Earnings call transcript: Vienna Insurance Group sees strong Q1 2025 growth

Vienna Insurance Group (VIG) reported a robust start to 2025, with significant increases in revenue and profit before tax for the first quarter. The company recorded an insurance service revenue of €3.1 billion, marking an 8.1% increase year-over-year, and a profit before tax of €260 million, up 7.5% from the previous year. The firm’s gross written premiums rose to €4.7 billion, an 8.3% increase. Currently trading at $196.13, near its 52-week high of $205.24, the stock price reflects investor confidence in the company’s strategic direction and financial health. InvestingPro data shows the company maintains an EXCELLENT financial health score of 3.82, with liquid assets exceeding short-term obligations.

Key Takeaways

• Q1 2025 insurance service revenue increased by 8.1% year-over-year.
• Profit before tax rose by 7.5% to €260 million.
• Gross written premiums grew by 8.3% to €4.7 billion.
• The solvency ratio improved to 271% from 262% in Q1 2024.
• The company expanded into new markets, including Poland and Albania.

Company Performance

Vienna Insurance Group demonstrated strong performance in the first quarter of 2025, driven by solid growth across its Central and Eastern European markets. The company’s strategic expansion into new regions, including the acquisition of a stake in Finanze, Poland’s largest financial broker, and entry into the Albanian insurance market, contributed to its robust financial results. The company’s diversified portfolio and competitive pricing strategies have positioned it well against inflationary pressures.

Financial Highlights

• Insurance service revenue: €3.1 billion (+8.1% YoY)
• Profit before tax: €260 million (+7.5% YoY)
• Gross written premiums: €4.7 billion (+8.3% YoY)
• Net P&C combined ratio: Improved from 92.7% to 92.3%
• Solvency ratio: 271% (up from 262% in Q1 2024)
• Dividend: €1.50 per share

Outlook & Guidance

Vienna Insurance Group maintains its full-year profit before tax guidance of €950-1,000 million, reflecting confidence in continued growth and market expansion. The company plans to continue its mergers and acquisitions activities and is developing a new three-year strategy, expected to be unveiled in the second half of 2025.

Executive Commentary

Peter Hoettinger, Deputy CEO, highlighted the company’s strategic positioning in Europe, stating, "We feel to be currently in the right area of Europe." CFO Liane Hirner commented on the interest rate environment, noting, "A smoothly increasing interest rate curve is positive."

Risks and Challenges

• Economic uncertainty in the Eurozone, with projected GDP growth of just 0.7% in 2025.
• Potential integration challenges with new market entries, such as in Albania and Moldova.
• Inflationary pressures affecting pricing strategies across different markets.
• Regulatory changes in Central and Eastern Europe that could impact operations.

Vienna Insurance Group’s first-quarter results indicate a strong start to the year, with growth across key financial metrics and strategic market expansions. The company’s robust financial health and strategic initiatives position it well for continued success in 2025. With a one-year price return of 8.98% and trading near its 52-week high, investors seeking detailed analysis can access the comprehensive InvestingPro Research Report, which provides expert insights and advanced metrics for informed decision-making.

Full transcript - Vienna Insurance Group Wiener (VIG) Q1 2025:

Youssef, Chorus Call Operator: Ladies and gentlemen, welcome to VIG Key Figures and Updates First Quarter twenty twenty five Conference Call and Live Webcast. I am Youssef, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and that this conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or for broadcast.

At this time, it’s my pleasure to hand over to Peter Hoettinger, Deputy CEO of EIG. Please go ahead.

Peter Hoettinger, Deputy CEO, Vienna Insurance Group: Thank you very much, and a very warm welcome this I’m happy to present together with my colleague, Liane Hirner, our first quarter results. We can present quite solid results in the first quarter with a growth in insurance service revenue by more than 8% and profit growth before taxes of 7.5%. We also have been able to place successfully a Tier two sustainability bond and repurchasing part of our subordinated debt. Additionally, we have additions in Albania to our two non life insurance company, a life insurance company, where we will realize with synergies and also exploring the life market in Albania, which is still at a very early stage. On top, we bought a stake in Finanze.

Finanze is the largest financial broker in Poland, which will support our growth of our Polish companies. And we are currently in a pit for taking over Moltosik, which is one of Moltos’ leading non life insurance companies. And the government has invited us to participate in this bid to then further develop the Moldavian insurance market. On the next slide, you see our diversification, which we have reached until today, and we believe this diversification is important and supports our resilience. And you see on gross written premiums, also in insurance service revenues, that there is a very nice percentages divided by our countries and region.

