Vienna Insurance Group (Vienna:VIG) Q2 2026 Earnings Call

0:00 Ladies and gentlemen, welcome to the VIG Results for the First Half Year twenty twenty six Conference Call and Live Webcast. I'm Moritz, the Chorus Call operator. I would like to remind you that all participants will be in a listen only mode and the conference is being recorded. The presentation will be followed by a question and answer session.

0:26 The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Peter Hoefinger, Deputy CEO. Please go ahead, sir. Thank you very much. Also from my side, a very warm welcome. Together with me is, Liane Hirne, CFO and Nina Hickelsberger from Investor Relations. We are happy to guide you through our half year results, which I think are pretty positive and a solid set of figures. We have achieved more than CHF 9,000,000,000 gross written premiums, which is a growth of 5.4%, achieving a profit of €640,000,000 which is up around 20% to the comparable period, having a net combined ratio of 91.4%, which is an improvement of 0.5%, even though we had a little bit higher nat cat claims activity.

1:29 Our solvency ratio stays at two seventy two, including, already Nuremberg, but at a simplified method and having an operating return equity of 17.8%. The next slide, you see our economic environment, which is continuously outperforming the Eurozone. So we have in the European countries, Central Eastern Europe, a GDP growth of 2.2% and in Western Balkans of 2.5%. But also looking forward, the next two years, also here, the forecast is even growing in the GDP growth. On the next slide, we want to illustrate you our robustness of our business model, just showing how we have developed approximately the last twenty years, with different developments at the time, starting with the impact of the global financial crisis, 2008, 2009.

2:40 Also during this period of time, we were able to have stable profits and paying dividends. We had then, 2013, a significant flood event in Central Eastern Europe, but also here, due to our conservative reinsurance strategy, we had a stable profit and we are paying dividends. During the periods of low and negative interest rates, 2015 and 2022, we further developed our profitability. The same in the hike of inflation and interest rates after COVID. Also here, our business model proved to be robust. And in the end, what we had at 2024, which was our largest Nat Cat event with around €630,000,000 gross claims.

3:40 Also here, we were able to keep our promises and pay our dividends as projected. I think this is showing despite growing and reaching size and becoming more profitable, also with these external events, we proved to be pretty resilient.

4:04 On the next slide, we are further working on increasing this resilience. You see the composition of our profit. So, the diversification of profit streams is more and more diversified. Just here, showing you the example and just taking the example from 2020 to 2025, where Poland extended CE and special markets were 18% of total profits 2020 and they are accounting already for 40% in the year 2025. Mid term, this will also further diversify with Nuremberger joining us.

4:54 On the next slide, showing an overview of where stand VHE in the context of the European primary insurance groups. We are now on the thirteenth position, excluding Nuremberg, but you see on the first column, we are top three growing company. All this with our focus in the region of market leader, and having in mind that our region still is characterized by low insurance penetration, but also, as mentioned before, combined with higher economic growth, this will also enable us in the future to have an attractive growth rate.

5:41 To give you also on the next slide, a short update on the Nuremberg acquisition. So we will have the closing on the May 18, achieving 99.2% of the shares, nominating my colleague, Mr. Lager and Mr. Lanna in the Supervisory Board. And, we also initiated a squeeze out process. I think it's also remarkable that between signing and closing, we have been pretty fast with just seven months, which allowed us to immediately start the integration process with Nuremberg. There is a special focus on the developing and implementing

6:30 strategy, as promised already in our earning calls of the first quarter. We will update our financial targets of Evolve '28, once the integration of Nuremberg and IFRS 17 is completed at the year end. With this, I'm handing over to the section of financials to Liane. Please, Liane. Thank you, Peter. Let me start on Slide 10 with the gross written premiums and a short reminder, while premiums are up by 5.4% compared to the stronger insurance service revenue growth, which amounts 7.1%.

