“VIG Plans to Build on Its Number One Position”

A double interview with Hartwig L?ger and Elisabeth Stadler, the incoming and outgoing CEOs of the VIENNA INSURANCE GROUP, respectively. How the new head of VIG is planning to lead the company to more efficiency and growth, and which of Ms. Stadler’s successes Mr. L?ger is looking to build on.

An interview by? martinek thomas ?for?trend.?Translation from the German original.

TREND: Ms. Stadler, VIG delivered particularly strong first quarter results, with a twelve percent increase in premium income. How did you achieve that?

Elisabeth Stadler: Part of it came from our acquisition of the Aegon companies in Hungary and Turkey. And, of course, inflation has also played a part; for example, our contracts in Austria also include index adjustments. In many Eastern European countries, we have one-year contracts, so the sharp rise in claims settlement costs can also be understood against that backdrop. But we achieved organic eight percent growth even without those effects by generating new business, which makes us very proud.

Mr. L?ger, how do you plan continue your predecessor’s success this year?

Hartwig L?ger: Of course, this is wonderful, positive momentum that we can benefit from and continue to build on. We have already collaborated on developing the VIG 25 strategic programme, and from that point of view, the leadership transition will be genuinely seamless and smooth.

But will you pursue your own strategy as CEO of VIG?

L?ger: The special value of VIG is that we see ourselves as a group. That means we are building on our decentralised network of autonomous companies in 30 countries. And for this reason, the holding company will continue to provide a very strong coordinating and facilitating framework, which forms the bedrock of our strategy. At the same time, however, we have updated our expectations for the individual markets this year. In other words, we have laid out clearly defined targets for the next several years with our executive management teams in our individual markets. And beyond that, we have Group-wide initiatives that are very much aimed not only at optimising our operating business, but also at taking further steps with regard to key issues for the future that are outside the traditional sphere of insurance, for example, toward the establishment of ecosystems.

Unlike many other companies, VIG has always adhered to a multi-brand strategy. Will that continue to be the case?

L?ger: Our basic attitude toward brand diversity will continue to evolve. It will be important for our brands to be strongly positioned. And, brand diversity for our brands with a strong presence will continue.

Does that also include Austria?

L?ger: We see Austria as an important element of our core market. We have two companies here, Wiener St?dtische Versicherung, the root of our Group, and Donau Versicherung, which are strong brands with their own positioning. We see opportunities for cooperation in the back-office areas, but both brands enjoy a solid market presence and are therefore positioned independently.

The Austrian market is largely saturated. Where do you see the possibility for generating additional business?

L?ger: We continue to see potential in Austria, especially in the risk provision segment. But we also expect the government to take clear steps to support these developments. Austria’s insurance tax puts us at a clear disadvantage compared to the rest of Europe. And of course there is the issue of disability and elder care. Here, too, it will be necessary to strengthen private provisions. I also see growth potential in ecosystems that go beyond our core product of insurance.

Has the rise in interest rates also given VIG an additional boost?

Stadler: Initially the ECB was slow in responding, but nevertheless we are grateful that several steps have since been taken to raise interest rates. Of course, this is good for our life insurance segment. We can once again generate significantly more business with our new investments. And life insurance as a product is becoming more and more attractive. Younger people, too, are now increasingly taking out life insurance again with an eye toward pension provision.

The capital market is also becoming increasingly important for retirement planning. Mr. L?ger, you recently bought a block of VIG shares yourself. What measures will you take to cater to shareholders?

L?ger: VIG has been listed on the Vienna Stock Exchange for a very long time, and Elisabeth Stadler has always ensured that shareholders have been able to securely rely on consistent dividends. We are above average for comparable indices this year in terms of our share price as well, so this also provides us with a solid foundation. And I am convinced that measures aimed at internal value enhancement will enable us to foster positive share price growth for the capital market over the next few years.

What role will unit-linked life insurance play at VIG in the future?

L?ger: We see that sustainability is becoming an increasingly important issue for customers of these products, and we will continue to adjust our focus accordingly.

Ms. Stadler, what digitisation measures have you put in place prior to the hand over to your successor?

Stadler: We launched digitisation very early on, beginning with internal administrative processes. But digitisation has also helped us improve many services for our customers. For example, shortening processing times for insurance applications. Claims processing has been made much easier. You can now take a photo instead of drawing a sketch and send the photo in to the insurance company. So, this development has both reduced costs for us while also creating added value for the customer.

Mr. L?ger, artificial intelligence is now the big issue. To what extent has AI already gained a foothold at VIG?

L?ger: AI has been in use for some time now. AI models are already being used in the claims settlement processes mentioned above, which has significantly boosted efficiency. But we are looking to use ChatGPT, the large language model that everyone is talking about now, to develop new solutions for customer contacts. We have even already developed a product based on telematics and AI in the Group.

