Ladies and gentlemen, welcome to VIG Key Figures and Updates First Quarter 2025 Conference Call and Live Webcast. I am Yusuf, the call operator. I would like to remind you that all participants will be in listening-only mode, and that this conference is being recorded. The presentation will be followed by a Q&A session. To ask a question, please press star followed by one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or for broadcast. At this time, it's my pleasure to hand over to Peter Höfinger, Deputy CEO of VIG. Please go ahead.
Thank you very much, and a very warm welcome this afternoon. I'm happy to present together with my colleague, Liane Hirner, our first quarter results. We can present quite solid results in the first quarter, with a growth in insurance service revenue by more than 8% and profit growth before taxes of 7.5%. We also have been able to place successfully a Tier 2 sustainability bond and repurchasing part of our subordinated debts. Additionally, we have additions in Albania to our 2 non-life insurance companies, a life insurance company, where we will realize with synergies and also exploring the life market in Albania, which is still at a very early stage. On top, we bought a stake in Finanse. Finanse is the largest financial broker in Poland, which will support the growth of our Polish companies.
We are currently in a bid for taking over Motorzyk, which is one of Moldova's leading non-life insurance companies. The government has invited us to participate in this bid to then further develop the Moldavian insurance market. On the next slide, you see our diversification, which we have reached until today. We believe this diversification is important and supports our resilience. You see on cross-referencing premiums, also in insurance service revenues, that there is a very nice percentage divided by our countries and region. The same is true for the result before taxes. We are having Austria with 35%, extended CE with 26%, and Czech Republic with 23%. On the next slide, you see the economic forecast for our region.
We feel to be currently in the right area of Europe, having projected GDP growth between 3% for next year in Poland to 2.5% in Czech Republic. Comparing this with the Euro area in the year 2025, with 0.7%, we are quite in a very active environment and benefiting from the internal growth and consumption of Central Eastern Europe. On the next slide, as I have mentioned, we have been able to issue a Tier 2 bond with a principal amount of EUR 300 million, an amount equivalent to the net proceedings is used for a combination of eligible green and social assets in line with VIG updated Sustainability Bond Framework 2025. The very strong order book of above EUR 1 billion, a peak, was finally 3 times oversubscribed and led to the lowest spread over of any subordinated notes of VIG, with 195 basis points.
At the same time, VIG repurchased the total volume of around EUR 126 million of subordinated notes issued in 2015 and 2017. With this introduction, I'm happy to hand over to Liane Hirner. Liane, please.
Thank you, Peter. As Peter already mentioned at the beginning of his presentation, we are very pleased with the solid business performance we achieved in the first 3 months of 2025. To summarize, the insurance service revenue increased by 8.1% to EUR 3.1 billion. Profit before tax rose by 7.5% to EUR 261.1 million, which is driven primarily by double-digit growth rates in Poland and the extended CE segment, with Romania and Bulgaria contributing significantly to the profit growth. The net P&C combined ratio improved from 92.7% to 92.3%. This reflects a lower claims ratio thanks to fewer weather-related claims and positive developments in the motor business in the Czech Republic and Poland. Our solvency ratio as of end of March this year stood as robust 271%, up from 262% in Q1 last year.
This was supported by increased own funds of about EUR 10.8 billion, driven by the positive operating performance of our business and by positive interest rate developments. The SER remained relatively stable at close to EUR 4 billion. Please note that the dividend payment for the business year got fully considered in the first quarter in line with our dividend policy. Excluding the transitionals, the solvency ratio stood at 252%. Now let's move to slide nine, and let's have a closer look at the top line development in the first 3 months 2025. Starting on page nine is the cross-written premiums overflow. Premiums were up 8.3% to overall EUR 4.7 billion. Here, Austria and the Czech Republic both did well in the Q1 with premium growth rates of above 6%. In Poland, the extended CE and the special market segments, we saw a double-digit growth rate.
Apart from Poland, with plus EUR 54 million additional premium volume in the first quarter, the markets Türkiye, Romania, and the Baltic states significantly contributed to the premium growth in absolute terms. This very favorable development gets also reflected in the insurance service revenue figures, which we show on the next slide. Overall, the insurance service revenue increased by 8.1% to EUR 3.1 billion. Austria's growth of 6% was mainly driven by the non-motor and health business. Czech Republic posted 7.3% growth, and Poland was up 8.2%, both benefiting from sound motor and other property business, as well as growth in life. In extended CE, nearly 3 quarters of the segment's EUR 90 million growth came from Romania, Slovakia, and the Baltics.
