Bank assurance is the going to be our major business in the coming years, says Erik Nagy, director for the CEE operations of Groupama
In 2006 г. Erik Nagy joined the International Development General Direction of Groupama SA, his assignment includes the CEE development of the company. Since January 2009 he is already
director of this region.
Being 42, he has a doctor\'s degree in medicine from the Budapest University and also an MBA degree from the Chicago University.
During the years 1998–2000Mr. Nagy is working for McKinsey in Budapest, and later - 2001-2005, in the American-Hungarian investment fund MAVA Capital in, being investment director.
Mr. Nagy, how did you choose the management of the two Bulgarian companies of Groupama?
- The key figures, the management team, is changed in only one position - the chief executive officer, the rest of the team is the former Garancia management team. We have chosen Mr. Yordanov based
on his local and international competence and achievements.
And based on his DSK Bank connections?
- Definitely, he is a former DSK Bank executive director and he understands how the bank works, what the priorities of a bank are and how to work with a bank – because he was inside it.
Are you not worried that he is better in banking than in insurance?
- No, because we have a very competent management team and they have spent number of years in the insurance industry – the chief financial officer, the life insurance director, the non-life
director, the chief actuary, the real estate insurance director. So I’m not worried at all.
Is bank assurance going to be the main line of business in the coming years?
- In the coming years, yes. In the short term we will definitely focus on bank assurance, not ignoring other channels, but our first priority on the Bulgarian market, having on our side such a
strong partner like DSK Bank, this clearly means bank assurance.
But not closing other channels?
- No, we do not close, we change, restructure, search the efficiencies, we clearly want to professionalize our agency network and as you know the selection of insurance agents is a competitive
process, there is a large number of candidates, but this is a very serious profession and some of them do not make it and fall out.
Are you happy with the purchase of DSK Garancia for now? Because we know, that the performance of the company is not good lately.
- I would not say it’s not good. Before the acquisition by Groupama DSK Garancia companies were established 2004, so it took these two companies like four years to set up the structure and to
establish on the market. Insurance is a long-term business, it cannot happen overnight.
Well, but the same goes for the other ex-OTP Garancia companies in CEE countries, but they perform better…
- It’s difficult to say what performs better and what does not… From the Garancia companies there is one of a different scale – that’s the Hungarian Garancia, but that was established I think in
1992-3. As for the companies in Bulgaria, Slovakia and Romania, they were established roughly at the same time and I would not say which one is more successful – they are almost of the same scale –
round 10 million euro of premium revenue.
But DSK Garancia has big financial losses for last year and for the first halve of this year. The loss from the non-life business is more than a million leva and…
- …and
one million profit from the life business, so we are braking even.
One million profit?
- Yes.
I have different figures... The tow companies have reported also uncovered losses from 2008 - total of 5.28 million leva.**
- We are braking even between the two companies - this is public information. The results of the previous years are also publicly available information and I do not wish to comment on them as
there were produced before Groupama would acquire these companies.
Do you think of selling the two companies if their performance continues to be bad and the losses accumulate?
- No. First of all it is not in the cards that they would not
develop - we are here to develop the business. So this is not a realistic scenario. Secondly, Groupama by its nature, by its history, is a long term perspective…
Though it is not effective acquisition as for now?
- It’s a good acquisition. It’s just that in terms of realizing return in the financial sense on the investment, it takes time – this is the nature of every capital investment…
Are you patient?
- Yes, being an insurance manager – they are patient people.
Are you going to invest in the company, what are your plans?
- I think it depends. 2009 is an exceptional year for us, for the country and globally. It is difficult to draw a definitive conclusion, based on 2009 experience. It’s not even bad for us that in
2009 the insurance market in Bulgaria did not grow, because we could focus our attention in the integration of the two companies in the Groupama Group – it is our priority for 2009. And this is
what we are carrying out. For example this rebranding project took considerable effort, time and money. And this is not what we are doing in 2010 and 2011. This is an investment of money and time
and we hopefully will reap the benefits of this investment next year onward.
So, bright future?
- I’m optimistic. The future might be not as bright as I hope, but…
There are rumors that DZI will be on the market again. Is Groupama potential buyer again?
- We intended to buy it once in 2006… When it comes to the market, we shall decide. It is not on the market yet. The shareholders of DZI will review the situation and when they make the
strategic decision, I’m sure this strategic decision will be available for all the potential acquirers, so we are here about that.
So, Groupama is a potential buyer?
- No, I would not put it that way. We are not following directly the development of DZI, but if KBC Group wants to sell this Bulgarian asset, we will make a decision. We are not actively looking at
DZI, but we will definitely consider the deal when/if it comes to the market.
Are you going to work only with DSK Bank in the bank assurance business?
- Yes, this is the only bank we will work with.
Could you specify in more detail your short and middle term intentions for Bulgaria?
- Short term intention is clearly what we are doing now – rebranding and integrating the two subsidiaries into Groupama Group, improve the operations, by this I mean looking in the information
technology, in the product portfolio. We have in preparation 3-years strategic plan, which will be approved in October-November. So we know where we want to go in the next 3 years – in terms of
capacity distribution, in terms of geographic footprint, in terms of product portfolio.
What part of the Bulgarian market are you aiming at?
- This is very much in line with the core Groupama strategy. We are general insurer and retail insurer, not industrial. For us the car insurance is important, especially casco, which is not in the
company’s current Bulgarian portfolio - we are on this market everywhere else where we operate. This closely depends on the evolution of the market – if the market evolves the way we wish, we will
enter it. And the casco segment of the market depends very much on the regulator. As it is now, the casco market is not favorable for us.
Do you intend to develop other lines of businesses?
- Outside life and non life insurance – no.
Do you intend to develop different channels?
- Yes, we shall pay special attention to the agents network, as I have mentioned. We often face the distribution issue on the other markets that Groupama works - we have a very sophisticated
portfolio, but reaching the client is thew key challenge. In Bulgaria, with the partnership of DSK Bank this is less of an issue. So the business situation here is not easy, but more
favorable than on other markets, where we cannot find a proper channel to penetrate the market. That\'s one of the reasons I\'m optimistic about our business here.
Do you expect to go on profit any time soon?
- Yes, in the next couple of years.
By the way, is the previous board of directors free of liability for the last year’s performance of the company?
- I checked with our lawyer who confirmed that the liability of the board of directors is not public information, thus I will not share it with you.***
Thank you for this interview.
* The assets of the Romanian company are actually around 20 million euro. Since the beginning of the year Groupama has invested totally 65 million euro in its three Romanian entities - Asiban,
BT Asigurari and OTP Garancia, their merging has already started and will be finalized in early 2010.
** The non-live Groupama company according to the Bulgarian Financial Supervision Commission's H1 2009 figures has reported 1.096 million leva losses, but has also 1.363 million leva uncovered
losses from 2008. The life insurance company has reported 1.032 million leva profit for the same periodq but its uncovered losses from 2008 equal to 3.849 million leva. Thus the accumulated losses
of the two companies from the last and this year equal to 5.276 million leva.
And one more thing - in the press kit from the press conference on the occasion of DSK Garancia rebranding to Groupama reads that since 2004 the Bulgarian life company has paid 5 million euro in
dividend and the non-life company - 4.3 million euro. The truth is that the two companies have never paid dividend - neither as Garancia, nor after being acquired by Groupama.
***This is not true, according to the Bulgarian regulations this information is public.
