DOI: 10.5817/FAI2015-3-2 No. 3/2015
23
Evaluation of the VIG Insurance Group’s
Insurance Portfolio in the Czech Republic
Lenka Přečková
Silesian University in Opava
School of Business Administration in Karviná, Department of Finance and Accounting
Univerzitní nám. 1934/3, 733 40 Karviná, Czech Republic
E-mail: preckova@opf.slu.cz
Abstract: This article aims to determine whether the developments in the insurance
business production correspond with the development of the expense-to-revenue
ratio of an insurance portfolio. The subject of the research is insurance companies
belonging to the VIG insurance group in the Czech Republic. Its commercial
production, i. e. insurance business, will be evaluated. The evaluation will be
performed by analysis and comparison of financial ratio indicators for the period
2005–2013. The insurance business will be first examined by market positions
through market share, increase in gross written premiums and product
diversification. Subsequently, insurance business will be evaluated by cost ratio
indicators, namely by expense ratio and loss ratio. The expense-to-revenue ratio and
product diversification will be assessed in the non-life segment. Finally, a comparison
will reveal whether the development of market position corresponds with the
development of operating costs and costs expended on insurance benefits.
Keywords: relative market share, the cost of taking out insurance, the cost of
insurance management, insurance benefits costs
JEL codes: G22
Introduction
This article reflects on the current situation of how to assess insurers in the Czech
insurance market. In various statistics and annual reports the insurance market is
primarily assessed from the perspective of commercial production, i. e. market
position and growth in premiums written. This is very aptly described by Lhotská
(2012, p. 23): "We are witnessing a competition aimed at maximizing market share
in the volume of premiums written." Lhotská (2012, p. 23) notes that the insurance
market is not so much threatened by irregularities in the distribution, climate
changes and the very current issue of new legal regulation of the insurance market.
The main threat to the insurance market is short-sightedness of insurance companies
pursuing a "swift victory". Insurance companies, instead of profitability and benefits
from insurance contracts, pursue primarily volume of new production.
Lhotská (2013, p. 28) points out that insurance companies should concentrate on the
quality of their insurance portfolios and thus seek to improve the outcome of their
own insurance business. Insurance companies should achieve an adequate quality of
Financial Assets and Investing
24
their insurance portfolio and a suitable product structure. The quality of an insurance
portfolio, i. e. plurality of contracts of all products, can be defined by various
parameters. It is suitable to evaluate claims ratio and cost management portfolio.
Lhotská (2015, p. 13) emphasizes the charm of the market share and the fact that
every insurance company is pleased "when its insurance company has a bigger pie
chart than its competitors." According to Lhotská, this aspect is overrated and steps
to ensure greater market share may even be counterproductive, as evidenced by the
history of Czech liability insurance. It should be noted that the market share must not
be superordinate to the priority of insurance companies which is their profit. Profit is
related not only to the size of the portfolio, but also to its quality. Řezáč (2009, pp.
158—162) presents results of his research conducted into the use of commercial
insurance market strategies in 2004. According to this research, 77% of insurance
companies seek to grow and 46% would like to increase or maintain their market
position, which confirms Lhotská’s approach to evaluating insurance market (2012,
2013 and 2015). Speaking of Řezáč’s research (2009), it is also interesting to
mention his stating that the cost strategy is implemented by 15% of insurance
companies. Most commercial insurers assess the state of the insurance market in the
Czech Republic as stable and they do not anticipate disproportionate cost increases.
The object of my research is the Vienna Insurance Group (hereinafter referred to as
VIG), which is due to its market share among the most important insurers in the
Czech Republic. This group is formed by Kooperativa pojistovna, a. s., Vienna
Insurance Group (KOOP), Česká podnikatelská pojišťovna, a. s., Vienna Insurance
Group (ČPP) and Pojišťovna České spořitelny, a.s., Vienna Insurance Group (PČS). To
complete the picture, it should be noted that the second major insurance group in the
Czech Republic is PPF - Generali, which was founded in 2008. The market share of
this insurance group was in the period 2008—2013 about 2% higher than the VIG’s
(annual reports of Czech Insurance Association).
