The internationalisation

The internationalisation of our company portfolio and the profit improvement programme are consolidating our leading position in Austria, and our increasing importance as a profitable player in Central and Eastern Europe. The clear increase of our premiums and profit in the 2006 financial year was the result of our company strategy aimed at consequent internationalisation and yield-oriented expansion. Our position as one of the leading insurance groups in Austria has remained the basis for our success. With the strategy of concentric circles around the Austrian market, we are focussing on profitable insurance niches in Western Europe (WEM), but, in particular, on the enormous growth potential in the New Eastern Emerging Markets (NEEM) on the eastern border of the European Union as well as on Central and Eastern Europe (CEE).

New markets in Eastern Europe as growth drivers

The new markets, with their considerable need to increase their economic prosperity, insurance coverage and old-age provisions, are our strategic growth drivers. We are utilising their potential with prudent determination. We are now operating in fifteen countries outside of Austria. And we are constantly evaluating the possibilities of becoming active in other regions of Eastern and South-Eastern Europe.

The preferred partnership with the Raiffeisen bank group is a reliable pillar of our internationalisation strategy. Together with our local banking partners, we provide services to over 10 million clients in the eastern target markets.

Leading life insurer acquired in Serbia

We increased UNIQA’s presence in the largely untapped emerging markets of South-Eastern Europe in 2006. At the beginning of November, we acquired 80% of the share capital of Zepter osiguranje A.D. in Belgrade. Concurrently, the general conditions for the acquisition of the remaining shares were specified. We renamed the company “UNIQA a.d.o.” at the start of 2007 and successfully launched the UNIQA brand in Serbia.

The sixth-largest insurer in Serbia is one of the country’s largest life insurers with more than 26 branches operating in the market. There are approximately 100 in-house employees. Brokers, cooperation partners as well as employed and freelance salespersons are involved in sales.

We aim to consolidate the position of UNIQA osiguranje as a leading life insurer by building up bank sales, made possible by the signing of a cooperation agreement between UNIQA and the Raiffeisen banka in Belgrade. The life insurance business is developing very positively and promises to create great opportunities.

The Serbian insurance market, which has annual premiums of approximately € 420 million, is currently dominated by property insurance, which makes up about nine tenths of the market. Therefore, we will broaden the offer of the new Group company to include innovative property and motor vehicle insurances.

Our involvement in the future growth region of Serbia perfectly complements our activities in South-Eastern Europe. The Serbian economy has achieved above-average growth levels in recent years. In 2006, despite increasing inflationary tension, the total economic output experienced a real growth of approximately 7% and is, therefore, on a steep growth path.

Entry into the Ukrainian market

We entered into the Ukrainian market in May 2006. The entry was a new milestone in our massive commitment in Eastern Europe.

With its 47 million inhabitants, the Ukraine is considered to be one of the largest and most promising markets in Eastern Europe. Due to its enormous need to catch up, the economy is growing dynamically: Despite double-digit inflation rates, the total economic output increased by more than 6% in 2006, and will continue to grow at a similar pace in the next years.

First, we took an equity stake of 35% of the share capital of Credo- Classic in Kiev, which was previously only active in property insurance. At the same time, an agreement was reached to gradually increase our involvement to 76% by 2009. Credo-Classic is the seventh-largest insurer in the country and has a premium volume of around € 30 million and almost 950 employees working in or outside of the office at 26 locations.

Extreme consolidation of the market

A process of extreme consolidation is taking place in the Ukrainian insurance market, which still consists of more than 400 companies. The ten largest companies currently only have a market share of around 21%. The greatest potential for growth in the next few years will lie in motor vehicle liability insurance, which has been compulsory since 2004, and the clearly underrepresented life insurance.

For this reason, we founded the Kiev-based UNIQA LIFE in October, with identical capital shares to Credo-Classic. The company immediately began selling life insurance, though at first mainly via Credo-Classic’s extensive marketing network.

Cooperation with Raiffeisen Bank Aval

The new cooperation with Raiffeisen Bank Aval, the leading retail bank in the country with 1,400 branches, offers great possibilities for expansion. It gives access to 3 million clients and creates an enormous potential for cross selling property insurance and other products. Therefore, Credo-Classic developed further offers in 2006, such as traveller’s accident insurance and travel cancellation insurance.

