First Hungarian General Assurance Company
The First Hungarian General Insurance Company was the most important insurance company in Hungary for nine decades, from its foundation in 1857 until its nationalisation in 1948. As a general insurer, it was engaged in all branches of elementary insurance as well as life insurance. The company became a market leader immediately after its foundation and later established several subsidiaries. It led the consolidation of the insurance sector after the First World War and between the two world wars was the chairman of the National Association of Insurance Institutes, the cartel organisation of insurers.
The nine-decade history of the First Hungarian General Insurance Company (hereinafter referred to as EMÁBIT) began during the absolutist period after the defeat of the 1848-49 War of Independence, but the idea of its foundation goes back even further, to the reform era. Among the founders in July 1857 were members of the landowning aristocracy, the patriotic political circle associated with Ferenc Deák and the merchant class of Pest. The founding and operation of the company under dualism is the finest example of Hungarian economic nationalism. The company combined modern principles of risk management and corporate organisation in such a way that the general public saw it not only as a domestic, but also as a patriotic enterprise. It was a new value proposition that the then dominant Trieste-based insurance companies, notably Generali and Adriatic Insurance, could not compete with in the short term.
Thanks to this, the company - as a pioneer in Hungary - was able to build up a huge network of agents throughout the country in just a few years and very quickly became a market leader. The rapid development of the network of agents was helped by the fact that it could rely to a considerable extent on the existing social organisation of linguistic and religious ethnic groups. In this work, Henrik Lévay, who was elected as interim managing director at the time of the founding and later as permanent managing director, proved to be highly successful. Timing played a major role in the initial success. In 1858 there was no significant competitor on the market other than Trieste. EMÁBIT preceded by a few years the founding of the large Viennese companies Anker (1858), Phönix (1860) and Donau (1867). The existing small companies in Hungary - first the Pesti Jég- and Tiszamelléki Tűzbiztosító, later the Győri Hajókárbiztosító and the Erdélyi Jégbiztosító cooperatives - were gradually absorbed into the new Hungarian company.
To survive in the early years, the insurer needed capital, talented management and a cadre of officials. Here, too, the patriotic and modern value proposition proved effective. The capital, unusually for a joint-stock company of the period, was provided by hundreds of domestic investors, and the urban merchant class saw enough imagination in the enterprise to want to be part of it as managers, officials or agents. The first management pursued a very prudent business policy, both in terms of pricing and reinsurance. The latter was particularly crucial in the case of ice insurance, which often produced catastrophic loss ratios: on one occasion in the 1870s, claims payments exceeded 2 501 TTC 3 000 of premium income. Prudence paid off, and before the Great Crash of 1873, the reserves needed to keep EMÁBIT profitable in the most difficult years were built up. The initial investors, who had to pay only 30% of the nominal value of their shares, could count on a steady dividend each year, while the share price rose steadily.
Throughout its existence, the EMÁBIT organisation consisted of a central office in Pest, head offices in the big cities of Hungary, and head offices abroad and in other provinces of the Monarchy, and later branches. Initially, the Central Office occupied a few rooms in the house of József Ürményi in Új-ter (now Erzsébet tér), and in 1870 the office apparatus, which had grown considerably in the meantime, moved to the new palace built by the company on Vigadó tér, where the Marriott Hotel stands today. The palace was bombed in 1944 and demolished in 1948.
The foreign operations were mainly in other provinces of the Monarchy: in Trieste, Vienna, Prague, they signed general agency contracts with large trading companies, but for decades they also operated successfully in Alexandria, Egypt, etc. Later on, the company maintained a presence in several markets, such as Austria, Romania and Bosnia and Herzegovina, and between the two world wars in the successor states to Trianon, in the form of subsidiaries.
In the last third of the 19th century, the insurance industry developed into a group of companies of considerable size, in which we find a constantly varying number of general, sectoral specialist and reinsurance companies working for the Hungarian and Austrian markets over the decades.
Before the turn of the century, life insurance was a growing share of premium income, and later of profits, and was rapidly growing throughout the market. And after the turn of the century, the proliferation of new classes of insurance such as motor, liability and workers' compensation further diversified a portfolio that had previously been heavily fire-insurance dominated. In the first years of the new century, despite fierce competition from the British and American life insurers Gresham, Standard and NewYork, EMÁBIT managed to increase its share of the life insurance market, but this success was already attributable to the new CEO, Vilmos Ormody, who succeeded Lévay.
