November 16, 2011
Continuous growth: CIG Pannonia Life Insurance Plc. increased its gross premium income by 28 percent in the first three quarters of 2011
Today CIG Pannonia Life Insurance Plc. published its report on the results of the first three quarters of 2011 and the evaluation thereof, according to the Hungarian Accounting Act, along with its further plans. The Board of Directors judged the results of the first three quarters to be a success.
In terms of its business results, the Company closed another successful period: premium income reached HUF 19.487 billion, which represents a 28 percent increase compared to the HUF 15.201 billion achieved in the same period in 2010. The growth of premium income was driven by the large number of new unit-linked life insurance policies, on the one hand, and the renewal premiums received from the existing life insurance portfolio, on the other.
Within the gross premium income, premium income from new policies totaled HUF 6.799 billion compared to the HUF 6.542 billion achieved in the same period of the previous year which signifies a 4 percent growth. The annual portfolio of the newly sold policies totaled HUF 7.067 billion in the first three quarters of 2011, which was 2.6 percent lower than the result of the first nine months of the previous year. It is important to highlight that last year’s result included a one-off effect of more than one billion forints due to the sales campaign which closed that August before the issue of shares. In 2011 the Company was able to repeat the new sales results achieved in the same period of the previous year but without similar activities and under different economic conditions.
The premium income of HUF 7.463 billion received from the regular renewal premiums paid under policies sold in the former period was 158 percent higher in the first three quarters of 2011 than the HUF 2.894 billion achieved in the first nine months of 2010.
Top-up premiums totaled HUF 5.225 billion, which was below the HUF 5.765 billion performances in the similar period of the previous year, while these make up only 27 percent of total premium income. This is lower than the 40 percent market average and so it is in line with the Company’s objective regarding the desired premium proportion.
The diversification of the sales channels improved further. BROKERNET Group’s share was 67 percent of new sales in the first three quarters of 2011, of which 60 percent was the share of sales in Hungary and 7 percent was the share of sales in Slovakia. The Company’s own network produced 11 percent while other sales channels achieved 22 percent. Comparison: In the first half of 2011, the share of the BROKERNET Group was 70 percent (63 percent in Hungary and 7 percent in Slovakia); the Company’s own network achieved 10 percent while other sales channels reached 20 percent.
Gross operating costs were HUF 12.538 billion in the first three quarters, of which acquisition costs made up HUF 8.546 billion and administrative costs totaled HUF 3.808 billion. In terms of business volume, acquisition costs were fully in line with the market level. Administrative costs amounted to HUF 2.660 billion without one-off items, which comprises 13.7 percent of gross premium income. It is a decrease of 0.1 percentage point compared to the figure of 13.8 percent in the same period of the previous year.
The capital situation of the Company is stable; its equity totaled HUF 6.612 billion on 30 September 2011. The available guarantee capital is HUF 5.639 billion, which makes up 585 percent of the level required by law.
The balance sheet total of the Company is HUF 39.596 billion; the retained loss for the year was HUF 3.116 billion at the end of the period. The Company has fully complied with its obligations.
The development of CIG Pannonia First Hungarian General Insurance Plc. and the Group’s fund business line and the foundation of the Group’s property management company, Pannonia Investment Service Provider Plc. and the preparation of its operation advanced according to plan in the current period.
Further plans
Based on the current medium-term plans of the Company, the capital raised through the public offering in October 2010 will ensure the Company’s capital requirement as per Solvency I until the first profitable operating year, according to the original plan.
The Company started to prepare for the introduction of the Solvency II requirements planned for 2013-14. Solvency II is a new, risk-based solvency system similar to Basel III that is applied in the banking industry. It creates a new framework for the actors in the insurance industry throughout the whole territory of the European Union. The principles set by Solvency II cover the proper evaluation of the insurance companies’ risks and financial resources, the issue of more effective supervisory reviews and the disclosure obligations of the companies. According to the expectations, the new regulations will result in stricter capital requirements for insurance companies since they take potential risks into consideration at a broader level than the current regulatory system. All in all, introducing Solvency II in 2013-2014 will make the whole insurance market more transparent, calculable and secure.
According to the Company’s current knowledge, compliance with the capital requirement of Solvency II will demand an extra fund of HUF 4 billion. Before the expected introduction, the Company’s purpose is to comply with the requirements of Solvency II as soon as possible. The Company plans to raise this HUF 4 billion fund within a hybrid scheme, i.e. in the form of subordinated loan capital and the issue of new shares, so that the transaction would have a minimal impact on the ownership ratios of the shareholders.
The primary goal of the Company’s management is to achieve the first profitable year in 2014 at the latest.
More information:
CIG Pannonia Life Insurance Plc.
Karolina Czakó
Communications Executive
E-mail: Tel: +36-70-466-0815