7:17 As we already explained in the first quarter, it is a topic of the special market segment and still restrictive approach in 2026 in the motor business in Q3. As shown on the slide, the special markets are the only segment with a slight premium decrease of 1.6%, whereas the growth rate for the insurance service revenue is still supported by the new production in the second half year 2025 in Czechia. At the same time, the countries in our CEE core market continue to deliver strong growth rates. For example, Poland with 8.3 premiums growth, while Czechia with 8.1%. Of the markets in our extended CE segment, Hungary and Bulgaria stand out with double digit growth rates of 1512% respectively.

8:11 Serbia with 9.7%, Croatia with 9.3% and Slovakia with 7% showed strong premium development as well. All of these markets outperformed the overall extended CE segment's premium growth rate of 6.4%. Last but not least, also Austria, being part of our CE core market, achieved 3.6% premium growth, contributing more than 20% to the overall premium increase of plus €462,100,000 On Page 11, the group income statement is shown. I will go into details on the following slides. I would only like here to mention the complete goodwill impairment of €72,800,000 for Hungary that impacted the development of the comparison period and highlights the net profit after taxes and non controlling interest of 470,000,000, up by 15.8%, leading to annualized earnings per share of EUR7.28.

9:26 On the next two slides, the details of the Insurance Service revenue growth of 7.1% to SEK6.8 billion are shown. Here you can see all segments as well as all lines of business are growing and contributing to the additional CHF453 million in insurance service revenue. In addition, the growth rates shown on this slide ranging from 3.6% for Austria to 10.9% for the special markets. These segments with the highest absolute contribution were extended CEE with plus EUR173 million, followed by Czechia with plus EUR95 million euros and Austria with plus €65,000,000 Here, I again would like to mention those markets in our extended CE segment that recorded double digit growth rates.

10:21 These are Ukraine plus 18.5%, Bosnia plus 16.2%, Hungary and Albania both plus more than 13%, Croatia with close to 13% and Bulgaria with plus 11.3%. You can find also the full overview of each market development on Slide 30 in the appendix. Over the page, the previously mentioned solid revenue growth in all lines of business is shown. Non life altogether grew by 6.3%, health grew by 8.8% and the life business overall increased by 9.3%. Trends that underpin our diversified growth profile and leading to a portfolio split of roughly 78% Non Life, 14% Life and 8% Health business, all of this not yet including Nuremberg Group.

11:25 The result before taxes growth of 20.7%, shown on Slide 14, is strongly supported by solid performances of the segments extended CE plus 98%, Austria plus 11% and special markets plus 35%. Extended CE adjusted for last year's entire goodwill impairment in Hungary recorded double digit growth of close to 14%. In Poland, the strong operational performance forms the basis for technical reserve strengthening, leading to this 12.8% decrease in result before taxes in the first six months. Slight decline in Czechia is primarily driven by an increased combined ratio.

12:14 Markets in the extended CE segment that I would like to highlight in terms of profit growth are Romania plus 33% and Bulgaria plus 15%.

12:26 In the special market segments, the growth is driven by the performance of Toukir with profits up by CHF 19,000,000 based on a strong capital investment result. On Slide 15, the combined ratio details and the split between claims and cost ratios are shown. The net combined ratio of the group improved to 91.4%, including discounting impact of 3.6%.

12:55 The increase in Poland is impacted by the already mentioned strengthening of the technical reserve. In Czech here, the combined ratio increase is due to the rise of the motor claims frequency, which triggered lower reinsurance commissions. Net weather related claims of roughly EUR81 million in the first half year twenty twenty six only slightly above the level of EUR73 million in the comparison period last year. Now let's move to Slide 16 and the contractual service margin in the Life and Health business. The Life and Health CSM increased by 1.3% in the period. This is primarily driven by interest rate changes and also a new business contribution,

13:45 triggered the mentioned growth in Health and life. Also, the CSM release of EUR299 million could not be fully offset by the new business of EUR252 million, the sustainability ratio improved to 84% compared to 80% in the first six months 2025. The new business of $252,000,000 came with an ongoing strong new business margin of 9% for the half year 2026, which is comparable value to the first six months of twenty twenty five.