Ormody joined the company's head office in Sopron immediately after its founding, at the age of 19. After 40 years as an officer, non-commissioned officer, deputy director and then deputy CEO, he became the company's CEO. He remained in this post for 25 years. He retired from active service at the age of 84, but not from EMÁBIT, of which he remained Chairman for a further 10 years until his death in 1932.
The company's continued growth required a lot of capital, so the previously very high dividend level has fallen, but this has not been reflected in the share price. The capital market was pricing in increasing profits and uninterrupted growth. This development was interrupted by the First World War.
As a result of post-war hyperinflation and Trianon, EMÁBIT, along with the sector as a whole, lost a significant part of its fire insurance portfolio, while its life insurance portfolio was completely devalued. Insurers sought new responses to the new challenges and this gradually became a sector-wide cartel. This was led by EMÁBIT, partly through the prestige it had built up in previous decades and partly through its excellent government contacts. The group retained its leading position throughout the interwar period, but could not even approach the excellent business results of the dual-war period. The main competitors at that time were the Farmers' Insurance Cooperative and Foncière Insurance, the two large Trieste companies having been somewhat superseded. Under EMÁBIT's leadership, the entire domestic insurance sector stumbled from crisis to crisis, through the Second World War and on to nationalisation. After a brief upturn, premium income fell again in the first half of the 1930s. Although the company was more successful than its competitors in maintaining profitability - thanks to its consistently profitable fire insurance portfolio - the previously very high dividend level fell dramatically. Capital was needed for post-war consolidation, to finance the extreme cost levels prevailing in the market as a whole and to take over bankrupt competitors.
EMÁBIT proved to be extremely successful in the dualism era and particularly crisis-resistant in the Horthy era, thanks to the stable ownership background for almost a century, in which, in addition to many hundreds of small shareholders, the old landowner and the new moneyed aristocracy both participated. They were joined after the turn of the century by a few large domestic banks, which were able to acquire ownership but not a leading role in the company. Another key to success was that the stability of ownership brought with it stability of management. In the nine decades between 1857 and 1947, the company was managed by only four CEOs - Henrik Lévay, Vilmos Ormody, Tódor Gergely and Imre Balabán.
After the Second World War, although the huge financial damage to real estate assets was an unprecedented disaster, the company's management faced almost the same challenges as its predecessors a quarter of a century earlier. It had to reorganise its operations, change to a new currency and deal with the consequences of hyperinflation. The life insurance portfolio in pence was completely devalued and its revalorisation could only have been achieved with the intervention of the government, but the budget could not have borne the burden. The main difference compared with the situation after the First World War was that this consolidation was no longer the responsibility of the company's management. After the death of Imre Balabán, the last general meeting of EMÁBIT - before nationalisation - was held in August 1947. Shortly afterwards, it was reported in the press that the General Economic Council had decided to merge the two largest insurers, Gazdák and EMÁBIT, and to take them into state ownership. In July 1948, the board of directors was removed at an extraordinary general meeting and replaced by directors seconded from the National Social Insurance Institute, the Ministry of Finance and the General Economic Council. From then on, the staff of the company, which was directly controlled by the State, was taken over by the State Insurance Company, which was set up four months later, with retroactive effect from 1 January 1949. The fate of the Vigadó Palace, by then the Molotov Square Palace, was sealed together with that of the company. In December 1948, the demolition permit was issued - in style - to the Hungarian Ministry of Construction and Public Works on behalf of the owner, with the requirement that the work should be completed within 60 days.
As quickly as the government has sorted out the fate of the building and the contract portfolio, it has found it difficult to cope with the international obligations arising from reinsurance relationships. These were not in order, which is probably why the State Insurance Company could not be the successor to EMÁBIT and why the liquidation process was not completed within decades. In order for this to happen on 2 February 2006, it was also necessary that at the beginning of the 21st century, 150 years after the company was founded, someone wanted to set up an insurance company in Hungary under the same name, taking the name of the First Hungarian General Insurance Company and its first subsidiary Pannonia at the same time.
Sources
Budapest Capital Archives (BFL)
VII.2.e. Company court documents (Cg). Company registers (from 1876)
Cg. 1876/570 First Hungarian General Insurance Company 1876-1914
Cg. 593/1915 First Hungarian General Insurance Company 1915-1949
Cg. 40 633 reprinted First Hungarian General Insurance Company from 1949
XV.17.d.329 - 24407 Building permit planning documentation 1873 (ca.) - 2006 (ca.)
Headquarters of the First Hungarian General Insurance Company, box 2112
Csury Jenő Jr. - Marosi Imre 1931: The history of Hungarian insurance. Budapest.
