The pre-tax profit fell year-on-year by 29 percent to 266 million euros.
The Vienna Insurance Group (VIG) achieved significantly less profit in the first nine months due to the corona crisis. The main reasons for this were a declining financial result and goodwill amortization for Bulgaria, Croatia and Georgia that had already been made in the first half of the year.
As announced in mid-November, earnings before taxes fell by 29.2 percent to EUR 266.3 million, VIG confirmed today. The expected decline in earnings for the full year was also confirmed.
Depreciation
The ongoing Covid 19 pandemic had a significant impact on the financial result, which fell by 18 percent to EUR 513 million. Goodwill amortization in the first half of the year in the amount of 118 million euros also weighs on profit. Without this goodwill amortization, an increase in profit before taxes (EGT) of 2.1 percent to EUR 384.1 million would be recorded for the first nine months of 2020. Earnings after taxes and non-controlling minorities fell by 22.7 percent to 175 million euros.
Even after three quarters, VIG recorded solid operating insurance business. The combined ratio – claims and costs in relation to the premiums – improved to 96.1 percent, after 96.4 percent. This is partly due to improved damage rates as a result of the pandemic. At the same time – as forecast for the first half of 2020 – an increase in claims expenditure was registered in the respective countries after the easing and increased claims reserves were built up.
The premium income rose by 1.7 percent to around 8 billion euros. With the exception of life insurance, which saw a slight decline of 1 percent, all lines were up. Austria and Poland were the main drivers of growth. The Turkey / Georgia, Romania and Hungary segments also showed above-average premium increases.
“Taking the Covid-19 situation into account, the VIG Group is on a solid path. We continue to see ourselves operationally in a position to manage the effects of the pandemic for the insurance group,” said CEO Elisabeth Stadler, according to today's announcement. In general, it has been confirmed that the business model with its very broad diversity across countries, brands, sales channels and products has proven successful even in difficult phases.
forecast
For the year as a whole, VIG expects a profit before taxes in a range of EUR 300 to 350 million “taking into account current developments and subject to unforeseeable volatility in the capital markets”, Stadler confirmed the forecast made in mid-November. In 2019, the pre-tax profit was 522 million euros.
Due to the current situation, which has led to different degrees of lockdowns and tightened Covid-19 measures, the assessment of the medium and long-term effects of the pandemic on the national economies and as a result of the insurance business continues to be difficult.
The CEE region got away with the first Corona wave better on average than Austria or Western Europe. This changed with the second wave, with very high infection rates being recorded in many VIG stores. The revised current economic forecasts for this region anticipated a recession in the fourth quarter of 2020 and a weaker economic recovery than a few weeks ago.
The international rating agency Standard & Poor “s (S&P) again confirmed VIG's rating of” A + “and a stable outlook on November 25, 2020, VIG said.