KOOP was founded in 1991 as the first commercial insurance company in former
Czechoslovakia and since its inception it has been part of the VIG. In early 2004 a
strategic partnership agreement was concluded between KOOP and Česká spořitelna,
a. s. (hereinafter referred to as ČS). (www.koop.cz, 2015)
The strategic partnership of KOOP and ČS is connected with the historical
development, which started with the creation and development of ČS-Živnostenská
pojišťovna, a. s., founded in 1992 by ČS’s Czech private capital. In 2000, ČSŽivnostenská
pojišťovna, a.s., welcomed a new shareholder, the largest Austrian life
insurer Sparkassen Versicherung, a member of the financial group Erste Bank. Since
2001, the insurer began using the new name Pojišťovna České spořitelny (PČS). This
was soon followed by development of bancassurance through the sale of PČS’s
insurance products offered in the ČS’s branch network. Because ČS and Erste Bank
specialized in life insurance and bancassurance, in 2003, stockholders sold the PČS’s
No. 3/2015
25
non-life insurance segment to KOOP. Since 2004, the PČS has specialized only in
selling life insurance through ČS’s network and selected external networks.
(www.pojistovnacs.cz, 2015)
KOOP is owned by three companies. These are: VIENNA INSURANCE GROUP AG
Wiener Versicherung Gruppe (96.32 %), VLTAVA majetkoprávní a podílová spol. s r.
o. (2.07 %) and Svaz českých a moravských výrobních družstev, Praha (1.61 %).
(www.koop.cz, 2015)
ČPP is a universal insurance company operating in the Czech insurance market since
1995. The ČPP has historically had a strong position in car insurance, especially in
compulsory insurance. With more than a million insured vehicles in the Czech
Republic it is the third largest provider of this type of insurance in the Czech market.
Since 2005, the ČPP has been part of the VIG. The insurance company is owned by a
single company, Kooperativa pojišťovna, a.s., Vienna Insurance Group. (www. cpp.cz,
2015)
The abovementioned evolution is essential for characterizing PČS. In 2004, PČS
began to specialize in selling life insurance through the ČS’s network and selected
external networks (see information on KOOP). Since 2001, the insurance company
has operated under the name PČS developing bancassurance. In 2008, the insurance
company became part of the insurance group VIG. The insurance company focuses
on premium life insurance products and it is one of the largest insurers in
bancassurance in the Czech market. PČS is owned by three companies. These are
VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe (90%), Kooperativa
pojistovna, a. s., Vienna Insurance Group (5%) and Česká spořitelna, a. s. (5%).
(KOOP’s annual report 2012)
1 Methodology
This article aims to determine whether the development in the insurance business
production corresponds with the development of the expense-to-revenue ratio of
insurance portfolios. I evaluate the commercial production, i. e. the insurance
business, by gross premiums and the cost of insurance business within the insurance
group VIG ČR in general, and according to the insurance companies belonging to the
group. To achieve the goal it is necessary to calculate and then analyze and compare
selected financial ratio indicators in the period 2005–2013; subsequently, it is
determined whether the development of market position corresponds with the
development of operating costs and insurance benefits costs. In this article, the
indicators are always meant for individual insurers and at the same time for the
entire VIG since 2005. Since 2008, all evaluated insurers have been part of the
group. Therefore, this fact was taken into account as well. Average values for
comparison of the VIG are calculated for the period 2005–2013.
Financial Assets and Investing
26
Ratio indicators used in the insurance industry are based on general ratio indicators
used in corporate financial analyses. However, in the world of insurance they must be
adapted because of the distinctions. (Vávrová, 2014). According to Vávrová (2014),
the aim of commercial insurers’ activities is not only the insurance or reinsurance
business but also investing funds that are temporarily available. Commercial insurers
must set the price of insurance protection without their exactly knowing the costs
associated with the services provided. The insurance company must be able to
manage a portfolio of insurance contracts, i. e. the insurance portfolio and
investment portfolio.
The first part of this research focuses on the analysis of gross written premiums
(hereinafter referred to as GWP) and indicators that are used to calculate the GWP.