And the same is true for the results before taxes. We’re having Austria with 35%, extended CE with 26% and Czech Republic with 23%. On the next slide, you see the economic forecast for our region. We feel to be currently in the right area of Europe, having projected GDP growths 3% for next year in Poland to 2.5% in Czech Republic. Comparing this with the euro era in the year 2025 with 0.7%, We acquired some in a very active environment and benefiting from the internal growth and consumption of Central Eastern Europe.

On the next slide, as I have mentioned, we have been able to issue a Tier two bond with a principal amount of €300,000,000 an amount equivalent to the net proceeding is used for a combination of eligible green and social assets in line with VHE updated sustainability bonds framework 2025. A very strong order book of above €1,000,000,000 at peak was finally three times oversubscribed and led to the lowest spread over of any subordinated notes of VHE with 195 basis points. At the same time, VHE repurchased a total volume of around €126,000,000 of subordinated notes issued in 2015 and 2017. With this introduction, I’m happy to hand over to Liana Hjelena. Liana, please.

Liane Hirner, CFO, Vienna Insurance Group: Thank you, Peter. As Peter already mentioned at the beginning of his presentation, we are very pleased with the solid business performance we achieved in the first three months of twenty twenty five. To summarize, the insurance service revenue increased by 8.1% to €3,100,000,000 Profit before tax rose by 7.5% to 260,000,000, which is driven primarily by double digit growth rates in Poland and the extended CE segment with Romania and Bulgaria contributing significantly to the profit growth. The net P and C combined ratio improved from 92.7% to 92.3%. This reflects a lower claims ratio, thanks to fewer weather related claims and positive developments in the motor business in The Czech Republic and Poland.

Our solvency ratio as of March stood at robust 271%, up from 262% in Q1 last year. This was supported by increased own funds of about €10,800,000,000 driven by the positive operating performance of businesses and by positive interest rate developments. The SCR remained relatively stable at close to €4,000,000,000 Please note that the dividend payment for the business year got fully considered in the first quarter in line with our dividend policy. Excluding the transitionals, the solvency ratio stood at two fifty two percent. Now let’s move to Slide nine, and let’s have a closer look at the top line development in the first three months, twenty twenty five, starting on Page nine with the gross written premiums over June.

Premiums were up 8.3% to overall 4,700,000,000 Here, Austria and The Czech Republic both did well in the Q1 with premium growth rates of above 6%. In Poland, the extended CE and the special market segments, we saw a double digit growth rate. Apart from Poland, with plus €54,000,000 additional premium volume in the first quarter, the markets to Kyrgyz, Romania and the Baltic States significantly contributed to the premium growth in absolute terms. This very favorable development gets also reflected in the insurance service revenue figures, which we show on the next slide. Overall, insurance service revenue increased by 8.1 to €3,100,000,000 Austria’s growth of 6% was mainly driven by the non motor and health business.

Czech Republic posted 7.3% growth and Poland was up 8.2%, both benefiting from sound motor and other property business as well as growth in life. In extended CE, nearly three quarters of the segment’s EUR90 million growth came from Romania, Slovakia and The Baltics. In Special Markets, it was again the dynamic development into key pushing the insurance revenue in this segment to roughly €290,000,000 up by 38% or €80,000,000 These strong developments underscore the broad based momentum across all our markets. To summarize, we have a look at Page 11. We had a strong start in 2025 with robust business performance of key metrics.

At our AGM last Friday, shareholders reported dividends of 1.5 euros per share, which will be paid out tomorrow, May 28. Given our sound Q1 performance with gross written premium and insurance service revenue both up 8% and the profit before taxes increase of 7.5%, we remain confident in reaching our targeted profit before range of €950,000,000 to €1,000,000,000 for the full year 2025. Our capitalization remained strong with a solvency ratio of 271%. The SFR reports for the full year 2024 are available on our website, and we have added two overview slides, including the sensitivities on the Slides thirteen and fourteen in this presentation. I have come to the end of my presentation, and we are now welcome your questions.

Peter Hoettinger, Deputy CEO, Vienna Insurance Group: Session.

Youssef, Chorus Call Operator: The first question comes from Yudish Shirochet from Autonomous Research. Please go ahead.

Yudish Shirochet, Analyst, Autonomous Research: Good afternoon, everyone. Can you hear me?

Liane Hirner, CFO, Vienna Insurance Group: Yes, we can hear you.

Yudish Shirochet, Analyst, Autonomous Research: All right. Thank you, Johan. So I’ll kick start with two questions first. Firstly, just on your guidance, judging from your pre tax profits, it seems quite a solid start to the year, but you have maintained your full year guidance unchanged. So I was just wondering, that just because it’s too early in the year?

