Question marks on insurance market. Economic analysis by Info-Prim Neo

The National Commission on Financial Market published the results achieved by the insurance companies in the first quarter of this year. The growth rates of one of the most dynamic markets continue to be high. The insurance premiums over January-March exceeded 200 million lei, an increase of 365.3% compared with the corresponding period last year. The insurance activity became more profitable. The profit of the 33 insurance companies working in Moldova has doubled during the first three months of this year, up to 48.6 million lei, as opposed to 23.84 million lei in the first quarter of 2007. But the rise in the authorized capital is insignificant compared with the given results. Over the three months, the insurance companies have increased the capital by 5.64 million lei, though 14 of them were close to relegation and were to increase their capital to 4 million lei by April 7. Nine of the insurance companies managed to obtain the consent of the National Commission on Financial Market to raising the authorized capital with difficulty, while another five companies were warned they could lose the license. The Commission’s report for the first quarter does not yet include all the changes because they were probably made when companies’ administrations had already drawn up the reports. It is not yet clear what will happen to the insurance companies that did not manage to raise their authorized capital up to the minimum level allowed. The statistics include neither the latest changes on the insurance market, the fact that a daughter company of the Russian company Rosgosstrah purchased the majority holding in Moldasig and the fact that Grawe Asigurare de Viata and Carat, companies that intend to become leaders on the insurance market, will merge. The results of the transaction have been broadly reported on. The Cypriot company Linekers, which is owned by the Russian holding company Rosgosstrah, paid 5 million USD for 80% of the shares in Moldasig. The money for the holding was transferred to the Moldovan company. The other holdings that include 20% of the shares are owned by Banca de Economii and the state-owned companies Moldova’s Railway and Moldova’s Post Office. When Moldasig was founded in 2002, Banca de Economii held 51% of the shares in the company, Moldova’s Railway - 25%, while Moldova’s Post Office - 24%. The transaction was performed. The obligatory procedures at the Registration Chamber and the National Commission on Financial Market are yet to be carried out. As a result of the purchase, Moldasig’s authorized capital was raised from 12 million lei to 60 million lei. There are a number of questions as to this transaction, asked in whispers or along corridors. One of the questions is why 80% of the shares in a company with assets worth over 20 million USD was sold for only 5 million USD This company has real chances of gaining annual profits of 1-1.5 million USD, if taking into account that Moldasig’s profit for the first quarter of this year was 4.9 million lei, the third by size in the system. Therefore, we can ask ourselves: was the holding really purchased for 5 million USD? 75% of the shares minus one share in Rosgosstrah are owned by investors. The state yet has a majority holding and can block any decision. Why didn’t Rosgosstrah directly purchase the shares in Moldasig, but founded the Linekers company to acquire one of the largest insurance companies in Moldova? The three founders of Moldasig are companies in which the state has controlling interest and we can suppose that it had great interest in the insurance company as well. Moreover, certain “orders” were passed through this company, as for instance the insurance in agriculture, which is 80% subsidized by the state. Why didn’t the state authorities hold an auction to sell the company for a higher price and earn incomes, in the same way they did when they privatized other companies? These and other questions will remain without answers even after the National Commission on Financial Market registers the transaction. The reorganization by merger of the companies Grawe Asigurare de Viata and Carat is more transparent. After merger, the two companies will take the third position by the value of assets, of over 100 million lei, and will be among the largest companies by the value of the subscribed insurance premiums (33 million lei in the first quarter). The Austrian group Grawe becomes a powerful player on the Moldovan insurance market and continues to purchase companies. So far, it has made three acquisitions, including the one from this year. In 2004, the group purchased Carintia SRL, a small insurance company based in Taraclia, beginning thus its activity in Moldova. In 2006, the company created Grawe Asigurare de Viata instead of Carintia, merged by adsorption with the only Moldovan life insurance company – Donaris Asigurari de Viata. Initiated in 2007, the merger was completed in May 2008. The merger of the two companies was approved at the extraordinary meeting of the shareholders of Grawe Asigurare de Viata. This February, the director of Grawe Asigurare de Viata, Peter Kasyk increased the holding in the insurance company Carat to 85.14%. The Austrian group’s ambitions to become a leader seem reasonable. The insurance premiums of the two companies over the first quarter of this year rose 88%, while of Carat -2.4 times.