Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the Vienna Insurance Group conference call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please make sure your phones have the DTMF tones activated in order to register for a question. Please press the star key followed by zero for operators. I would now like to turn the conference over to Nina. Please go ahead.
Welcome to everyone, and a warm welcome for this afternoon. Today, Liane Hirner, our CFO, will guide you through the presentation, and Harald Riener, member of the Managing Board, who is in charge for the countries, the Baltics, Poland, and the Ukraine, will speak about the planned mergers in Poland. The members of the board, including our Deputy CEO, Peter Höfinger, are ready to take questions after the presentation. I now hand over to Liane. Please go ahead.
Good afternoon, ladies and gentlemen, and also welcome from my side to our update of the first nine months of this year. In today's presentation, we will share the group's, the growth written premium developments and our solvency ratio development. In addition, we will focus on strategic topics and the recent announcement for selected markets. Let me now start on page 2 with a short reminder of our ongoing strategic program, VIG 25, with which we are optimizing, enhancing, and expanding our business model. The strategic objectives are unchanged. VIG intends to expand its leading market position in CEE, and wants to be at least among the top three in each of its CEE markets, except Slovenia. Another of VIG's goals is to create sustainable value based on a strong solvency position.
Sustainability objectives with respect to the environment, society, customers, and employees complete our overall goals, and I will talk about the newly established group-wide sustainability program in a minute. Before doing so, I would like to shed some light on the pillar called CO³, standing for communication, collaboration, and cooperation. It's a newly established department that shall boost cross-border knowledge sharing, as well as intensify the cooperation between VIG companies active in the same country. Our intention is to introduce new ways of networking within VIG and to enhance structure and visibility of the know-how and best practice transfer within our group. In a fast-changing environment with increasing customer expectations, it is, to our expert opinion, essential to strengthen the exchange between group companies and to make best use of the vast experience throughout our whole group.
With CO³, we are professionalizing and institutionalizing this exchange to the benefit not only of VIG, but also of customers and stakeholders overall. This brings me directly to slide three. Talking about benefits for VIG and its stakeholders, we have to talk about our sustainability program. VIG's definition of sustainability is creating economic value today without doing so at the expense of tomorrow. Based on our business model, the sustainability program defines six spheres of impact. The three areas on the right side of the slide focus mainly on environmental issues. For both asset management and underwriting, the overall objective is to reduce emissions in portfolios to net zero by 2050. For our own operations, the goal is to be climate neutral already by 2030, aiming towards net zero by 2050.
In the areas of the left, employees, customers, and society, the main focus is on social aspects. Everybody nowadays talks about the importance of financial literacy, which we fully subscribe to. For us, as insurance, risk literacy is even more important. A representative study of nine of our CEE markets, conducted by Gallup International on behalf of VIG, has shown significant deficits in the risk perception. Going forward, and as part of our sustainability program, VIG, in collaboration with its group companies, will address this topic and contribute to increasing risk literacy in the CEE region. At the moment, we are in close contact with our group companies in order to discuss and to define the KPIs to measure the achievement of our objectives in the six areas, and we will report on this next year.
Now, after this short strategic overview, let's move on to the gross written premium development for the first nine months of 2023, which we show on slide 4. The trends already seen at the half year, this year persisted. Thus, we are able to report double-digit premium growth also for nine months, and VIG achieved an overall gross written premium volume of EUR 10.6 billion. Strongest contributors of the increase were the segments Extended CEE and Special Markets. In the segment Extended CEE, we see Hungary, the Baltics, and Romania as the main contributors of the double-digit growth, whereas the Special Markets, Czechia, especially the life business, is driving a strong growth. With regard to the other markets, Austria and Czech Republic, both showed sound premium developments, driven by non-life business and health insurance.