For this reason, I had to calculate market share by GWP in individual insurance
companies and within the VIG for the abovementioned period. I then calculated the
relative market share (RMS). This indicator is used by the rating agency Moody's
(www.moodys.com) - the ratio of premiums written and the average of written
premiums in the selected country:
AverageGWP
GWP
RMS  (1)
Subsequently, I also analyzed the annual increase in GWP, as this indicator should
demonstrate growth; the recommended value according to Korobczuk (2007) is in
the range between -10% and + 30%. According to Vávrová (2004), new insurance
companies make effort to reach a higher growth rate in the early years, and this
indicator must be considered marginal in new insurance markets.
Another part of my research focuses on the non-life insurance segment. The reason
for this concentration is primarily reporting of statistics and the type of the selected
indicator. I will analyze the distribution of insurance products. Product diversification
is also assessed by the rating agency Moody's (www.moodys.com) and insurance
products are evaluated by whether or not they achieve at least 10% of premiums
written.
Furthermore, I also calculated and assessed the cost items of non-life insurance. I
calculated the ratio indicator “expense ratio” (ER), which is very often used in
evaluating costs of insurance activities (Pulchart, 2002; Korobczuk, 2007; Gestel et
al., 2007; Vávrová, 2014). It is the proportion of operating costs and premiums
written. For the calculation I took into account gross operating expenses (GOE) and
gross premiums written (GWP). This indicator should reach an amount lower than
30% (Vávrová, 2004; Korobczuk, 2007). The formula for the calculation is:
GWP
GOE
ER  (2)
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The last indicator is the loss ratio (LR) (Pulchart, 2002). This is the share of insurance
benefits costs (GBC) and premiums written. For the calculations I worked with gross
values. The lowest values are most favorable for insurance companies. The formula
for the calculation is:
GWP
GBC
LR  (3)
2 Data
Data used for the calculation of financial ratios were taken from the following Internet
sources: GWP is drawn from the financial section of annual reports of individual
insurers, precisely from the Special section to the technical account of non-life
insurance. The total GWP and number of insurance companies in the Czech Republic
was found in ČNB statistics, i. e. Basic indicators of the sectors of the financial market
and the Report on supervision performance. For the specification of insurance
products (hereinafter referred to as IP) and values of GWP, I used the statistics
created by Czech Insurance Association (hereinafter referred to as ČAP). The
information was found in the document named Individual results of ČAP’s members.
ČAP’s statistics are selected because of their unified classification by products and
reporting GWP for these products. Gross operating expenses and gross claims
incurred were searched for in the annual reports of insurance companies, also this
time in the Special section to the technical account of non-life insurance.
Liability insurance is offered merely by KOOP; it is included in non-life insurance.
3 Evaluation of VIG’s business activities
3.1 Market Share and Relative Market Share
KOOP is the second largest insurer in the Czech Republic by market share in GWP
within the entire period from 2005 to 2013.
Figure 1 shows that KOOP’s market share decreased by 2.66% over the period. ČPP
and PČS have both reached a market share of around 5% in recent years. Their share
in the period 2005—2013 grew. If we compare both insurance companies, it is clear
that the insurer PČS increased its market share almost 3.5 times, and insurer ČPP
almost 1.5 times. In the years 2011—2013, both insurers shared the 6th and 7th
rank in the Czech insurance market. For comparison of the development it is
important to note that in 2005 PČS ranked tenth in the Czech insurance market and
ČPP ranked seventh. The other market share shown in Figure 1 is the one of the
insurance group VIG. In the monitored period, this share rose and in 2013 reached
almost 32%.
Financial Assets and Investing
28
Figure 1 Development of VIG’s market share in the Czech Republic by GWP
Source: Author’s own work based on ČNB’s statistics and insurers’ annual reports
Another important indicator for the assessment of the position in the insurance
market is the relative market share (RMS). The development of the relative share
in the Czech insurance market is shown in Figure 2.
