ERGO in the Baltic States in 2014: ahead of insurers with regards to NPS, growth of the market share and 17 times bigger profit

August 25, 2014

ERGO in the Baltic States is consistently growing both in GWP, profit as well as in size of the market share in some segments. According to an IFRS-based assessment, in the half year of 2014 ERGO amounted to EUR 2.5 million profit, which is 17 times bigger in comparison to the equal period last year (EUR 0.14 million in 1-2 Q of 2013). ERGO wrote more than EUR 77.6 million premiums, what resulted a moderate  growth (EUR 76.6 million in 1-2 Q of 2013) and increased its market share in health insurance segment from 19.1% to 19.7%.

According to Dr. Kęstutis Bagdonavičius, Chairman of the Management Board of ERGO in the Baltic States, all ERGO insurance companies in the Baltic States achieved excellent results, which comply with the profitable growth strategy of ERGO. “Excellent profit growth was related with positive technical result mainly due a decrease in our net loss ratio in P&C. Growth in GWP was mostly influenced by good development of Life and Health insurance business in all three countries. Life insurance business volumes are growing via bancassurance channels while growth in health reflects improving economic situation in the Baltic States. Both private clients and companies decide to purchase ERGO health insurance more often than previously”, said Dr. Bagdonavičius.   

Commenting the results separately in each country, Dr. Bagdonavičius stresses Estonia showing the best results in health insurance by growth of 58%, while Latvia has been the driver in increasing GWP in Life insurance by 22%. Lithuania influenced the biggest part of the profit in all three lines of business: P&C, Life and Health.

The market share of ERGO in the Baltic States is 12.3% after six months. In health insurance segment ERGO market share increased from 19.1% to 19.7%. ERGO in Latvia has significantly outperformed the market in P&C: while Latvian insurance market during 6 months grew by 9.4%, ERGO grew by 15.1%. Significant outperformance by ERGO compared to the market’s growth was fixed in ERGO health insurance in Lithuania: market share increased from 15.8% to 18.4%.

In the 1-2 Q of 2014 ERGO customers in the Baltic countries were paid EUR 37.7 million claims. Within this period even three large losses in 2nd Q amounted of net EUR 2.4 million.

The subsidiaries of ERGO in the Baltic States – ERGO in Belarus, ERGO Invest and ERGO Funds – generated the profits during the half year amounting to EUR 369 thousand profit. ERGO in Belarus wrote EUR 2.4 million GWP.  

Overviewing the successful half year results of ERGO in the Baltic States and the reasons Dr. Bagdonavičius emphasizes the focus to the costumers. “We identify Customer centricity as the key factor for long term profitable growth. In order to become even more a customer-centric and an efficient organisation we are developing strategic initiatives aimed to a deeper understanding of our customers: CRM, customer segmentation, mapping customer needs, process automatisation projects like e-claims, e-signature, establishment of lean processes, strengthening e-channel, etc. As a result of all these initiatives ERGO now lies considerably ahead of the most important competitors in all three Baltic States according to the Net Promoter Score (NPS)”, Dr. Bagdonavičius said.  

Regarding the trends and prognoses of insurance market in the Baltic States Dr. Bagdonavičius carefully forecasts the growth of Baltic insurance market. „Forecasts of ERGO in the Baltic States show that economy of the Baltic States is recovering as well the volume of P&C, life and health insurance businesses will continue to grow this year. However, the business environment remains difficult owing to the low interest rates and that will push risk carriers to focus more on insurance risk. We see limited and price driven market with long soft market cycles, too. As well the EU Sanctions implemented further trade and investment restrictions could have consequences on Baltic countries and insurance Industry”.

According to Dr. Bagdonavičius, Solvency II will bring significant impact to the insurance industry as competition will become even tougher. “All market players will be obliged to follow this approach, therefore, everybody will have to take into consideration costs for provision of capital necessary for business. The biggest impacts from Solvency II come from having to define risk appetite across all functions and cope the volatility in solvency capital requirements”, Dr. Bagdonavičius said.

“What insurance industry should use more proactively is digitalisation. Many business models can be replaced or improved by digitalisation, and we insurers have long since ceased to be just spectators on the side lines”, Dr. Bagdonavičius said.