The VIX has experienced a lot of uncertainty in 2021, and the beginning of 2022 is shaping up to be its wildest time yet.

Following the increased inflation, labour shortages, continued supply chain disruptions, the Ukraine – Russia tensions,  as well as the ongoing COVID-19 pandemic, the markets have been highly volatile as of late. If we were to add the Fed’s decision to end its taper program by March, as well as initiate several rate hikes in 2022 (in order to combat said inflation), the volatility that can be seen on the market is understandable.

As one of the best measures of showing said volatility and uncertainty, we have VIX, or Volatility Index (also known as the fear index). VIX is calculated based on the S&P 500 options and reflects market expectations on (the implied) volatility in the coming 30 days. In comparison to classic indices, VIX’s growth actually represents negative sentiment, or rather, increased risk of market volatility. VIX levels over 30 could be considered risky, and this shows that the market is expecting high volatility.

As we have had several events in the last couple of months (the Ukraine-Russia tension, Omicron appearance, the aforementioned inflation, and rate hikes), VIX has been soaring to levels not seen since the beginning of 2021 (although this is still well below its highest during March 2020). As of the time of this writing, the VIX is hovering at levels between 31 and 32 points, which is an increase of over 80% since the beginning of 2022, clearly showing an immense amount of volatility in the market.

Performance of VIX Since the Beginning of 2020 (%)

Considering its negative correlation to S&P 500, (which declined by around -8.6% since the beginning of 2022), this surge in its value does not come as a surprise. As already mentioned, the largest amount the VIX ever held (82.69) was on 16 March 2020, when the first large-scale COVID-19 restrictions were announced. Considering VIX gained almost 50% since last week, it is plausible that the current volatility trend might continue, reaching the value it had at the beginning of the last year (37.5 points) but this would also require continued volatility of the S&P 500. Looking at the remainder of the graph, we can see that it had a mostly flat run through 2020, except a few hiccups (like the largest one at the end of November, beginning of December due to Omicron and expected rate hike news).

We can also see this uncertainty spill over to Europe. In the past week, the ATX index declined by 6.51%, DAX declined by 4.11%, CAC 40 declined by 4.15%, FTSE 100 declined by 2.54%. Looking at the region, we can see that BET declined by 4.16%, SBITOP declined by 3.8%, and CROBEX and CROBEX10 declined by 3.6% and 3.4%, respectively.

Performance of Selected European Indices, WTD (%)

In terms of individual companies in the region, In Croatia, AD Plastik experienced the largest decrease of 8.2%, followed by Končar with 7.8%, Atlantska Plovidba with 4.8%, and Podravka, which declined by 4%. In Slovenia, the largest decrease was noted by Triglav, which decreased by 5%, followed by Sava Re and Petrol, which declined by 4.7% and 4.1%, respectively. On the flipside, Luka Koper was the only Slovenian blue-chip to experience an increase in this period, growing by 1.6%.

Performance of Croatian and Slovenian Blue Chips, WTD (%)

Yesterday, Triglav held virtual Capital Markets Day 2022 where its Management discussed its strategy until 2025, main goals in business development and Group expansion. Here are key takeaways from their investor day.

Takeaway No. 1 CFO confirmed that they would like to grow in Asset Management, so market speculation on potential purchase of NLB Skladi is still possible. Total revenues are expected to grow at CAGR of 4% in the period from 2020 till 2025. Premium growth is expected to come from other regional and international markets (both freedom of services in EU and Adria region). Growth of other income is expected to be higher than GWP growth. Revenue growth is also going to be supported by AUM growth.

Takeaway No. 2 Increase in profitability and ROE of 10% in the period from 2022 to 2025 is estimated by the Management. Key drivers of targeted ROE is growth of income and asset under management and stable underwriting results. Increased productivity is expected to come from cost initiatives and savings realized due to digitalisation and automation of processes, coupled with prudent capital management.

Takeaway No. 3 Triglav Group is looking to become leading digitalized insurance and financial group in the Adria region. Therefore, Triglav has embarked on digital transformation process that will achieve outstanding customer experience. It will be realized by Triglav’s transition from insurance-oriented business model by adding assistance and related services to service-oriented business model. Triglav develops interconnected ecosystems that include insurance products. The example is shared platform for its customers consisting of different segments called Triglav Health, Triglav Pets, Triglav Home, etc. through which customers can obtain different products at uniform customer experience across all channels, processes, and products. This will be realized by decoupling core system from DWS and introducing Client relationship management through all parts of process value chain. Triglav plans to address this goal in three fields: Digital platform (which provides outstanding user experience), Digital Service as alternative to traditional sales channel and Digital onboarding of clients. In the future Triglav Group also expect to embark on higher automation of the claims processes.

Takeaway No. 4 Strong ambitions to become leader in delivering Sustainable Development (ESG) solutions and number one locally in this segment. In Investment segment Triglav expects to increase share in green and sustainable investments. Also, their exposure in investments to coal exit list issuers is expected to be less than 1% of total investment value by 2025. In Insurance segment, Triglav is eager to promote products related to sustainable mobility. In company’s processes Triglav is looking to increase share of electricity from RER, reduce energy and paper consumption and to achieve less production of waste. Triglav will also be looking to engage stakeholders in their mission to achieve high levels of client satisfaction. One of ways to increase employee satisfaction will be by implementing concept of flexible working at Group level by 2023. Another important ESG goal will be engagement of overall society by further participation in social responsibility and environmental projects. Efficient corporate governance is one of the main pillars of the company. And by 2025 Triglav expects to upgrade public exposure in ESG reporting.

Takeaway No. 5 No change in dividend policy is expected by the strategy. To read on Triglav’s historic dividends, please clique here.

Here you can find the dates for the upcoming events of the regional companies.

Given the current Covid-19 situation, some of these events might be subject to change (postponed or cancelled).