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Profitability remains top priority for CIG Pannónia after acquiring two MKB insurers

Maintaining and boosting competitiveness was behind the acquisition of the MKB insurance companies, CIG Pannónia says.

Dr. Gabriella Kádár, CEO of CIG Pannónia Életbiztosító Nyrt.

At first glance it didnʼt look like the deal of the century. MKB Bankʼs life and asset insurance portfolio generated hundreds of millions of losses last year. And yet, CIG Pannónia decided to acquire its competitors from owner Versicherungskammer Bayern. 

“We had to realize that the scope of organic development is limited on todayʼs market; the acquisition definitely served the purposes of competitiveness,” says Dr. Gabriella Kádár, CEO of CIG Pannónia Életbiztosító Nyrt. “After a change of strategy in 2014, we did start going down the path towards competitiveness, but the acquisition embodies the sort of the leap that paves the way for a new kind growth.”

CIG entered the market back in 2007 with the intention to become a leading player. However, in 2014 a change of course led to a concept that focused instead on strengthening a mid-sized market position. A streamlined operation and intensified activity aimed at securing more clients and revenue helped ensure CIG was running a profitable operation.

Some analysts now fear that the large numbers of auto liability and home insurance policies that came with the deal may jeopardize this hard-won effectiveness. But Kádár is confident that the company can handle it.

“Our ultimate task is to run a profitable asset insurance segment, so any necessary measures from profile cleansing to re-pricing will be subject to this requirement,” she says. “It would be premature to reveal any specifics as to how this process would be implemented, but what is certain is that sustainable owner profits remain the top priority.”

The deal shortcuts what would have been years of hard work through organic growth, as CIGʼs asset segment will double as a result. On the other hand, the MKB insurance companiesʼ cost level provides favorable synergy options. More importantly, MKB itself will become a major sales partner in the area of life insurance.

“We already have great business relations with banks, but a step like this can add a sheer volume of growth to sales in the banking channel,” the CIG CEO adds. “Up till now we have been working on the development of our network and have found independent sales partners; however, the banking sector opens up whole new opportunities.” It was also a major factor that MKB is the only big bank in Hungary that had not committed itself towards any insurer, except, of course, for the MKB insurance entities that were up for sale.

Part of the reasoning behind the acquisition-related effort is to reach an elevated level of differentiation. CIG plans to introduce new innovative products that tap into the opportunities presented by smart solutions.

The purchase price has not been disclosed, but experts suspect it must have been attractive to make the deal work. The total revenues of CIG and MKB from last year totaled some HUF 27 billion, which would have secured 11th place in the market ranking.

“We are not obsessed with crawling upwards in terms of ranking, but we do want to solidify our position, and we will certainly keep our eyes open for more potential acquisition targets,” Kádár says.