Or is that a reflection of some increased uncertainty or maybe some slowdown that we should be aware of further down the line? That’s my first question. My second question is on solvency actually. Just looking at your most recent sensitivities, it seems that your sensitivity to increase of 50 basis points in your incorporate bond spreads is now minus 6%. And but last year, I think it was closer to 15%.

So I was just wondering what has driven this change, please? Thank you.

Liane Hirner, CFO, Vienna Insurance Group: So I’m happy to answer your questions. The first one regarding to the guidance. The guidance remains unchanged. Usually, our first quarter or we start with a good first quarter and also we did that in the last year. There is no increase of uncertainties.

But for the moment, it’s too early and we stay with our outlook as presented.

Yudish Shirochet, Analyst, Autonomous Research: All right.

Peter Hoettinger, Deputy CEO, Vienna Insurance Group: Thank Yes.

Liane Hirner, CFO, Vienna Insurance Group: The second question was regarding solvency. The spread of corporate bonds, 50 basis points compared to last year. This year, you would have to add spread corporate bonds and spread government bonds. This was shown in one figure last year, 14.9% minus. And this year we split it, so you can see 5.55% downward sensitivity for corporate bonds and 8.96% downward sensitivity for corporate bonds.

Yudish Shirochet, Analyst, Autonomous Research: Okay. That makes sense. Right. Okay. That makes sense.

Thank you very much.

Liane Hirner, CFO, Vienna Insurance Group: Somehow unchanged.

Yudish Shirochet, Analyst, Autonomous Research: Okay, great. Thank you very much.

Youssef, Chorus Call Operator: The next question comes from Auguste Marcant, UBS. Please go ahead.

Auguste Marcant, Analyst, UBS: Hi, Leon. Hi, Peter. Congrats on a solid set of results. My first question is on P and C. How are you seeing pricing versus inflation trends in your major geographies?

And how do you see it developing in near medium term? Any color there would be helpful. Then my second question is on your strategic plan, your current strategic plan since this year. Are there any updates, any plans on an update for the market or anything there? And then my final question is on excess capital.

Again, you’re still trending well above your target range. Now you have a bit more debt than you did before as well, so that also helps. Any thoughts about how do you see your capital? Do you see potential for inorganic growth, the distributions? Anything you can tell me here would be helpful.

Thank you.

Peter Hoettinger, Deputy CEO, Vienna Insurance Group: Thank you. Thank you for your questions. I will take the first two questions. The first question is rate increases versus inflation. You have to separate between Austria and Central Eastern Europe.

In Central Eastern Europe, we have annual contracts. Therefore, we are adopting our contracts also to the claim costs and needs. And therefore, we are reflecting quite pretty the inflation and are able to increase with inflation. In Austria, specifically in the retail book, we have long term contracts with indexes, indexes which are not CPI, but for example, in the household property, it’s a construction price index or in CASCO business, it’s a repair cost index, which is generally higher than the CPI. We are having here the effect that the indexation is always done at the inception at the original inception date of the policy.

Therefore, quite a large part of our books gets inflated with the inflation rate from last year increased this year, whereas the inflation in Austria is quite stable, even maybe a bit lower than last year. If I come to your second question, which is more about the topic about our strategy, you know that we are currently still having our strategy VHE ’25. We are in the middle of the process making our new strategy for the next three years. As soon as there is something to deliver and to inform, we’re happy to do so. I would expect this to be in the second half of the year.

I over to Liana.

Liane Hirner, CFO, Vienna Insurance Group: Thank you. Your last question related to the capital position of VIG. We have a very solid solvency ratio, I already mentioned, which has been positively influenced by the interest rate development. So our capital is well above the target range that we published between 102%. As Peter already started in his presentation, our M and A activities are ongoing.

So we have explained some other M and A activities in Albania, in Poland and in Moldova. So the active capital or the capital is used for inorganic growth and also for organic growth. So the growth rates in the gross written premium and insurance service revenue, both amounted to 8% in the first quarter twenty twenty five also need capital.

Youssef, Chorus Call Operator: The next question comes from Thomas Ugner, Ester Group. Please go ahead.

Thomas Ugner, Analyst, Ester Group: Yes. Hello. Good afternoon. Thank you also for taking my question. I’d be interested in your expectations for the combined ratio.

Was it 92.3% in Q1? Do you expect I mean, presumably, you would expect weather related claims to go up in the coming quarter or in the coming quarters. Do you expect any positive developments on the cost ratio? It increased a bit year over year, while the claims ratio was quite a bit better than last year in Q1. And staying with the combined ratio, if you could just maybe talk a little bit about the individual segments and their development in Q1?

