UNIQA expects a moderate upturn in the euro zone in 2015, with positive momentum in terms of general demand as a result of the lower price of oil, a lower euro exchange rate and the quantitative easing by the ECB. The expectations for growth in CEE are now more heterogeneous. In Central Europe (CE), the economic structural conditions remain positive overall, with expect-ations in terms of economic growth above average when compared with the whole of Europe. The outlook for Russia has changed significantly: Russia’s economy is expected to fall into a deep recession as a result of the fall in the price of oil, the western sanctions and a more restrictive monetary policy. Ukraine remains in recession and requires stabilising political measures and international financial aid. Structural problems prevent some countries in Southeastern Europe (SEE) from fully exploiting their growth potential. Romania is continuing its recovery as is Bulgaria, although at a more moderate pace. Politicians in Croatia and Serbia are faced with structural reforms and budget consolidation, which are expected to keep GDP growth at virtually zero.
The ECB announced an expanded bond acquisition programme in January 2015 (quantitative easing). As part of the expanded programme, the ECB will make monthly purchases of securities beginning in March from public and private issuers amounting to €60 billion. The programme is to run at least until September 2016 or even longer if the ECB sees no sustainable development in inflation, which is consistent with its mandate of achieving price stability.
The capital market has already to some extent anticipated the ECB programme: benchmark interest rates have reached new historic lows in the euro zone over the past year. Yields on German government bonds with 10 year maturities fell below 0.4 per cent in December 2014. UNIQA expects a long period of low interest rates as a result of the slow economic recovery, low inflation and major stimulus through monetary policy.
Consolidated profit or loss
UNIQA expects moderate economic growth for 2015. The very low level of interest rates is also placing a strain on the insurance industry as a whole, with no reversal in this trend expected in the near future. UNIQA believes that there are exceptionally high levels of uncertainty in relation to medium-term economic developments in Europe in combination with the geopolitical tensions.
Nevertheless, UNIQA still expects growth in profit from ordinary activities in the double-digit percentage range of 425 to 450 million euros for 2015 as compared with 2014, steady premium performance and further improvement in the combined ratio. UNIQA is continuing to focus its attention on increasing profitability in its core insurance market and to concentrate more heavily on cost and capital management.