No policies for Poles
By : Jeffrey Sparshott
Polish life insurance companies stumbled during the first quarter of 2001, with net financial results falling by 74% compared to the same period last year, according to information released last week by the Central Statistical Office (GUS) (http://www.stat.gov.pl/english/index.htm).
A slowing economy and disappointment with policies are two main factors hurting life insurance companies, said Marek Kurowski, an analyst with the Polish Insurance Chamber (PIU).
"Macroeconomic conditions, which are external to the insurance sector, caused a diminution of the real growth in the life sector," Kurowski said. "What is an important and interesting phenomenon in the life sector is a significant increase in the benefits paid because a lot of clients have resigned from contracts. One reason is macroeconomic. I think that another reason, they are a little disappointed."
Clients who had understood life insurance contracts as a kind of investment partly because they were sold as a form of investment see that it's not true, he said. Now that consumers are more aware of how policies work, they are cashing them in rather than waiting to collect full benefits at a later date.
Despite the fall in net revenues and profits, life insurer assets grew 32% since 2000's first quarter to zl. 21.7 billion ($5.4 billion), GUS said.
And the long-term outlook for Polish insurance is not nearly as bleak as first-quarter results would suggest, analysts said, with the non-life insurance market stabilizing and the overall market poised to become a major European center through the next 10 years.
"Despite narrowing margins and increased competition, the current low level of insurance penetration, set against a large population and a rising rate of economic growth, has provided a backdrop ripe for growth," said Ashley Gill, an associate in Standard & Poor's Financial Services Group (http://www.standardandpoors.com/index.html).
"Further economic development through EU membership, however, will improve Poland's GDP and should result in a subsequent boom in the insurance market," Gill said.
Companies are also learning the market and, following significant financial losses accompanied by increasingly fierce competition during the past few years, many insurers are now better placed to improve their market share and their earnings potential. They still face stiff competition, however, from Powszechny Zaklad Ubezpieczen (PZU), Poland's dominant insurance company, analysts warn. PZU controls more than half of the life and property market.
PZU and the Treasury Ministry, which holds a majority stake in the company, plan to launch the insurer's initial public offering (IPO) this year so that the government can collect revenue from the sale no later than early 2002, Treasury Minister Aldona Kamela-Sowinska said last week. It is unclear if a no-confidence vote in the Sejm or September's parliamentary elections will affect the stock offering.
Poland sold 30% of PZU in 1999 to a consortium led by pan-European insurer Eureko for zl. 3 billion ($750 million). In the IPO phase of the company's privatization, Eureko has agreed to increase its stake to 50%. According to the treasury's agreement with Eureko, 30% will be floated on Warsaw and potentially London exchanges, 15% will go to PZU employees and the last 5% will remain in state hands.