I know you touched very briefly on Czech Republic and Poland. Maybe you can go into some more detail on other regions.

Peter Hoettinger, Deputy CEO, Vienna Insurance Group: Okay. Thank you for your question. Combined ratio, 92%. You know it’s the first quarter. You know that principally in the first quarter, there is low weather related claims activity.

The same is true for this first quarter. If there would be something like a nat cat season in our region, then it lies ahead of us. I would expect that we will stay in the region of our combined ratio where we are today. There will be a certain smoothing out of the cost ratio over the year. And let’s see how the nat cat and weather related claims will develop.

But if it would be not something very unexpected, one can expect that we will be in this range of the combined ratio. To go more into details of the region, we see and you see by our figures that we are able from the beginning of the year to have again an attractive growth dynamic in Poland. We had the mergers and the reduction of complexity last year in emerging companies. The growth ratio, which we are showing here is clearly a sign that we are again very much focused on the market development. Market development is very much supported by other property as the GDP growth in Poland is quite outperforming and there is a large economic activity there where we are benefiting.

I mentioned, I think, Czech Republic, where we also do have a decent growth property as well as in motor business. We are growing quite significantly in Romania. In Romania, on one hand side, we are growing in motor business, CASCO and motor TPL, but also in property. Also in Romania, we see a favorable economic environment currently there, also driven by a certain number of repatriation of Romanian citizens back to Romania the last years and a certain increase of ForEx direct investment. Maybe to have a word about Bulgaria.

In Bulgaria, we are growing with 9.9%. Over here, it is mainly driven by property business. Also Bulgaria does have nice GDP growth, which is supporting our premium growth there. Again, generally, we are able to reflect in our rates the inflation of our claims costs. So there is a certain automatic driver of the premium growth by inflation adaptation.

But on the other hand side, the markets which I mentioned, we also have an increase of number of leases. I hope this gave you a bit more details.

Thomas Ugner, Analyst, Ester Group: Thank you very much.

Youssef, Chorus Call Operator: The next question comes from Thomas Chieser, Holt AM. Please go ahead.

Thomas Chieser, Analyst, Holt AM: Good afternoon to everyone. Hi. I would have a question related to the interest rate environment. So it’s quite a recent topic on the bond markets globally that loan rates are going up. And would be curious on your opinion, how is it affecting VIG currently and whether, of course, it’s more happening maybe in The U.

S. And Japan, but might have an effect also on the European rates. German rates are also higher due to the fiscal situation. So generally, can you mention a little bit how is it affecting? Is it benefiting VIG or not?

What is the kind of a sweet spot of loan grades for your business in your mind? And whether the current market rates we are seeing it will continue to support the financial profits of the company or not? Okay. Thank you.

Liane Hirner, CFO, Vienna Insurance Group: Thank you. I’m happy to take your question regarding interest rate developments. For VAT, interest rate developments of our countries are relevant. So euro tax ground, Turkish euro foreign currency, the main yield curve. And in the first quarter, we saw an increase.

So this had a positive effect on our results also on the solvency ratio in force. In April, we also see the intermittency decreased again. The interest rate environment outside our markets are not do not have a huge impact on our business. Does this answer your question?

Thomas Chieser, Analyst, Holt AM: Yes, maybe that part I would ask again is whether what do you think what’s an optimal level of euro interest rates for your business?

Liane Hirner, CFO, Vienna Insurance Group: In optimal, I didn’t catch your question.

Thomas Chieser, Analyst, Holt AM: Optimal level of long euro rates for your business or is this current environment is kind of optimal for VIG or higher rates would be more beneficial or not?

Liane Hirner, CFO, Vienna Insurance Group: For us, low interest rate environment as for every insurance group, think, is not the best situation, but as it is currently and smoothly increasing interest rate curve is positive and is something that we would be happy. But on the other hand, as we saw in the past years, we could manage very well all the interest sensitivities that we saw in the last years in various crisis times. So, ABN could be quite well matched and very well diversified. So, this makes our group very resilient also in this respect.

Thomas Chieser, Analyst, Holt AM: Okay. Thank you.

Youssef, Chorus Call Operator: That was the last question. I would now like to turn the conference back over to Nina for closing remarks.

Liane Hirner, CFO, Vienna Insurance Group: Thank you. Thanks to everyone listening in and for your question and interest. We will publish the half year results of Vienna Insurance Group If you have any questions in the meantime, please do not hesitate to contact the Investor Relations team. We are happy to help.

Thank you and goodbye.

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