Exceeding all but the most optimistic forecasts, Poland’s life
insurance market set a cracking growth pace in 2008 with a number
of market players producing spectacular premium income growth.
Though a repeat performance in 2009 is out of the question, the
market continues to hold significant long-term potential.
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Shrugging off deteriorating economic conditions Poland’s life
insurance market continued to grow apace in 2008 with gross written
premium income bounding ahead by 52.8 percent to PLN38.99 billion
($12.2 billion). For Central and Eastern Europe’s largest insurance
market the increase in premium income in 2008 was the highest in a
decade of uninterrupted growth and exceeded the previous record
increase of 37.8 percent achieved in 2006.
Last year was also especially notable for the strong comeback made
by Poland’s largest insurer, state controlled PZU Group, which
reported that its life insurance unit PZU Žycie recorded premium
income of PLN13.08 billion, up a massive 80 percent compared with
2007. Highlighting the significance of PZU Žycie’s 2008
performance, the PLN5.82 billion increase in its premium income
represented over 40 percent of the total PLN13.48 billion increase
in premium income recorded by the life industry as a whole.
PZU Žycie’s premium income surge also boosted its market share from
28.5 percent in 2007 to 33.6 percent, ending a decline in market
share which as recently as 2002 stood at 50 percent. PZU Žycie’s
profitability also held up well in 2008 though investment income,
which fell from PLN1.57 billion in 2007 to PLN203 million, took its
toll with net profit falling 35 percent in 2008 to PLN1.42
billion.
In total PZU Group’s net profit fell 35 percent at PLN2.34 billion
with general insurance contributing PLN859.5 million (down 40
percent) and other operations including asset management and
insurance units in Latvia and Ukraine contributing a net PLN60.5
million.
At the end of 2008, PZU reported total assets of PLN58.2 billion,
up 11 percent compared with 2007.
PZU Žycie’s resurgence was set in motion in 2004 under the
leadership of then-director Krzysztof Rosinski, who was tasked with
aggressively expanding the insurer’s bancassurance channel.
A successful strategy, PZU Žycie is today a leader in the
bancassurance channel. Notably, bancassurance played the major role
in PZU Žycie’s growth in 2008 with premium income via the channel
increasing from PLN957 million in 2007 to PLN6.38 billion in
2008.
In 2005, reorganising PZU Žycie’s entire sales structure was
entrusted to Rosinski who explained his approach to this challenge
in a recent interview.
Rosinski said that his decision was to work in two directions.
Firstly came what he termed “quick wins” that enabled an immediate
increase in sales. Secondly, he started working on longer-term work
on enhancing the entire sales network.
In December 2008, building on the foundation laid by Rosinski, PZU
Group unveiled a strategic plan covering the period 2009 to 2012.
Among key objectives of the strategy is to service PZU’s
substantial customer base more effectively and take greater
advantage of the group’s extensive branch network and high brand
recognition. According to PZU it currently has 5.7 million
customers, 750 branches and a 93 percent brand recognition rate
among Polish consumers.
Focus of sales growth is on PZU’s traditionally strongest areas,
the group life and motor insurance segments, and on expanding in
other market segments such as health insurance and individual life
insurance.
Homegrown success
Poland’s dynamic life market has acted as a magnet to foreign
insurers, with 23 of the 30 life insurers operating in the country
at the end of 2008 foreign-controlled, according to the Polish
Financial Supervision Authority (PFSA). However, foreign insurers
have not had it all their own way, with one domestic insurer in
particular standing out as a huge success: TUnŽ Europa (TUE).
Founded in 1994 as a general insurer TUE entered Poland’s life
market in 2002 with the establishment of TU na Žycie Europa (TUE
Life). The new unit gained ground rapidly, producing premium income
of PLN170 million in its first year of operation according to the
PFSA. This ranked it eighth out of the 32 life insurers in the
market at the time.
TUE Life continued to enjoy rapid growth with premium income
increasing at a CAGR of 63 percent between 2003 and 2007. Eclipsing
this impressive showing TUE Life recorded a 120 percent increase in
premium income in 2008 to PLN2.66 billion, lifting its market share
from 4.7 percent in 2007 to 6.8 percent in 2008.
Playing a key role in the insurer’s success has been Rosinski who,
after his term of office at PZU Žycie expired, joined TU Europa in
June 2006 as a vice-president. Since 2007 Rosinski has been on the
management boards of TU EUROPA’s life and general insurance units.
He is also president of the board of Polish financial services
company Getin Holding, which has a 99.8 percent stake in TU
Europa.
Commenting on reasons for TU Europa’s success Rosinski explained
that bancassurance was playing a major role, stressing that “we are
completely focused on bancassurance”.