In the course of our expansion strategy, we had already achieved a foothold in the Romanian market in 2005. After acquiring 27% of the share capital of the seventh-largest Romanian insurer, Versicherung ASTRA S.A., we intend to acquire the majority interest of the company in future.

New logo for the Romanian market

After a decision at an extraordinary general meeting of ASTRA and UNIQA, the company now appears under the new ASTRAUNIQA logo. The logo was presented to the public at a launch event in Bucharest.

The company aims to become the market leader in the Romanian insurance market in future, by utilising the solid basis of both partners and innovations in its broad product spectrum for private and corporate clients. The high expectations of the management for 2006 have been fulfilled by an increase in premiums of over 80%.

The service was also improved in 2006 by the new website www.astra-uniqa.ro, which enables online access to products and contract data. Furthermore, Romanian clients can now reach the call centre at a freephone hotline number, and pay in their policy fees at any post office country-wide.

Joining the EU promotes prosperity in Romania and Bulgaria

The admission of Romania into the European Union as of 1 January 2007, will add further impetus to the country’s economic catching-up process. Supported by a strong increase in private consumption and a robust growth in investments, the country’s real production rose by more than 6% in 2006.

The unemployment rate has levelled out at about 6%; inflation continues to fall, recently hitting 7%. These are favourable prerequisites for a basically problem-free expansion over the next few years. Our activities in this future growth region will benefit by this.

As will our commitment in Bulgaria, which also became a new EU member at the beginning of 2007. After taking over 20% of the capital stock of the sixth-largest Bulgarian insurance company, Vitosha, in the year 2005, we have been responsible for managing the Sofia-based company since 2006. At the beginning of 2007, we took over the majority of the shares and rebranded Vitosha into UNIQA. We plan to increase our commitment to at least 75% by 2009.

The cooperation with the Raiffeisen banks in Bulgaria has resulted in an enormous growth spurt in property insurance, and particularly in the life insurance business.

Capital increase for future investments in Bulgaria

A capital increase of € 18 million in 2006, made Vitosha one of the best capitalised insurance companies in Bulgaria. Aside from building up reserves, the influx of capital has served to finance important investments for the future. The goal is to strengthen the impact of marketing, modernise the IT system and to increase the brand awareness of UNIQA in Bulgaria.

In 2006, to reinforce our brand in the Bulgarian market we launched a campaign in motor vehicle liability insurance called “Stick and Win“. And we also promoted UNIQA as a quality brand in the aspiring new EU member country through an advertising cooperation with Krum Donchev, the Bulgarian runner- up in the European rally championships.

Faces for UNIQA

Sports sponsoring is one of the cornerstones of our marketing activities in Central and Eastern Europe. For example, we were able to increase the brand awareness of UNIQA amongst the public as the main sponsor of the world water slalom championships held in Prague. In Bulgaria, we are working successfully with Krum Donchev, the runner-up of the European rally championships, as a public advertising medium in the aspiring new EU member country. Moreover, we support Sparta Prague, the most popular Czech football club, and in Hungary the games of the Handball Champions League. We are also continuing the Group “faces for UNIQA“ campaign with a partnership with the Czech world-class kayak paddler Stepanka Hilgertova, the Serbian ex-basketball star Alexander Djordjevic as well as in Slovakia with the successful ski racer, Veronika Zuzulova, and in Hungary with the well-known water polo players, Adam and Barnabas Steinmetz.

Interview with Hans Peter Haselsteiner

		Next Generation Gerlinde Fellner, 29 Institute for Political Economy The scientist examined the influence of psychology on the financial markets in her thesis and received two awards for her work. Ms Fellner, you tie human behavioural patterns to macroeconomic developments. What discoveries did you make here? Human behaviour in economic and financial markets is much less characterised by rational calculation as economic theory would like to assume. The quality of a decision definitely depends on emotional and social processes. Do you see differences here between Western and Eastern Europe? There is a divide between West and East in the willingness to take risks. However, the people in most of the Eastern European countries are currently being confronted with major economic changes. They still have little faith in government institutions. This can dampen the growth rate. Above all, those companies that operate in the market must help to reduce these trust barriers. How can you explain the success of your scientific work? In research, as in most other professions, hard work and persistence pay off. But building up cooperative partnerships and networks is decisive for success.
Over the past 30 years, the 63-year-old entrepreneur has turned a family business based in Carinthia into one of the largest construction firms in Europe, which is planning an initial public offering in 2007. As one of the leading suppliers in Central and Eastern Europe, STRABAG has over 50,000 employees at over 500 locations and provides construction services amounting to more than e 10 billion a year.
Dr Haselsteiner, you have written a success story in the construction branch that is quite unusual. Why are you so successful? I am often described as calculating with a cool head. I find this description too one-sided. But it is an on-the-mark description of a certain side of my actions: I always make sure that I have minimised the risks and use the opportunities that the market offers in a consequential and decisive manner. You can only be successful if you act economically. Because you don’t build for its own sake, construction is an economic activity that has to pay off over the long run, like any other business. “You can only be successful if you act economically.” If you want to be successful in business you have to be ready to cross borders and take on risks. UNIQA provides its customers with a reliable and experienced partner in sixteen countries, helping them guard against, and overcome, entrepreneurial risks.

