Inuring more, responsibly

Dear Shareholders, Ladies and Gentlemen!

“We want to be a reliable partner for our stakeholders.” Sometimes this is easier said than done. I am therefore all the more pleased that we were able to demonstrate our reliability once again in 2021. With a more in premiums, profits and engagement and with the presentation of our new strategic programme for the period until 2025, we are reinforcing this objective.

We increased our premium volume by 5.5% in financial year 2021, thereby exceeding the EUR 11 billion threshold for the first time, while also earning a solid pre-tax result of EUR 511.3 million. Our well-known strengths – diversity, long-term thinking, flexibility and continuous improvement of the existing model – make us resilient and made this more in success possible. They helped us manage the effects of the ongoing pandemic. However, all of this is once again being put to the test by the current state of war in Ukraine. We have become even more closely united as a Group in the past two years and have proven our reliability under difficult conditions. This is all the more important in extreme situations such as those that currently exist in Ukraine. What matters at the moment is taking care of the people there, including our employees and customers. In addition to the human suffering, the conflict and sanctions can be expected to have far-reaching economic effects that are yet difficult to assess. We will also overcome this challenge together. Broad diversification across markets and lines of business and local entrepreneurship promote stability and allow us to provide mutual support. Our decentralised structure allows our companies to react quickly with solutions that are custom-tailored to market needs – even in extreme situations.

Improved combined ratio, higher dividend

In spite of the major natural disasters that occurred in 2021, due to our comprehensive reinsurance programme, which limited the net impact on our results to around EUR 90 million, our combined ratio improved to 94.2%. This success was due in part to sustainable efficiency improvements in our business operations. The pandemic also had a positive effect. The reduction in road traffic led to a favourable claims development in the motor line of business in 2021. Given the good business development, we are aiming for a clearly higher dividend than in the previous year. Specifically, we will propose a dividend of EUR 1.25 at the Annual General Meeting. This shows that the VIG Group is a reliable partner for its shareholders. It has paid a dividend every year without exception since 1994, even during the financial crisis 2007 and 2008, and recently during the COVID-19 pandemic.

Strategy update

After completing Agenda 2020, we introduced our new VIG 25 strategic programme that sets our course until 2025. VIG 25 was developed in a Group-wide process in close cooperation with the CEOs of all our insurance companies. Together we systematically analysed the current trends in the insurance industry. To meet market requirements and ensure further dynamic growth of the Group, targeted initiatives were established for the three focus areas of more efficiency, more customer proximity and more value added (detailed information in the VIG 25 strategic programme). We continue to focus on process optimisation and the digital transformation and are adding new areas of focus by expanding our business model beyond the insurance business. We already see great potential in the pension provision and asset management areas, especially in the CEE region. We are increasingly relying on the use of hybrid approaches and a combination of personal and digital contact for customer support. We want to increase our presence on digital platforms or even develop ecosystems ourselves where we can offer a wide range of services in certain areas, such as healthcare, housing and cars. This will increase our visibility and relevance to customers.

New structures

When new ideas are put in place, structural changes are also needed to adapt to the new requirements. We decided on three major structural changes during our strategic considerations of VIG 25. First, we reorganised our region. The focus remains on Central and Eastern Europe (CEE), where we include Austria as one of these 20 countries. Second, our future reporting will focus on six reportable segments, namely Austria, Czech Republic, Poland, Extended CEE, Special Markets and Group Functions, instead of the previous twelve. This streamlining improves the clarity of the information presented. Third, we have reassigned the areas of responsibility and country responsibilities at the Managing Board level and established additional positions. In addition to the CEO (Chief Executive Officer) and CFRO (Chief Financial and Risk Officer), the CIO (Chief Innovation Officer), COO (Chief Operations Officer) and CTO (Chief Technical Officer) coordinate their corresponding areas.

Growth in the CEE region and the Aegon acquisition

VIG 25 and related initiatives will assist us in achieving our newly formulated Group objectives. In addition to creating sustainable value, we also aim to further expand our leading market position in the CEE region. The medium-term objective is to be at least one of the top three insurance groups in each CEE country by 2025, with the exception of Slovenia. The planned acquisition of the CEE business of the Dutch company Aegon N.V., which was not yet finalised by the editorial deadline, is a major step in this direction. We signed a purchase agreement at the end of 2020 for the acquisition of companies in Hungary, Poland, Romania and Turkey. In addition to becoming market leader in Hungary, VIG will enter the life insurance market in Turkey with this acquisition. The asset management and pension fund business will also be significantly strengthened. The acquisition process has come to a halt for the time being, as the Hungarian Ministry of the Interior refused to provide the required approval. After intensive talks, we were able to negotiate a positive solution. In February 2022, we signed a cooperation agreement with the Hungarian state-owned holding company Corvinus. Our Group company Union Biztosító and, subject to the closing of the Aegon transaction, the Hungarian Aegon companies will be merged in several stages into a specially established Hungarian VIG holding company. Corvinus will hold a 45% interest and the VIG Group will assume operational management with a controlling majority interest of 55%. With the agreed cooperation we avoid lengthy, cost-intensive legal proceedings, achieve clarity and can make a positive contribution to the Hungarian insurance industry.

Sustainability objectives included in the strategy for the first time

The VIG Group published its sustainability strategy for the first time in 2017. We took another major step in 2021 by including sustainability or “ESG” objectives – i.e. efforts in the “Environmental, Social and Governance” areas – in our Group objectives. These include, among other things, offices largely climate-neutral by 2030, social involvement in local communities, promoting employee training and education and offering a wide range of products with social and environmental added value. In the investments area, increasing sustainable investments is very important to us. The VIG Group invests substantially in renewable energies. Our portfolio of green bonds has been growing over the past years to EUR 436.4 million by the end of 2021. In addition to investments in green projects, the investment criteria (sustainability bond framework) of the EUR 500 million sustainable bond we issued in 2021 also explicitly allow investments in social projects, which once again underscores our overall integrated view on sustainability.

Despite the war in Ukraine, in one of our VIG markets, which deeply concerns us, we will continue to manage the operational insurance business well as before. We aim to continue growing profitably in our home market of Central and Eastern Europe, both through organic growth and acquisitions. We believe in the long-term potential of the region and know what insurance can contribute. The VIG Group will therefore combine proven principles with new ideas to create even more sustainable value for all stakeholders. To protect what matters – health, old age provision, a planet worth living on and, in times like these, peaceful coexistence!

Elisabeth Stadler
Chairwoman of the Managing Board