What does that look like?

In the Czech Republic, our Group company Kooperativa has launched a telematics tariff for motor vehicle liability insurance. Customers can access data on their driving behaviour using an app on their mobile phone. This runs on an AI-based model that enables customers to optimise their driving. Customers receive a portion of their premium credited as a cashback when they improve their driving behaviour in terms of safety and ecology, etc.

VIG had been increasingly located its digitisation competence centres in CEE countries because recruiting employees was easier there. Now, however, the labour market situation in CEE has evolved since then.

Stadler: Recruiting and staffing has now become an issue for us in all of our countries. In earlier years, we brought employees from the CEE region to Austria, which was a successful strategy. Now, however, the employees we are looking for, for example in risk management or actuaries, are in great demand across the board. You have to make every effort to be a seen as a well-regarded and attractive employer in order to interest potential employees.

L?ger: Of course, it is great when we are singled out for national and international awards as a great place to work. But there are also new elements that we are looking to strengthen. We want to place more importance on the Group’s network. For example, if our Polish company Compensa is looking for an actuary, the job vacancy will of course mention Compensa as the employer, but at the same time it will highlight international collaboration on projects with all our companies. That gives the position an enormous boost.

The labour market in general is undergoing major changes. Young people are not looking for a career, but rather for work-life balance. They don’t want to work on site in an office, but remotely from the beach. Will the insurance company business model still be attractive to this new generation?

L?ger: I’m a father of two, and I’ve seen with my own children that demands for flexibility have increased significantly, especially when it comes to a remote or work-from-home set-up. The pandemic also afforded us the opportunity to realise that more flexibility at work can actually have a positive impact on productivity. Indeed, today’s young people may live and work differently, but they are firmly committed to making their contribution to society.

Stadler: The importance of flexibility has been particularly evident at our companies in Ukraine, where we have 1,400 employees. Some of them went to Austria, Prague or Poland after the outbreak of the war and worked remotely from there. Most of them have since returned to Ukraine. I have great respect for the employees in Ukraine who continue to provide the best possible customer service under these circumstances.

Another major trend is climate change. How has the steady rise in losses caused by increasingly dramatic natural disasters affected your business?

Stadler: We had already come to that realisation in recent years and have come to expect an increased volume of claims due to climate change. Last year we had a tornado in the Czech Republic. This year, there have already been two smaller ones in Austria. Up to now, we had only seen such events occur in the US, but now these extreme weather disasters have started to hit home.

That entails premium increases.

Stadler: But we have also taken a considerable number of preventive measures. It is only the Austrian government that has remained unpersuaded by the insurance industry’s proposal for a kind of compulsory insurance to cover natural disasters, which has already been in place in other countries for some time now.

On the key issue of Eastern Europe. Do you, Mr. L?ger, plan to set a different tone in the region that generates half of your premium income?

L?ger: We have clearly defined our home market CEE as 20 countries, in addition to the ten countries we have defined as special markets. In so doing we have clearly scoped out our regional focus and are not currently considering any strategy to expand our footprint. However, our clear goal is not only to shore up our market leadership in the CEE region, which currently stands at 20 percent of market share, but also to build on it. That is why we are looking to boost strong growth in this area, both organically and, if it makes sense, through acquisitions.

What are your further plans for pension funds following the acquisition of the Aegon companies?

L?ger: As already laid out in the VIG 25 strategic programme, we consider pension funds a dynamic element alongside our other business areas. However, a variety of legal environments must be taken into account in our individual countries. We recently acquired a pension fund in Slovakia, and we have defined Bulgaria as a competence centre, as we have been very successful in this area there for many years. We see a lot of potential for pension funds in CEE in the coming years.

Ms. Stadler, you have helped shape all of these developments at VIG since 2016. Will you continue to be associated with the company?

Stadler: I will continue to be associated with VIG and hold some supervisory board mandates within the Group. I also sit on several supervisory boards of other companies and am Vice President of the Red Cross. That said, I am also very much looking forward to traveling and spending time with my family.

Mr. L?ger, you were finance minister of Austria from December 2017 to May 2019 and then even Chancellor for a few days. Where do you stand on politics today?

L?ger: My stance is as neutral as it has always been. I have never been a member of any political party and will continue to remain independent. But I had an opportunity to get a look behind the political scenes as an independent expert and I am grateful for the wealth of experience it has given me. But my foray into political life was also intense enough that I now prefer to remain in the private sector. ?

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Translation from the German original. In case of doubt, the German version is authoritative. You can find the full interview in German in the latest issue of trend ?? https://www.trend.at/

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