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10 Questions

with Martin Diviš
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June 18th, 2008 issue

COURTESY PHOTO
Diviš says life and property insurance are among the top areas for potential growth in his sector.
THE DIVIŠ FILE



Job title: Chairman and CEO, Kooperativa
Age: 34
Nationality: Czech
Previous position: Deputy GM, Kooperativa
Education: MBA, Prague International Business School
Kooperativa is the second-largest insurance company in the Czech Republic, controlled by Austria’s Vienna Insurance Group. Last month, Martin Diviš took over direction of the insurer. He talks to The Prague Post about the government’s pension reforms, Kooperativa’s interest in health care and consolidation on the market.
? You succeed Vladimír Mráz, who just this year won the national Manager of the Year Award. Will it be difficult to follow in such large footsteps?
It is certainly not easy to replace a person like Mráz. Taking over the management of Kooperativa and finding some continuity with what he has done is truly demanding. Nevertheless, I have an advantage in that I have been in different positions at Kooperativa for 12 years — I know Kooperativa and its employees well.
Vladimír deserves huge thanks for his work. He can be credited with making Kooperativa a strong and well-respected financial institution. With our yearly premium significantly higher than 1 billion euros [$1.5 billion, 24 billion Kč], we now have something to build on, things that can be developed. Which we will do not forgetting that the current market has changed.
? In this changing insurance industry, where do you expect to see the most growth?
I definitely expect further growth in life insurance. Compared with Western Europe, our country has the potential to double or triple the number of people with such insurance. I also see great potential in property insurance — home, apartment or household insurance — as nearly half of the population is without this insurance. So the time when all homeowners find it absolutely natural to insure their properties is still to come. Other areas of potential growth in insurance are pensions and health care.
? When compared with your competitors, what would you say is your most successful life insurance product?
For life insurance, we’ve had particular success with Perspektiva, which won the Life Insurance of the Year award for 2007. Its main advantage is its flexibility — clients can decide themselves on where to invest their insurance reserves, they can dispose of assets they’ve saved up and they can influence the amount of the premium.
 
? What would Kooperativa like to see out of the pension reforms currently moving through Parliament?
Well, there is still the question of what share commercial insurance will have in the whole pension system. In case reforms are done in this area, it would undoubtedly be a significant impulse to the development of the insurance market.
It is logical for the government and legislators to create more opportunities for commercial insurance companies, because this sector has been very stable and, since 1989, has not faced any kind of financial problems or crises of trust, like some other segments of the finance market. Insurance companies have clearly demonstrated that they are stable and they manage well what they are doing.
 
? The government is also pushing healthcare reforms, which could make private health insurers more viable. Does Kooperativa have any plans to offer health insurance?
Well, we have entered this field since we succeeded in the tender for the privatization of the Mělník hospital. Kooperativa is famous for its high-quality client care and our care for patients will definitely reflect those values. Our biggest shareholder, Vienna Insurance Group [VIG], has extensive and long-term experience with health insurance and the operation of various healthcare institutions. Obviously we will employ that experience when providing health care for residents of Mělník and Central Bohemia. As for offering health insurance, well, it depends on the development of the legislature, but it is an area we are deeply interested in.
? I saw that VIG is setting up a reinsurer based in Prague. Can you give us any insight as to why the decision was made to base the company here?
The reinsurer should be fully operational by next year. Based on the large potential of the Central and East European markets, which VIG specializes in, we can expect up to a billion-euro volume in the future. Setting up this reinsurance company — which will provide insurance to existing insurance companies — is an extraordinary endeavor for our company because there are so few reinsurers in the world. Austria doesn’t even have one.
Establishing the company here in Prague is a huge honor and means that the Czech insurance market has a large role to play in VIG’s activities. We want to use our 15 years of experience in this region to offer reinsurance not only to companies in our group but also to other insurance companies. At the same time, we’re responding to the latest developments on the international market, which are leading to the creation of stronger and stronger transnational corporations and therefore to a narrowing of offerings.
? On the topic of VIG, it began trading on the Prague bourse this February. What prompted this move and how has it gone?
Entering the bourse was an important step that VIG’s Czech employees are very proud of. VIG is today the only insurer listed on the bourse. Joining the bourse is one of the best proofs that the Czech Republic, with two VIG companies — Kooperativa and Česká podnikatelská pojišťovna — is the second most important market for the whole group, after Austria.
? How well have VIG and Kooperativa weathered the credit crisis of the past year?
I would like to confirm that our group has not participated in the U.S. mortgage market. Last year’s results have proven that our conservative investment strategy is successful: The gross profit increased one-third to 437 million euros and prescribed premiums grew 17.5 percent to 6.9 billion euros.
? The big European Union directive all the insurers are waiting on is Solvency II. What do you anticipate its impact will be?
We expect that this project will strengthen the importance of risk management on both sides, meaning insurance companies and regulators. Solvency II is bad on its principles for evaluation of assets and debits. The advantage will be that more effective placement of the capital will probably cause lower prices for the client. And increased competition and transparency will create better conditions for development of new products and price fixing.
Generally we can expect that the level of risk management is going to increase and the lower risks of a company crash will lead to higher trust in the insurance business and financial stability. Moreover, the new framework is going to be used jointly throughout the entire EU. Together with greater transparency, it should speed the creation of the real joint market for financial services.
? Do you expect we’ll see any more consolidation on the local insurance market?
Well, we can never be 100 percent sure about this, when we keep in mind what large consolidation steps have been taken recently. By that I mean Česká pojišťovna, which created a joint venture with Generali of Italy, and then the last big acquisition so far: VIG, assuming we get all the necessary permissions and approvals, purchased the insurance operations of Erste Bank in April, which includes the Czech insurer Pojišťovna České spořitelny.
Want your manager to answer our 10 Questions? Contact Paul Voosen at pvoosen@praguepost.com


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