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RSA to leave Czech Rep, Direct Pojistovna ceased selling insurance

The reasons, financial results in 2011, cumulative loss, leaving of Jan Carny and a new organizational structure, the possible sale of the insurance portfolio...
Published: 26.6.2012 05:34

PRAGUE (CTK, Autofox) - Direct Pojistovna (RSA) ceased to sell new insurance policies in the Czech Republic on June 25. It is a strategic decision by the parent company RSA. Therefore, Direct will be gradually leaving the Czech market.

“A new contract cannot be concluded now. The call centre works for existing clients. Direct Pojistovna intends to meet all obligations to them for the duration of their contract. The process of termination of its activities in the Czech Republic will take several years,” a media representative of RSA, Radovan Suk told CTK, adding that Direct has approximately 74,000 active insurance policies.

Insurance companies usually sell their insurance portfolio when leaving market. The last insurer which did so was Dolnorakouska pojistovna (Niederosterreichische Versicherung), which sold its insurance portfolio to Kooperativa (VIG). “There are different options we consider,” Direct Pojistovna spokeswoman Katerina Krasova said vaguely.

Insurance contracts are therefore still valid. However, Direct will not renew them after their expiry date. The reasons for suppression of RSA’s activities in the Czech Republic are unfavourable conditions in the Czech insurance market, which apparently have not allowed RSA to achieve sufficient size and profitability in a reasonable timeframe.

Direct Pojistovna showed a loss of CZK 324.1 million in 2011, a loss of CZK 334.2 million in 2010, a loss of CZK 435,4 million in 2009, a loss of CZK 402,8 million in 2008, a loss of CZK 265,3 million in 2007. It represents a cumulative loss of CZK 1.76 billion (EUR 70 million). For comparison, gross written premiums for 2011 amounted to CZK 324.6 million (+10%).

“Our strategy is to achieve a certain size on the selected market, which allows us to generate sustainable profits. With regard to the situation and development of the Czech insurance market, we realize that this will not be possible in the Czech Republic within a reasonable timeframe, so we have made the difficult decision to withdraw from the market. We are ready to fulfil all our commitments until our business in the Czech Republic has been terminated,” executive director of RSA for Central and Eastern Europe Andrew Burke said.

Director of comparative portal Ceskepojisteni.cz Pavel Ronovsky has expected the end of Direct’s activities for a long time due to long-term highly negative financial results. “At Direct there was significant discrepancy between the marketing proclamations for the lowest price in the market, although on average its offer was one of the most expensive third of the insurers. At the same time it was not a low-cost insurance company, because the advertising costs were the highest on the market. The number of employees was also excessive to the number of clients,” Ronovsky told CTK.

Direct Pojistovna general manager and chairman Jan Carny (53, photo 1) has decided not to participate in the process of closing operations. He will only remain there for the time needed to pass his position, a post he has held since November 2008. Roman Fink (34, photo 2), the former chief financial officer will become the new general manager. “A new organizational structure will be introduced soon,” Krasova added. Direct Pojistovna employs 180 people.

Direct Pojistovna increased collection of premiums by 2% to CZK 82 million in Q1 2012 y/y. Direct’s share on the Czech insurance market thus amounted to 0.3%.

Direct Pojistovna entered the Czech market in May 2007 with direct sale of car insurance. First the insurer offered damage liability insurance, to which the company added accident insurance. In April 2009, the company extended its offer with property insurance and liability insurance, and from autumn 2011 it also offered travel insurance.

British insurance group RSA Insurance Group became the owner of Direct in June 2009. RSA’s net premiums written amounted to GBP 2.2 billion (CZK 70 billion) in Q1 2012, grew by 5% y/y. RSA operates in six countries of the CEE region: the Czech Republic (Direct), Poland (Link4), Estonia (RSA), Lithuania (Lietuvos), Latvia (Balta) and Russia (Intouch). “Termination of activities does not apply to any other markets except for the Czech Republic,” Krasova added.

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