EMÁBIT (Ormody Vilmos) 1908: Jubilee album of the First Hungarian General Insurance Company: 1857-1907. Budapest.
Gyula Horváth - Gábor Tamás 2017: 160 years of the First Hungarian General Insurance Company. Insurance and Risk. (4.) 2. 102-104.
Gyula Horváth - Gábor Tamás 2017:A Short History of the First Hungarian General Insurance Company. Insurance and Risk. (4.) 3. 94-97.
Géza Muzsay 2007: the First Hungarian General Insurance Company was founded 150 years ago. Insurance review. (53.) 8. 3-25.
János Pompéry 1883: To mark the quarter-century anniversary of the First Hungarian General Insurance Company. Budapest
Gábor Tamás 2019a: Managerial dominance? Organizational evolution and career paths of officials in an insurance company. Kövér György - Pogány Ágnes - Weisz Boglárka (eds.): Domain - 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.
Gábor Tamás 2019c: From war to crisis, from crisis to war. Insurance and risk. (6.) 2. 52-95.
Gábor Tamás 2020: network or hierarchy? The agent network of an insurance company in the mid-19th century. A network of insurance companies in the mid-19th century: Network & hierarchy. Hungarian Economic History Yearbook 2020. (4.) 245-271.
Founded on 15 July 1857.
Date of cessation: 1948
Founders: Baron József Eötvös, Baron Samuel Jósika, Baron László Karácsonyi, Baron Pál Sennyei, Baron Antal Szécsen, Ferenc Deák, Gr. György Apponyi, Gr. Dessewffy Emil, Gr. György Károlyi, Gr. Ferenc Zichy, Gr. Zichy Henrik, Havas József, Kiss András Nádossy István, Somsich Pál, Szőgyényi László, Ürményi József
Securities issued:
| First Hungarian General Assurance Company |
Decisive leaders:
1858-1898 | Henrik Lévay |
1898-1922 | Ormody Vilmos |
1922-1936 | Tódor Gergely |
1936-1947 | Imre Balabán |
Main activity: insurance
Main products:
From 1858 | fire, ice and cargo insurance |
From 1860 | life insurance |
Around 1890 | accident insurance |
Around 1900 | motor vehicle breakdown and liability insurance |
Seats are not configured
Locations are not set
Main milestones are not set
Author: by Gábor Tamás
Founded on 15 July 1857.
Founders: Baron József Eötvös, Baron Samuel Jósika, Baron László Karácsonyi, Baron Pál Sennyei, Baron Antal Szécsen, Ferenc Deák, Gr. György Apponyi, Gr. Dessewffy Emil, Gr. György Károlyi, Gr. Ferenc Zichy, Gr. Zichy Henrik, Havas József, Kiss András Nádossy István, Somsich Pál, Szőgyényi László, Ürményi József
Decisive leaders:
1858-1898 | Henrik Lévay |
1898-1922 | Ormody Vilmos |
1922-1936 | Tódor Gergely |
1936-1947 | Imre Balabán |
Main activity: insurance
Main products:
From 1858 | fire, ice and cargo insurance |
From 1860 | life insurance |
Around 1890 | accident insurance |
Around 1900 | motor vehicle breakdown and liability insurance |
Seats are not configured
Locations are not set
Main milestones are not set
Author: by Gábor Tamás
First Hungarian General Assurance Company
The First Hungarian General Insurance Company was the most important insurance company in Hungary for nine decades, from its foundation in 1857 until its nationalisation in 1948. As a general insurer, it was engaged in all branches of elementary insurance as well as life insurance. The company became a market leader immediately after its foundation and later established several subsidiaries. It led the consolidation of the insurance sector after the First World War and between the two world wars was the chairman of the National Association of Insurance Institutes, the cartel organisation of insurers.
The nine-decade history of the First Hungarian General Insurance Company (hereinafter referred to as EMÁBIT) began during the absolutist period after the defeat of the 1848-49 War of Independence, but the idea of its foundation goes back even further, to the reform era. Among the founders in July 1857 were members of the landowning aristocracy, the patriotic political circle associated with Ferenc Deák and the merchant class of Pest. The founding and operation of the company under dualism is the finest example of Hungarian economic nationalism. The company combined modern principles of risk management and corporate organisation in such a way that the general public saw it not only as a domestic, but also as a patriotic enterprise. It was a new value proposition that the then dominant Trieste-based insurance companies, notably Generali and Adriatic Insurance, could not compete with in the short term.