Figure 2 Development of VIG’s relative market share in the Czech Republic
Source: Author’s own work based on ČNB’s statistics and insurers’ annual reports
Moody's rating assesses multiples of the average GWP and then assigns a rating level
accordingly. For evaluating a relative share which is at least three times greater, an
Aaa rating is assigned (high level), which corresponds with KOOP’s and VIG’s results.
In the period 2010—2013 Aaa rating was reached by PČS as well. The insurance
No. 3/2015
29
company ČPP reached, in the whole period, an Aa rating (good), because it stayed in
the range between 1.5 times and 3 times the GWP.
The graphic representation shows a noticeable growth of the relative share of all
insurance companies. The lowest increase is manifested by the KOOP insurance
company. The highest growth (four times) was reached by PČS. ČPP’s indicator
increased by almost 60%. VIG has increased its relative share since 2008 by at least
0.02%.
3.2 Increase in Gross Written Premiums
Increase in gross written premiums (or growth rate) is the most commonly
monitored indicator in the insurance market and it is graphically illustrated in Figure
3. Growth rates of insurance companies in the period were in positive territory. Only
KOOP reached negative values in the period between 2009/2010 and 2010/2011. In
the other years, KOOP’s values were positive and the average rate was 2.13%. ČPP
achieved the highest values (14%) in the years 2006/2007 to 2009/2010 and the
average increase was 8.04%. PČS shows the greatest fluctuation in the monitored
period; the average increase amounts to 23.59%. VIG has reached 3.11% (since
2008) of average increase in GWP.
Figure 3 Development of GWP increase within VIG (Czech Republic)
Source: Author’s own work based on insurers’ annual reports
Recommended values of increase in GWP are between -10% and + 30%, which all
insurers met, except PČS. High growth in GWP in years 2005/2006/2007 was
probably caused by strategic changes in 2001 and 2004. Thanks to these changes,
the PČS can be considered a "new" insurance company specializing in life insurance
through bancassurance.
Financial Assets and Investing
30
3.3 Product Diversification
For the correct assessment of insurers’ insurance portfolios it is important to learn
more about the structure of IP. Firstly, it is necessary to divide GWP into life and nonlife
insurance. This is reflected by Table 1 below showing results of KOOP, ČPP and
PČS within the monitored time period.
Table 1 Ratio of non-life and life insurance within GWP within VIG (Czech Republic)
Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013
Ratio of non-life
GWP KOOP, %
77.24 77.13 76.29 75.88 75.17 72.95 71.28 70.24 68.44
Ratio of life GWP
KOOP, %
22.76 22.87 23.71 24.12 24.83 27.05 28.72 29.76 31.56
Ratio of non-life
GWP ČPP, %
79.55 78.59 74.42 74.20 72.87 70.93 70.16 69.76 69.18
Ratio of life GWP
ČPP, %
20.45 21.41 25.58 25.80 27.13 29.07 29.84 30.24 30.82
Ratio of non-life
GWP PČS, %
0.43 0.54 0.82 1.30 1.53 7.42 7.37 7.52 6.70
Ratio of life GWP
PČS, %
99.57 99.46 99.18 98.70 98.47 92.58 92.63 92.48 93.30
Source: Author’s own work based on insurers’ annual reports
Having compared the values in Table 1 in the monitored period, it can be summarized
that the market share of life insurance GWP increased and in 2013 exceeded the
value of 30% for KOOP and ČPP. In 2013, the insurance group VIG reached ratio of
life insurance of around 55% GWP. This would not have been possible without PČS,
which focuses primarily on life insurance.
Figure 4 Development of VIG’s ratio of non-life and life insurance GWP (Czech
Republic)
Source: Author’s own work based on insurers’ annual reports
No. 3/2015
31
Structure of Insurance Portfolio of Non-life Insurance
Insurers KOOP and ČPP dominate in non-life insurance and non-life insurance IP
reached almost 70% of market share within overall GWP in 2013. Table 2 compares
the development of IP of non-life insurance of KOOP, ČPP and VIG by GWP share. IP
are selected by ČAP’s categories. The insurance company PČS does not conclude
these types of IP. GWP of non-life insurance of PČS is included in the overall
calculation of VIG under the category of Other Insurance. It is namely accident
insurance, illness insurance and insurance covering various financial losses. Table 2
also includes civil and business insurance. These IP are assembled after selecting
relevant items and subsequent summation of GWP of property insurance and liability
insurance.
