Asirom, one of the largest insurance companies in Romania, requires investments worth at least 15 million euros to update its IT system, train human resources and reorganise its claim settlement processes, according to the company's general manager, Boris Schneider.
"In a few months' time, the shareholders will perform a capital increase. I don't know what its value will be, but 15-20 million euros would be an appropriate sum for the investments we plan to make. I don't think this increase will be a problem for a strong partner like Vienna Insurance Group," Boris Schneider told ZF.
At the end of July, the Austrians at Vienna Insurance Group, which own Omniasig, Omniasig Life, Unita and Agras in Romania, bought 30% of Asirom for 47 million euros. The shares were taken over from businessman Ioan Niculae, who retained an approximately 20% stake in Asirom in the wake of the transaction. The businessman intends to sell his stake to the Austrians, which will be followed by Vienna Insurance putting out a tender to the other shareholders. This is the most spectacular transaction seen on the insurance market within the last few years. Through this acquisition, the Austrians have added the best-known name on the domestic insurance market to their portfolio.
Asirom is listed on the RASDAQ market of the Bucharest Stock Exchange and is worth, at the latest trading price of 0.8 RON/share, 156 million euros (510.3 million RON). The company's share capital stands at some 19.5 million euros (63.8 million RON).
Apart from Ioan Niculae and Vienna Insurance, Asirom's shareholders also include AVAS (The State Assets Resolution Authority) which holds 6.38% and three off-shore companies, whose shareholders are not known: Waterwe Ventures Limited (9.55%), Tarkul Estated Ltd. (5.39%) and Damrosch Trading Limited (9.48%).
Asirom reported a 78% drop in net profit to 2.1 million RON (0.63 million euros) in the first half of the year, due to the three factors.
"Firstly, our profit fell because of a rise in overall salaries by 4 million RON, given that we started to grant a 20-25% seniority bonus to a large number of employees. We also slightly modified our portfolio so that the costs related to the acquisition of policies have risen, as we are trying to increase the percentage of RCA (auto liability) insurance and to lower the share of comprehensive insurance. Auto liability insurance policies make a profitable business, unlike comprehensive insurance, where the claim settlement rate is very high," explains Asirom's manager.
He believes the comprehensive auto insurance is the only loss-making line of business of the insurer, while all the other lines remain profitable.
For this year, Schneider says the company's goal is to make a profit. In 2006, Asirom reported a profit of around 4 million euros, after losses of 10 and almost 6 million euros in 2005 and 2004.
"It will be harder for us to make a profit this year, as we transferred many premiums for reinsurance, but this remains our goal," states the head of Asirom.
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