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XPRIMM News - THE ROMANIAN INSURANCE MARKET NEWSLETTER
No. 104, March 13th, 2008

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FIAR
INSURANCE PROFILE
  EDITORIAL


Signs of maturity


The results of the previous year have brought for the Romanian insurance market the surpassing of some psychological milestones for many indicators, but also two reasons for being optimistic.

The amount of gross written premiums has acceded EUR 2 billion, the average density surppased EUR 100, while unfortunatelly, the value of paid claims was higher than EUR 1 billion.
Beyond these thresholds that have been surpassed, the insurance industry offers two maturity signs: life insurance and territorial network.
The growth over the average of the life insurance line of business represents one of the main reasons of satisfaction on the market level. It is true that reported to the 2006 increasing ratio, the life insurance has reported only a 1.5% higher growth. But, if we compare the 2006 results in EUR (+12.5%) with the ones from 2007 (+34%) on this line of business, this still represents a constant growth.

Practically, after the old TV set was replaced in the Romanian houses by LCD's, apparently there are some money in the Romanian pockets for life insurance. On the other hand, another reason, more important, has contributed and sustained the development of the life insurance: the birth of the private pensions. Today, in Romania, we assist to a similar situation with what happened in all the countries were the private pensions were implemented: the inducement of the life insurance.

The second sign of maturity is represented by the growing over the average of the underwriting in the rest of the country, excepting Bucharest. The results of the other regions in Romania show, on one hand, the reaching of the saturation level in Bucharest, and on the other hand the fact that the potential of province is beginning to turn account by the insurers. That means that in the previous year, the forces proportion was changed between Bucharest and the province.
If in Bucharest, in 2006, almost 54% from the total amount of gross written premiums from the entire market were recorded, in 2007, the province has increased its share with 8 points. This thing was mainly caused by a growing in European currency recorded in the province of 54%, compared with Bucharest, with 14%.

In fact, the evolution from the previous years can be treated not necessarily as a spectacular growth, but as a normal development of emerging markets through maturity. We expect a mature market, where the life insurance will represent over 50% and, the brokers will contribute with over 50% to the insurers' business. We expect a mature market where the one digit increase that represents in absolute value more than actual values.

by alex.rosca@mxp.ro

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ASIBAN
ASIGEST

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MICROSOFT
AUDATEX
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ASIBAN
FADATA
EDITORIAL | INTERVIEW | TOP PRESS | CEE & CIS | FINANCIAL NEWS | EVENTS
 INTERVIEW

 

Interview with Mr. Theodor ALEXANDRESCU,
General Manager,
AIG Life

XPRIMM: How would you characterize the evolution of AIG Life in 2007, quantity-wise and quality-wise?
Theodor ALEXANDRESCU:
For AIG Life, 2007 was the best year the company had in Romania so far. We have registered an important growth. According to the results registered in the first three quarters of 2007, we are the most profitable life insurance company on the market, and we hold an honorable second place. We are in graph with our plans, because, since we entered Romania, we had a ten years strategy and we also have big plans for the next ten years for the Romanian market. 2008 has all the premises to determine a growth as big as this year's. We intend to keep our position as leaders in growth and profitability terms on the market segment we are active on.

XPRIMM: What are the challenges you are expecting for this year, on the life insurance market?
T.A.:
We believe that in 2008 the Romanian life insurance market will continue to grow. The evolution will be strengthened by the Second and Third private pensions Pillar. The people already understand that they have to increase their income after retirement, for a better standard of living. On short term, many persons will feel the need of life insurance and also the advantages provided: protection, capital accumulation and investments. Through a well prepared sales force, AIG Life will contribute to the education of Romanians, because their risks are to be taken by a powerful financial organization.
Nevertheless, the major challenge in 2008 might be convincing people that choosing a pensions plan through life insurance will cover the financial problems for an individual and his family. By the means of continuous communication with the potential customers, they will get to understand the difference between a pensions plan, which basically offers accumulation of capital, and a life insurance that, besides the accumulation of capital, offers many other protection advantages against unpredictable events in life.