In special markets, it was again the dynamic development in Türkiye, pushing the insurance service revenue in this segment to roughly EUR 290 million, up by 38% or EUR 80 million. These strong developments underscore the broad-based momentum across all our markets. To summarize, we have a look at page 11. We had a strong start in 2025 with robust business performance for key metrics. At our AGM last Friday, shareholders issued a dividend of EUR 1.55 per share, which will be paid out tomorrow, May 28th. Given our sound Q1 performance with cross-written premium and insurance service revenue both up 8% and the profit before taxes increase of 7.5%, we remain confident in reaching our targeted profit before taxes range of EUR 950 million-EUR 1 billion for the full year 2025. Our capitalization remained strong with a solvency ratio of 271%.
The SSCR reports for the full year 2024 are available on our website, and we have added 2 overview slides, including the sensitivities on slides 13 and 14 in this presentation. I have come to the end of my presentation, and we are now welcome to your questions.
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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 press star and 2. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may press star one at this time. The first question comes from Yudish Chicooree from Autonomous Research. Please go ahead.
Good afternoon, everyone. Can you hear me?
Yes, we can hear you.
All right, thank you. I'll kick start with 2 questions first. Firstly, just on your guidance, judging from your pre-tax profits, it seems quite a solid start to the year, but you have maintained your full-year guidance unchanged. I'm just wondering, is that just because it's too early in the year, or is that a reflection of some increase in certainty, or maybe some slowdown that we should be aware of further down the line? That's my first question. My second question is on solvency, actually. Just looking at your most recent sensitivities, it seems that your sensitivity to an increase of 50 basis points in your incorporated bond spreads is now -6%, but last year, I think it was closer to 15%. I was just wondering what has driven this change, please. Thank you.
I'm happy to answer your questions. The first one regarding the guidance, the guidance remains unchanged. Usually, our first quarter, or we start with a good first quarter, and also we did that in the last year. There is no increase of uncertainties, but for the moment, it's too early, and we stay with our outlook as presented.
All right, thank you.
Yeah, the second question was regarding solvency. The spreads of corporate bonds, 50 basis points compared to last year, this year, you would have to add spread corporate bonds and spread government bonds. This was shown in one figure last year, 14.9% minus. This year, we split it, so you can see 5.55% downward sensitivity for corporate bonds and 8.96% downward sensitivity for government bonds.
Okay, that makes sense. Right, okay, that makes sense. Thank you very much.
Somehow unchanged.
Okay, great. Thank you very much.
Welcome.
As a reminder, if you wish to ask a question, please press star followed by one. The next question comes from August Markan, UBS. Please go ahead.
Hi Liane, hi Peter. Congrats on solid set on results. My first question is on P&C. How are you seeing pricing versus inflation trends in your major geographies, and how do you see it developing in near medium term? Any color there would be helpful. My second question is on your strategic plan, your current strategic plan in this year. Are there any updates, any plans on an update for the market or anything there? My final question is on excess capital. Again, you're still trending well above your target range. Now you have a bit more debt than you did before as well, so that also helps. Any thoughts about how do you see your capital? Do you see potential for any inorganic growth, distributions? Anything you can tell me here would be helpful. Thank you.
Thank you. Thank you for your questions. I will take 2 questions. The first question is rate increases versus inflation. You have to separate between Austria and Central Eastern Europe. In Central Eastern Europe, we have annual contracts. Therefore, we are adopting our contracts also to the same costs and needs. Therefore, we are reflecting quite pretty the inflation and are able to increase with inflation. In Austria, specifically in the retail book, we have long-term contracts with indexes, indexes which are not CPI, but for example, in the household property, it is a construction price index, or in CASCO business, it is a repair cost index, which is generally higher than the CPI. We are having here the effect that the indexation is always done at the inception, at the original inception date of the policy.
Therefore, quite a large part of our book gets inflated with the inflation rate from last year, increased this year. Whereas the inflation in Austria is quite stable, even maybe a bit lower than last year. If I come to your second question, which is more about the topic about our strategy, you know that we are currently still having our strategy VHE25. We are in the middle of the process making our new strategy for the next 3 years. As soon as there is something to deliver and to inform, we're happy to do so. I would expect this to be in the second half of the year. I'm going to hand over to Liane.
Thank you. Your last question related to the capital position of VIG may be very solid. Solvency ratio I already mentioned, which has been positively influenced by the interest rate development. Our capital is well above the target range that we published between 100% and 200%. As Peter already started in his presentation, our M&A activities are ongoing. We have explained some of our M&A activities in Albania, in Poland, and in Moldova. The excess capital or the capital is used for inorganic growth and also for organic growth. The growth rates in the cross-written premium and insurance service revenue both amounted to 8% in the first quarter 2025, also need capital. This would be my answer.