14:22 Over the page, we present the details of the total capital investment result of 173,500,000, up by twenty six point four percent, driven by higher interest rates in the bond market. This significant increase in the remaining result from financial instruments stems mainly from higher unrealized gains and lower unrealized losses, as well as higher currency gains. In addition, we have also achieved growth in current income due to an increase of the average return on our fixed income investment portfolio. I would now move on to the next Slide 18. This year, you can see the investments overview as of end of June twenty six.

15:09 Investments held at VIG's own risk

15:13 further increased to SEK39.1 billion, up by SEK1.1 billion compared to year end. The most significant change in asset class split is in affiliated companies. Related to the acquisition of Nurnberger and the steel pending initial consolidation, the share in affiliated companies increased from 1.4% at year end to 5% at the end of June. So we show Nuremberg as a share in not consolidated companies. This will disappear, of course, with the full consolidation at year end again. Percent. Other than that, there were only minor shifts, both by rating and by issuer.

16:02 This brings us to Slide 19 and the solvency ratio.

16:06 The solvency calculation includes for the first time, but based on a simplified method, Nuremberg. What does this mean? First of all, there is no consolidation as of 06/30/2026 yet. And we used the data from Nuremberg from the consolidation from the for the consolidation from the first quarter twenty twenty six. Thus, the solvency ratios, both including and excluding transitionals as of end of June might still move in both directions and the first set of consolidated Solvency II figures will be provided for year end 2026. As of June 2026, based on the simplified inclusion approach and data from Nuremberg as of first quarter, VHG's solvency ratio came in at 272%.

17:01 This is 24 percentage points lower due to the inclusion of Nuremberg compared to the solvency ratio of 296% at year end twenty twenty five. The SCR increased by EUR873 million with plus 22% stronger than the own funds plus 12% compared to year end. The largest SCR driver was the increased market risks, the equity risk. Solvency ratio, including transitional measures of 200 excluding transitional measures of 258% decreased by 18 percentage points compared to year end for the same reasons. However, our capitalization is and stays strong even with more impact from Nuremberg, which might be the case after full consolidation as of 07/01/2026.

17:56 VHG will remain with its solvency ratio well above the 200% threshold.

18:04 That brings me to the end of my presentation and we come to the outlook. Based on our sound performance in the first half year twenty twenty six, including the premium and profit growth, the improved combined ratio and the ongoing strong profitability in Life, we are confirming the given guidance. Still without Nuremberg, we target profit before taxes within the range of €250,000,000 to 1,300,000,000 for 2026.

18:35 We hope the market continues to value our healthy growth trajectory as currently reflected in the favorable share price development. With this, I have come to the end, and I will hand back to the operator. We are now ready and happy to answer your questions. You. And the first question comes from Qianlu from UBS.

19:32 Please go ahead.

19:34 Hi, good afternoon everyone. Thank you for taking my questions. This is Kian Lu from UBS. Two questions from me please. The first one is on Poland. The growth was very strong, but at the same time you strengthened reserves and the combined ratio moved up year on year. Can you help me understand what's behind that reserve strengthening? Is it mainly a prudence build? Or are you seeing any adverse claims trend in the book? And if it's the latter, do you feel your recent pricing has adequately reflected those trends? And the second one is on the solvency ratio including Nunberger. So should we think of that number as broadly excluding any diversification benefits? And if so, how should we think about the potential capital synergies from the transaction over time? Thank you.

20:26 Thank you for your questions. I'll take the first one, Poland. Yes, it's a prudent measure. We are back on a growth dynamic, and we are using the favorable results to further make our balance sheet in Poland more robust. This is the reason for it. Happy to take the second question regarding the solvency ratio. As I explained, we had included them in a simplified method in the Q1 data. What we did is we added the SCR sub modules and took their own funds of Nuremberg.