XPRIMM: What measures, do you think, must be taken in order to stimulate the development of this sector?
T.A.:
The legislation should allow deductibility also for life insurance, so that the employees to be encouraged to insure their revenue, family and life. At the time being, the Romanians are not stimulated to buy life insurance products.
Furthermore, for a better understanding of this field, which is still undeveloped in Romania, the authorities should initiate a plan of communication, in which the major players on the market must be involved.

XPRIMM: Do you consider that the private pension's debut will influence also the life insurance market?
T.A.:
The private pensions already had an important impact in the growth of interest towards what is a life insurance and what is its purpose. We can obviously say that the implementation of the Second Pillar has been the reason of many interesting debates about life insurance, between the insurance agents and their potential clients. 2008 represents the moment when these discussions will start to transform themselves into actions.

XPRIMM: Thank you!

by mihaela.circu@mxp.ro

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Theodor ALEXANDRESCU
Mr. Theodor ALEXANDRESCU,
General Manager,
AIG Life

MEDICOVER
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 TOP PRESS

Top 5 Insurers for 2007
The Romanian insurance market surpassed EUR 2 billion during the past year. The growth over GDP increased the penetration rate up to 1.8%, while the insurance density exceeded EUR 100 per capita in 2007.
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by alex.rosca@mxp.ro, 5.03.2008


Over EUR 1 billion claims paid in 2007
The Romanian insurance companies had paid, over the past year, over EUR 1 billion losses. Thus, after the market surpassed EUR 2 billion in gross written premiums, 2007 brought into the picture a total amount of claims which, according to the Insurance Supervisory Commission (ISC), worked out at RON 3.35 billion (over EUR 1 billion).
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by alex.rosca@mxp.ro, 6.03.2008


Motor insurance... profitable?
"The insurance market is the only financial sector in Romania which loses money. At leas three years the market is billing effluences and the results reflect an emphatic tendency of more worsen situation", stated Cristian CONSTANTINESCU, President of UNSAR (National Association of Insurance and Reinsurance Companies from Romania) within the second Edition of the National Motor Insurance Conference held at the Parliament Palace on March 6th.
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by andreea.ionete@mxp.ro, 6.03.2008


The first transaction on the Romanian private pensions market
Away forecasted by analysts, the intention of some Pillar II funds of selling its portfolios is starting to become real.
In this context, OTP Pension Fund will sell its Pillar II portfolio to BT Aegon, according to NewsIn.
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by mihaela.circu@mxp.ro, 11.03.2008


ERGO enters the Romanian market
German group ERGO had decided to establish a life insurance company in Romania - ERGO Asigurari de Viata. The company will start to sell life insurance policies in the second quarter of this year, through a partnership with the local subsidiary of the Italian group UNICREDIT, UNICREDIT Tiriac Bank.
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by mihaela.circu@mxp.ro, 12.03.2008


Over EUR 370 million for ALLIANZ-TIRIAC in 2007
The Romanian insurance company ALLIANZ-TIRIAC had reported, last year, a total amount of gross written premiums of EUR 371 million, 17% up in comparison to 2006, according to ALLIANZ Group press release.
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by andreea.ionete@mxp.ro, 6.03.2008


ASTRA-UNIQA rose by 23% in 2007
The Romanian insurance company ASTRA-UNIQA has registered, in 2007, a total amount of gross written premiums of RON 374 million, 23% more than the previous year.
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by andreea.ionete@mxp.ro, 6.03.2008


AIG Life - leader in terms of growth and profitability
AIG Life has the intention of keeping, in 2008, the position of leader terms of growth and profitability on the life insurance segment.
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by mihaela.circu@mxp.ro, 10.03.2008


PORSCHE Insurance - an exclusively Motor Hull insurer
Financial group PORSCHE intends to launch in Romania its own insurance division - PORSCHE Insurance, offering motor insurance products in Romania starting the third quarter of this year.
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by vlad.panciu@mxp.ro, 4.03.2008


ASIROM has a capitalization of RON 185.92 million
The Romanian insurance company ASIROM will increase its share capital to RON 185.92 million. The decision was taken within the General Meeting of Shareholders at the end of February this year.
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by mihaela.circu@mxp.ro, 5.03.2008

