Victoria Group

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Victoria Group

Victoriaplatz 1
D-40198 Düsseldorf
Telephone: (49) (211) 477-0
Fax: (49) (211) 477-4444
Web site:

Wholly Owned Subsidiary of Ergo Versicherungsgruppe A.G.
1853 as Allgemeine Eisenbahn-Versicherungs-Gesellschaft
Employees: 10,593
Total Assets: EUR 5.7 billion ($5.3 billion) (2000)
NAIC: 524113 Direct Life Insurance Carriers; 524114 Direct Health and Medical Insurance Carriers; 524126 Direct Property and Casualty Insurance Carriers; 524128 Other Direct Insurance (Except Life, Health, and Medical) Carriers; 52413 Reinsurance Carriers

Düsseldorf-based Victoria Group, formerly known as Victoria Holding AG is one of Germanys leading groups of direct all-round insurance companies and is part of the Ergo Group (Ergo Versicherungsgruppe A.G.), the countrys second largest direct insurer. The company offers policies for life, accident and health insurance as well as car insurance and pension plans to individuals. Victoria also provides coverage for property damage for individuals and businesses. The companys D.A.S. subsidiary is Europes leading legal insurer. Victoria policies are sold through the companys exclusive sales network as well as through a network of ERGO affiliates, including a cooperation with Bavarian bank HypoVereinsbank. The groups 26 foreign subsidiaries in 14 European countries contribute about one quarter of its total sales. Victorias financial assets are managed by ERGOs subsidiary Munich ERGO AssetManagement GmbH (MEAG). Victoria is controlled by German reinsurer Munich Re.

From Railway Insurance to General Insurance in the 19th Century

Victoria is the result of the combination of several insurance companies whose names have changed over more than 135 years. It became a public limited company on September 26, 1853, under the name of the Allgemeine Eisenbahn-Versicherungs-Gesellschaft (the General Railway Insurance Company). Railway insurance was an innovation introduced by Otto Crelinger, a banker and member of the board of the Berlin-Potsdam Railway Company.

In 1843, Otto Crelinger applied for a royal license to found a railway transport insurance company, claiming that it is a peculiarity of steam transport that it carries risks which in part cannot be anticipated and in part cannot be avoided, even with the greatest of care, and which are certainly of a more diverse and dangerous nature than those involved in any form of land transport up until now. It was Crelingers idea to include the insurance charge in the fare and thus to insure all passengers automatically for a sum of between £150 and £450 (1,000 to 3,000 taler).

It took ten years for permission to be granted by King Friedrich Wilhelm IV of Prussia. This delay resulted to some extent from initial fears that insurance of this type might encourage railway companies to neglect safety standards. However, Crelingers request was granted finally, and he became the first managing director of the company that was later to become Victoria. His company extended coverage for railway transport to related insurance against death, accidents, or fire on the railways, but it remained primarily a transport insurer. Its transport insurance turned out to be very popular and was extended to apply to land and inland waterway transport in 1858.

In 1861, the company became involved in life insurance, introducing the innovative product of a life insurance policy with premium refunds. This policy proved to be a major success. One year after its introduction, the companys total life insurance premium income exceeded one million taler, which was quite a considerable sum. Ever since then, the companys main strength has been in life insurance.

In 1875, the company took the name of Victoria zu Berlin Allgemeine Versicherungs-Actien-Gesellschaft (Victoria of Berlin General Insurance PLC), a step that underlined the companys diversification into general insurance. The premium refunds were extended to various other types of insurance, such as accident insurance in 1883.

Under the leadership of Otto Gerstenberg, Victoria focused its attention still further upon the general public. Gerstenbergs career with the company started in 1873, when he joined as a mathematician. In 1888, he became general manager and from 1913 to 1931 was president of the board. From 1892 onwards, the company offered popular insurance (Volksversicherung) to its customers. This was a type of life insurance new to Germany, a plan that Victoria took from the United Kingdom after studying the Prudentials policies in London. Anyone could take out this type of insurance without the need for a doctors examination. The insurance payments were low and were collected weekly by 2,600 uniformed employees. This type of popular insurance became extremely successful. The companys particular attachment to popular insurance was to last until the 1970s, when, due to a buoyant economy and the provisions of the welfare state, insurance of this kind became obsolete. Under Gerstenbergs management, Victoria had become Germanys largest life insurance company by the turn of the century and Europes largest by 1913.

