would you characterize the evolution of your business in Russia?
is the largest market in the region by far, so for us it is a must. In
recent years, we have strengthened our presence by consolidating our
activities there under a single company under the ALLIANZ brand. This
has enabled us to both leverage the ALLIANZ name and to unify our way of
doing business in the company.
Across the board, the market is
seeing severely accelerating motor claims cost in the Russian market,
mainly driven by recently introduced changes in regulation. In addition,
as the ruble declines against the euro the replacement parts for
non-Russian brands of cars become more expensive. The biggest share of
our business in Russia is in the P&C segment and here in the motor
lines. But people are buying more and more insurance products that cover
for the loss of salary or wage following a car accident. We take this
as an indicator that people are getting more aware of the fact that they
can protect themselves against certain situations by buying insurance.
XPRIMM: Which is your assessment with regard to the future development of the CEE markets, in the short and middle term?
In the long run, and this is the timeframe we have to think in, this
region will continue to grow - moderately. For 2014 we still expect to
see growth as well but on a lower level. We have been operating in the
CEE region for decades and we are here to stay. When it comes to
strategy, we follow a certain steadiness in our strategy for each
Insurance penetration in CEE is still on a low level
compared to many countries in the rest of Europe. With rising income
people will want to protect what they have achieved, also during old
age. This will help us offer/sell our insurance and old age provision
That said, we will have to address challenges in some
of our markets. I have earlier mentioned the pricing issue in countries
like Hungary and Romania. In Russia, for example, there are many
different market players, both international and local, and not all of
them follow a long-term strategy. This makes it more difficult to create
trust among our (potential) customers. The market for life insurance is
underdeveloped, and, as life insurance is a long-term business, it is
even more important to create trust among our customers. After all, they
invest their money today and have to be sure that they get it back at a
later stage, often after 20 or 25 years, with a nice profit on top.
are optimistic about the region as a whole, even though it might take
some time for the insurance markets in the region to fully take off.
you say that the promising potential shown by these markets two decades
ago proved real? How far/close are the CEE markets from fulfilling
their potential from the insurance business perspective?
20 years ago the situation was different. There was a lot of enthusiasm
concerning the vast market potential, but the challenges that came
along were often underestimated. That said, we have indeed managed to
establish flourishing businesses in many markets, and the CEE region is
an important part of our overall presence in Europe.
Over the years, we have learned a lot. Now we continue to focus our businesses on profitable growth.
changes do you think would be the most important for the CEE markets in
order to provide a better environment for the insurance business'
growth and profitability?
M.B.: The business of
insurance companies is a long-term business. We work with forecasts and
rely on assumptions that might or might not become true in the future.
To help us make sound business decisions a stable political and
regulatory environment is essential. People buy P&C insurance today
to prevent a potential loss in the future. The business of life
insurance is a business where one makes a decision today that will pay
off only in 20 or 30 years. The nature of this business makes it even
more important to base today's decisions on reliable assumptions for the
In order to make it easier for us to reach out to our
customers and to make sure that our customers can get in touch with us,
technical infrastructure is important. Infrastructure investments, for
instance into broadband cable, would surely help many companies and
customers in Central and Eastern European countries.
example is our internet-based calculation tool to be launched soon in
Croatia. People will be able to insert their personal data including the
length of their working life, prospected retirement age, etc. The tool
calculates how much money needs to be saved on top of their state
pension in order to secure an adequate life-style during retirement age.
are your Groups' development plans in the region? Would the Group be
interested to further extend its activity in the former soviet
countries, beside its presence in the Russian insurance market?
is one of the biggest insurance companies in the region. We offer
insurance and financial solutions across nine countries: Bulgaria,
Croatia, Czech Republic, Hungary, Poland, Romania, Russia, Slovak
Republic, and the Ukraine. We are one of the few insurance companies in
the region that offer a wide array of insurance solutions to different
customers, from individuals to large corporations.
personal P&C, life and health insurance we are present with our
global lines that serve international travellers, investors and
corporations. These include ALLIANZ Global Assistance which provide
support and insurance for people with a variety of individual needs.
Then of course there is ALLIANZ Global Investors that helps people
realize their financial goals. Our unit ALLIANZ Global Automotive works
with car manufacturers to provide motor insurance through their car
dealers. And then, of course, there is ALLIANZ Global Corporate &
Specialty that insures major corporations and transport around the
world. This is a clear USP for ALLIANZ.
We are looking to grow
our business and intend to grow profitably. We would like to maintain
our strong market position in the P&C business and to further build
our life insurance business as well as our asset management business.
respect to other CIS markets: if opportunities become available, we are
always prepared to thoroughly assess them and decide in the best
interest of the shareholders.
For our customers, we would like to
be their partner of choice by providing outstanding products and
services. We are optimistic about the region as a whole, even though it
might take some time for the insurance markets to fully take off.
| Published on 27.11.2014