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 CEE & CIS


ALLIANZ pointed 19 million customers in New Europe
The year 2007 was another very successful year for ALLIANZ in New Europe. The company continued its successful course of growth. Gross premiums written by the company grew by 21 percent from EUR 3.34 billion in 2006 to EUR 4.03 billion in 2007. All countries where ALLIANZ is active as Bulgaria, Croatia, Czech Republic, Hungary, Kazakhstan, Poland, Russia, Romania, Slovakia, Ukraine contributed to this outstanding overall growth rate.
"Once again we outperformed our growth from the previous year and maintained our leading position among the international insurers in this very important and dynamically growing region", commented Werner ZEDELIUS, board member of ALLIANZ SE, responsible for growth markets.
The life and health business recorded statutory premiums of more than EUR 1.0 billion in 2007, increasing by 24 percent from EUR 836 million in 2006. Besides ALLIANZ Slovenska poistovna, once again ALLIANZ Poland was the main driver for this positive performance, reporting an increase in premiums of EUR 64 million, amounting to 431 million euros in 2007.
On property and casualty insurance business ALLIANZ increased premiums by 19 percent from EUR 2.5 billion in 2006 to 3 EUR billion in 2007, to which most of all contributed ALLIANZ companies in Russia and Poland. In February 2007, ALLIANZ acquired the majority shareholding in ROSNO, one of the largest Russian insurance companies and recorded an increase of EUR 263 million amounting to a total of EUR 913 million in 2007 on the Russian market. Allianz in Poland increased gross premiums written by 30 percent from EUR 283 million in 2006 to EUR 367 million in 2007. At the same time, in September 2007, ALLIANZ entered the insurance market in Kazakhstan by acquiring 100 percent of the shares in ATF-Polis. "Thus ALLIANZ is well positioned to participate in the dynamic growth of the Kazakh market", explains Werner ZEDELIUS.
The good sales performance of the ALLIANZ tied agent network as well as the dealer channel facilitated this development.
"Having entered the CEE markets at a very early stage and now holding top positions in all markets, we feel well prepared to deliver on our promise to be the most trusted partner for our customers, employees and sales partners," commented Werner ZEDELIUS on the outlook for business results in the region.
by oleg.doronceanu@mxp.ro, 6.03.2008


Pension Fund to get a third of Zavarovalnica TRIGLAV
A 34% stake in insurance company Zavarovalnica TRIGLAV that former insurance policy holders are entitled to will be transferred over to the Institute for Pension and Disability Insurance (ZPIZ) in accordance with a bill that the government adopted, SLOVENE Press Agency reports.
"This will put into action the will of the people expressed at the referendum in November 2007, and provide a long-term solution for the financing of pensions", State Secretary Andrej SIRCELJ said after the government session.
The bill is the latest attempt by the government to find an owner for the stake that is still classified as public ownership and is one of the biggest chunks of equity that has not found a proper owner after the start of privatization over a decade ago.
The stake was initially supposed to be divided among people who bought TRIGLAV insurance policies in 1990, but this proved nearly impossible due to the large number of claimants involved and the missing paperwork.
Last year the government came up with a proposal to transfer the stake to the state-run Pension Fund Management (KAD), but the motion was voted down in the November 2007 referendum amidst concerns that there were not sufficient safeguards in place ensuring that KAD would not simply sell the shares at some point in the future.
Now the government heeded ever louder calls, including from the ranks of the coalition parties, to give the share to the pension purse, helping it to cope with the funding gap that is expected to appear in the near future due to the rapidly ageing population and the increasing number of pensioners.
The latest proposal also includes safeguards, as it says that "the ZPIZ can only sell the shares in accordance with the act on public finances, which requires the green light from the government and parliament", SIRCELJ added.
According to the bill, the money that the ZPIZ makes with the management of the TRIGLAV stake can only be used for disbursement to pensioners and recipients of disability benefits.
by andreea.ionete@mxp.ro, 11.03.2008



