The Slovak Insurance Company (SP) holds the dominant position on the insurance market with a 60 % share. According to Edita Bukovská, SP President, the increased competitiveness in insurance has not harmed SPs position. The company is especially helped by long-term contracts with 4.5 million Slovak citizens in a wide range of insurance products. SP's activities range from insurance to finance and investment.
The Slovak insurance market in 1997 totaled 17.2 billion Slovak crowns (Sk) ($521 million). This sum was vied for by 24 insurance companies, but none came close to the 10.4 billion Sk ($ 315 million) that SP pulled in. Bukovska told a group of students at the Economic University in Bratislava that an increase in competition had been good for SP. She claimed that as a result SP had improved its services and acquired know-how from foreign companies.
Most of the company's business occurred in non-life insurance products, such as real estate and material property. These latter fields yielded 7.5 billion Sk in revenue, compared to 2.9 billion Sk from life insurance. Over 950,000 claims were compensated, worth a total of 7.68 billion Sk, an increase of 1.5 billion Sk over 1996. Most claims were paid out for non-life insurance policies, amounting to 5.14 billion Sk versus the 2.54 billion Sk that went out for life insurance.
Though SP has a monopoly on auto insurance by law, Bukovská isn't thrilled about the company's responsibility for handling all passenger vehicle and agricultural vehicle claims. Last summer was especially brutal for the company, thanks to the July floods. Claims for auto insurance cost the company 157% more than it brought in through auto premiums. Legislation is now in the works that will end SP's monopoly by the year 2000.
Despite these setbacks, the insurance company made a net profit of 310 million Sk in 1997, down only 29 million Sk from 1996. The company's assets should reach 31 billion Sk this year with reserves near 25 billion Sk.
It also holds shares in about 50 small and large joint stock companies. SP owns shares in five hotels which are not profitable, according to company representatives, but which do offer cheap and easy advertising for the company. SP also holds stakes in several mass-media companies and leases expensive technology to needy firms.
Still, the main areas of business for SP are insurance, financing and investment. SP has a share - from 0.3 to 72 % - in seven Slovak commercial banks. The highest share (72 %) is in Istrobanka, followed by Polnobanka, Priemyselna Banka and Banka Slovakia. On the one hand, SP would like to lower its share in banks as it is fearful of not recovering its investments. Nevertheless, the company is involved in bailing out Investment and Development Bank (IRB), which was placed under a caretaker administration by the National Bank of Slovakia (NBS) due to non-liquidity on December 19, 1997. "The Slovak Insurance Company is interested in the recovery of IRB's portfolio, and in helping the bank to function with at least a small profit in 1999. However, we are not in a hurry to enter the bank," said Bukovská.
Out of 16,500 SP shareholders, the two largest are still the same two that own a majority in IRB - the National Property Fund (FNM, 50.5%) and the Košice-based Eastern Slovak Ironworks (VSŽ, 20.05%).
In the next two to three years, SP wants to establish a financial holding group that would put all of its activities under an umbrella. This would include, along with the insurance sector, about 15 strategic companies involved in banking, tourism, health insurance, pension insurance, leasing, consultancy, and mass-media.
This article orignally ran in the daily Praca, March 17, 1998.