At the same time Victoria branched out further, with the founding of the affiliated Victoria Feuer-Versicherung AG (the Victoria Fire Insurance Company, VFC) in 1904 being of major significance. VFCs activities included insuring not only against fire, but also against burglary, floods, accident, liability, and all kinds of car insurance. It grew quickly and became Victorias second most important area of business. To this day VFC is Victorias most important subsidiary with several subsidiaries of its own. Before World War I, Victoria had become a multinational enterprise. It extended its activities to all north, east, and west European countries, excluding the United Kingdom, and to the Balkans. World War I was extremely damaging to Victoria. The losses from the withdrawal of foreign investments were minor compared with those resulting from all the claims made during the war and, worse still, from the hyperinflation that followed.

Economic historians have characterized the interwar period as a time of relative stagnation. This was certainly Victorias experience. The company had to adapt to new economic conditions. Fearing the negative impact of political events, Victoria acted with characteristic caution. In 1923 it founded two subsidiaries in the Rhine, Victoria am Rhein Allgemeine Versich-erungs-Actien-Gesellschaft, offering life insurance, and Victoria am Rhein Feuer- und Transport-Versicherungs AG for fire and transport insurance. In the same year French and Belgian troops occupied the Ruhr district, causing widespread fear that this region would be separated from the rest of Germany. In founding its Victoria am Rhein subsidiaries, the company had safeguarded its interests.

All these changes were time-consuming and expensive to implement. Only by 1927 had Victorias assets returned to the level at which they had started at the turn of the century. However, Victoria still remained ahead of its competitors. In 1932, it accounted for 80 percent of all the premiums collected from abroad by German insurance companies. This situation was in line with its prewar status. The tradition of popular insurance continued as well and was strengthened in 1939 by the acquisition of Victorias rival in this field, Vorsorge.

In 1938, after the Treaty of Munich, which brought the Sudetenland in Czechoslovakia under Nazi rule, Victoria took over the activities of a Prague company in that region. World War II, however, caused Victoria major setbacks. Not only did it have to cope with unfavorable conditions in western Germany, but it also lost its main geographical area of activity, central and eastern Germany, as well as its direct foreign investments. Furthermore, Victorias head offices in Berlin were destroyed.

Cautious Growth after World War II

By its 100th anniversary in 1953, however, Victoria had recovered its standing. During the 1950s, it steadily strengthened its position in the insurance market. Once more, its policy was one of cautious growth. By this stage the company chiefly operated from Düsseldorf, Berlin having become an isolated outpost of the free market economy. Although the company retained an office in Berlin, new offices were built in Düsseldorf in 1952. Four years later, the two affiliated companies of Victoria am Rhein were merged with the two Victoria zu Berlin companies.

The 1960s were years of economic prosperity for West Germany. Victoria showed steady and rapid growth. During the decade, its annual premium income tripled and two important steps were taken. Victoria bought the Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherung AG (DAS), a relatively small company specializing in legal expenses insurance. DAS gradually expanded to become Europes largest company in its particular area of insurance. The second important step for Victoria was a return to overseas expansion. The company made direct investments in the Netherlands, Austria, Portugal, and Spain. Furthermore, Victoria took part in the International Group Program, formulated by the U.S. insurance company John Hancock Mutual Life. The program was aimed at multinational enterprises wishing to offer uniform insurance to all their employees worldwide. A similar scheme, the International Network of Insurance, was started in 1979. Through these ventures Victoria became the leading German insurer in such international insurance networks.

The 1970s saw a further tripling in Victorias premium income, despite the overall downturn in the world economy. Victoria made little effort to diversify outside insurance. Its acquisition in 1970 of a 25 percent in the paper company Zellstoff AG was sold off a little later. The only investment it retained outside insurance was in a small shipping company. In 1971 Victoria branched out into health insurance. It bought 10 percent of the German Gilde-Versicherung AG from the U.K. Sun Alliance group. Rumors spread that the Sun group would draw Victoria into its orbit. These were vigorously denied by Victorias chief executive, Heinz Schmöle, who emphasized his groups determination to remain independent.

Company Perspectives:

Big. Strong. Fast. That is the strategic vision of the Victoria Group brought to the lowest denominator.

Past events were remembered and prompted Schmöles denials when Victorias shares were subjected to considerable speculation during the winter of 1969-1970. In the 1920s Victoria had found itself the object of one of the first German attempts at a hostile takeover bid in Germany. This attemptby the Michael groupwas unsuccessful, but caused anxiety at Victoria. Again in 1983 a group led by two large German competitors, tried unsuccessfully to buy a majority shareholding in Victoria. Although Victoria made a tempting target, chief executive Dr. Jannott stated in 1989 that rumors of takeovers did not worry the company at all. Victorias shareholders were diverse, with German reinsurance company Münchener Rück being the largest of 8,000 shareholders with a 12 percent stake.