Bulgarian private health insurers to be relicenced
The private health insurance companies will have to be relicensed if the proposed changes to the Health Insurance Act are legislated, it emerged after the announced initiative for an increase in health insurance contribution rates and for the gradual demonopolisation of the National Health Insurance Fund (NHIF), acording to DNEVNIK a.m.
All existing funds will have to perform a capital raise to comply with the new requirements which include a proposal for a minimum capital of EUR 5, 1 million EUR.
At present, the licensing minimum is set at EUR 255.900 thousdands in capital. The fund is further required to enlarge its capital to at least EUR 1 million within three years of receiving a licence. Most of the existing funds have a capital in the EUR 1 million ranges.
The funds have already disclosed all relevant information about their direct shareholders on the site of the Financial Supervision Commission but there is a proposal to increase the degree of disclosure. If it is legislated, the funds will have to reveal also the names of their indirect shareholders as well.
Offshore domiciles will not be disallowed but the funds will be obliged to disclose fully the identity of the off-shore company owners so that they could be held liable in case of any financial irregularities at the fund.
Market sources said off the record that some of the active funds were unlikely to apply for relicensing as they would be unable to meet the capital requirements and that, in the end, would lead to a wave of mergers.
The monthly health contribution rate will be raised to 8% from mid-2008 with 2% of the contribution going to the private health insurers which are expected to be ultimately managing around EUR 250-300 million.
by oleg.doronceanu@mxp.ro, 10.03.2008


Russia to open doors to foreign insurance companies
A draft law was submitted to the State Duma, lower house of Russia's parliament, if the bill goes through foreign insurance companies will be allowed to open offices in Russia.
The bill was introduced by Alexander KOVALY, Member of Committee on the Financial Markets.
However, only "reliable and qualified" foreign insurance companies will be permitted to open offices in Russia, an explanatory letter to the document reads.
The document outlines terms and conditions for foreign insurers while protecting the interests of Russian agents, the government and the national insurance market.
According to the reached arrangements on the Russia accession to the WTO foreign insurance and reinsurance organization should be allowed on the Russian market, is also spoken in the note.
The draft law also details the documentation that a foreign insurance company is required to submit to Russian regulators to achieve certification in Russia, as well as establishing the guidelines for operating on the Russian insurance market, and fixes deadlines for approval and grounds for refusing licenses. Measures to monitor the activity of foreign insurers in Russia are also included.
The branch opened in Russian Federation should correspond to following requirements: to have the form similar to an open joint-stock insurance company, the legal and actual address should not be in an offshore zone, to have within 5 years positive indicators of financial stability and solvency.
The branch of the foreign insurance organization can not create any isolated divisions and carry out reinsurance in parent organization or in its affiliated insurance organizations, or affiliated with these. Besides, the branch can not carry out insurance operations in other states or concerning non-residents of the Russian Federation, as well as to render agency, broker services and other intermediate services.
by oleg.doronceanu@mxp.ro, 11.03.2008
 

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 FINANCIAL NEWS



Romania attracted 4% of total FDI in Europe
Some EUR 200 billion were invested last year in Europe, with Romania, Russia and Poland among the top investment countries, according to advisory company OCO Global. This is a new record and is due to an increasing inflow of investments into Eastern Europe. Globally, trans-border investments rose 5.1 percent in 2007, to some EUR 630 million. More than 11,500 investment and expansion projects were announced last year, likely to lead to 2.9 million new jobs. China still tops the investment destination list, with 1,171 projects, worth EUR 59.3 billion.
In Europe, Russia is the leader of investment destinations for the fifth year in a row. According to data published by Romanian authorities, more than EUR 7 billion entered the country as foreign direct investments (FDI) in 2007, or 4 percent of the EUR 200 million invested in Europe. FDI made up some 35 percent of total investments made in Romania last year.
by Business Standard, 11.03.2008


Romania ranks seventh in the EU in terms of annual inflation
Romania ranks seventh in the European Union in terms of annual inflation, at 7.3 percent in January. Main factors for the increase in inflation were higher prices in education, transportation and the food sector, according to EU's statistics office, EUROSTAT. Annual inflation in the euro-zone rose to 3.2 percent in January, compared to 3.1 percent in December, 2007, as consumer prices increased 0.4. At the EU level, annual inflation rose to 3.4 percent in January, from 3.2 percent in December, with a 0.2 percent monthly increase in consumer prices.
Countries with the highest inflation in the EU were Latvia (15.6 percent), Bulgaria (11.7 percent), Czech Republic (7.9 percent) and Hungary (7.4 percent). Lowest inflation levels were registered in the Netherlands (1.8 percent), the United Kingdom (2.2 percent), Germany and Portugal (2.9 percent).
The European Central Bank (ECB) has not yet cut its key rate, although several European states registered inflation levels way above ECB's 2 percent target.
Analysts are predicting that the central bank will cut the key rate twice this year, from the current 4 percent, following the lead of the U.S. Federal Reserve, which applied several rate cuts last year and this year, down to the present 3 percent.
In Romania, the National Bank (BNR) rose the key rate several times, to 9 percent, and analysts foresee a new increase this spring, up to 9.5 percent.
by Business Standard, 13.03.2008


