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The Warsaw Voice » Other » March 12, 2008
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Banking on a Merger
March 12, 2008   
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Sławomir Walery¶, president of Aspecta Życie TU SA and Gerling Polska TU na Życie SA, talks to Konrad Bagiński.

You are in the process of merging two companies, Aspecta and Gerling, into one insurance company. How far have you proceeded with this complicated and time consuming process?
We needed to take several formal and legal steps, such as the preparation of many documents that have led to the purchase of Aspecta shares. Last April Gerling's capital was increased by 12 million euros so that the funds could be used to pay the parent company for Aspecta. We managed to do quite a lot in terms of merging the operations. Sales networks have already been combined. Although they work in two different firms, their structures are identical and we are working on establishing identical commission systems, we also are trying to unify our products and the services. We have said from the very start of the merger that would work along the principle of 2+2=4, which means that we will not reduce the number of sales branches, but that we will continuously work to develop them. Of course, mergers on the Polish insurance market are not new, but each situation has to be approached individually.

The latest news is that Gerling bought out Aspecta Life shares. What does that mean in terms of the process of merging the two companies?
It is an important step in the formal and legal merger of the companies. Having this decision behind us, all that remains to be done is to obtain approval from the Polish Financial Supervision Authority (KNF) for the merger, that is for the "the absorption" of Aspecta into Gerling and the cancellation of its shares and to deregister them from the National Court Register. We are confident that this whole process is coming along smoothly. We are working on submitting the application to the KNF. We need to have a well-prepared opening financial balance for 2008, which we plan to have completed by mid-March, and other documents, including detailed plans of the merger. Once we receive all the necessary approvals, we will change the name Gerling to HDI Gerling. We want to complete all the process by mid-2008. We still have a lot of work ahead of us.

Have you started to plan an advertising and marketing campaign?
We do not plan an advertising campaign. We are planning for a new logo and a few changes associated with that. We will use the well recognizable in Poland HDI brand.

What will be the new company's position on the insurance and financial services market?
That is difficult to say, most surveys give a misleading picture of the market, because it is hard to know what criteria to use to measure insurance companies. Many insurance companies deal in capital investments which account for a significant part of sales revenue of the market. We are ranked in the top ten companies that generate income from insurance policies with regular premiums.

The financial markets bore the brunt of the crisis first in United States and then in Europe. How did this situation affect Polish insurance companies?
Those companies that offer single premium non-unit-linked products of bancassurance type felt it the most. We do not operate in this market segment, although we offer single premium unit-linked insurance policies, which can be treated as umbrella funds for mutual funds. In this segment we have noticed a marked drop in public interest since November last year. I think this drop will persist for quite some time. The challenge is to translate sales effectiveness into increased sales of regular premium insurance policies thereby to explain to clients that the best results come from long term, regular savings. They should avoid speculation and try to average out deposits and profits.

How can your industry counterbalance the effects of the weakening of the Warsaw Stock Exchange?
First of all, it has to look after its assets so that they do not flow out of the company. In all our promotional materials we recommend long-term savings. Second, it is important to maintain sales: here, it will be a success to prevent big falls in production. The broadening of safety net services could be a valuable option. Such as our product MEGAPROFIT, a life insurance policy linked with an insurance capital fund. It is an insurance policy for all who wish to invest regularly and effectively. We do not provide health cover, but we can subcontract these services and offer them to our clients. We have such services in group insurance and they are very popular, especially since the difference in price (in comparison with a policy without medical cover) is marginal.

What is the most important consideration now in order to merge the companies?
We are principally concentrating on improving the IT system which is at the heart of every insurance company. We are working towards unifying it, including migration of data, so that we would end up with a single IT system after the merger. We are also working on improving clients' access to our company, primarily through the internet so that the clients and sales partners would have an easy and fast access to data. We are also establishing a new call center which will provide comprehensive client services.

New companies are entering the Polish market all the time. How do you think the insurance market will continue to develop in Poland?
Since Poland entered the European Union, the insurance market has been developing in a very dynamic way. Foreign investor interest is a proof of that as well as insurance companies' increasingly good financial results. Competition has increased due to EU companies entering our market. Unit-linked insurance policies have become popular throughout the world as well as in Poland. Given the improvements in the economic situation, regular wage increases, increasing awareness of insurance and financial services and satisfactory legal security for the client, I think that the prospects for growth of the life insurance market in Poland are good, however we should bear in mind that we are entering very uncertain global macroeconomic conditions and therefore we should be prepared to adjust our operations accordingly.

The insurance market in Europe is seeing numerous mergers. HDI Samopomoc TU SA has recently merged with HDI Asekuracja TU SA and similar deals are in the pipeline. How do merging companies benefit?
Mergers make sense when the companies pursue similar sales strategies and offer similar products. Insurance companies that merge benefit from an increased share of the market and a better reputation among clients and agents. Also important are cost reductions and the introduction of more efficient processes based on the experience of the two companies. The merger will double our strengths.
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