Vienna Insurance Grp Ord

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 across written premiums of 8.569 million Euro premiums, which is a growth of 8.7%. Insurance service revenues of 6,396,000,000. which is an increase of 8.1%, and profit per tax of 531 million, which is 10.5% growth. Our net combined ratio of 91.9% and earnings per share up 10% to 5.92 euros, 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 the strong performance, we also had a goodwill impairment in Hungary in the amount of 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 73 million Euro in comparison to last year of 113 million. We have announced on the 8th of August that we entered an exclusive due diligence with Nuremberger in Germany and we also have won an official tender Monday this week for MoldoSig 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 €950 billion to €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. It's the group income statement. Apart from the already mentioned increased insurance service revenue, I would want to highlight the improved total capital investment results, up by 32.5%, profiting from higher interest rates. With regard 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 $16.8 million. We recorded an increase of 2.8% in the insurance service revenue to 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 wrote down the remaining €72.8 million of goodwill in Hungary. Despite this measure, we were able to achieve group profit before taxes of €531.4 million, and the net profit after taxes and non-controlling interests in the amount of $386.7 million, both up by 10% approximately. On the next slide, we show the details for the insurance service revenue of $6.4 billion, being up by 8.1%. I would like to point out that our biggest segment in this half year was $1.9 billion in revenues, and an increase of 8.6% is extended CEG. Compared to the first six months of last year, extended CE contributed 148.8 million more in revenue. It's worth mentioning here that several CE markets achieved double-digit growth ratios. For example, Slovakia plus 12% and the Baltics plus 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 in Turkey. Let's now take a look at the breakdown of insurance service revenue by line of business. As you can see on slide 8, MTPL with plus 11.2%, health with plus 15.1%, as well as unit and index-linked life and life without profit participation with each roughly plus 11%, present robust double-digit growth. From an already high revenue level of more than 3 billion, other property grew by 3.9%, contributing roughly 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 plus 21.2 million is Poland, followed by the Czech Republic with plus 17.9 million. Both markets supported by significant improvement of the combined ratio. To be fair, if we adjust for the goodwill impairment already mentioned in Hungary, the segment extended CE would have been our top performer. Nevertheless, despite this goodwill impairment, we achieved double-digit profit growth of 10.5%, which demonstrates the strength 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% to 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 4 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 5 percentage points in the special market is due to two factors. Firstly, a one-off effect in the previous year And secondly, a negative development in motor and other property ends in Turkey this year. Now let's move on to slide 11 in the contract and 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 6 billion, supported primarily by the rise in long-term interest rate curves. Although the CSM release of 283 million could not be fully offset by the new business of 228 million, the sustainability ratio improved to 80% after 77% in six months, 24. The new business CSM in life and health was strong at 228 million with a still favorable new business margin of 8.9% for the first half of 2025, but slightly down, so slightly down from 10% at year end. Now over the page, we present the detail of the total capital investment result of 295.6 million, up by 32.5%, driven by an increased interest rate revenue, plus 51.2 million, mainly due to a higher volume of income investments, and also higher interest rates in Turkey. Thus, the investments held at our own risk shown on slide 13 further increased to 37.5 billion, up by 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 25 amounted to 45.6 billion euros. As there are only minor shifts in the bond rating split due to portfolio quality improvement, I would move on to slide 14 and the solvency ratio and the details of their own funds development, which is shown on slide 15. Solvency ratio, including transitionals as of June 25, increased to 278% after 261% at year end and 271% at quarter 1, 25. While the SCR of $4 billion only slightly increased by 1.5% due to higher capital requirements for health and non-life insurance, Their own funds of $11 billion increased by more than 8%, impacted by the positive interest rate development and the capital measures taken. The details of their own funds are presented on the next slide, 15. The solvency ratio excluding transitional measures of 238% underpins the strong capitalization of VIG and allows us to successfully further develop our business models 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 increase in VIG's share price over the past six months. With a share price of 43.7 euros as of June 25 and a plus of 44%, VIG shares have outperformed both the Austrian Traded Index and the Stocks Europe 600 Insurance Index. Looking at our book value per share of 47.26 euros at half year, 25, 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 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 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 and 1 at this time. The first question comes from the line of Judesh Shikore 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. So on the contractual service margin, I mean, there was a material benefit from the changes in variable fee, which I understand is due to longer-term interest rates. So 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 mean, I see rates only moving by 30 basis points, so not very much. So maybe if you could clarify something, the duration you were referring to. That's my first question. Then secondly, on the CSM itself, I think the new business margin dropped to around 9%, 8%, 9% in H1. And again, I think you mentioned a change in the term structure of interest rates. So, again, if you could clarify the technicalities around that, that would be very helpful. And then finally on the CSM again, I think since we transitioned, since you transitioned to FRS 17, the balance between, you know, 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. So if you could talk a bit around that, that would be very helpful. And then 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. And if I look at operating earnings in H1, it's up 25%. Obviously that's excluding the impairment. So 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 space 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. So at least the dividend of last year will be the dividend of the current year. And as we always said, also if the positive business development will have an impact on the dividend, so if we expect rising profits, then usually also the dividend should follow this path. So for the time being – This is all dividend policy, so no changes here. Regarding CSM development, the first question was related to the duration. So we have the release factor, which you can use for the CSM release in Life and Health. is approximately 10%. So this would be a valid proxy to model the CSM release and the years is also approximately 10 years. And the last question was or the third question was regarding CSM new business. The new business CSM is slightly below This has mainly to do with the interest rate curve structure. So in the shorter period, the interest rates decreased. In the longer term, interest rates increased. And the balance is improving. There is also less impact from the Turkish company in the second quarter of 2025. So this has also an impact. I hope this answered your question.

