Financial Analysis and Information Systems of ERGO-Property and Casualty

One of the most important subsidiaries of the Ergo Group in Greece was the ERGO-Property and Casualty. Before the merging in 2016, the company was specialized at the insurances of personal property and liability (personal or professional). ERGO-Property and Casualty has been operating in Greece for more than 25 years, employing 227 people and having Ergo Group as its main shareholder. We presented at chapter 3 the company and its activities. In this section based on the financial data of the company until 2016, we aim to analyze the economic situation of the company before the merging in a huge scheme.

The company achieved to fully cover its capital requirements from the first year of the implementation of the Solvency II directive and held a total amount of 120.6 million Euros in equity. The solvency capital requirement (SCR) of the company in 2016 that expressed the amount of funds that insurance and reinsurance companies are required to hold under the European Union’s Solvency II directive was formed in 143,3%. The SCR incorporates risks such as non-life underwriting, life underwriting, health underwriting, market, credit, operational and counterparty risks, and must be recalculated at least once per year. In addition to the SCR capital, the Minimum Capital Requirement (MCR) of the company, which represents the threshold below which the national supervisor (Bank of Greece) would intervene, was formed in 399%. As a result, the company can be classified as solvent, at least for the immediate future, since the solvency ratio of this is over 100%. These solvency ratios

indicated that the company’s cash flow was sufficient to meet its short-and long-term liabilities.

In the following table, we present the basic economic sizes of the company, such as gross registered premiums, net accrued premiums, the cost of compensation and the profits it had after taxes. We want to depict a general picture of the economic situation of the company at 2016, as well as the strengths and weaknesses of ERGO-Property and Casualty before its merging.

Financial Data 2016 2015

Gross Registered Premiums 145.90 millions of euros 139.80 millions of euros Net Accrued Premiums 120.30 millions of euros 114.00 millions of euros

Human Resources 228 199

Compensation Costs 46.00 38.50

Operating Expenses 48.30 45.00

Investment Result 2.5 4.9

Profits before taxes 26.30 30.5

Profits after taxes 17.60 25.20

Financial Data at 2016 - ERGO Property

Table 3: Financial Data of ERGO Property at 2016 Source: Data from research

We observe in Table 3 that the gross registered premiums of the company increased from 139.80 million Euros in 2015 to 145.90 million euros in 2016. As a result, the net accrued premiums were also increased from 114.0 million euros to 120.3 respectively. The improvement in the financial situation of the company in the aforementioned years came mainly from the lower reinsurance costs that existed in 2016, due to the fact that the market economy conditions were smoother than the previous year. The important thing was that the company managed to increase its production despite the difficult conditions prevailing in the country, operating in a competitive environment due to the intense shrinkage of the insurance market in Greece.

The compensation costs increased in 2016, as did operating expenses, due to the small increase of 29 people in human resources. The company decided to cover various advertising

54 campaigns, promoting its existing products and invested in its information systems knowing about the merger that would take place next year.

In general, the company showed positive progress, which as recorded above is due to the increase in insurance contracts but we notice a decrease in net profit after taxes due to the reduction of its investment result by 49.0% compared to 2015.

The technological infrastructure of the company was considered satisfactory due to ongoing investment in Information Systems. The majority of the economic activities of the company were made by the web platform. All insurance products of the company were promoted and sold through an online interactive system namely ERGO portal. The online systems of the company replaced the legacy bureaucratic systems which collected millions of contracts in excel format and could not process and configure critical information.

In 2016, ERGO via its information systems had the ability to process claims efficiently.

Information could be gathered and entered into online forms for processing. Agents and customers had access to information so they could be kept up to date as the claims process progressed. Information systems also enhanced Ergo’s communication with its policyholders.

The company could collect data and send it to customers using easy-to-understand forms with information about claims status, benefits, and tips on ways to stay healthy or reduce costs. By embracing information technology, Ergo could operate more effectively in order to attract and retain customers.

Through Information systems the company had the ability of the following:

✓ Launch innovative products to the market quickly

✓ Automate all areas of the company

✓ Provide access from any device. No installations. No downloads required

✓ Get detailed and updated real-time accounting

✓ Easy maintenance and change management

Information systems of Ergo made it easier for consumers to find information on policies, to enroll, to manage their policies, to update information, and to check the status of claims. The company could free up resources so that agents and customer service staff would have more time to assist customers one on one, leading to more satisfied policyholders and increased profits for insurance companies. Without a doubt, we can say that the company had a strong

technological infrastructure that could support the operations of the new company after the merger.

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