Table 2 Product diversification of the insurance portfolio
of non-life insurance within VIG (Czech Republic)
IP Insurer 2005 2006 2007 2008 2009 2010 2011 2012 2013
Compulsory
insurance,
%
KOOP 18.05 18.90 19.80 20.86 20.76 21.37 22.94 23.66 23.85
ČPP 0 0 0 0 0 0 0 0 0
VIG 15.66 16.36 17.05 17.73 17.33 17.36 18.33 18.73 18.80
Property
insurance,
%
KOOP 25.19 24.73 22.83 22.28 23.07 23.88 23.73 24.57 25.21
ČPP 11.73 9.85 9.86 10.29 10.46 10.40 11.46 12.45 13.27
VIG 23.40 22.72 21.01 21.45 20.94 21.09 20.93 21.68 22.31
Liability
insurance,
%
KOOP 7.40 6.66 6.64 6.90 7.15 7.02 7.66 8.34 8.30
ČPP 4.18 5.18 4.32 4.89 4.71 4.79 5.24 5.68 6.20
VIG 6.97 6.46 6.31 6.58 6.73 6.49 7.02 7.62 7.68
Motor
vehicle
insurance,
%
KOOP 18.22 19.24 20.63 20.49 19.88 19.03 18.22 17.52 17.47
ČPP 7.83 11.53 12.61 13.01 14.82 16.62 18.34 18.95 20.10
VIG 16.54 18.19 19.49 19.32 18.98 18.14 17.71 17.26 17.46
Motor
vehic.
liability
insur., %
KOOP 26.68 25.85 24.62 23.85 23.32 22.80 20.97 19.82 19.38
ČPP 73.52 68.60 67.97 65.99 64.23 61.19 56.73 52.07 50.25
VIG 32.86 31.53 30.52 29.96 29.84 28.50 26.51 25.00 24.52
Other
insurance,
%
KOOP 4.45 4.62 5.48 5.63 5.82 5.90 6.49 6.08 5.79
ČPP 2.74 4.84 5.24 5.82 5.79 6.99 8.24 10.84 10.18
PČS 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
VIG 4.27 4.74 5.64 5.96 6.18 8.39 9.50 9.71 9.23
Civil
insurance,
%
KOOP 6.78 7.17 7.61 7.78 8.30 9.15 9.67 9.99 10.22
ČPP 0.83 1.05 1.47 2.49 2.55 2.60 2.86 3.11 3.33
VIG 5.99 6.34 6.75 6.98 7.34 7.86 8.22 8.46 8.67
Business
insurance,
%
KOOP 24.61 22.86 20.55 20.21 20.56 21.66 20.39 21.35 21.56
ČPP 13.28 13.32 8.39 7.80 7.90 7.80 8.59 9.34 9.95
VIG 23.10 21.56 18.84 18.33 18.44 18.87 17.77 18.57 18.82
Source: Author’s own work based on ČAP’s statistics
10% of the total GWP were achieved by four KOOP’s IP throughout the period.
Another important IP is the business insurance. In 2013, property insurance reached
the highest percentage (25.21%). In 2013, civil insurance exceeded the 10%
threshold for the first time. The most significant change occurred in liability insurance
Financial Assets and Investing
32
of motor vehicles. It dropped from 27% to 19%. All products, except for liability
insurance and civil insurance, reached average levels of around 20%. Distribution of
IP within the insurance portfolio can be evaluated as even.
ČPP achieved a 10% market share with its three IP. Business insurance cannot be
included here because there was a decline, and except for 2005 and 2006 it did not
even reach 10%. In 2013 liability insurance of motor vehicles reached the highest
percentage (50.25%) and extended the average value of 62% in the period; it
decreased from 73.52% to 50.25%. Within the portfolio we can observe the growth
of motor vehicle insurance, from 7.83% to 20.10%.