What do the new markets in Eastern Europe mean to you?
Without a doubt, Eastern Europe is a market of the future; in certain areas its expansion rate is even outdoing the growth rates in China. In ambitious markets, the construction business is always there before all the others. And the need to catch up in the next 30 years is huge in the countries of Eastern Europe. What it took us 60 years to accomplish after the war is expected to take place in just a short time in the emerging markets. An enormous potential for the future of the construction business, which can contribute substantially to the economic development of Eastern Europe and its people.

What are the important factors in the development of Eastern Europe?
Entrepreneurial thinking must adapt itself to the needs of the markets. All-purpose strategies or across-the-board solutions don’t help here. What we need are fitting comprehensive concepts for the special situations in the individual countries of Eastern Europe. Those who develop intelligent custommade solutions are, as always, a step ahead.

New campaign

Our new campaign also started internationally in 2006: The print campaign began in the early summer, almost simultaneously, in four Eastern European countries. In the autumn, we broadened the campaign to include two additional countries.

UNIQA Hungary receives quality seal of approval

UNIQA Biztosító Zrt., operating in Hungary for sixteen years and based in Budapest, has earned a reputation as a pioneer for product innovation as well as a top address for first-class customer service. These achievements were recognised in 2006, with the ISO certification and the issuing of the seal of approval through SGS Hungaria GesmbH by an external audit firm.

The niche product “Super-G”, travel insurance with extra coverage which was developed towards the end of 2005, in collaboration with Car-Tour International travel agencies and the Hungarian Ski Academy, has already become a great success in Hungary. The product was upgraded to “Super-G+” with an additional personal liability insurance in connection with a motor vehicle assistance service, and was taken out by almost 10,000 clients in the past winter season.

The introduction of the VitalClub in Hungary made UNIQA Hungary the first Group company outside Austria to strengthen the activities in the area of health care. The prevention programme was introduced in April 2006 in the form of a health week, several VitalWeekends and UNIQA company sport days.

UNIQA Biztosító Zrt. was awarded the quality seal of approval for first-class service. Our Hungarian subsidiary has been impressing people with product innovations and an outstanding understanding of service for sixteen years.

Network of agencies has expanded further

We have increased our presence in Hungary by opening the 100th agency office. The advantage of the agency system, which is unique in Hungary, is that external UNIQA employees can operate agencies on their own account.

The agency network and the office’s own network give UNIQA Biztosító a powerful basis for expanding the business. A result of our dynamisation projects, with which we aim to increase our market share in countries such as Hungary, Poland, the Czech Republic, Slovakia and Croatia through integral, sustained and profitable growth.

With a market share of around 6.5% and over 1,100 employees who look after more than 320,000 clients, we are now not only the no. 6 in Hungary; above all, we are the most rapidly expanding business on the Hungarian insurance market.

Reorganisation increased the sales force in Poland

In 2006, the Group companies UNIQA and FILAR in Poland focussed on the optimisation of all processes which serve to continually improve the quality of service. The reorganisation of sales structures was part of this.

The role of bank sales reached a whole new dimension as a result of the framework agreement with Raiffeisen Bank Polska. In particular, in the case of life insurance – especially unit-linked policies – the sale over the bank counter is becoming increasingly important in Poland as well.

As part of the preferred partnership between UNIQA and the Raiffeisen bank group, we developed a special offer for Raiffeisen’s clients in Poland. It includes diverse new products such as insurance coverage for unemployment, improper use of credit cards or loss of money. Furthermore, we insure the leasing vehicles of Raiffeisen Leasing Poland.

