Ladies and gentlemen, welcome to the VIG Results for the First Half-Year 2025 Conference Call and Live Webcast. I'm Matilde, the course call operator. I would like to remind you that all participants will be 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. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Peter Höfinger, Deputy CEO VIG. Please go ahead.
Good afternoon to our half-year presentation, and thank you for joining us. We are happy to present you today strong half-year results. We have achieved a gross written premium of EUR 8.569 million, which is a growth of 8.7%. Insurance service revenues of EUR 6.396 million, which is an increase of 8.1%, and profit before tax of EUR 531 million, which is a 10.5% growth. Our net combined ratio of 91.9% and earnings per share up 10% to EUR 5.92, which results in an operating return on equity of 18.9%. On the next slide, I'm happy to guide you through our main events which we had in the first half-year. Besides having this strong performance, we also had a goodwill impairment in Hungary in the amount of EUR 72.8 million.
We had an improvement of our combined ratio, which was also supported on one hand side by a lower frequency and lower impact of weather-related claims, and also a better cost ratio. Weather-related claims in the first six months were EUR 73 million in comparison to last year of EUR 113 million. We have announced on 8th of August that we entered an exclusive due diligence with NÜRNBERGER n Germany, and we also have won an official tender Monday this week for MOLDASIG in Moldova. All this gives us confidence that we will keep our guidance, and we are convinced that we will come out to the upper end of our target range of EUR 950 million- EUR 1 billion for the year end. With this, I'm handing over for the details to Liane. Please, Liane.
Thank you, Peter. Now let's start on slide six with the group income statement. Apart from the already mentioned increased insurance service revenue, I would want to highlight the improved total capital investment result, up by 32.5%, profiting from higher interest rates. With regards to the goodwill impairment taken in Hungary, which Peter already mentioned, please note that the profit before taxes in Hungary adjusted for this goodwill impairment would have amounted to EUR 16.8 million. We recorded an increase of 2.8% in the insurance service revenue to EUR 324.5 million, and the net combined ratio improved to 94.8%. Given the market environment, we are satisfied with the developments in Hungary. However, the additional premium tax got prolonged until 2026, and further governmental initiatives in Hungary cannot be excluded.
This is why VIG, and this is fully in line with our conservative approach, decided to go for this complete goodwill impairment and drove down the remaining EUR 72.8 million of goodwill in Hungary. Despite this measure, we were able to achieve group profit before taxes of EUR 531.4 million, and the net profit after taxes and non-controlling interests in the amount of EUR 386.7 million, both up by approximately 10%. On the next slide, we show the details for the insurance service revenue of EUR 6.4 billion being up by 8.1%. I would like to point out that our biggest segment in this half-year with EUR 1.9 billion in revenues and an increase of 8.6% is extended CE . Compared to the first six months of last year, extended CE contributed EUR 148.8 million more in revenue.
It's worth mentioning here that several CE markets achieved double-digit growth ratios. For example, Slovakia + 12% and the Baltics + 11.4%, accounting for about half of the additional revenue. You can find the full overview of the individual market developments on slide 26 in the appendix. We are pleased about the continuously sound insurance service revenue growth of 4.7% in Austria, 6.7% in Czech Republic, and 8.9% in Poland. However, outperforming all other segments in terms of revenue growth is special markets, up 29.7%, driven by the ongoing dynamic business development into Kiev. Let's now take a look at the breakdown of insurance service revenue by line of business.
As you can see on slide eight, motor vehicle liability insurance with plus 11.2%, health insurance with + 15.1%, as well as unit and index-linked life insurance and life insurance without profit participation with each roughly + 11%, present robust double-digit growth. From an already high revenue level of more than EUR 3 billion, other property grew by 3.9%, contributing roughly EUR 120 million of additional revenue. Overall, this slide illustrates the diverse growth profile of our group. Currently, only life insurance business with profit participation remains stable, but on a favorable level. On the next slide, we present the development of the result before taxes in more detail. Strongest growth contributor with +EUR 21.2 million is Poland, followed by the Czech Republic with +EUR 17.9 million. Both markets supported by significant improvements of the combined ratio.
