Dear shareholders, ladies and gentlemen!
As a leading insurance company in Austria and Central and Eastern Europe, we especially stand out from other insurance companies during challenging times of high volatility and uncertainty: as a reliable partner for our customers, an attractive employer for our employees and a transparent, profitable company for you, our valued shareholders. VIG stands for Value Inspired Growth. In 2014, we proved that we can achieve this goal even when times are bad.
The Group wrote EUR 9.1 billion in premiums, close to the same level as the previous year, in spite of negative exchange rate effects, necessary optimisation measures in Italy and an intentional reduction in low-margin short-term single-premium business in Poland. In Austria, which continues to be our largest single market, Wiener Städtische generated above-average growth that compensated for the decline in Italy due to Donau Versicherung. Although exchange rate effects caused premiums to decline by 4.5% in the Czech Republic, when adjusted for these effects premiums rose by 1.3%, which meant that the Czech Republic remained our largest market in the CEE region. It was followed by Poland, where we continued to reduce our business in low-margin short-term single-premium life insurance products, thereby accepting a premium decrease of 9.5%. The Remaining Markets grew by more than 8.9%, the highest rate in the entire VIG Group. In the CEE region, performance in Albania, the Baltic States and Hungary was particularly noteworthy.
I am particularly pleased that the positive development of premiums was also reflected in VIG’s results of operations. Our underwriting result improved substantially in 2014, and profit before taxes rose 46.0% over the previous year to EUR 518.4 million, in spite of lower investment income due to the current low level of interest rates and a EUR 79 million write-down of Hypo Alpe Adria bonds. Moreover, Poland, Slovakia and the Remaining Markets provided their best performance to date. For the first time in years, Romania once again achieved a positive result. The Czech Republic achieved the highest profit before taxes in the Group, partly because the results in Austria were negatively affected by the write-down of Hypo Alpe Adria bonds mentioned above. This shows that our efforts to increase efficiency and profitability have truly paid off. The same applies to our combined ratio of 96.7%, which was significantly below the 100% mark in 2014. As a result of these positive developments, we will propose in the Annual General Meeting in May 2015 that our dividend policy be maintained by increasing the dividend from EUR 1.30 in the previous year to EUR 1.40 per share.
Vienna Insurance Group is excellently positioned in Central and Eastern Europe.
In addition to these operating successes, our entry into Moldova in 2014 expanded the group of markets in which VIG operates to 25 countries. This puts the VIG Group in an excellent position in Central and Eastern Europe. Our total market share of 19% makes us number 1 in our core markets and further expands our leading position.
We will continue to strengthen this successful position in future years and use it to achieve earnings-oriented growth. We aim to continue growing faster than the overall market, while maintaining our focus on Austria and the CEE region. The current low interest rate environment is expected to cause a decline in our ordinary financial result in 2015 that is not likely to be overcompensated by another increase in our underwriting result. In addition to our excellent capital resources and outstanding rating, we will also do everything in the future to safeguard the advantages that VIG offers. This fundamental attitude is also reflected in the title given to the newspaper included with this VIG Annual Report 2014: VIG is on “the safe side” – now and in the future.
With this in mind, I want to thank you on behalf of the Managing Board for the confidence you have placed in us. I would also particularly like to thank the around 23,000 employees of VIG for their outstanding efforts and commitment in 2014.
General Manager of VIG
Note: Detailed information on VIG’s business strategy is provided in the paper “The Safe Side” that is included with this report.