Ladies and gentlemen, welcome to the VIG Update for the First Three Quarters 2024 Conference Call and Live Webcast. I'm Sandra, the Chorus Call operator. I would like to remind you that all participants are in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions in writing via their chat field. For operator assistance, please press star and zero. The conference will not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Nina of Investor Relations. Please go ahead.
Thank you, Sandra, and welcome to today's Vienna Insurance Group Conference Call. Liane Hirner, our CFRO, will guide you through the presentation. After the presentation, Peter Höfinger, our Deputy CEO, and Liane Hirner will be happy to answer your questions regarding the nine months 2024 update. Liane, please go ahead.
A warm welcome also from my side for our update of the first nine months of this year. In today's presentation, we will share, in addition to the gross written premiums and solvency ratio, also the IFRS 17 KPIs: insurance service revenue, profit before taxes, and net P&C combined ratio. Overall, the three quarters of this year were characterized by the strong operational performances of our group companies. With gross written premiums up by 8% in nine months 2024 and insurance service revenue increasing by 9.3%, we continue to deliver growth not only in the top line. Profit before taxes growing by 8.5% as well. Despite the impact of Storm Boris, the Central Europe NatCat storm flood event in September underpins our strengths and resilience. VIG's group reinsurance program limits the estimated gross losses of approximately EUR 600 million from Storm Boris to EUR 70 million net.
Most affected markets are Austria, the Czech Republic, and Poland. Speaking of Poland, I will come to the successful merger in Poland on the next slide. But let me first mention North Macedonia, where we as a group are the number one insurer. We have merged two companies in North Macedonia. Winner Non-Life and Macedonia Insurance will operate together under the brand name Makedonija Osiguruvanje, taking care of the nonlife business, while Winner Life will continue to operate independently and offer life insurance. Last week, our main shareholder celebrated the group's 200th anniversary. For VIG, as listed group holding the IPO on 17th November 1994, was a major milestone, which we highlighted with a special website and a separate LinkedIn campaign. Compared with the group's long history, our stock market history is relatively short, but we are determined to make it as successful and as long-lasting as the group itself.
Turning to slide four, constantly working on growth and efficiency and supporting the development of our group companies and the markets they are active in is part of the success story of VIG. The completion of the announced mergers in Poland is one example of how we are achieving this. In view of the specific market situation in Poland, where PZU is the number one insurer with a market share of roughly 35% and is more than twice as big as the number two insurer on the Polish market, the three VIG companies, currently number four in Poland with a combined market share of 9.4%, are set to improve sales and to expand the market position after merger.
Looking now at the macroeconomic outlook that we show on slide five, Poland's expected GDP growth rates of 3.7% in 2025 and 3.3% in 2026 shows a positive economic environment that we want to take advantage of. In general, the CE markets are expected to perform well despite the downward drag from Germany, based on strong private consumption and supported by foreign direct investments, especially in the Western Balkans. That can be seen in light of nearshoring trends following the supply chain issues experienced in many industries. On the right-hand side of the slide, we show the average annual real GDP growth for the period 2024- 2028 from the Institute for Advanced Studies in Vienna, which also expects Romania, Poland, and Hungary to grow at average rates above or around + 3%.
All this, combined with falling inflation and real wage increases, underpins the attractiveness of the region and confirms our commitment to CE. Now let's move on, the next slide, to the details of our first to third quarter results 2024, demonstrating again the strong development of VIG. Insurance service revenue of EUR 9 billion, up by 9.3%. Profit before taxes of EUR 666.5 million increased by 8.5%. The segments Extended CEE , here especially the markets Romania, Bulgaria, and Slovakia, Poland, and Austria mainly contributed to the profit growth. Despite the impact of CE flood losses, VIG's P&C net combined ratio remained at 94.3% at the previous year's level. The discounting effect was 3.4%. Due to an increased solvency capital requirement due to the increased business volume of EUR 4.1 billion, the solvency ratio, including transitional, amounted to 259%. Solvency ratio excluding transitional measures was at excellent 237% as of September 2024.