While regular life premium business is growing, the single premium life business in both markets further declined. Growth in Poland is mainly driven by Casco, other property, and the life single premium business, but positive developments are also recorded in the life regular and the health business. These overall positive developments in premiums give us confidence for the year as a whole, and it shows that our group companies are really doing very well. With this, I would move on to slide five, and the good news regarding the increase of our stake in the Hungarian business. In the view of time, I will not go through the history of the participation of Corvinus in detail. You have a brief overview on the left of the slide number five.
Over the past year and a half, the collaboration has worked very well, and trust and mutual understanding developed and increased. When we were offered the opportunity to acquire a 35% stake back from Corvinus, we decided to increase our stake to 90%, as we believe in the long-term potential of the Hungarian market. Corvinus keeps a 10% stake, and we will continue the successful cooperation and further develop the Hungarian insurance market together in the framework of a strategic partnership. As the parties have agreed not to disclose the purchase price, I would like to state here that the purchase price got determined by an independent company valuation, effected by a renowned audit company based on the current market situation.
With this, I now hand over to my fellow board member, colleague, Harald Riener, who will talk about Poland, and he will give you more insight on the planned mergers of our group companies in this country.
Thank you very much, Liane. Very warm welcome from my side. It's a pleasure to present such an interesting market as Poland here today, and I would like to give first an overview on slide 6. We have a population of about 38 million, and the young generation being extremely tech-oriented, the market offers considerable potential. After Austria and Czech Republic, Poland is the third largest segment in our portfolio. Insurance density, this is the amount spent per capita for insurance, totals 410 EUR in Poland. This is less than half of the weighted average of the VIG market, and in combination with GDP growth from 2024 onwards, the attractive basis for our activities in Poland. VIG, which has been in Poland for 25 years, is currently number four on the Polish market, with 9% market share.
PZU is undisputed market leader, holds a market share of 35%. After the closing of the acquisition of the Aegon entity in Poland, we have got three non-life insurance companies, Compensa, InterRisk, and Wiener, and three life insurance companies, Compensa, Vienna Life, and Aegon. Given this competitive market environment, in order to increase both insurance service revenue and profit going forward, we decided to concentrate our market presence from 6 to 3 insurance companies and to join the forces to strengthen our market position in Poland. On slide 7, that we are going to merge Compensa and Wiener into one non-life company called Compensa. InterRisk, at the same time, will continue to operate independently. Separate project stream, all three life companies will be merged into one life entity.
Of course, in line with the multi-brand strategy of VIG, we will use the one or other brand also going forward, independent of the company name, as a sales brand. By joining forces, we want to create stronger and bigger players on the non-life and life side that are attractive for customers, sales partners, and employees. Alongside the implementation of the legal steps for the merger, the project teams, local managers, together with VIG experts, are working on the target operating models for the non-life and the life company. The goal is further profitable growth as well as increased efficiency, competitiveness of the entities in order to strengthen our market position. The leading mergers are, of course, subject to approval of the Polish supervisory authority and are expected to be completed in the second half of the next year, 2024.
Fully implemented target operating models for both companies and to re-realize the synergies of the mergers, it will take longer. So much for the overview on the planned mergers. I would like to hand back to Liane for the executive summary.
Thank you, Harald. We now have summarized the key takeaways on slide 8. When we published our earnings expectations for this year in mid-August, guiding group profit before taxes in a range of EUR 700 million-EUR 750 million for 2023, we already mentioned the dampening effects of severe weather events. Weather-related claims in the first 9 months of 2023 came in at roughly EUR 460 million gross, already exceeding the full year level of 2022. After reinsurance, we are taking, we are talking about an amount of roughly EUR 270 million. Nevertheless, based on the ongoing strong operative performance of VIG Group companies, VIG is fully on track to meet the expectations for 2023. As of today, we even expect profit before taxes on the upper end of the target range.