To be fair, if we adjust for the goodwill impairment already mentioned in Hungary, the segment extended Central and Eastern Europe would have been our top performer. Nevertheless, despite this goodwill impairment, we achieved double-digit profit growth of 10.5%, which demonstrates the strengths of our business model. Now, over the page, the combined ratio details and the split between claims and cost ratios are shown. The net combined ratio of the group improved to 91.9%, including a discounting impact that increased from 3.1%- 4.4% on the claims ratio. As mentioned already by Peter Höfinger, significant lower costs arising from weather-related claims and natural catastrophes in the first six months of this year, compared to the same period of last year, were supporting this overall positive development.
The substantial improvements by more than four percentage points, both in the Czech Republic and in Poland, were additionally driven by positive developments in motor. Moreover, Polish household insurance profited from higher average premiums. The deterioration of the combined ratio by five percentage points in the special markets is due to two factors. Firstly, a one-off effect in the previous year, and secondly, a negative development in motor and other property and in Turkey this year. Now let's move on to slide 11 and the contractual service margin in life and health business. On the left, the life and health CSM roll forward shows an 8.9% increase for the period to a net CSM of EUR 6 billion, supported primarily by the rise in long-term interest rate curve. Also, the CSM release of EUR 283 million could not be fully offset by the new business of EUR 228 million.
The sustainability ratio improved to 80% after 77% in six months 2024. The new business CSM in life and health was strong at EUR 228 million, with a still favorable new business margin of 8.9% for the first half of 2025, slightly down from 10% at year-end. Now, over the page, we present the details of the total capital investment result of EUR 295.6 million, up by 32.5%, driven by an increased interest rate revenue + EUR 51.2 million, mainly due to a higher volume of income investments and also higher interest rates in Turkey. The investments held at our own risk, shown on slide 13, further increased to EUR 37.5 billion, up by EUR 1 billion compared to the year-end. The split between the different asset classes is hardly changed, with the vast majority of 74% invested in bonds. The total capital investment portfolio as of June 2025 amounted to EUR 45.6 billion.
As there are only minor shifts in the bonds rating split due to portfolio quality improvement, I would move on to slide 14 and the solvency ratio and the details of the own funds developments, which is shown on slide 15. Solvency ratio, including transitionals, as of June 2025 increased to 278% after 261% at year-end and 271% at quarter one 2025. While the SCR of EUR 4 billion only slightly increased by 1.5% due to higher capital requirements for health and non-life insurance, the own funds of EUR 11 billion increased by more than 8%, impacted by the positive interest rate development and the capital measures taken. The details of the own funds are presented on the next slide 15.
The solvency ratio, excluding transitional measures of 238%, underpins the strong VIG and allows us to successfully further develop our business model and to look at business opportunities in our markets. It's great to see that the positive business developments within our group are reflected in the VIG's share price over the past six months. With a share price of EUR 47.7 as of June 2025 and a plus of 44%, VIG shares have outperformed both the Austrian Traded Index and the STOXX Europe 600 Insurance Index. Looking at our book value per share of EUR 47.26 at half year 2025, there is still some room for improvement. With that, I have come to the end of my presentation, and now we are happy to answer the questions you might have.
We'll now begin the question- and- answer session.
Anyone who wishes to ask a question may press star and one on the telephone. You'll 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 from the webcast while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Youdish Chicooree from Autonomous Research. Please go ahead.
Good afternoon, everyone. Can you hear me?
Yes, we can hear you. Thank you.
Yes, thank you. Hi. I've got a few questions on the contractual service margin and one question on the dividend policy. On the contractual service margin, there was a material benefit from the changes in variable fee, which I understand is due to longer-term interest rate. I was wondering if you could specify what kind of duration you're talking about here because, you know, at the 10-year end of the curve, I see rates only moving by 30 basis points, so not very much. Maybe if you could clarify something, the duration you were referring to, that's my first question. Secondly, on the CSM itself, I think the new business margin dropped to around 9%, 8%-9% in H1. I think you mentioned a change in the term structure of interest rate. If you could clarify the technicalities around that, that'd be very helpful.
Finally, on the CSM again, I think since you transitioned to IFRS 17, the balance between new business and CSM release has been improving, such that I think last year your new business was basically covering the entirety of the CSM release, but this seems to have gone in reverse in H1. If you could talk a bit around that, that'd be very helpful. On the dividend policy, it's more a clarification, actually. I guess your policy talks about paying a dividend, which is at least the same as last year, if not increased with the development of operating earnings. If I look at operating earnings in H1, it's up 25%. Obviously, that's excluding the impairment.
I'm wondering whether when we think about the dividend trajectory, is the growth, the rise in operating earnings, the right way to think about it, or should we actually be thinking more in terms of, you know, like a more modest pace of dividend growth? Thank you very much.