Restructuring in 1989

In 1989, Victoria underwent major restructuring after a decade of careful planning. It was the first restructuring in over 135 years of the groups history and was intended to increase Victorias competitiveness. Under German law, the Spartentrennungsprinzip prevents life, health, damages, accident, legal, or credit insurance from being offered together by a single company. Insurers wishing to provide cover in these different areas are forced to create a separate company for each, with one company in charge. Victoria was unusual among Germany insurance groups in having a life insurance company at its head, because life insurance had dominated Victorias activities, especially in its first 60 years. Other insurance groups in Germany were headed either by damages insurance companies, by reinsurance companies, or by holding companies. There was always a danger that with a life insurance company at the head of the Victoria group, it might suffer badly from losses in other group companies dealing with damages insurance or reinsurance, which by their nature carry considerably greater financial risk.

The Victoria group therefore created a holding company, Victoria Holding AG, bringing itself in line with other German insurance groups and allowing itself greater flexibility. Victoria Holding had majority shares in three main enterprises, Victoria Life, Victoria Insurance, and Victoria Health, which in turn held investments in several insurance companies in Germany and abroad.

The restructuring of the group was only one of the steps by which chief executive officer Jannott tried to increase Victorias competitiveness. On an international level he strengthened Victorias relationship with Japans Dai-Ichi Mutual Life and its investment in the United States in the Munich-American Reinsurance Company (MARC) group, in which Victoria had a 10 percent share. The MARC groups capital had increased 11-fold since 1985. In Europe, Victoria occasionally took over small private firms such as the Greek company Olympiaki in 1989.

Key Dates:

Allgemeine Eisenbahn-Versicherungs-Gesellschaft is founded.
The company introduces life insurance with premium refunds.
The company is renamed Victoria zu Berlin Allgemeine Versicherungs-Actien-Gesellschaft.
Victoria Feuer-Versicherung AG is founded.
The companys Berlin headquarters are destroyed during World War II.
New headquarters are built in Diisseldorf.
Victoria buys a majority in Deutscher Automobil Schutz Allgemeine Rechtsschutz-Versicherung AG (D.A.S.).
The company adds health insurance to its services.
The new holding company Victoria Holding AG is created.
Victoria starts cooperating with Bayerische Vereinsbank AG.
Victoria Holding AG is merged with Hamburg-Mannheimer AG to form ERGO Versicherungsgruppe AG.
The Victoria group launches its first image campaign.
Victoria receives an AAA Standard & Poors rating for its sound financial standing.

Focusing on Strengths in the 1990s

By 1991, Victorias exclusive distribution network consisted of over 10,000 full time and part time salespeople. To expand its reach, the company started cooperating with the Bavarian bank Bayerische Vereinsbank AG. The bank referred its customers to Victoria for their insurance needs and Victoria salesmen recommended the banks financial services. In addition the two companies founded a joint venture in the area of Bausparen, special savings programs for aspiring homeowners subsidized by the German government, which witnessed a revival after the reunification of the two German states. This cooperation turned out to be very successful for both companies.

While the fall of the Iron Curtain opened up new growth opportunities, it also had a downside. Car theft and burglary as well as claims for car accidents increased significantly. For example, in big cities like Berlin gangs from eastern Europe allegedly smuggled stolen Mercedes and BMW over the Polish border to sell them in Poland and Russia. When its car insurance subsidiary slipped into the red, Victoria started consolidating its business by canceling a number of policies and by being more selective in approving new ones. Another area of concern was fire insurance and building insurance for small and mid-sized businesses where the company dealt with a number of large claims. Fortunately, the losses were neutralized by the companys sales in other markets such as life and health insurance and capital investments where the company reallocated assets from the real estate to the stock market. After five years of expansive growth, the economic recession which had been delayed in Germany because of the reunification, finally left its mark in the mid-1990s when sales started declining in key markets such as life insurance. In response, Victoria focused on cost consolidation and cautious growth under the motto profits before growth. Although the company invested heavily in new IT technology, Victoria was able to keep administrative cost relatively low. Growth in the second half of the 1990s came from new products in the area of disability and health insurance and private pension plans. The strategy worked very well and as a result Victorias profits increased significantly despite stagnating sales.

