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Edited Transcript of EUPIC.AT earnings conference call or presentation 25-Sep-19 2:30pm GMT

Half Year 2019 European Reliance General Insurance Co SA Earnings Call

Sep 27, 2019 (Thomson StreetEvents) -- Edited Transcript of European Reliance General Insurance Co SA earnings conference call or presentation Wednesday, September 25, 2019 at 2:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* George Gkouskos

European Reliance General Insurance Company S.A. - IR

* Stefanos I. Verzovitis

European Reliance General Insurance Company S.A. - Vice-Chairman of the Board, CFO and GM of Financial & Administrative Services

* Thomas Konstantinidis

European Reliance General Insurance Company S.A. - Member of Investment and Asset & Liability Management Committee

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Conference Call Participants

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* Manos Hatzidakis;Beta Securities

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. I am Gailey, your Chorus Call operator. Welcome, and thank you for joining the European Reliance conference call to present and discuss our first half 2019 financial results. (Operator Instructions) And the conference is being recorded. The presentation will be followed by a question-and-answer session. (Operator Instructions)

At this time, I would like to turn the conference over to Mr. Gkouskos George, Finance and Administration Manager. Mr. Gkouskos, you may now proceed.

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George Gkouskos, European Reliance General Insurance Company S.A. - IR [2]

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Good afternoon, ladies and gentlemen. I want to welcome you to our teleconference regarding our financial results of first half of 2019. At this point, I want to give to Mr. Verzovitis Stefanos, Chief Financial Officer of our Company in order to present you our main financial results. Mr. Verzovitis, you may proceed.

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Stefanos I. Verzovitis, European Reliance General Insurance Company S.A. - Vice-Chairman of the Board, CFO and GM of Financial & Administrative Services [3]

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Good afternoon, ladies and gentlemen. Thanks for participating in this presentation. We will start our brief presentation with a view in Greek insurance market for the first 6 months of 2019.

As you can see, the first 6 months of 2019, Greek insurance market has a growth of approximately 4%. This growth is coming from life insurance and mainly from group life insurance policies and UL.

Nonlife insurance sector has a small decrease due to motor third liability sector, which has a decrease of 3.3%. On the other hand, the other nonlife sectors have a small increase of 0.8%. So as you can see, we have a slight increase in total written premiums of Greek insurance market through the first 6 months of current year.

Let's move on to some -- to our group, and before to show you the financial figures, let's have -- take a look of some general information about the group. The group is 42 years group with the parent company, which is the insurance company and the -- which consists also the group by the asset management company. It's a European Reliance Asset Management. We have also Alter Ego. It's a company that has as an issue facilities management. And also we have a brokerage company, which is not yet activated.

The company has a network of more than 5,500 agents and actually, it is a retail company with more than 640,000 insurance policies.

Let's see -- let's have a brief -- take a look of employees and sales network. As we said, our sales network is consisting from above 5,500 agents, insurance agents, most of them are tied or great part of them are tied with our company. The men and women division, as you can see, is most -- the 65% is consisting by women and the 35% by men is the employees -- the in-house employees. At the same time, 45% of women is in top management position.

Another point that we are very taking a look is the staff training. You can see that the first 6 months we have around 4,000 hours on training. Until the end of the year, we're going to have more than 10,000 hours training.

Presence in Greece. As you know very well, our group is activated in Greek market. We are focusing in that market because we believe that we know very well the market, very well the needs of Greek customer. So we have a presence in 104 retail offices all over Greece, all over the parts of Greece. And as you can see, we are continuing to increase this sales network.

A few words about insurance products and services that we are offering to more than half a million clients. So we have a portfolio that covers every needs: Car Protection, Property Protection, Private Health Insurance System, Income Protection, Health and Family Care, Quality of Life System, Home Protection, and finally, Education.

Let's see now the financial result for the first 6 months of 2019. Very briefly, first of all, you can see that we have a significant growth in our written premiums, more than 10%. At the same time, we saw that Greek market was in 3.9%. So we are having speed 3 more times versus Greek market. The result of that was a consolidated pretax profit that doubled consolidated pretax profit of EUR 16 million versus EUR 8 million last year. This is the result of the good operation profit also, but it's also a result of the good investment revenues that we have current year.

Next slide, you can see also the insurance provision that it was continued to strengthen. They're achieving EUR 300 million. And also, we have a significant increase of consolidated tax equity from EUR 116 million at the end of 2018 to EUR 133 million at the end of June 2019. A very important thing also is solvency ratio. When we start solvency in 2016, we started from a rate of 125%, and the target is in -- a period of 3 years to be more than 160%. So in a period of 2.5 years, we have the opportunity to achieve our initial target. And right now, we are in 162%, which reflects the very positive and strength position of our group.

If we take a look of the breakdown of the gross written premiums per sector, we can see that all 3 sectors, life, motor and other nonlife, has increased. This means that there's a balance in the growth of the company, which is not based only in 1 sector, but this -- let's say, a holistic balance in our revenues.

The results, which also very significant key, let's say, result. We have also positive results, the gross insurance sector results, for both life, which is approximately double, from motor sector also doubled and from other nonlife sector, which is a significant increase. Overall, it's a 58% increase versus last year.

Very important thing and one of our main targets is our market share because we have a strong target in that case. Let me remind you that we started this decade with the market share of 2.1%. And right now, we are estimating that we are in 5.1%. And very soon, we're going to triple this percentage, the percentage of the debut of current decade.

Investment portfolio continues to grow up with very healthy allocation between government bonds, corporate bonds, shares investment, other investment and cash. You know very well that we are in a low yield or negative yield period. This is something that is not -- this is something that will be continued for at least 2 or 3 years. And in that environment, we are trying to do our best in order to get yields and to be always on the safe side to have low risks. The first 6 months of the year was under capital control in Greek market. This was erased before 3 weeks. So from now on, we have the freedom to be -- to invest in a proper way versus last 4 years that had -- that we are under capital control.

