Tomasz CZALBOWSKI, Vice President of the Management Board, POLISH Re
POLISH Re has a strong position among the largest exporters of financial services in Poland. In 2007, for the first time in its 12 year history, more than half of the company’s written premium came from its operations outside Poland (53.4 per cent) and its value exceeded EUR 75 million. We are discussing about the achievements and future intentions of the reinsurer with Tomasz CZALBOWSKI, Vice President of the Management Board and Jacek KUGACZ, Executive Director.
XPRIMM: You have been awarded for two consecutive years the most dynamic
evolution in Eastern Europe. How did the business evolve over this period?
Jacek KUGACZ: We proved that you were right by assigning this award,
because Romania, along with Russia, was the country where we became the
most successful. In these countries business grew significantly and we
used that as a marketing tool. This aspect was noted by the market and,
obviously, we are eager to continue providing the best services and constantly
improve them to prove that we deserve this award.
XPRIMM: How do you see the results of POLISH Re in the CEE in the
first semester of 2008?
Tomasz CZALBOWSKI: We followed the pattern of development of the
previous year in terms of written premiums. Underwriting results are
according to the plan and capital position of the company is very good.
At the same time, we were affected by turbulences of the financial market,
the strengthening tendency of the Polish zloty that somehow affected
our results in the first six months.
Generally speaking, compared to the previous year, our evolution was
stable and the growth reached 10%, although it's difficult to compare
because some treaties are still in progress and on the different stages.
Last year we had two standards: financial statements (according to the
Polish accounting system) and international finance reporting system,
so the level of premiums depends on your calculation methods.
I just want to point out that, despite the tendencies of strengthening
of the Polish zloty (that affected us as exporters of financial services)
and other market turbulences our evolution was stable and up by 10% in
comparison with the similar period of the last year. More or less, this
is also due to our conservative approach to risks as well as a consequence
of the fact that we were not so much affected as other companies were.
Jacek KUGACZ
Executive Director
POLISH Re
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XPRIMM: How is the relation with the Romanian insurance companies
for the moment? How is your business in Romania?
J.K.: Romania is among the few countries where we have a significant
role on the market. On the other hand, we noticed that, in Romania, the
same tendencies are present like in many others countries; international
groups are coming in, buying companies, like GROUPAMA recently and others
that previously entered the market. So, this could affect our relations,
but we will continue our efforts to be accepted as security for the international
groups. This is already situation in some cases.
XPRIMM: Do you negotiate your contracts with each company from the
international groups or directly with the groups?
T.C.: In case we are accepted by a group, the acceptance is at group
level and then all the companies know that they can use our services
or, in some cases, it is just a group program like most of these international
entities have.
This is extremely important, because the tendencies of activity of the
international groups are not only in Romania or Poland but also in other
countries like Ukraine, Russia and other markets were we are present
on, so we have to focus on that.
XPRIMM: Which are the key factors that helped you achieve such good
results on the Romanian market? Which are your advantages against the
competition?
J.K.: For sure it was the excellence of our services and individual
approach for all the customers; we are an efficient reinsurer based in
Warsaw so we have lower fixed costs, compared to western companies, and
have no minimum premium requirements. One can say that each and every
client is important for us.
At the same time, we are closer to the clients, to the market, we provide
the best services and we are also involved in organizing different events
like technical seminars. For example, the last one we have organized
was at the beginning of September and the main topic was general third
party liability. Also, we intend to organize another technical seminar
in Kiev, until the end of this year. We try to provide our clients with
the latest know-how and expertise and sharing our experience.
XPRIMM: Besides Romania, which are your strategic markets?
J.K.: All markets of the CEE countries are very important to us,
but obviously there are differences between these markets, regarding
the number of companies, structure etc.
For example, two years ago our number of clients in Russia and in other
CIS countries was 58 and this year it is more than 90. So, diversity
is the key factor these days, as this also shows certain credibility
for the clients as well as for the insurance companies and brokers, it
shows how POLISH RE is seen on these markets.
Our presence on a market depends on the number of our clients and size
of the specific market, but we want to be a strategic partner for all
countries of CEE, South Europe and CIS.
XPRIMM: You have to "fight" then with the tendencies of market concentration
- many companies are merging, being bought by international groups and
probably it's much harder to work with one big client...
T.C.: That is correct, but we have closely analyzed the evolution
of the market, and we have managed to convince our clients a few years
ago. Companies that belong to international groups are pushing their
parent companies to include POLISH Re, as a security, despite the fact
that we don't fulfill their criteria of "A-".
It's very important that local companies are really supporting us; without
their support we wouldn't be accepted by the groups.