Now, over the page, we show the gross written premium development by segment. Overall, premiums increased by 8% to an amount of EUR 11.5 billion, strongly supported by double-digit growth rates in the segments Extended CEE and Special Markets. Again, it's Romania, Bulgaria, but also the Baltics, Slovakia, and Hungary pushing the premium volume in the Extended CEE segment. In the Special Markets segment, it's mainly Türkiye driving the premium growth to over EUR 1 billion after nine months. As shown on slide eight, also Austria, Poland, and the Czech Republic recorded sound premium growth, which translates to positive insurance service revenues presented on the next page. Overall, insurance service revenue increased by 9.3% to EUR 9 billion. Double-digit growth rates were recorded in Poland at 13.6%, the Extended CEE with 13.8%, and the Special Markets segment with 20.7%.
Other property business and either motor or health, as stated on slide nine, are driving the favorable development. Please note that the Extended CEE segment contributes the same level of revenues as Austria, our most developed market, which means further diversifying our top line. Now, on the next slide, with regards to the solvency ratio development, you can find the details on slide 10. The solvency ratio of 259% as of third quarter includes transitional measures. The SCR increased to EUR 4.1 billion due to a reduction of the loss-absorbing capacity of the technical provisions caused by the downward shift of the interest rate curve in the main VIG markets, which is Euro, Polish Zloty, Czech crowns, and Romanian RON. The own funds of VIG Group increased slightly.
As a result, the regulatory solvency ratio of the VIG Group with incorporation of transitional measures of technical provisions came in at 259%, staying on a very strong level, well above 200%. For the calculation without transitional measures on technical provisions, a similar development has been observed. In this case, the solvency ratio of the VIG Group amounted to excellent 237%. Now, this brings me to our last slide of today's presentation. As the presented figures clearly show, VIG is well on track to reach its 2024 target. We therefore confirm our guidance to profit before taxes on the upper end of the target range of EUR 825-EUR 875 million for 2024. Our responsible and conservative corporate and reinsurance policies limited the impact of floods as expected and modeled by our risk managers.
We will stick to our reinsurance approach and make sure that VIG is protected against severe NatCat events also in the future. We are confident that we will achieve our goals based on the strong capitalization of VIG, the solid performance of our segments Austria, Czech Republic, and Poland, the continuously growing Extended CEE segment, and last but not least, based on the positive macroeconomic environment for the CE region. With this, I have come to the end of my presentation, and Peter and myself are happy to answer your questions.
That will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume of the webcast while asking a question. Anyone with a question may press star and one at this time. Our first question comes from August Markham from UBS. Please go ahead.
Hi. Thanks for taking my questions. I have three, if that's okay. First one on Boris. Are there any estimates on how much more will it cost in 4 Q or further down the line at the start of 2025? My second question is on the outlook. You mentioned in your presentation that you're positive going into 2025. Do you think you can sustainably maintain the high single-digit to low double-digit growth that you have been having in GWP? And then lastly, on your 4 Q experience, how has the weather and claims been so far? That's all. Thanks.
Good afternoon. Thank you for your questions. I will take care of all of them. I start with the last one. There is nothing specific to be reported on Q4 until now. There is no significant effect in Q4 until now. Coming to question one, Boris estimates, the EUR 600 million is a conservative estimate. We are very well known in the reinsurance industry that our estimates keep throughout the time. So we also do not expect any creeping in here in the year 2025. We feel comfortable with the gross figure, which we are reporting here. Coming to our growth dynamic, I think Liane was outlining the economic growth. So we should benefit out of the economic growth. On the other hand side, one driver of our growth this year, but also last year, was the inflation and therefore the needed increase of some insured values.
As inflation is slowing down everywhere, we will not have this growth driver. So we will grow, but it is likely that maybe we will grow a bit less than maybe we have shown this year.
I'm happy to take your second question regarding the outlook. As I already confirmed in my presentation, we confirm our guidance for this year to be on the upper end of our target range. When it comes to 2025, I also had some words on my slide on the positive macroeconomic environment for the CE region. But we will present the outlook for 2025 together with our preliminary results in March 2025.
The next question comes from Thomas Unger from Erste Group. Please go ahead.
Yes. Hello. Good afternoon. Thank you also for taking my questions. I'd like to ask you, you said that your reinsurance approach will not change. Do you expect any change in costs coming next year? Any specific effects from the CE floods that you incurred now? And if I could also ask you on the figures on profitability on the business lines for P&C Life and Health, how did that perform thus far in 2024? And then also if you could give us the specific figures for the first three quarters on the insurance service result as well as the net investment result. I'd appreciate that. Thank you.