Thank you very much. I'm happy to take your questions. I would propose to start with the dividend policy because I think it's very important for you. I can confirm that we did not change our dividend policy for the moment. At least the dividend of last year will be the dividend of the current year. As we always said, also if the positive business development will have an impact on the dividend. If we expect rising profits, then usually also the dividend should follow this path. For the time being, this is all for the dividend policy, so no changes here. Regarding CSM development, your first question was related to the duration. We have the release factor, which you can use for the CSM release in life and health, is approximately 10%.
This would be a valid proxy to model the CSM release, and the years is also approximately 10 years. The last question was, or the third question was regarding CSM new business. The new business CSM is slightly below a year-end new business CSM. This has mainly to do with the interest rate curve structure. In the shorter periods, the interest rates decreased. In the longer term, interest rates increased. The balance is improving. There is also less impact from the Turkish company in the second quarter of 2025. This has also an impact. I hope this answered your question.
Thank you very much. This answered most of my questions, but if I could come back on the dividend, I mean, you know, the operating earning growth is very high. I was wondering whether the relationship between your business operating results and the dividend trajectory is like a one-to-one relationship or not, basically.
Dear Youdish, I kindly ask for your patience. We did not change anything to the dividend policy for the time being. Let's wait and see.
All right. Okay. Thank you very much.
The next question comes from the line of August Marčan from UBS. Please go ahead.
Hi Liane, hi Peter. Thanks for taking my questions. I have three. First one on the updated targets. I appreciate the slight upgrade, but if I take the 1H performance and I normalize the second half of the year for Boris, it feels like the target is not too difficult to achieve. Is this just conservatism or is there anything else going on here? My second question is on Hungary. Could you give more details on the impairment and should we expect anything more going forward here? Does this full goodwill impairment mean you're looking to exit Hungary as a market? Finally, on the P&C market, could you give a bit of color on how the pricing versus inflation is developing across your key non-life markets and how have the weather-related claims been in 3Q so far? Thank you.
Thank you very much for your question. Also, I will take the questions on the updated targets and on Hungary and start with these two questions regarding the targets. We increased our outlook in the way that we, for the moment, are confident that we reached the upper end of our range. As you know, the macroeconomic environment is ongoing volatile and also other geopolitical uncertainties are happening. This, I would like to mention, but also favorable weather-related and not cut claims development in the first half of 2025, which we did not experience in the last year, but also not in the second half of the last year. We will see what will happen in this area.
In general, we always would again like to emphasize that we have a conservative approach and as insurance, we want to stay also on the safe side, also when it comes to target settings. It's better to overdeliver what we promised. It's what we also said in previous periods. With regards to the goodwill impairments, when you look in our balance sheet, you will see that there is an amount of EUR 1.2 billion goodwills left, but the list of countries decreased significantly over the past years. Regarding Hungary, the impairment which has been booked in the first half year 2025 was the entire goodwill impairment. There's nothing left in Hungary. We are satisfied with the business in Hungary and also with the results. I told you before, it is a positive result when we exclude the goodwill impairment. There's absolutely no idea to exit the Hungarian market.
With all of this, we stay conservative and we will see what we will present to you in the next quarters regarding outlook. These were the two questions, and I would like to hand over to Peter for the P&C question.
Thank you for your question. Maybe let's start with some of our main markets, Poland, Czech, and Austria, specifically here in property and here in retail property business. You see a positive impact on pricing due to the large flood event of last year. There is an increased pricing momentum. You see in motor business more a lowering of the pricing momentum, but this is also to do with the lowering of the inflation. We have been benefiting also over the last years of always catching up in pricing with the inflation. As inflation is now going down, there is the consequent element also in pricing. Seeing this, I think you also saw our claims ratio. It's still a quite favorable environment.
What can be seen recently for the large corporate business, large industrial business, where there is also international participants, mono-liner insurers participating in the accounts, we see a certain letterness or even sometimes a reduction, which is obviously driven by certain pricing momentum from the London market. This is only for the very top-end accounts. For all the other larger corporate business, we see a stable environment in our region. This is somehow giving you a bit of a color of the pricing environment.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. We now have a question from the line of Thomas Unger from Erste Group. Please go ahead.