Within VIG, five insurance products reached 10% of GWP. Only liability insurance and
civil insurance did not reach 10%, however, these figures are growing. The highest
average share for the period 2008—2013 was reached by liability insurance of motor
vehicles with the amount of about 27%. Other IP reached the average ratio of around
20%. In all monitored IP it is possible to observe some growth, except for motor
vehicle insurance and liability insurance of motor vehicles.
3.4 Expense-to-revenue Ratio of Non-life Insurance Portfolio
The first monitored indicator is the cost indicator loss ratio (LR). The lower values,
the better for insurance companies. Figure 5 shows the development of this indicator.
Given that the insurance company PČS has a very low share of non-life insurance, its
evaluation will be considered marginal. However, the figures indicate a significant
decline in this indicator and value in 2013 is the lowest of all within all monitored
subjects.
Figure 5 Development of loss ratio within VIG (Czech Republic)
Source: Author’s own work based on insurers’ annual reports
No. 3/2015
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KOOP reached values up to 60%, except for the years 2006 and 2013; all values
fluctuated evenly in the period. ČPP reached higher values and a chronological
development of the increase in this indicator can be observed. The value of 60% was
exceeded within six years and in 2013 exceeded 70%. The insurance group VIG
slightly fluctuated between 54% and 63%. It reached values below 60% in all
monitored years except for 2006, 2010 and 2013.
The second monitored indicator is the ratio indicator expense ratio (ER). Insurance
companies should not exceed 30%. Figure 6 indicates the development of this
indicator. Given that the insurance company PČS has a very low share of non-life
insurance, its development will also be considered marginal. It is worth noting that
the indicator value in the period 2010—2013 remained at a very low level.
KOOP shows even values in this indicator, reaching around 21%. ČPP exceeded the
value of 30% in 2007 and since this year, it has been fluctuating around this figure.
Between 2010 and 2011, it got slightly below 30% and in 2012 and 2013 again
exceeded 30%. Also VIG shows even values in this indicator, reaching around 22%.
Figure 6 Development of expense ratio within VIG
Source: Author’s own work based on insurers’ annual reports
3.5 Comparison of the Insurance Business of the VIG
Table 3 shows a comparison of selected indicators evaluating insurance activity by
individual insurers and VIG. The indicators are briefly commented on. I listed values
reached in 2013 and the average for the period 2005—2013 for insurance companies
and for VIG for the period 2008—2013.
Financial Assets and Investing
34
Table 2 Comparison of VIG’s insurance business (Czech Republic)
Indicator
KOOP ČPP
Evaluation
Value in
2013
Average Evaluation
Value in
2013
Average
Market
share
2nd
place for
the entire
period
20.00% 21.10%
7th
place
(2011—13,
2005)
4.62% 4.00%
Relative
market share
High level (>3)
for the entire
period
10.40 10.86
Good level
(1.5—3) for
the entire
period
2.40 2.07
Growth of
GWP
Slightly
unsteady
character
2.30%
(2012/13)
2.13%
High growth
(2006—10)
3.84% 8.04%
Non-life
insurance
share
Except for
2013, it
exceeds 70%.
Non-life share
being reduced.
68.44% 73.85%
Except 2012
a 2013
exceeding
70%, nonlife
share
being
reduced
69.18% 73.30%
Product
diversification
Equal
distribution
5 IP
exceed
10%
5 IP- 20%,
2 IP- 8%
Uneven
distribution.