Group results. Net profits is EUR 12.5 million. That, combined with profits from investments, have driven total equity from EUR 116 million at the end of 2018 to EUR 132 million, and we are very glad about that. We have also positive news about taxation. This refers to net tax profit. Taxation of 2018 was at 29%. Current year, we are running in 28% and there's a strong possibility to [vault] a new low, so we go to 24% very soon.

A few informations about our shareholders.

First of all, dividends, that's something that interest our shareholders. The interest that we gave for last year was EUR 0.13, and also there is a decision of general assembly that from now on we give our dividends the minimum the 35% of net profits, at least. This is going to be the minimum. As far as concerning the owner structure, there was not some -- a significant change this -- the current year.

Also, we are -- from July 2019, we are running a program of buying own shares in order to have a strong, let's say, price in our sales and increase our shareholders value.

In that slide, you can see the capitalization of company and the total equity, the first line is the total equity, the second is capitalization. As you can see, capitalization is always lower to total equity, and this is a very positive news for our shareholders, which means that there's capacity for -- we believe that there is a capacity for future growth.

A few things about events and C.S.R actions because apart of figure we believe -- we always believe that company is not only figures, but there is general actions that we are doing for the society we live who is hosting the company. So we have as advance 2 new innovative products, growth of retail offices. The strong dividend, we have already mentioned that. And the reacquisition of own shares that we also have mentioned that.

A lot of actions concerning C.S.R. Scholarships, donations, participations and assist to the wildfire that we have last year with deaths. This was very terrible action.

So closing this presentation, let me remind you the 2019 goals that we have to achieve till the end of the year. We have to ensure smooth operation, something that we do very well till today, but we have to continue that. We have to implement IDD, most of them have done. The new regulation of GDPR. Right now, we are in the stage of preparation and analysis for the establishment of the new IFRS 17 and 9, effective from the debut of 2022. We're always trying to find new distribution channels to design and develop new innovative products. The training some -- it's an issue that is an ongoing issue for us, for the sales network. Always, we're trying to find the best employees, the best talents to improve the liquidity and net equity and finally to develop new software. And we have -- let me inform you that we have 3 years digitalization plan for all our services in-house, in the company and in sales network.

Talking about 2019 financial goals. We want to have a decrease in total cost of net premium about 0.6%, to increase our total assets 5.4%, to decrease our loss ratio by 3%, to decrease our lapse ratio by 0.5% and finally and the most important is to increase the net written premiums by 9.8%. As you can see, the first 6 months, we do well, and we strongly believe that at the end of the year, we will be above 10% in terms of growth.

So this was our brief presentation. Thank you for your passion. And right now, we are ready to get any questions about that.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have a question from one of our webcast participants with the name of (inaudible) [Christos]. The question is, congratulations on the strong results. Can you please comment on the decrease of the average credit rating of your investment portfolio? And this -- is this a conscious attempt to increase yield or a result of downgrades?

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Thomas Konstantinidis, European Reliance General Insurance Company S.A. - Member of Investment and Asset & Liability Management Committee [2]

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This is Thomas Konstantinidis. I'm the President of the Investment Committee. Regarding the credit -- the decrease of the credit rating, there is certain things happening at the same time. One important issue was the capital controls. As Mr. Verzovitis has told you up until this summer, we have capital control. So we have -- we were -- it was mandatory to invest all the capital we created in Greece, within the Greek borders. As a result, every year, in this first 6 months, we increased our exposure in Greece. Second reason is, it has to do with the negative yields as in Europe and especially in the Triple-A bonds. We have negative yields. We have to reinvest assets in a lower quality. And as a result, the total average of the credit portfolio went lower. There was no downgrades. It was not a result of downgrades or any other reasons. It was a conscious decision to decrease -- to maintain our yield by lowering a little bit of quality of the portfolio and avoiding negative yields, also holding lower duration. Any other questions?

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Operator [3]

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(Operator Instructions) The next question is from our audio participant, Mr. Hatzidakis Manos with Beta Securities.

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Manos Hatzidakis;Beta Securities, [4]

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Congratulations for the results, the best ever for the first half of a year. First, a question about the volumes with stock making the market. Are you willing to increase the free float? And what are your thoughts for supporting the volumes that are made in the spot market?

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Thomas Konstantinidis, European Reliance General Insurance Company S.A. - Member of Investment and Asset & Liability Management Committee [5]

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Manos, this is Thomas Konstantinidis again. There's no plans for increasing the free float at the moment. And volumes, as you know, it's on the stock markets. So we have already made some arrangements in terms of hiring market makers in order to improve the liquidity of the market. So I think this is for now.

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Stefanos I. Verzovitis, European Reliance General Insurance Company S.A. - Vice-Chairman of the Board, CFO and GM of Financial & Administrative Services [6]

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And we're going to see. Another point that I've missed to tell to our investors, to our shareholders is the decrease of dividend's taxation from 10% to 5%. This is going to make Greek market more attractive. And combined with all other, let's say, measures, we believe that the picture of Greek Stock Exchange market and our picture also will be better and our shareholders will be more attractive versus the past.

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Operator [7]

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(Operator Instructions) Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Gkouskos for any closing comments.

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George Gkouskos, European Reliance General Insurance Company S.A. - IR [8]

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Thanks a lot, ladies and gentlemen, and more than welcome to any one of you if you have any more inquiries, always you can call me or you can e-mail me on ir@europisti.gr. Thank you, again, very much for your time.

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Operator [9]

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Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.