I will start with reinsurance. When we are placing our NatCat program for the whole CE region, we are having two independent modeling companies, and we have an internal model. As many of our markets, there are no market models. So we have the highest quality data for a program for the whole region covering it. We have long-standing relationships with our reinsurance companies. This flood event is an event which is as modeled. So there is no surprises by our reinsurance partners of it. Very much also due to the flood prevention measures which have been taken from the year 2002 until today in Czech Republic and in Austria specifically, but also in Poland. Therefore, the reinsurance market is currently hard.
So, there will be certain adaptations generally in our reinsurance programs, but I do not see a major impact on our NatCat program due to the flood as it is for what we have budgeted and it is modeled as it is coming to reality.
Coming back to your question regarding the insurance service result and the net investment result, the net investment result remained quite stable compared to the first three quarters last year and amounted approximately EUR 350 million. The insurance service result is a little bit lower compared to the first nine months last year due to NatCat events, but in both third quarters it's well above EUR 800 million.
Okay. Thank you very much.
As a reminder, if you wish to register for a question, please press star followed by one. The next question comes from Bhavin Rathod from HSBC. Please go ahead.
Hey, good afternoon. Thank you for taking my question. And thank you also for providing those additional details around combined ratios, PBT, and insurance revenue. I really appreciate that. So I have a few questions on my side. The first one would be on your PBT guidance. Now, given you have already grown the PBT by close to 9% this year so far, and if I look at your 2023 PBT, it was at somewhere around EUR 876 million if you adjust for the impairment charges. Now, the question is, now given you're already 8% above what it was last year, why should we not expect the PBT to be materially above what you are currently guiding, i.e., at around EUR 875 million?
Or is it just because of the fact that you're expecting some sort of impairment charges or any one of that we should be mindful of in the fourth quarter of this year? So that's the first one. The second one would be again on this PBT growth of 9%. Appreciate if you could provide more colors around how it was driven in terms of growth by P&C and Life. At first off, it was largely driven by P&C business. Should we believe that even at nine months it was driven by the P&C book, or there was some contribution from the Life segment as well? And lastly, on the dynamics around P&C pricing in some of your major markets, appreciate if you can provide more colors around what sort of pricing dynamics you were seeing in some of your major regions like Poland, Hungary, Austria, and Romania. Thank you.
Thank you for your questions. I will start with the last one. Certain pricing elements. Maybe I start with Poland. Poland in the past was quite painful for us in the pricing area of motor repair. We now did this year our homework with merging and realizing synergies, but at the same time, we also see first signs of a recovery of the market. In my personal opinion, the whole market is loss-making in motor repair. So there is a certain dynamic giving the room for an increase in the motor repair pricing. If I come to Czech Republic, motor is still a very, very strong competition here. We have an exceptional market position there. This I would see to be continued to see this competition. Hopefully, there will be some different developments in next year. Austria in motor business is pretty stable.
When we come to property and corporate business, the picture is a bit different. We see that Poland, as well as in Czech Republic, there are certain rate increases in property and corporate. We see in Austria a more flattish development, but if there is an account which has certain losses over the year, there are also rate increases, so this has become more individual in Austria by the pricing account by account and not anymore so a general tendency. I hope this gives you enough flavor. Maybe one topic. It is too early to say if there will be certain impacts on the consequences of the floods, where generally one can see certain impacts of such an event like Boris, but this is too early to comment. This we should see in the first quarter what will be in the various markets with the impact of the flood event.
Thank you.
Coming back to your question regarding the PBT growth of 9%, this is mainly coming out of the P&C business. Life is a rather flat development. CSM release is slightly below the first three quarters of last year. So here, rather stable development. And when it comes to P&C, I refer to what Peter has said, and we could reflect the inflation also in our premium development. So the profitability in P&C increased compared to the first three quarters last year. Your first question related to the PBT guidance. We still keep our guidance and confirm that we will end the target above the upper range of the target level. As you know, it's still quite volatile in the macroeconomic environment, and we cannot exclude impairments or negative one-off effects in the fourth quarter.
So we stick with our guidance with the upper end of the target range for the time being.
That's very helpful. Thank you so much.
Welcome.
For any further question, please press star followed by one. Star followed by one. Ladies and gentlemen, so far, there are no further questions. I hand the call back over to Nina for any closing remarks.
Thank you, Sandra. Ladies and gentlemen, thank you for participating in today's call. The next results call, which will present preliminary results for the financial year 2024, is scheduled for the 12th of March 2025. In the meantime, our best wishes for the upcoming festive season and goodbye from Vienna.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.