ExclusiveSales in Poland was strengthened considerably, the reorganisation of FILAR’s office network was completed and the broker service was totally restructured, both internally and across the region. In the process, we made sure the contact to the bigger brokers was efficient. A special team was trained to see to their needs.

New channels of distribution were developed

In 2006, we reached a cooperation agreement with car dealers in Poland to open up new channels of distribution. A special motor vehicle policy was offered to selected clients. The range of products was also increased and made more attractive in other areas of insurance.

We introduced a new house and flat insurance for private clients and developed a comprehensive security offer for small and medium-sized enterprises in Poland, as well as a tailor-made comprehensive insurance package for important cooperation partners in residential cooperatives.

Award for the best insurance in Poland

Furthermore, we began the sale of a unit-linked life insurance that is also suitable as a company old-age provision. We also brought innovative solutions for health care onto the Polish market.

The efforts taken by UNIQA TU to constantly optimise services were rewarded by the monthly magazine “Home & Market” with the conferring of the title “Best Insurance Company”.

Brand awareness increased in the Czech Republic

Our subsidiary UNIQA pojišt’ovna based in Prague launched new activities in 2006, to further increase brand awareness and our market share in the Czech Republic. As the main sponsor of the world championship in water slalom, we increased the advertising awareness of the public to UNIQA.

Thus the prerequisites for a continued high expansion rate in insurance and old-age provision have been created for the current year.

New products for Slovakia

UNIQA poistovna was successful in Slovakia in 2006, thanks to new products and sponsoring activities. The market launch of the unique life insurance “life insurance joker” aroused much public attention. Furthermore, a group life insurance and the health insurance MedExclusive were offered for the first time.

In 2006, we again successfully participated in the “golden coin” competition for the best products from the banking and insurance industry and this time, we took third place for our household insurance product. This allows us to advertise publicly with the “golden coin” logo.

Bank sales begin in Croatia

Together with the Raiffeisenbank Croatia our extremely rapidly expanding company in Croatia, UNIQA osiguranje, launched the sale over the bank counter of credit balance insurance and a credit card package. This distribution channel now makes up 15% of UNIQA Croatia’s existing premium volume, contributing more than usual to expansion.

At the beginning of the year, the Croatian company presented a new boat insurance at the Zagreb Boat Show and the Croatia Boat Show in Split. We were also the main sponsors of the chamber music festival by Julian Rachlin & Friends in Dubrovnik, for the third time. By inviting selected guests to this event, we made our contribution to the idea – very popular in Austria – of an ArtCercle.

Successful switch-over process in Bosnia

Our company in Bosnia and Herzegovina successfully switched to the UNIQA brand in 2006. This was achieved through advertising on television and advertising signs in Sarajevo and other cities. The UNIQA brand was thus successfully introduced to the Bosnian insurance market, while at the same time emphasising the reliable cooperation with the Raiffeisen bank group within the framework of the preferred partnership.

With the start of bank assurance in Bosnia and Herzegovina, the Group company brought an innovative combination product to the market for the acquisition, financing and insurance of real estate. The unique offer will give new impetus to the continuously high rate of expansion of our business in Bosnia and Herzegovina.

UNIQA Osiguranje is now the fifth-largest insurer in Bosnia and Herzegovina. In life insurance, the company has even reached third place.

Mannheimer Versicherung on course for success once again

In Germany, our Mannheimer insurance group was once again on course for success in 2006. The company managed to slimdown internal procedures and increase the number of its brokers significantly, particularly in on location broker sales.

With its growing brand programmes, in particular, the Mannheimer multi-risk policy for the middle-class, the company operated with extreme success. In connection with special expertise for target groups and underwriting and pricing by competent local brokers, the company will further consolidate its position in the medium-sized company segment of the market.

Additional impetus for the broker business

The extraordinarily fast-growing broker business was given additional impetus by the opening of the new industry headquarters in Ulm, at the beginning of 2007, as a result of access to one of the most rapidly expanding economic regions in Germany. The entire UNIQA Group profits from the role Mannheimer Versicherung plays within the corporate Group as a competence centre for target groups and brand programmes.

As a provider of specialist services and niche insurance, Mannheimer is distinguished by its insurance of the SINFONIMA music instruments. This includes a special and comprehensive insurance coverage in the area of music: for musicians, orchestras, hobby musicians and anyone who owns a musical instrument.