Yes, hello. Good afternoon. Thank you for taking my questions as well. I would like to ask you about the potential acquisition of the controlling stake in NÜRNBERGER . What do you see in this company that is particularly appealing to you? The company evidently has its issues and is in a transformation process. Is it mainly the German market that's appealing to you or the potential earnings contribution after a successful turnaround? Also, how would such a transaction support your strategy, which is focused in Central and Eastern Europe and in which Germany currently is only a special market? That's my first question. Secondly, I would like to ask you and congratulate you on the operating performance in the first half of 2025. Really, many of the countries have improved the top line as well as the profits contribution.
I'd like to ask you specifically about the Baltics and after the strong revenue increase and also profit growth, what are the drivers there? Lastly, about Turkey, top line growth really strong, but this has not, at least in the first half of 2025, translated into profit growth. What are the challenges there? Thank you.
Thank you, Thomas, for your questions. I would like to start with your first question with the NÜRNBERGER topic. You know, we are market leading in Central and Eastern Europe, and when you look at our history, we have always embraced opportunities throughout our whole history. In Germany, we have two companies. It's a special market for us. NÜRNBERGER could contribute VIG to the further diversification of our portfolio. This is a very important strategic topic for us. As you know, we are a little bit different. We have a multi-brand strategy. This, in combination also with local entrepreneurship, which is very anchored within our group, we think that we could offer ideal conditions also for securing the location and preserving the identity of the strong NÜRNBERGER brand. This makes absolute sense from this perspective.
I'm sure you know that on August 8, we made a press release also that we started into an exclusive due diligence. We have to wait. We have to look into the details. We have also external support in this exercise. After the conclusion of the due diligence work, we will draw our conclusions what could be the next steps. This is for the moment all I can say to this topic.
I'm happy to take the question for the Baltics. In the Baltics, we are clearly number one in all of the three countries. Three or four years ago, we made an exercise of merging also one company, and we are realizing over the last years' synergies. We are now very well-strong forces there. The main driver of the growth currently is the health business, where we have achieved also with quite digital solutions in having a strong market share in health business. Also, in property insurance, we are over proportionately growing and winning business there. All this is supported by the motor market, which is a growing motor market by number of vehicles, but also by a technically sufficient premium which we are experiencing in motor.
One has to say, we do have a quite exceptional management team currently in the Baltics in all of our companies, which are working excellently in exploring the opportunities of this market.
Thank you very much. Maybe lastly, on Turkey, if you could also talk about that.
Maybe then I should also take Turkey. In Turkey, we are in the life business and in the non-life business. Life business is very decently developing, and we do have attractive products for our customer there, specifically in this high inflationary environment. Also, with the currency devaluation, we still do offer attractive products, and this is the growth driver in the health business. On the non-life side, it is a balance which we have to run there because the high inflation is a challenge in non-life business. If you sometimes look purely on your technical result, you maybe would see combined ratios above 100%, but this has to be seen in the context of double-digit interest rates, which are there in the market. There you have to find the match and the balance of your book.
This is the main challenge which we see currently in Turkey, balancing the opportunities, but at the same time, having a quite cautious risk management in this exceptional environment. We are also willing to have a conservative balance sheet there, strengthening our reserves and making sure that we are well prepared also for volatilities which are there today, but maybe also volatilities which could be ahead of us. I hope that this somehow answered your question.
Yes, thank you very much.
Once again, to ask a question, please press star and one on your telephone. We have a follow-up question from the line of August Marčan from UBS. Please go ahead.
Hi, thanks for taking my follow-up. In the presentation, you gave indication that you will give details on the new strategy for 2026- 2029 at the 3Q update. I was just wondering if you could give us a little preview of, is it going to be new KPIs? Is it going to be a bit more KPI-oriented than the current strategy? Just anything if you can say at this point.
Thank you. As we have stated that we will give an update next time, I think it's too early to give you now the update. As our VIG 25 strategy is coming to an end by the end of this year, we are happy to inform you in the last quarter about our new strategic exercise and the main value drivers which we will go to follow for the next strategy. Please next time, okay?
Okay, thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Nina for any closing remarks.
Thank you for your interest and for your questions. We look forward to presenting the update for the first three quarters of 2025 on the 25th of November, together with first insights into our new strategic program for 2026- 2028. If you have any questions in the meantime, please do not hesitate to contact us in Investor Relations. Thank you. Goodbye.
Ladies and gentlemen, the conference is now over. Thank you for choosing Coursecall and thank you for participating in the conference. You may now disconnect your lines. Goodbye.