By the mid-1990s, Victoria was one of Germanys top direct insurers. Because of its strong market position and because it was publicly traded, the company was an ideal takeover candidate for foreign insurers who wanted to enter the German insurance market. However, Victoria was committed to remain in German hands and started negotiations with its long-time biggest shareholder Munich Re. Finally, Victoria agreed to merge its holding company with Hamburg-Mannheimer AG, another large direct insurance holding company in which Munich Re held 80 percent, to form the new ERGO Versicherungsgruppe AG. The result was a consortium of equal partner companies. Since Victoria had built a strong brand name, the company kept marketing its products under the Victoria brand. The only visible change for Victoria customers was the additional note a company of the ERGO Versicherungsgruppe which was included under the logo in all correspondence and marketing communication.

Throughout its history, Victoria never tended to run large advertising campaigns. Instead, it built its success on a reputation for reliability and efficient service. However, to secure the companys position in an increasingly consolidating and competitive market, Victoria launched a DM 25 million image campaign in 1998. Unlike most other German insurance companies, Victoria used neither worst case scenarios nor perfect world images to deliver the message that it was a fair partner close to its customers, both with its products and geographically. And unlike its major competitors Victoria used print media, not television, as its main advertising channel. Through a series of magazine ads which stressed Victorias competence as a problem-solver in day-to-day insurance cases, the company was able to increase its visibility and brand recognition among potential and existing customers.

By the end of the 20th century, Victoria seemed to be well positioned as a part of the ERGO group of insurance companies to defend its position in Germany and to expand internationally in the future. New business by referrals through Hamburg-Mannheimer and DKV was growing and the cooperation with Hypo Vereinsbank had proved valuable. When Germanys federal government enacted new legislation in 2001 that guaranteed government subsidies for certified individual pension plans beginning in 2002, Victoria immediately invested DM50 million in product development, marketing and sales force education to secure a share of this future growth market. Victoria also planned to expand its full-time sales force from 3,900 in 1999 to 4,500 in 2003. Another goal to secure a strong position in the future was to raise the percentage of life insurance customers who would re-invest the money paid after the policy ended through ERGOs investment arm MEAG. Another area of potential future growth was E-business where Victoria Lebensversicherung entered a strategic partnership with BauFinanzierung .direkt AG, a company that offered real estate financing plans through the Internet, in early 2001. In the same year Victoria received an AAA Standard & Poors rating for its sound financial standing.

Principal Subsidiaries

Victoria Lebensversicherung AG; Victoria Versicherung AG; Victoria Krankenversicherung AG (75%); Victoria Rückversicherung AG; D.A.S. Rechtsschutz-Versicherungs-AG; Victoria International AG; Vorsorge Lebensversicherung AG.

Principal Competitors

Allianz AG; AMB Generali Holding AG; AXA Colonia Konzern AG.

Further Reading

BauFinanzierung.direkt AG mit neuem strategischen Partner-die Victoria Lebensversicherung AG, OTS Originaltextservice, January 30, 2001.

Bei der Victoria ist das Wachstumstempo erlahmt, Frankfurter Allgemeine Zeitung, November 24, 1995, p. 21.

BV steigt mit Victoria ins Bauspargeschaeft ein, Süddeutsche Zeitung, May 18, 1991.

Victoria Versicherung 1853-1928, Berlin: Victoria, 1928.

80 Jahre Victoria-Versicherung, Victoria Zeitung Nos. 8/9, 1933.

Die Hundertjahrfeier der Victoria-Versicherung, Berlin: Victoria, 1953.

Hundert Jahre Victoria Versicherung, Berlin: Victoria, 1953.

Im Zug der Zeilen, Düsseldorf: Victoria, 1978.

Jaitner, Peter, Sicherheit im Grossformat, Werben und Verkaufen, December 8, 2000, p. 94.

1999 war für die Victoria-Gruppe ein Spitzenjahr, OTS Originaltextservice, April 3, 2000.

Victoria-Gesellschaften erhöhen wieder die Dividenden, Frankfurter Allgemeine Zeitung, May 9, 1998, p. 20.

Victoria Versicherung AG: Wachstumsschub im 1. Halbjahr, OTS Originaltextservice, August 15, 2001.

Victoria Versicherung mit Schönheitsfehlern, Süddeutsche Zeitung, November 24, 1993.

Victoria wächst überdurchschnittlich, Frankfurter Allgemeine Zeitung, November 27, 1999, p. 23.

Victoria: Wir werden nicht jeden Spuk mitmachen, Frankfurter Allgemeine Zeitung, Novemebr 26, 1994, p. 21.

Vorsorge; Alles Riester oder was?, Focus Magazin, June 25, 2001, p. 210.

Harm G. Schroter

update: Evelyn Hauser

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Victoria Group

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