Vienna Life and Annuity Insurance Institute

The Vienna Life and Annuity Insurance Institute is a joint foundation of the First Hungarian General Insurance Company (EMÁBIT) and the Vienna Insurance Company Vienna. It can be regarded as a twin company of the Vienna Insurance Company, which, under the new regulations introduced in the mid-1870s, was exclusively engaged in life and annuity insurance, separate from the elementary insurer. In principle, it operated in the provinces of the Habsburg Monarchy beyond the Lusatian border, but in practice it also sold insurance extensively in Hungary, relying on the infrastructure and agent network of EMÁBIT. After the dissolution of the Monarchy in 1925, the company was merged into Phőnix Life Insurance Company, also based in Vienna.

Of the three Vienna-based members of the EMÁBIT group, Vienna Life and Annuity Insurance was exclusively active in life and annuity insurance. The insurer and its twin company, the Vienna Insurance Company, were early examples of the practice, which had been spreading in Europe since the late 1870s, of managing life insurance separately from elementary (indemnity) insurance in a separate company. This was a major change from the practice of earlier decades, particularly in continental Europe, especially in Germany, Italy and the Austro-Hungarian Empire. In contrast to England and the countries of northern Europe, where insurance companies specialising in a single line of business became widespread, in these countries, from the 1820s onwards, large, so-called general insurance companies operating all lines of business at once were established. The most important of these were the First Hungarian General in Hungary, Generali and Adriai in Trieste in the Italian province of the Monarchy, and Donau and Phönix in Vienna. The general form of insurance undoubtedly had its advantages in terms of risk management and company organisation, but it combined two completely different types of insurance. In contrast to the one-year or at most a few years' business horizon of non-life insurance, life insurance was a commitment of several decades. This had to be reflected in the way risks were assumed and policies managed, but most of all in pricing and reserving techniques and in the selection and management of investments. By the last quarter of the 19th century, with the development of actuarial mathematics, it had become clear that the two businesses should be treated separately and this was incorporated into insurance regulations in countries, including the Commercial Law in Hungary. The separation did not apply to long-established large companies, but it was the only way to set up a new company. A little over a hundred years later, history repeated itself: exactly the same regulatory change took place in Hungary with the introduction of the Insurance Act of 1996, before which the large composite insurers of today could be established, but after which life insurance could only be started up as a separate company.

Accordingly, the product range of the Vienna Life and Annuity Insurance Company consisted exclusively of various life and annuity insurance policies. Among the endowment policies, the company sold fixed-term death, annuity and mixed life insurance, so-called funeral insurance for life, and variants of these for several lives, usually for spouses. Endowment insurance included the marriage assurance insurance, which was quite popular in the 19th century, also for a fixed term, up to a certain age of the insured daughter. A common feature of endowment insurance was that, in return for a premium payment, usually regular, the insurer paid out the capital sum in a lump sum on death or on expiry of the predetermined term. There was no question of the inflation tracking or valorisation that is natural today, as inflation was an unknown concept in those decades, but rather the trend-like fall in prices caused problems. Endowment policies accounted for 90% of all life insurance, annuity policies, which paid a regular annuity on the occurrence of an insured event, were much less popular.

The establishment of Vienna Life and Annuity Insurance Company, along with its twin companies, was prompted by the recognition by its parent company, EMÁBIT, that its Austrian clientele was expressly reluctant to insure their lives and assets with a Hungarian company, especially one with a Hungarian name. By early 1881, this climate of hostility had intensified to such an extent that it forced EMÁBIT's management to reorganise its business beyond the Ladin border. The insurer took over the entire Austrian life insurance portfolio from the parent company.