Thanks to this, the company - as a pioneer in Hungary - was able to build up a huge network of agents throughout the country in just a few years and very quickly became a market leader. The rapid development of the network of agents was helped by the fact that it could rely to a considerable extent on the existing social organisation of linguistic and religious ethnic groups. In this work, Henrik Lévay, who was elected as interim managing director at the time of the founding and later as permanent managing director, proved to be highly successful. Timing played a major role in the initial success. In 1858 there was no significant competitor on the market other than Trieste. EMÁBIT preceded by a few years the founding of the large Viennese companies Anker (1858), Phönix (1860) and Donau (1867). The existing small companies in Hungary - first the Pesti Jég- and Tiszamelléki Tűzbiztosító, later the Győri Hajókárbiztosító and the Erdélyi Jégbiztosító cooperatives - were gradually absorbed into the new Hungarian company.
To survive in the early years, the insurer needed capital, talented management and a cadre of officials. Here, too, the patriotic and modern value proposition proved effective. The capital, unusually for a joint-stock company of the period, was provided by hundreds of domestic investors, and the urban merchant class saw enough imagination in the enterprise to want to be part of it as managers, officials or agents. The first management pursued a very prudent business policy, both in terms of pricing and reinsurance. The latter was particularly crucial in the case of ice insurance, which often produced catastrophic loss ratios: on one occasion in the 1870s, claims payments exceeded 2 501 TTC 3 000 of premium income. Prudence paid off, and before the Great Crash of 1873, the reserves needed to keep EMÁBIT profitable in the most difficult years were built up. The initial investors, who had to pay only 30% of the nominal value of their shares, could count on a steady dividend each year, while the share price rose steadily.
Throughout its existence, the EMÁBIT organisation consisted of a central office in Pest, head offices in the big cities of Hungary, and head offices abroad and in other provinces of the Monarchy, and later branches. Initially, the Central Office occupied a few rooms in the house of József Ürményi in Új-ter (now Erzsébet tér), and in 1870 the office apparatus, which had grown considerably in the meantime, moved to the new palace built by the company on Vigadó tér, where the Marriott Hotel stands today. The palace was bombed in 1944 and demolished in 1948.
The foreign operations were mainly in other provinces of the Monarchy: in Trieste, Vienna, Prague, they signed general agency contracts with large trading companies, but for decades they also operated successfully in Alexandria, Egypt, etc. Later on, the company maintained a presence in several markets, such as Austria, Romania and Bosnia and Herzegovina, and between the two world wars in the successor states to Trianon, in the form of subsidiaries.
In the last third of the 19th century, the insurance industry developed into a group of companies of considerable size, in which we find a constantly varying number of general, sectoral specialist and reinsurance companies working for the Hungarian and Austrian markets over the decades.
Before the turn of the century, life insurance was a growing share of premium income, and later of profits, and was rapidly growing throughout the market. And after the turn of the century, the proliferation of new classes of insurance such as motor, liability and workers' compensation further diversified a portfolio that had previously been heavily fire-insurance dominated. In the first years of the new century, despite fierce competition from the British and American life insurers Gresham, Standard and NewYork, EMÁBIT managed to increase its share of the life insurance market, but this success was already attributable to the new CEO, Vilmos Ormody, who succeeded Lévay.
Ormody joined the company's head office in Sopron immediately after its founding, at the age of 19. After 40 years as an officer, non-commissioned officer, deputy director and then deputy CEO, he became the company's CEO. He remained in this post for 25 years. He retired from active service at the age of 84, but not from EMÁBIT, of which he remained Chairman for a further 10 years until his death in 1932.
The company's continued growth required a lot of capital, so the previously very high dividend level has fallen, but this has not been reflected in the share price. The capital market was pricing in increasing profits and uninterrupted growth. This development was interrupted by the First World War.
As a result of post-war hyperinflation and Trianon, EMÁBIT, along with the sector as a whole, lost a significant part of its fire insurance portfolio, while its life insurance portfolio was completely devalued. Insurers sought new responses to the new challenges and this gradually became a sector-wide cartel. This was led by EMÁBIT, partly through the prestige it had built up in previous decades and partly through its excellent government contacts. The group retained its leading position throughout the interwar period, but could not even approach the excellent business results of the dual-war period. The main competitors at that time were the Farmers' Insurance Cooperative and Foncière Insurance, the two large Trieste companies having been somewhat superseded. Under EMÁBIT's leadership, the entire domestic insurance sector stumbled from crisis to crisis, through the Second World War and on to nationalisation. After a brief upturn, premium income fell again in the first half of the 1930s. Although the company was more successful than its competitors in maintaining profitability - thanks to its consistently profitable fire insurance portfolio - the previously very high dividend level fell dramatically. Capital was needed for post-war consolidation, to finance the extreme cost levels prevailing in the market as a whole and to take over bankrupt competitors.