21:14 So there is some diversification effects, of course, included on sub SCR module level, but there could be a different effect when we really do the full consolidation at year end. So there might be some volatilities also when we have the full inclusion, the full consolidation and full inclusion as of year end. I hope this answers your question. Got it. Thank you very much. And the next question comes from Thomas Neuhold from Kepler Cheuvreux. Please go ahead. Good afternoon. Thank you for the presentation and taking my questions. I have two questions regarding the development of the P and L in the first half of twenty twenty six on Page 11.

22:03 I was just wondering if you can explain in what detail why the lines in service revenue, research reinsurance, health and other income and expenses deteriorated so strongly year on year in the first half of twenty twenty six. I'm happy to take your question. If I understood correctly, insurance service revenue reinsurance held. This has to do with a large loss occurred in the second half of twenty twenty five. So this was an impact, the positive impact in last year. And when comes to other income and expenses, there is a one off included, which does not have an impact on the net or mainly a one off that does not have an impact on the net result.

23:03 It's due to consolidation of reinsurance balances. Okay. I see. Thanks a lot. Welcome. And we do have another question coming from Thomas Unger from Erste Group. Please go ahead. Hi, good afternoon. Thank you for taking my questions as well. I'd like to come back to the solvency ratio and the impact from the inclusion of Nuremberg. I'm not sure if I missed it, but can you mention the impact that you have from that inclusion on the solvency ratio? And then secondly, on the solvency ratio, own funds development, Page 33 in your presentation, there's a strong move in the taxes other category.

24:01 If you could explain that as well, I'd appreciate that. And then I'd like to talk about Hungary. This showed the strongest improvement on profit before tax year over year, obviously, because of the impairment last year and also very strong top line growth in the first quarter. What do you see on the market? Do you see any feeling effect of the political change in the first half? And what were the effects of the sector specific taxes in H1? And what are your expectations for insurance sector taxes under the new government going forward? Thank you. So thank you for your questions. Your first question regarding the solvency ratio.

24:57 It stands at two seventy two percentage points, including Njoinberga. If we would not include the effect of Nuremberg, the solvency ratio of half year would be two ninety six percent, so 24 percentage points higher. And this is also the same solvency ratio as of year end 2025. So without Nuremberg, this foreign currency ratio remains stable and the 24% is the effect of Nuremberg. Your second question was on Page 33, the development of their own funds, the column taxes and other. And here is a strong movement of plus 964%.

25:45 Here included is the additional are the additional funds from Njyenberga, which are approximately €1,000,000,000 and the negative tax effect of €100,000 So this is mainly Njyenberga on funds effect. I'll come to your last question, which is concerning Hungary. I start here with the topic of taxes. In the taxes, nothing has changed until now. So there is no effect of changing of taxes. It is too early to give any concrete evaluation for the future. We do hope that there will be short to mid term positive changes for the insurance sector, but I think it's too early, to have here a clear message in this direction.

26:42 Our growth is, on one hand side, also supported by FX effects. One has to say, on the other hand side, there is a positive mood and atmosphere in the economic environment where we are benefiting, and therefore, we're also here generating this growth in Hungary. Thank you. And can you give me the specific impact of the sector taxes that you had, the additional sector taxes that you had in the first half? You mean on Page 33, it's €120,000 sorry, this was a different For Hungary. For Hungary. For Hungary, exactly the It's €24,000,000 Thank you.

27:49 So it looks like there are no further questions at this time. So I would like to turn the conference back over to Nina, Head of Investor Relations. Please go ahead. Ladies and gentlemen, thank you very much for participating in today's call. Our next results call covering Wick's results for the first three quarters of twenty twenty six is scheduled for the November 26. If you have any further questions in between, Investor Relations is there for you. Otherwise, we wish you a good afternoon, and thank you once again. Bye. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.