The Vienna Life and Annuity Insurance Company was founded by EMÁBIT and its newly established Vienna Insurance Company, which did not involve bank capital, but through Vienna Insurance Company a significant Viennese business community became part of the venture. The company had a share capital of HUF 1 million, which was floated from the outset not only on the Vienna stock exchange but also on the Budapest stock exchange in the form of 5 000 shares of HUF 200 each. The leading officers of the insurance company were in common with the Vienna Insurance Company, and its chairman was one of Vienna's most prominent entrepreneurs, the knight Ede Pál Schoeller. Schoeller was known in the 1880s primarily as a railway entrepreneur (Wittmansdorf-Ebenfurt Railway, 1883), but his business also extended to the manufacture of arms and metal goods, and for decades he was president of the Vienna commodity exchange and, in parallel, of the Austrian Chamber of Commerce and Industry. In addition to Schoeller, the Viennese business circles were represented on the board of the insurance company by the vice-president Count Géza Batthyány, then Baron Fedor Nikolics, and a member of the board of directors. From EMÁBIT, the three-member board of directors initially included Henrik Lévay, General Manager, and Vilmos Ormody, Deputy General Manager, and from 1892 Zsigmond Nyitrai, who was appointed General Manager of the Vienna Insurance Company. The insurer initially had a joint CEO with its twin, but later no CEO was appointed. First Vilmos Sonnleithner, then Antal Lazsánszky, managed the company as Managing Director.

It was as true of the Vienna Life and Pensions Insurance Company as of its twin, but its scope of operations was not limited to the provinces beyond the borders of the Land of Latium. It also had a branch in Hungary, operating jointly with Wiener Biztosító, which of course used the infrastructure and the network of agents of EMÁBIT. At the same time, the complex - almost chaotic - business strategy of the group was demonstrated by the fact that in the Austrian provinces the parent company continued to sell its own life insurance policies. Vienna Life was also part of the life insurance boom that began in the 1890s, with a balance sheet total that quickly surpassed that of the Vienna Insurance Company and, before the First World War, was already a major player compared with that of EMÁBIT.

After the First World War and the dissolution of the Austro-Hungarian Monarchy, the Vienna Life and Annuity Insurance Company continued to share the fate of its owner and its twin company. EMÁBIT decided to withdraw and sold its shares in the two Viennese companies to the German Münchener Rückversicherungs AG in 1924. The new owner, the following year, merged both companies with its own Vienna subsidiaries, so that Vienna Life and Annuity Insurance became part of Phoenix Life Insurance. Interestingly, in this way - a decade later - it was also indirectly involved in the biggest insurance collapse in Central Europe, the famous Phőnix scandal. The life insurer, which grew like a small balloon after the World War through aggressive business policies and acquisitions, tried to cover up its balance sheet deficit of 15% of Austria's GDP by faking its balance sheets. The fallout of the case shook the insurance markets not only in Vienna but also in the successor states of the Monarchy, leading to a loss of confidence in life insurance everywhere - already shaken by post-war hyperinflation - and to a reorganisation of the supervision of the life insurance market.

Sources

Jenő Csury Jr. - Imre Marosi 1931: The History of Hungarian Insurance. Hungarian Hungarian insurance.

Sándor Mihók, then Jakab Ambruster, G. Sándor Nagy, later Mihály Della Vedella (ed.) 1873-1944/45. Hungarian Compass Financial Yearbook. Budapest.

EMÁBIT (Ormody Vilmos) 1908: The jubilee album of the First Hungarian General Insurance Company: 1857-1907. Budapest.

Gyula Horváth - Gábor Tamás 2018: The Phoenix scandal. Insurance and Risk (5.) 4. 96-100.

Gábor Tamás 2019a: Managerial dominance? Organizational evolution and career paths of officials in an insurance company. Kövér György - Pogány Ágnes - Weisz Boglárka (eds.): Manor - Company. Hungarian Economic History Yearbook 2019. (3.) 287-324.

Gábor Tamás 2019b: The development of the insurance market in Hungary from the mid-19th century to the First World War. Insurance and Risk (6.) 1. 14-49.

No name 1881: Vienna Insurance Company. Economic column. The Hon.7 June 1881.

Untitled 1881: The Hon's private telegraph books. Vienna. The Hon. 14 June 1881.

Founded on 15 July 1881.

Date of cessation: 1925

Founders: joint foundation of Erste Magyar Általános Biztosító Társaság and Wiener Biztosító Társaság

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Main activity: life insurance

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Author: by Gábor Tamás