EMÁBIT proved to be extremely successful in the dualism era and particularly crisis-resistant in the Horthy era, thanks to the stable ownership background for almost a century, in which, in addition to many hundreds of small shareholders, the old landowner and the new moneyed aristocracy both participated. They were joined after the turn of the century by a few large domestic banks, which were able to acquire ownership but not a leading role in the company. Another key to success was that the stability of ownership brought with it stability of management. In the nine decades between 1857 and 1947, the company was managed by only four CEOs - Henrik Lévay, Vilmos Ormody, Tódor Gergely and Imre Balabán.
After the Second World War, although the huge financial damage to real estate assets was an unprecedented disaster, the company's management faced almost the same challenges as its predecessors a quarter of a century earlier. It had to reorganise its operations, change to a new currency and deal with the consequences of hyperinflation. The life insurance portfolio in pence was completely devalued and its revalorisation could only have been achieved with the intervention of the government, but the budget could not have borne the burden. The main difference compared with the situation after the First World War was that this consolidation was no longer the responsibility of the company's management. After the death of Imre Balabán, the last general meeting of EMÁBIT - before nationalisation - was held in August 1947. Shortly afterwards, it was reported in the press that the General Economic Council had decided to merge the two largest insurers, Gazdák and EMÁBIT, and to take them into state ownership. In July 1948, the board of directors was removed at an extraordinary general meeting and replaced by directors seconded from the National Social Insurance Institute, the Ministry of Finance and the General Economic Council. From then on, the staff of the company, which was directly controlled by the State, was taken over by the State Insurance Company, which was set up four months later, with retroactive effect from 1 January 1949. The fate of the Vigadó Palace, by then the Molotov Square Palace, was sealed together with that of the company. In December 1948, the demolition permit was issued - in style - to the Hungarian Ministry of Construction and Public Works on behalf of the owner, with the requirement that the work should be completed within 60 days.
As quickly as the government has sorted out the fate of the building and the contract portfolio, it has found it difficult to cope with the international obligations arising from reinsurance relationships. These were not in order, which is probably why the State Insurance Company could not be the successor to EMÁBIT and why the liquidation process was not completed within decades. In order for this to happen on 2 February 2006, it was also necessary that at the beginning of the 21st century, 150 years after the company was founded, someone wanted to set up an insurance company in Hungary under the same name, taking the name of the First Hungarian General Insurance Company and its first subsidiary Pannonia at the same time.
Sources
Budapest Capital Archives (BFL)
VII.2.e. Company court documents (Cg). Company registers (from 1876)
Cg. 1876/570 First Hungarian General Insurance Company 1876-1914
Cg. 593/1915 First Hungarian General Insurance Company 1915-1949
Cg. 40 633 reprinted First Hungarian General Insurance Company from 1949
XV.17.d.329 - 24407 Building permit planning documentation 1873 (ca.) - 2006 (ca.)
Headquarters of the First Hungarian General Insurance Company, box 2112
Csury Jenő Jr. - Marosi Imre 1931: The history of Hungarian insurance. Budapest.
EMÁBIT (Ormody Vilmos) 1908: Jubilee album of the First Hungarian General Insurance Company: 1857-1907. Budapest.
Gyula Horváth - Gábor Tamás 2017: 160 years of the First Hungarian General Insurance Company. Insurance and Risk. (4.) 2. 102-104.
Gyula Horváth - Gábor Tamás 2017:A Short History of the First Hungarian General Insurance Company. Insurance and Risk. (4.) 3. 94-97.
Géza Muzsay 2007: the First Hungarian General Insurance Company was founded 150 years ago. Insurance review. (53.) 8. 3-25.
János Pompéry 1883: To mark the quarter-century anniversary of the First Hungarian General Insurance Company. Budapest
Gábor Tamás 2019a: Managerial dominance? Organizational evolution and career paths of officials in an insurance company. Kövér György - Pogány Ágnes - Weisz Boglárka (eds.): Domain - 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.
Gábor Tamás 2019c: From war to crisis, from crisis to war. Insurance and risk. (6.) 2. 52-95.
Gábor Tamás 2020: network or hierarchy? The agent network of an insurance company in the mid-19th century. A network of insurance companies in the mid-19th century: Network & hierarchy. Hungarian Economic History Yearbook 2020. (4.) 245-271.