Investment with a safety harness
The unstable situation on the financial markets increases VIG’s resolve to continue its security-oriented investment strategy.
Sometimes speculation pays off. When it does, assuming a higher risk is rewarded with an above-average return. As mentioned, this pays off sometimes – but probably not always, and this is by no means a professional approach to take when it involves the investment made by an insurance company.
Safety first. When VIG invests its money, security is given top priority. Non-transparent investment vehicles are not permitted. The focus instead is on good credit ratings and stable investment returns. As a result, VIG invests primarily in European government bonds with sound budgets in good corporate bonds and in real estate. Equities, on the other hand, only account for around four percent of the portfolio. It is also important for the investment horizon to match the liabilities profile. And since insurance policies – particularly life insurance policies – tend to be somewhat long-term, the principle of conservative investment also includes long-term investment. The result is an asset mix representing stable cash flows and a steady growth in value. Rapid changes in value – in one direction or the other – do not fit this picture. In order to ensure this is not the case, VIG investment is subject to some security mechanisms – it could be described as a “safety harness” for the invested capital. Risk is managed among others using strategic asset allocation, with upper and lower limits for each asset class and each subsidiary. Limits and guidelines naturally exist across the Group. This applies to the holding company as well as the Group companies.
Sustainability. VIG also feels it has a duty to make appropriately sustainable investments. This means, for instance, giving preference to investing in local infrastructure projects. Other examples that can be named are our continued involvement in providing affordable housing in Austria, and our sustainable approach to energy and resources when constructing our own office buildings. We take the same line with our ongoing investment in CEE government bonds. In this way, the Group provides long-term capital for the funding needs of the region.
All’s well that ends well. In the final analysis, the investment strategy used by an insurance company must ensure that the company’s own long-term obligations can be met in full. This principle is given the highest priority when we make investments.