Ladies and gentlemen, for any further questions, please press star followed by one. The next question comes from Thomas Unger as the group. Please go ahead.
Yes, hello, good afternoon. Thank you also for taking my question. I'd be interested in your expectations for the combined ratio with a 92.3% in Q1. Do you expect, I mean, presumably you would expect weather-related claims to go up in the coming quarter or in the coming quarters. Do you expect any positive developments on the cost ratio? It increased a bit year over year while the claims ratio was quite a bit better than last year in Q1. Staying with the combined ratio, if you could just maybe talk a little bit about the individual segments and their development in Q1. I know you touched very briefly on Czech Republic and Poland, and you can go into some more detail on the regions. Thank you.
Okay, thank you for your question. Combined ratio 92. You know it's the first quarter. You know that principally in the first quarter, there is low weather-related claims activity. The same is true for this first quarter. If there would be something like a NatCat season in our region, then it lies ahead of us. I would expect that we will stay in the region of our combined ratio where we are today. There will be a certain smoothing out of the cost ratio over the year. Let's see how the NatCat and the weather-related claims will develop. If it would be not something very unexpected, one can expect that we will be in this range of the combined ratio.
To go more into details of the region, we see and you see by our figures that we are able from the beginning of the year to have again an attractive growth dynamic in Poland. We had the mergers and the reduction of complexity last year in the merging companies. The growth ratio, which we are showing here, is clearly a sign that we are again very much focused on the market development. Market development is very much supported by other properties. The GDP growth in Poland is quite outperforming, and there is a large economic activity there where we are benefiting. I mentioned, I think, Czech Republic, where we also do have a decent growth property as well as in motor business. We are growing quite significantly in Romania. In Romania, on one hand side, we are growing in motor business, CASCO and Motor GPL, but also in property.
Also in Romania, we see a favorable economic environment currently there, also driven by a certain number of repatriation of Romanian citizens back to Romania the last years and a certain increase of forex direct investment. Maybe to have a word about Bulgaria. In Bulgaria, we are growing with 9.9%. Over here, it is mainly driven by property business. Also, Bulgaria does have a nice GDP growth, which is supporting our premium growth there. Again, generally, we are able to reflect in our rates, the inflation of our claims costs. There is a certain automatic driver of the premium growth by inflation adaptation. On the other hand side, the markets, which I mentioned, we also have an increase of a number of risks. I hope this gave you a bit more details.
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 Thomas Cheser, Hold AM. Please go ahead.
Good afternoon to everyone. Hi. I would have a question related to the interest rate environment. It's quite a recent topic on the phone markets globally that long rates are going up. I would be curious on your opinion, how is it affecting VIG currently and whether, of course, it's more happening maybe in the U.S. and Japan, but might have an effect also on the European rates. German rates are also higher due to the fiscal situation. Generally, can you mention a little bit how is it affecting? Is it benefiting VIG or not? What is a kind of a sweet spot of long rates for your business in your mind and whether the current market rates we are seeing, it will continue to support the financial profits of the company or not? Okay, thank you.
Thank you. I'm happy to take your question regarding interest rate developments. For VIG, interest rate developments of our countries are relevant. Euro, Czech koruna, Turkish, Europe, and the main yield curve. In the first quarter, we saw an increase. This had a positive effect on our results, also on the solvency ratio. In April, in the meantime, we see a decrease again. The interest rate environment outside our markets does not have a huge impact on our business. Does this answer your question?
Yeah, maybe that part I would ask again is what do you think what's an optimal level of euro interest rates for your business?
Optimal? I didn't catch your question. Optimal level?
Optimal level of long euro rates for your business. Is this current environment kind of optimal for VIG or would higher rates be more beneficial or not?
For us, a low interest rate environment for every insurance group, I think, is not the best situation, but as it is currently, and a smoothly increasing interest rate curve is positive and is something that we would be happy. On the other hand, as we saw in the past years, we could manage very well all the interest sensitivities that we saw in the last years in various crisis times. We are quite well matched and very well diversified. This makes our group very resilient also in this respect.
Okay, thank you.
Ladies and gentlemen, once again, to ask a question, please press four, star followed by one. That was the last question. I would now like to turn the conference back over to Liane for closing remarks.
Thank you. Thanks to everyone listening in and for your question and interest. We will publish the half-year results of Vienna Insurance Group on the 27th of August. If you have any questions in the meantime, please do not hesitate to contact the Investor Relations Team. We are happy to help. Thank you and goodbye.