A confidence that we also put in writing on our outlook slide at the end of the presentation. Before we get there, however, I would like to highlight first, the confirmation of VIG's excellent rating of A+ with stable outlook by Standard & Poor's. And second, the increase of our solvency ratio, including transitionals, as of end of September 2023, to strong 304%. Over the page, on slide 9, you see own funds and SCR at end year-end 2022, and as of end of September 2023. The solvency ratio as of end of September 2023 experienced a very positive impact, mainly coming from our Austrian group companies. With increasing yields on the long end of the curve, the traditional life insurance business becomes more profitable.
This led to higher loss-absorbing capacities of technical provisions and a decreasing SCR. In combination with the increase on funds, this led to a solvency ratio, including transitionals, to strong 304%. Excluding transitionals, the ratio stood at about 277% as of end of Q3. Based now on this really strong capitalization of the group, VIG on Monday, this week, released its new dividend policy that we have added to the outlook for this year on slide 10. Participation of shareholders in VIG's success is a priority for us and has always been a priority for us, and we have paid dividends every year without interruption since our initial listing on the Vienna Stock Exchange in 1994.
With regard to dividend continuity and predictability, we aim to pay in the future a dividend per share that is at least equal to that of the previous year and increases continuously depending on the operating earnings situation. The proven resilience of our business model will thus be reflected in the dividend payment going forward. For 2023, this means a dividend per share of at least EUR 1.30. The final dividend proposal will, as also in prior years, follow together with our preliminary results for 2023. Now let me end my presentation with the confirmation of given outlook. Based on the solid performance expected, we expect profit before taxes for 2023 on the upper end of the given target range.
Thank you very much, and now my colleagues and I are available for any questions you might have.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. Please make sure your phone sets the DTMF tones activated in order to register for a question. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making a selection. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question comes from Youdish Chicooree from Autonomous Research. Please go ahead.
Good afternoon, everyone. Thank you for taking my question. I'll just kick off with probably three questions first. The first one is just on the momentum in growth written premiums. I'm just wondering if you could split the growth you've reported by segment, like, in terms of P&C and non-life. And probably indicate whether in your P&C market at the moment, whether you feel that pricing is adequate compared to inflationary pressures. So that's my first question. Second question is on Poland. I think in the past you've talked about pricing in motor being challenging, but yet when I look at the premium growth figures, it's quite strong at 16%. So maybe if you could provide some color on the underlying drivers, please.
And then, linked to Poland, in terms of the mergers, like the objective there is to basically broaden your product offering. But I was wondering whether there are major opportunities to actually generate cost savings in those markets. I mean, if we could tackle this question first, and I've got a final question on solvency, I can come back to it later. Thank you.
Thank you, Peter Höfinger here. I take your first questions. If we look on the performance of our gross written premiums, we see a bearish development in single premium. So currently in our region, single premiums is not really taking off. It's negative. The other hand side, if we look on life regular, life regular is positive developing. This has also very much to do with our cooperation with Erste Bank, where life regular is quite an attractive product for the banking channel to be sold. If we go to non-life, we see in all lines of business a positive development, a growth. The highest dynamic we see in Casco.
This has to do on one hand side with rising prices of new cars, and therefore automatically the increase of our premiums, but also in some of our markets with a higher new car registration. Still some delays out of COVID times, which we have seen this year coming in the new cars year. If we look on the pricing development in our markets, and this in relation to inflation, one has to say that our for our region, inflation is not such a new thing than maybe in Western Europe or in the Western world. In all of our markets in the last 30 years, they have experienced times of inflation. Therefore, our management is quite well experienced in dealing with it.
We have clear mechanisms in place to immediately mitigate the issue of claims inflation. Also, having in Central Eastern Europe, mainly one-year contracts, which allows us to immediately increase sum insureds of our insurances, and therefore reflecting it in our premiums. We do feel comfortable currently that pricing developments we can tackle with the inflation topic. I have to say one thing, this is in Motor TPL, Motor TPL being a long tail business. So also believe that we are well prepared there, but when it comes to bodily injuries, it takes longer to see the effects there, and there is a certain salary inflation, and the salary inflation has an impact on the compensation in bodily injury.