So, we are accepted by some companies, some international groups, but
we still have to work on that. Obviously, this is the tendency and we
have to find the solutions, we will certainly manage to achieve our objectives,
and the upgrade of POLISH Re's rating will be very helpful.
XPRIMM: What are the relations with the Ukrainian insurance companies?
They were used to reinsure their risk mostly on the Russian market. Was
it difficult to convince them to work with POLISH Re?
J.K.: In my opinion, we are seen by the Ukrainian players as a western
reinsurer, but first of all, we are seen as local partner. They can communicate
with us in Russian, we know the market and we have been working in Ukraine
since the very beginning, in 1997. Also, we used to be the shareholder
of local company (Skide-West) that became PZU Ukraine some time ago.
We proved that our interest in Ukraine is strategically important and
we have a good competitive position here and on other CEE markets.
XPRIMM: In terms of business, does the Ukrainian market nowadays give
you more business than the Romanian one?
J.K.: Generally speaking, Romania, Russia and Baltic States are the
most important from premium volume point of view; Ukraine is among the
TOP-7. I would like to underline that last year for the first time ever,
the premium volume from abroad was higher than the premium from the domestic
market, and amounted more than 53%. The gross written premium volume
for last year was EUR 75 million; from Poland that was EUR 35 million,
while the rest was achieved abroad. What is important is the fact that
Polish market also increased last year by 10%, but a much higher increase
was seen on foreign markets. So, our tendency is to expand and to develop
on the foreign markets, which have a high potential. We need to expand
further our client-base, especially in the light of our new potential
shareholder, that will permit us to develop new lines of business.
XPRIMM: What about Russia, is there a strong competition? They do
have some important domestic players...
J.K.: Yes, it is, but I wouldn't say that the Russian reinsurance
companies are playing a very important role. A much more important role,
in terms of inward reinsurance, is played by local insurance companies.
Obviously, the competition there is quite big, especially now. We have
to compete with big local companies, especially because there internal
reinsurance is very developed; the companies are reinsuring the risks
between themselves. So this is a factor that is taken into account when
they are placing the risks. Potential competitors are SCOR, HANNOVER
Re, SWISS Re, as well as major local insurance companies, depending on
treaties and limits.
XPRIMM: What can you tell us about your new potential shareholder?
T.C.: The transaction has started; our company has a status of public
company but is not listed on the Stock Exchange. We tried to list it
but due to the weakness of the financial market and the fact that the
company did not achieve a satisfactory issue price we abandoned this
process. FAIRFAX decided to make a public offer (call) to acquire up
to 100% of the POLISH Re and the transaction just started. I can tell
you that the expected value of the transaction is about USD 72 million.
According to the announcement Fairfax has received so far commitments
to tender to the offer from shareholders holding approximately 47% of
the shares of Polish Re.
XPRIMM: Do you think this is a good thing for the company?
T.C.: Yes, we are very glad that we could be in this very reputable
and strong, well-known financial group. We discussed with our rating
agencies and it seems that after completing the transaction there could
be moves towards an upgrade, which is very important for the future development
of the business.
XPRIMM: Do you think that FAIRFAX will continue the same strategy of
expansion on CEE markets?
T.C.: Yes, for sure, they see POLISH Re as a long-term solid platform
to expand in this part of the world.
XPRIMM: What are the goals for the next period?
T.C.: We want to follow the path of development that we have today;
we also have to discuss with new shareholder about its intentions, probably
it will occur at the beginning of next year. We will be still focusing
on business quality and profits from our core underwriting activity.
In 2008 we hope we will be up by 10% in gross written premiums; after
that, it will depend on FAIRFAX which we believe is focused more on quality
and profit than on an increase in premiums. Also, we expect a certain
upgrade in ratings. This will help us run the business well; it will
also be a good sign for international groups, for the clients and brokers
that we are moving in the right direction at the moment.
We were assigned four years ago with a "BBB-" rating by S&P,
outlook "stable", and after four years we are at the same level.
Recently, when the information about FAIRFAX was made public, we were
put by S&P credit watch positive, which is the first step to make
the change of outlook and then to upgrade the company's rating. We are
on a good path, and in the Monte Carlo the news were accepted with great
pleasure by brokers and our partners. Fairfax is known of doing very
good investments also during tough times of turmoil on the financial
markets world-wide as nowadays. For sure, this acquisition of POLISH
Re will reinforce our position as the leading reinsurer in the Central
and Eastern European Countries.
XPRIMM: Thank you!
Editor: Vlad PANCIU, Oleg DORONCEANU
| Published on 13.11.2008 |