“We, bancassurance specialists, provide something more than just
products,” Rosinski continued. “We offer complete solutions,
including advertising campaign proposals, market analyses and IT
applications.”
He added that it takes TU Europa just a week to create a brand new
structured product that can be implemented at any branch of any
bank, financial advisor or insurance agent.
TU Europa currently has agreements with 11 of Poland’s 15 largest
banks.
Rosinski also emphasised “significant support from shareholders.”
Notably, Leszek Czarnecki – one of Poland’s most dynamic
entrepreneurs – holds a 56 percent stake in Getin Holding, which in
addition to TU Europa has interests in banking, investment
management and leasing.
Among many accolades, Czarnecki was named by UK publication The
Financial Times as one of the 25 “emerging stars of European
business” in 2004.
Underscoring the potential that exists in Poland’s life insurance
market, a number of foreign players have also enjoyed exceptional
growth in recent years.
Not least of these is Belgian bancassurer KBC Bank, which in 2000
acquired a 40 percent stake in WARTA Insurance and Reinsurance
Company, a composite insurer that together with PZU is the only
Polish insurer that survived the Second World War. KBC
systematically upped its stake in WARTA, acquiring full control in
2006.
A market of opportunity
Initially WARTA’s life unit WARTA TUnŽ made modest progress under
the KBC banner, its gross premium income recording a CAGR of 11
percent between 2003 and 2007. However, in 2008 a major improvement
occurred with premium income increasing by more than 300 percent to
PLN2.93 billion. This lifted the insurer’s market share from 2.8
percent in 2007 to 7.5 percent and improved its ranking from 10th
to 4th.
Dutch bancassurer ING also recorded an impressive improvement in
its position in Poland’s life market in 2008, lifting gross premium
income by a hefty 180 percent to PLN3.88 billion. This boosted
ING’s market share from 5.4 percent in 2007 to 9.9 percent, and
brought it within striking distance of toppling UK insurer Aviva
from its long-held second position in the market.
Notably Aviva’s premium income growth has lagged that of the Polish
life industry in three out of the past four years, reducing its
market share from 12.4 percent in 2005 to 10.2 percent in
2008.
Another major international player making strong inroads into
Poland’s life market is French insurer Axa, which in 2008
registered a hefty 320 percent increase in premium income to
PLN1.61 billion. This lifted Axa’s market share from 1.5 percent in
2007 to 4.1 percent in 2008 and its market ranking from 12th to
7th.
Strong competition for market share is also being exerted by a
number of smaller foreign players that have made impressive inroads
into Poland’s life market in recent years. Particularly impressive
have been gains made by Austrian composite insurer UNIQA which has
as a key part of its strategy expansion into Central and Eastern
European markets.
UNIQA’s acquisition of composite insurer Polonia in 2000 marked its
entry into Poland. Though a number of small acquisitions followed,
by 2003 UNIQA’s life premium income was still a minimal PLN5.6
million.
Steady progress was made after 2003 with a big breakthrough coming
in 2008 when UNIQA recorded a 402 percent increase in premium
income to PLN1.16 billion. This lifted its market share from 0.9
percent in 2007 to 3 percent and its market ranking from 15th to
11th.
UNIQA follows a multichannel approach in Poland with Austrian bank
Raiffeisen’s Polish unit playing a key role. Notably, in its review
of 2008 results UNIQA noted that bancassurance sales had been the
main driver of increased premium income.
Vienna Insurance Group (VIG) is another Austrian insurer making
strong headway in Poland where it operates in the life market under
the brands Compensa, a composite insurer acquired in 2001, and
Benefia, a composite insurer acquired in 2005. Also acquired in
2005 was insurer Royal Polska, now part of Benefia.
VIG’s Polish life units produced consistently robust growth since
2005, notching up a CAGR of 95 percent during the period to reach
total premium income of PLN1.35 billion in 2008.
This gave VIG a market share of 3.5 percent and ranked it 9th in
the life market compared with 14th in 2005.
How Poland’s life market will fare in 2009 remains to be seen.
However, the impression gained from insurers reporting first
quarter 2009 results is that the going is tough.
VIG, for example, reported a minimal 0.1 percent year-on-year
increase in premium income in the first quarter of 2009. Faring
worse PZU Žycie reported a 10.5 percent fall in premium
income.
Also reporting first quarter 2009 results was Italian insurer
Generali which saw it’s Polish life unit Generali Žycie’s premium
income slip 6.4 percent compared with the first quarter of 2008 to
PLN178 million.
Commenting on first quarter 2009 results, Generali noted:
“According to expectations, this year the Polish life insurance
sector will be affected by a sharp decrease in the sales of
products with a single premium payment.”