JP Morgan: Romania's banking system has good development perspectives
The widening current account deficit, accelerated inflation, and turbulence on international markets will not affect the development potential of the Romanian banking market, according to JP Morgan analysts.The report was carried out as an analysis of RAIFFEISEN International, but also includes a section on Romania's banking system.
JP Morgan specialists believe that Romania still has great potential for growth in terms of banking. Even though the investment bank's report raises the issue of hikes in the exchange rate and interest rates, which could lead to an increase in the non-performing loan ratio, it shows that the level of penetration of banks in Romania is still low, compared to other European Union states, albeit comparable to other emerging countries. JP Morgan analysts estimate that this year's loan gross domestic product (GDP) ratio will reach 45 percent, and deposits 33 percent. The figures are based on data from the National Bank of Romania (BNR) and the National Institute for Statistics (INS).
by Business Standard, 10.03.2008


BCR, responsible for over one fourth of ERSTE's profit
The net profit of Romania's largest banking group, Banca Comerciala Romana (BCR), increased last year by 22.3 percent, to EUR 276.5 million, which represents over one quarter (25.1 percent) of the ERSTE mother bank's net profit in 2007, posted at EUR 1.1 billion.
BCR's profit also makes up over one third (33.5 percent) of the total profit in 2007 of all banks in Romania, which amounted to EUR 825 million, up 32 percent year-on-year, according to data reported by lenders to the Central Bank. BCR's direct competitor, BRD-Societe Generale posted a profit last year of EUR 274.8 million.
While reporting standards are different, the results show that BRD-SG and BCR made over 50 percent of the profit. BCR's earnings in 2007, without including restructuring costs, rose 42 percent, to EUR 362.1 million, according to a declaration for Business Standard by bank officials.
The engine of this growth was consumer loans, especially in lei, but also mortgages, and loans for small and medium-sized businesses.
by Business Standard, 3.03.2008


Economic growth of 6% boosts the RON and the stock market
Construction, services and consumption led to economic growth above analyst estimates. The 6 percent increase of gross domestic product (GDP), following a 6.6 percent advance in Q4, led to the appreciation of the national currency and to higher quotations on the stock market. GDP rose by up to RON 404.7 billion (EUR 122 billion), according to data published yesterday by the National Institute of Statistics (INS), leading to a 2.33 percent budget deficit and a 13.9 percent current account deficit. In spite of a negative contribution by agriculture to GDP, due to severe drought last year, construction and services compensated with higher contributions to the gross domestic product. Furthermore, these fields will be at the foundation of solid growth in 2008.
"Last year, a significant increase was registered in the services and construction fields. It is likely that an increase in the consumption growth rate was registered in the fourth quarter. VAT could have had a stronger impact, but net taxes alone make up 10-12 percent of GDP", BCR's Chief Economist, Lucian ANGHEL, told Business Standard.
by Business Standard, 11.03.2008

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 EVENTS



FIAR - International Insurance-Reinsurance Forum
May 19-23, 2008
Sinaia, Romania
Organizer: Media XPRIMM
Details: www.fiar.ro


Moscow International Reinsurance Congress
March 25-26, 2008
Imperial Park Hotel, Moscow, Russia
Organizer: RUSSIAN POLIS Information Group
Media Partner: PRIMM Insurance&Pensions Magazine
Details: www.in-sure.ru/conference


12th All-Russia Conference on Reinsurance
March 27-28, 2008
President Palace, Moscow, Russia
Organizer: Reinsurance Committee of the All-Russia Union of Insurers (ARIA)
Media Partner: PRIMM Insurance&Pensions Magazine
Details: www.re-conference.ru


The Fourth International Risk Management Conference
April 17-18, 2008
Almaty, Kazahstan
Organizer: EURASIA Insurance Company
Media Partner: PRIMM Insurance&Pensions Magazine
Details: www.theeurasia.kz

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