In some of our markets, there is calculation methods depending on minimum salaries in the market. They have been increased and we cannot predict how this will further increase in the months to come. So there is a certain uncertainty in Motor TPL when it comes to bodily injuries.
Thank you. Thank you very much.
Second question, Poland and the growth. The growth is coming strongly out of the Casco and the property area. Also, health is growing. The situation in the MTPL market is still challenging. And here, the group is currently on a stable position. So the growth coming mostly out of Casco, property and health. Concerning the cost savings, we see here, so number one, merger is, of course, subject to approval of the Polish supervisory authorities. And the process of the legal merger, we expect to be completed in the second half of the next year. Midterm, we would expect a saving potential in the double-digit EUR million area, around EUR 20 million.
In terms of, you mean, on the cost side?
Yes.
All right, great. Thank you very much.
Thank you.
The next question comes from Bhavin Rathod from HSBC. Please go ahead.
Hello, good afternoon, and thank you for taking my questions. I have 3 on my side. The first one would be on your revised outlook, which you now expect at the upper end of the previous guidance. So just trying to understand what has changed since the first half of 2023, and what's driving that optimism? And then related to that, would you say the overall weather losses at 9 months were broadly in line with what you expected when you dictated those guidance? The second one would be on your dividend policy. I wanted to understand, how should we think about the growth in the dividends going forward now?
Would you say that we should be thinking about the growth based on the evolution of the IFRS 17 operating earnings, or would you recommend to look at the local accounts, when we should think about this dividend growth? The third and the final one would be on your reinsurance strategy for next year. A lot of the peers are reviewing their reinsurance policy, given how the reinsurance rates have evolved. But how are you thinking about your reinsurance protection for next year? Thank you, so those will be the only questions that I have.
Thank you. Peter Höfinger here again. I will start with your last question, reinsurance. Yes, we see a hardening of the market over the last three years. We do have quite some advantages when we go to the reinsurance market. On one hand side, we have group programs with the national modeling companies, and we are offering global reinsurance companies with one signature to get the leading portfolios of Central Eastern Europe for their global diversification at low cost efforts from the reinsurance companies, and this gives us an advantage in bargaining. We are not changing our general reinsurance approach, so we stay on a conservative basis. On local programs, we see a gradual increase of our self-retention.
On one hand side, driven by the reinsurance market, but on the other hand side, also very much driven by our portfolio growth, which logically is also then reflected in a higher retention. But overall, there is no change in our general reinsurance approach. Being willing to be quite conservative, ceding quite an amount to the reinsurance industry to reduce volatility on results of large nat cat or man-made losses.
I'd like to take your question number one and two. With your question regarding the outlook, which we gave in summer this year, between EUR 700 million and EUR 750 million. All the assumptions we took when we formulated this outlook now turned out also to be the same in reality, especially when it comes to nat cat and weather-related claims. So this gives us very much the confidence that we also, in the end of the year, will stay within this range, and even we will end up in the upper end of the target range. The dividend policy is based on the IFRS 17 group results, as it was also in the past.
As I already mentioned, we have been paid dividends since 1994, and we, all our, investors, participate on our success and on our results. So with the outlook for 2023, in the upper range of the guidance, we decided that we have the dividend of the last year as the minimum dividend. And if everything turns out as expected, I would, as in past, as in the last years also, would expect that the dividends will increase. But as I said before, the final decision will be taken in February when we do the preliminary results, because the year is not over. I hope this answered your quick question.
Yes, it does. Thank you so much.
The next question comes from Thomas Unger, from Erste Group. Please go ahead.
