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ERGO in the Baltic States was profitable by increasing efficiency

November 18, 2013

According to an IFRS-based assessment, ERGO in the Baltic States in 9 months of 2013 wrote more than EUR 112 million premiums, which resulted in a growth of 5%. Positive result amounted to EUR 3.3 million profit. In the 3 Q quarters ERGO customers in the Baltic countries were paid 5.2% more claims compared to the equal period last year – EUR 63.3 million.

According to Dr. Bagdonavičius, Chairman of the Management Board of ERGO in the Baltic States, in 2013 was undoubtedly noticed significant population purchasing power and domestic consumption recovery factors which are leading to changes in consumer habits and a positive assessment of their financial future. “Both in
Estonia and Latvia as well as in Lithuania real wages grew faster than GDP. Growing consumption means that the residents give more money not only to necessary goods, but for home renovation and vehicle acquisition. The positive assessment of their financial capacity and easier mortgage offers are leading to increased investments in real estate. Increased consumption also had a positive impact to the growth of contracts and premiums in the insurance market. A recovery in the insurance market is also seen in the commercial segment due to increasing production-related investments, promoting engine and vehicle growth, which influences engineering and construction insurance coverage growth”, Dr. Bagdonavičius said.

In P&C insurance segment premiums of ERGO in the Baltic States totalled ca. EUR 80.4 million. Main drivers of growth in P&C segment were MOD, MTPL and Accident insurance. Excellent results were also obtained in life and health insurance segments totalling EUR 31.8 million written premiums with a growth of 17.7%. Such result was influenced by growing Life business volumes via bancassurane channel, especially providing Risk
insurance and Voluntary pensions via our partner-bank in Latvia. Increasing amount of annuities contracts in Estonia and Lithuania and fast growth in health insurance business contributed to the growth of life and health premiums as well.

The profit of EUR 3.3 million was influenced by an excellent technical and investment result as well as by decreased cost ratio. “Cost optimization is not a choice or an option in order to remain effective, profitable and
competitive. We cannot burden our customers with our internal administration costs, therefore we have to find ways and possibilities to become more effective and thus offering more attractive prices for our customers”, Dr. Bagdonavičius said.  

In the 1-3 Q of 2013 ERGO customers in the Baltic countries were paid EUR 63.3 million claim benefits. Within this period one of the biggest motor third party insurance claims in Latvia amounted to EUR 0.35 million. One of the biggest claims in Estonia due to MTPL claim came up to EUR 0.3 million. In Lithuania the biggest claim due to fire amounted to EUR 0.24 million. “Claims administration efficiency is one of the most important tasks, which can be achieved by creating simple and comprehensible claims administration processes. We seek for this process to become as simple and fast to our customers as possible. The law sets a maximum period of time for compensating damages and we comply with them, but of course, our aim is to compensate our customers for damages as quickly as possible as our surveys show that our clients have the expectations to get their claims paid in 7-10 days after they notify about the claim. Already in Latvia we compensate the health claim within 2 working days”, Dr. Bagdonavičius said.

Very pleasing results according to the market share have been achieved in Latvia. In Latvia in health and life segments ERGO grew faster than the market. The market share in health increased from 19.4% to 22.2%, in life – from 9.6% to 10.3%.

The subsidiaries of ERGO in the Baltic States – ERGO in Belarus, ERGO Invest and ERGO Funds – generated a profit during 9 months amounting to more than EUR 1 million, which is more than twice the profit from last year.  ERGO in Belarus wrote EUR 5.3 million premiums, twice more than during the same period of last year. 

Commenting the trends and prognoses of insurance market in the Baltic States Dr. Bagdonavičius emphasizes 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. The biggest challenge facing the insurance market in the next year will be the profitability. Achieving a positive technical result for companies will be a challenging task. Still, we forecast that the average premium will not increase due to the high competition in the insurance market, as in all countries there are new players in the market who are trying to win the insurance market. Insurance companies will offer new solutions to customers and increase the profitability by reducing internal costs. Here especially two
factors will become more important in the future: increasing the efficiency by using modern IT technologies as well as using the internet for communication and sales with our customers“, Dr. Bagdonavičius said. 

ERGO in the Baltic States

ERGO has been among leading insurance groups in the Baltic States and the only one to offer a complete
range of coverage including non-life insurance along with life, pension and health insurance. Premiums of ERGO Baltic totalled EUR 150.2 million in 2012. Last year customers in the Baltic countries were paid more than EUR 96.3 million for insurance claims. ERGO Insurance Group is also present in Belarus offering
services in the non-life sector. Over 550,000 customers in the Baltic States trust the services, know-how and financial stability of ERGO Group.

ERGO companies operating in the Baltic countries are part of the international ERGO Group – one of the largest insurance corporations in Europe. Worldwide, the Group is represented in over 30 countries and concentrates on Europe and Asia.

ERGO is part of Munich Re, one of the leading reinsurers and risk carriers worldwide.