Thank you very much. Yeah, this answered most of my questions, but if I could come back on the dividend. I mean, you know, the operating earnings growth is very high, so I was wondering whether the relationship between, you know, your business operating results and the dividend trajectory is like a one-to-one relationship or not, basically. Okay.

Dear Judith, I kindly ask for your patience. We did not change anything to the policy for the time being. So let's wait and see.

All right. All right. Okay. Thank you very much.

The next question comes from the line of August Markham from UBS. Please go ahead.

Hi, Leon. Hi, Peter. Thanks for taking my questions at 3. 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, I feel like the target is not too difficult to achieve. Is this just conservatism or is there anything else going on here? Then my second question is on Hungary. Could you give more details on the impairment and should we expect anything more going forward here? And does this full impairment mean you're looking to exit Hungary as a market? And then finally on the PNC market, could you give a bit color on how the pricing versus inflation is developing across your key non-life markets and how have the weather relative claims been in 3Q so far? Thank you.

Thank you very much for your questions also. I will take the questions on the updated targets and on Hungary and start with these two questions regarding the targets. So 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. I would like to mention that also favorable weather-related and nut-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. So we will see what will happen in this area. I 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 and it's better to over deliver what we promised. It's what we also said in previous periods. With regard to the goodwill impairments, when you look in our balance sheet, you will see that there is an amount of 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, 2005, was the entire goodwill impairment, so there is nothing left in Hungary. We are satisfied with the business in Hungary and also with the results. I told you before it's a positive result when we exclude the goodwill impairment. So there's absolutely no idea to exit the Hungarian market. So with all of this we stay conservative and we will see what we will present to you in the next quarter regarding outlook. Yeah, so 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 events of last year. So there is an increased pricing momentum. You see in motor business more a lowering of the pricing momentum, but this has 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 inflation as inflation is now going down. there is the consequent element also in pricing. But 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, insurers participating in the accounts. We see a certain or even sometimes a reduction, which is obviously driven by certain pricing momentum from the London market. But this is only for the very top end. for all the other larger corporate business, we see a stable environment in our region. So 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 M1 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 Nuremberg. And what do you see in this company that is particularly appealing to you? The company evidently has its issues and is in the transformation process. So is it mainly the German market that's appealing to you or the potential earnings contribution after a successful turnaround? And 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. And then 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 performance top line as well as the profits contribution. And 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? And then lastly about Turkey, top line growth really strong, but this has not, at least in the first half of 2025, has not translated into profit growth. What are the challenges there? Thank you.

So thank you, Thomas, for your questions. I would like to start with your first question with the Amir Berger topic. You know, it's clear we are market leader in CEE, 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. And Nürnberger could contribute to VIG to the further diversification of our portfolio. This is a very important strategic topic for us. And as you know, we are a little bit different. We have a multi-brand strategy. So this, in combination also with local entrepreneurship, which is very important, anchors within our group. We think that we could offer ideal conditions also for securing the location and preserving the identity of the strong Nuremberger brand. So this makes absolutely sense from this perspective. And I'm sure you know that on August 8th we made a press release also that we started into an exclusive due diligence And, yeah, we have to wait. We have to look into the details. We have also external support in this exercise. And after the conclusion of the due diligence work, we will draw our conclusions, what could be the next steps. So this is for the moment all I can say to this topic.

I'm happy to take the question for the Voltex. In the Baltics, we are clearly number one in all of the three countries. Three, four years ago, we made an exercise of merging also one company and we are realizing over the last years synergies. And we are now very well-strung 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, but also in property insurance, we are overproportionately 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. I also wanted 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 Türkiye, if you could also talk about that.

Maybe then I should also take Türkiye. In Turkey, we are in the live business and in the non-live business. Live business is very decently developing, and we do have attractive products for our customers there, specifically in this high inflationary environment, also with debt. currency de-evaluation, 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, and 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 and we are also willing 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 1 on your telephone. We have a follow-up question from the line of August Markan 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 26 to 29 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 at this 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 VHE 25 strategy 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 strategy program for 2026 to 2028. And if you have any questions in the meantime, please do not hesitate to contact us in investor relations. Thank you. Goodbye.

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