Private insurance programme in Liechtenstein

The Vaduz-based UNIQA Group companies are, amongst other things, established as product pioneers in Liechtenstein with innovative concepts for asset management and art insurance. The insurance concept for the new generation with changed provision needs has taken shape with the development of the private insurance programme “Liechtenstein Privileg”, which offers individual solutions for all phases of life.

The cooperation between UNIQA Liechtenstein, Finance Life, Raiffeisen Capital Management and Raiffeisenbank Liechtenstein enabled the creation of a product with the best of both worlds: The “tailor-made suit” for investment, refined by the privileges of the life insurance line in Liechtenstein. In addition, the subsidiary achieved much success amongst art lovers and private collectors as a result of the all-risk coverage from its art insurance programme “CasaArte”.

High-quality service in Switzerland

The continued success with innovative group health insurance in Switzerland achieved by UNIQA Assurances in Geneva is attributed to the high quality of service and an advisor team selected for the consulting needs of international organisations, embassies and missions.

The European nuclear research centre CERN remains the biggest client with 12,000 policyholders. The Swiss Group company’s high level of service was confirmed by the renewal of its ISO quality certification.

Synergy leads to success in Italy

The integration of our three companies in Italy under one management, which was initiated after acquiring the equity majority of Claris Vita, which was branded UNIQA Previdenza at the beginning of 2007, and accessing bank distribution via the branches of the Veneto Banca, brought the desired success. The introduction of competence and corporate centres made it possible to utilise the specialised expertise of the separate companies for the entire Italian group.

UNIQA Assicurazioni is the specialist for health insurance; UNIQA Previdenza is responsible for life insurance; while CARNICA takes care of the property and casualty insurance business. The company with the best competence in a specific area makes its specialised experience available to all Group companies in all channels of distribution, through the technical development of new products.

New accident insurance for all distribution channels

Thus the new accident insurance rate, “Prospettiva Sicura”, which CARNICA made ready for the market, has been sold by all agents from the three companies since November 2006. The product’s suitability for use in all distribution channels was already taken into consideration during the design phase.

As a special service and instrument of customer retention, UNIQA Previdenza introduced the “UNIQA Aura” credit card in cooperation with Veneto Banca and Findomestic. Clients in Italy can use the card to pay for purchases or insurance premiums in instalments, recharge their airtime or pay motorway tolls.

Extended financial scope for EBRD commitment

The European Bank for Reconstruction and Development (EBRD) gives us considerable support in opening up our target markets in Eastern Europe. Up to now, the bank has invested € 46 million in our Group companies in Croatia, Hungary, the Czech Republic and Poland, within the scope of its financial commitment.

We intend to increase the cooperation with the EBRD in the current year. The EBRD will support our involvement in Bosnia and Herzegovina, Serbia, Romania, Bulgaria and the Ukraine over the next few years, by acquiring a minority stake of the UNIQA companies.

In view of the exceptional growth rate of our Group, UNIQA Versicherungen AG issued supplementary capital bonds to the value of € 250 million as a further boost to its capital resources. The ownership ratios and voting rights of our shareholders remained unchanged by this measure used to finance our expansion with supplementary capital.

Standard and Poor’s confirms “A” rating

“A” rating This year, UNIQA once again impressed the rating agency Standard & Poor’s: Once more, the international agency gave the UNIQA Group an “A” rating.

According to a recent analysis by the international rating agency Standard & Poor’s, the fundamental data of the Austrian insurance industry has strongly improved during the past few years and is predicted to remain at a good level in the future. The reason for this positive development lies in healthy growth rates, the booming life insurance business in Austria and the expansion to Eastern Europe. Despite increasing price competition in some areas of property insurance, the results are convincing and the outlook for this line of business is stable.

UNIQA insurance group’s sound financial state was also confirmed by Standard & Poor’s in 2007. The rating of the UNIQA Group, as well as that of its core companies: UNIQA property insurance, UNIQA personal insurance and the Zurich-based UNIQA Re, remains consistently good at “A”. The outlook of the individual companies and the Group as a whole was assessed by the agency as “STABLE”.

Highlights

• The UNIQA Group’s premium volume amounted to over € 5 billion in 2006. About a third of this came from the countries outside of Austria.



• In 2006, we entered the market in Serbia and the Ukraine. When developing our target markets, the preferred partnership with Raiffeisen is an important component of our internationalisation strategy.



• The cooperation with the EBRD is a cornerstone of our expansion in South-Eastern and Eastern Europe and has existed since 1998. We plan to further intensify it in the future.