Specializing
in car
insurance
3 IP
exceed
10%
Mot.
vehicles
liab. ins.:
62%
2 IP-
10%
Loss ratio
53%—64%,
60% exceeded
in 2 years,
slight
fluctuation
60.45% 57.46%
39%—72%,
60%
exceeded
in 6 years,
indicator
growing
71.30% 58.48%
Expense ratio
20%—22%,
never
exceeded 30%
20.96% 21.15%
11%—33%,
30%
exceeded in
5 years
30.26% 26.47%
Indicator
PČS VIG
Evaluation
Value in
2013
Average Evaluation
Value in
2013
Average
Market
share
5th
place
(2011—13)
10th
place
(2005)
7.25 % 5.24 %
2th place
within
insurance
groups
31.87 % 30.87 %
Relative
market share
High level (>3)
for the period
2010-13
3.77 2.74
High level
(>3) for the
entire period
16.57 16.36
GWP
Highly
fluctuating,
high growth
6.11% 23.59%
Slightly
fluctuating
3.36% 3.11%
Non-life
insurance
share
Specializing in
life insurance,
bancassurance,
growth of nonlife
share
6.70 % 3.74 %
Positive
development,
non-life
insurance
share
decreasing
54.5% 59.10%
Product
diversification
Focus on life
insurance and
bancassurance
Not
evaluated
Not
evaluated
Even
distribution
5 IP
exceeded
10%
Mot.
vehic.
liab. ins. -
27%
4 IP-
20%,
2 IP- 8%
Loss ratio
2010—2013
significant drop
under 5%
27.99%,
low share
of non-life
57.77%,
low level
of non-life
Slight
fluctuation,
values under
61.53% 56.83%
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insurance insurance 60% except
2013
Expense ratio
2010—2013
significant drop
under 5%
1.44%,
low share
of non-life
insurance
37.82%,
low level
of non-life
insurance
20%—23%,
30% not
exceeded
22.13% 22.38%
Source: Author’s own work
Conclusions
This article aims to determine whether the developments in the insurance business
production correspond with the development of the expense-to-revenue ratio of
insurance portfolios. KOOP, ČPP, PČS and the insurance group VIG are evaluated by
position in the insurance market, according to operating costs and insurance benefits
costs for the period 2005—2013.
Because PČS is an insurance company specializing in life insurance, only insurance
companies KOOP and ČPP are evaluated complexly. There are differences between
KOOP and ČPP. The development of KOOP is a development of a stable insurance
company in all indicators. ČPP is proved to be an insurance company with significant
growth in the Czech market share. But the results in product diversification have
shown an uneven distribution. Cost ratios have indicated increase in the monitored
period. KOOP, having ranked second in the Czech insurance market, can be
evaluated, in terms of its market position, as stable. KOOP’s indicators of market
share, relative share and growth of GWP are slightly fluctuating. Product
diversification is even. This insurer is a universal insurance company with a
predominance of non-life insurance (70% share). Loss ratio is in the range between
53% and 60%, expense ratio is in the range between 20% and 22%. Expense ratios
also show a slightly fluctuating development. We can say that the development of the
KOOP’s commercial production corresponds with developments in the cost of the
insurance portfolio.
ČPP insurance company has ranked 7th
(2013) in the Czech insurance market. It is a
universal insurance company which specializes in insurance of motor vehicles and
motor vehicles liability insurance. In terms of market position, it can be evaluated as
an insurance company with significant growth in market share and relative share. In
the monitored period it is also evident that its GWP grew significantly. Product
diversification is uneven. This is caused by the increased share of motor vehicles
liability insurance and motor vehicle insurance. In terms of temporal evolution we can
positively assess ČPP’s reducing GWP proportion for these insurance products. Loss
ratio is in the range between 39% and 72% and expense ratio in the range between
11% and 33%. Cost ratios show a slight increase. We can say that ČPP’s
development of commercial production does not correspond with the development of
cost of the insurance portfolio. In the monitored period, both cost ratios rose. The
insurance company should focus on product diversification of its insurance portfolio
and its expense-to-revenue ratio strategy for its insurance portfolio.
Financial Assets and Investing
36
PČS has ranked 5th
(2013) in the Czech insurance market. It is an insurance
company specializing in life insurance in form of bancassurance. For this reason, this
insurer has not been evaluated within production diversification and expense-torevenue
ratio. In terms of market position, it can be evaluated as an insurance
company with significant market growth and relative share.
VIG’s overall results are, due to the structure of individual insurance companies, very
positive, both in terms of market position, and in terms of expense-to-revenue ratio.
These results would not have been reached without the high market share of KOOP
and growth of PČS, which focuses on the life segment.
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