Omniasig and BCR Asigurari, which ended the merger early in May, posted gross written premiums of 282 million lei (EUR63 million), down 19% on the same time last year. Astra posted RON292 million revenue on general insurance segment, 12% less than in January-March 2011.
The Austrian-held Vienna Insurance Group (VIG), the owner of the two insurers, had promoted their merger as a way to consolidate the local business and said the newly created company would be the market leader.
The statements were based on the RON1.2 billion in revenue posted by the two insurers last year. Omniasig and BCR Asigurari, number 3 and number 6 on the general insurance market at the end of 2011, totaled RON200 million more than Astra in premiums.
This is not the first example of a merger that does not prove one and one always makes two. Groupama had the same problem after having decided to merge Asiban and BT Asigurari into one company in 2009. Groupama had paid about half a billion euros right before the crisis to buy the two companies and the new entity resulted from the merger has been losing market share constantly.
The merger of Generali and Ardaf last year followed the same pattern. The new company ranked seventh on the general insurance market at the end of 2011, having posted 20% business decline, even though before the merger the Italian-held Generali was hoping for a top five position.
The business decline during the merger process is largely due to the restructuring, which put pressure not only revenue but also on spending. For instance, Omniasig and Asigurari had 400 employees leave on their own or laid off since the beginning of the year, which translated into additional expenses on severance pay.
Prior mergers have shown such expenses translate into significant losses in the first years in business. For instance, Groupama posted RON50 million losses in 2010, while Generali posted RON80 million losses last year.
Omniasig and BCR Asigurari did not reveal anything about the bottom line in the first quarter, but VIG announced almost EUR3 million in losses from local operations. VIG also owns Asirom and BCR Asigurari de Viata.
Experts say that when faced with a merger, it is the good employees that leave the company first for fear they might lose their jobs and the weak employees stay, and therefore the value of the human resources declines and that shows in sales. Omniasig’s gross written premiums also fell because of portfolio restructuring steps in the first quarter. Auto liability insurance premiums halved, for instance.
The third leading general insurer at the end of March was Allianz-Tiriac with RON207 million in gross written premiums, down 11%. Allianz-Tiriac was the market leader until 2010. (EUR1=RON 4.4648)
(English version by Loredana Fratila-Cristescu)