Yes. Hello, good afternoon. Thank you also for taking my question. I would like to follow up on the dividend policy. Is it correct that you essentially introduced a floor now, the prior year's DPS is the floor for the next year, and that is independent of operating earnings situation, right? The increase will depend on the operating earnings. Since you essentially introduced the floor to the dividend, should we expect the increases to be more gradual and not follow the development of earnings on a year-to-year basis? Because, based on your guidance, that for 2023, that would mean an increase of 30%-40%. That's my first question.
Second one would be on Signa, and if you could tell us about your current exposure to Signa, and what measures do you expect to take in the Q4 of 2023 especially on the bond that you're still holding? And then thirdly, on weather-related claims, if you could just give us the comparative figure of last year's nine months weather-related claims, and also for Q3 in 2022 and Q3 in 2023. I'd appreciate that. Thank you very much.
Peter Höfinger, I will start again with your last question, weather-related claims. Last year, in the first three quarters, we had EUR 320 million and around EUR 230 million net. If we look on the weather-related claims of this year, approximately 50% of the total claim sum, which was mentioned by Liane, was affected in the Q3 .
I'm happy to take your follow-up question on the dividend policy. You understood correctly that we introduced a floor with the prior year BPS. The increase will depend on the operating earnings, on the development of the earnings. Overall, I would say we have also shown in the past, and we will continue to stick to our conservative long-term view and approach. I would rather expect a more stable or gradual development of the dividends in the future. Your question to our exposure of Signa, we have a bond in our books with EUR 50 million. So compared to our approximately EUR 3.35 billion overall investment portfolio, it's rather minor or immaterial, not substantial for us.
The final decision on the impairment, we will take at year-end, but when you take the current developments into account, I think it's quite clear where the decision tends to go. But it is, it's not something that is substantial or material for us. So no big, big thing.
Very clear. Thank you very much.
Ladies and gentlemen, as a reminder, anyone who wishes to ask a question may press star followed by one at this time. We do have a follow-up question from Youdish Chicooree from Autonomous Research. Please go ahead.
Thank you. Thank you very much. Yes, yes, I've got a few, couple of more questions. The first one is on, you know, the financial performance indicators, which you said you are reviewing. So I was just wondering what the plan is, whether you were planning to give us some key KPIs or key targets sometime early next year? Because, you know, the reason I ask is when the process of, you know, formulating IFRS 17 estimates, and that would be quite handy. So any indications on the timeline, that'd be helpful. And then the second question is on just on solvency capital, and considering it's very strong, and you've just, you know, issued a new dividend policy.
I'm just wondering whether you, you are actually open to distributing some excess capital to shareholders, be it in the form of special dividends or even through a share buyback? Or, or, or rather, is it fair to say you would rather be happy to wait for the right M&A opportunity to actually deploy the excess? Thank you.
Thank you for your question. So, regarding our KPIs review, we are, of course, thinking of or discussing on, on future KPIs. From today's point of view, I can give you an indication on the timeline. I expect that we release new KPIs in the Q1 , 2024. So we will have, of course, when we finalize this year-end, then even more indications on, and numbers to be able to define the new KPIs.
Regarding solvency capital and our dividend policy, of course, we have a high solvency capital ratio, but I also explained that it very much comes out of the Austrian guaranteed life insurance book and the related interest rate increase, especially in the last quarter on the long end of the interest rate curve, which showed or turned out in this strong solvency capital ratio in the group. We have no plans for a special dividends or share buybacks in the moment. Overall, I think the situation, the macroeconomic environment, is still quite volatile, so we are happy with this solvency ratio. And, as always, M&A is something we are...
Our M&A department is always very busy, and we are open to M&A as always in the past to also grow inorganically.
All right. Thank you. Thank you very much, for your answers. Thank you.
There are no further questions at this time, and I hand back to Nina for closing comments.
So ladies and gentlemen, thank you for your interest and for listening in. If you have any further questions, please do not hesitate to contact me or my team in Investor Relations. Goodbye from Vienna, and with Christmas fast approaching, best wishes for the upcoming festive season. Goodbye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.