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Triglav Boss Says Profitability Key Goal, Expansion to Follow (interview)

Ljubljana, 06 July (STA) - Zavarovalnica Triglav chairman Matjaz Rakovec has told the STA that Slovenia's largest insurer would be ready to reduce its market share to secure profitability. While Triglav, which Rakovec said posted a EUR 14m profit in the first quarter of 2010, is now focused on consolidation, it sees its future in the Balkans.

Rakovec, who took over last autumn, said that following a loss in 2009, the profit of the core company for the first three months this year was almost double of what had been expected.

"Similar results were recorded in the entire Triglav group. All subsidiaries more or less broke even, but this was not so significant for the overall result, since Triglav generates 85% of its premiums in Slovenia."

Asked about the main reasons for the upturn, he said he was "happy that the work of the new management is already showing results".

"Certainly, developments on the capital markets...had a favourable effect, while damage claims payments - we eliminated many of those from last year in the first three months - also worked in our favour."

He highlighted corporate management as the key goal in the new strategy until 2013, saying this was one of the shortcomings that the OECD was noticing for the entire Slovenian economy.

"This means that we manage the group and the goal until 2013 is that all subsidiaries operate in the black, meaning that they are all able to secure the expected capital adequacy."

Asked about the main reason - beside the global financial crisis - for Triglav's failure to meet its goals on SE European markets in the past, Rakovec again pointed to lack of know-how and experience with corporate management.

"I think this has historical roots. Slovenians used to be closed into a circle of what was an arranged economy, which we managed to exit only in the 1990s."

"We partly turned to the West with its known rules, while most expansion efforts involved the Balkans where the rules are very different. They expected there that cooperation with the Slovenians and their companies would continue along the lines set in the time of the former Yugoslavia."

While confirming that now was a time for consolidation and not for new acquisitions, Rakovec said that nonetheless "opportunities are emerging on the Balkan market, as the prices of certain insurance companies are very low". "Especially bigger insurers are withdrawing, as the market is not interesting for them."

"We are currently taking over Albsig, a small Albanian insurer and are planning to enter Kosovo with a subsidiary via the Albanian market...The Western Balkan market has 24 million people, which means it has substantial possibilities for growth - not immediately, but in the coming strategic periods."

Still, Rakovec sees certain problems on the Balkan markets, "especially in the south, where insurance culture is rather poorly developed, to the point where people have even given up basic car insurance". "This is for instance happening in Montenegro, where the state is allowing this in order to prevent social unrest."

Rakovec confirmed that Triglav is leaving Slovakia, "because it is a very difficult market, full of middlemen...and currently not interesting".

As regards Slovenia, he said that fully submitting to the goal of profitability, the company is ready to reduce its 38.5% share on the Slovenian market to 36%. "Increasing one's market share at any cost is simply not reconcileble with profitability."

While the chairman announced that Triglav would withdraw from certain minor investments in the near future, he said that the 25% stake in Abanka, Slovenia's no. 3 bank, was a key investment for the company.

Its strategy for Abanka includes all possibilities, "ranging from the option of selling as one extreme, to the option of buying as the other - in the latter case the condition is of course that the state shows readiness to secure a capital increase for Triglav". "This will be one of the most important stories in the coming years."

Rakovec admitted that listing Triglav on the Ljubljana Stock Exchange when the financial crisis broke out was not exactly an example of good timing, but added that he could understand that the previous management wanted to hurry up - "after all, Triglav is Slovenia's biggest insurer".

While refusing to comment on the current price of Triglav on the stock market - at EUR 19.12 on Monday, Rakovec said he was a "determined owner of 4,360 Zavarovalnica Triglav shares and will not be selling".

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