Erste Bank erhöht die Empfehlung auf "Kaufen"

Thus far, 2013 has unquestionably been a difficult year for VIG in the P&C business, as extraordinary expenses in Romania and Italy weighed on the segment’s performance. While we expect Romania to remain a difficult market, the issues in Italy should not be a significant burden in 2014. We remain optimistic about VIG’s growth prospects in CEE and expect results to improve significantly next year.

In the recent slide, VIG shares dropped to below EUR 35. At a P/E of 9.8 and a P/B ratio below 1.0, based on our 2014 estimates, we view this as a buying opportunity. Thus, we raise our recommendation from Accumulate to Buy, while leaving our target price unchanged at EUR 43. The stock’s decline also yielded a more favorable picture within its peer group.

We lowered our expectation for FY13 substantially and project a weak 4Q13, with the Italian branch still a drag on profitability in Austria. For FY14, we anticipate net profit to be strong again. We also lowered our dividend projection for this year (EUR 1.20 vs. EUR 1.30 previously).

Aside from the obvious weaknesses in the 1-3Q13 results, underlying profitability in Austria was strong and the CEE subsidiaries (ex Romania) performed very well. VIG’s life business faces regulatory risk in Austria.