Group business development

Page

1 of 11 Next page

Go to page:

Certified

Certified

Business activity

The UNIQA Group provides life and health insurance, and is active in almost all lines of property and casualty insurance. The Group holding company, UNIQA Versicherungen AG, conducts the indirect business for the Group. In addition, it carries out numerous service functions for the Austrian and international insurance subsidiaries, in order to take best advantage of synergy effects within all the Group companies, and to consistently implement the Group’s long-term corporate strategy.

With over 12.5 million insurance policies being managed at home and abroad, a gross premium volume written of € 5.1 billion (2005: € 4.7 billion) and capital investment of more than € 21 billion (2005: € 19.4 billion), the UNIQA Group is one of the leading insurance groups in Central and Eastern Europe.

In 2006, 42.5% of premium volume came from life insurance (2005: 41.3%), 17.5% from health insurance (2005: 17.9%) and 40.0% from property and casualty insurance (2005: 40.9%).

Group pre-tax results reached e 238.5 million

In the 2006 financial year, the UNIQA Group was able to further improve its profits and earned a profit that was 25.3% higher than the profit on ordinary activities, which amounted to € 238.5 million (2005: € 190.3 million). Sales profitability could be increased in 2006 to 5.8% (2005: 4.8%).

Details on the consolidated and associated companies can be found in the corresponding overview in the Group notes (cf. Group companies). The accounting and valuation methods used as well as the changes in the scope of consolidation are also explained in the Group notes.

Risk report

The comprehensive risk report of the UNIQA Group is in the notes to the consolidated financial statement 2006 (cf. notes, p. 86 ff).

UNIQA Group business development

The following comments to the business development are divided into two sections. The section “Group business development” describes the business performance from the perspective of the Group with fully consolidated amounts. The business trends in life, health and property and casualty insurance are discussed in the segment reports. For the first time, the 2006 Group management report is also geared to the fully consolidated amounts. The figures for the previous year have been adjusted accordingly.

Profit on ordinary activities
Net profit
in € million

UNIQA is pursuing a consistent dividend policy that provides for a pay-out ratio of about 30% of the Group results. Therefore, the Management Board intends to propose a dividend payment of 35 cents per share to the Supervisory Board and the general assembly – an increase of 35% compared to the previous year.

Premium volume climbed to over e 5 billion in 2006

The UNIQA Group’s consolidated premiums written rose in 2006, by 3.7% to € 4,532.1 million (2005: € 4,370.2 million). If one also considers the savings portion of premiums from unitand index-linked life insurance in the amount of € 559.3 million (2005: € 360.2 million), the total premium volume grew by 7.6% to € 5,091.4 million (2005: € 4,730.4 million). The retained Group premiums earned grew by 3.2% to € 4,129.7 million (2005: € 4,000.4 million).

Premium volume written
incl. the savings portion of premiums from
unit- and index-linked life insurance
in € million

In Austria, premium volume written incl. the savings portion of premiums from unit- and index-linked life insurance increased in 2006, by 1.0% to € 3,420.5 million (2005: € 3,385.6 million). The reasons for this moderate growth were the high expirations in the area of bank sales and the reduction in single- premium business in life insurance. Furthermore, the loss of recurring premiums from policies with abbreviated premium payment periods put a burden on the development of premiums. Premiums earned in Austria in 2006 amounted to € 2,916.3 million (2005: € 2,917.0 million).

In the growth regions of Eastern and South-Eastern Europe (CEE & NEEM) the premiums developed noticeably faster in 2006. Premium volume written including the savings portion of premiums >from unit- and index-linked life insurance increased in 2006, by 32.7% to € 639.8 million (2005: € 482.2 million). This put the share of Group premiums coming from CEE & NEEM at 12.6% (2005: 10.2%). The premiums earned rose by 20.2% to € 523.5 million (2005: € 435.4 million).

In the Western European Markets (WEM) the premium volume written also rose by 19.5% to € 1,031.1 million (2005: € 862.6 million). This corresponded to a share in the Group premiums of 20.3% (2005: 18.2%). Earned premium income in the companies in Germany, Switzerland, Liechtenstein and Italy increased by 6.5% to € 689.8 million (2005: € 648.0 million).

Development of insurance benefits

The consolidated retained insurance benefits decreased in the 2006 financial year, despite the rise in premiums by a total of 1.6% to € 3,715.6 million (2005: € 3,776.9 million).

In Austria, UNIQA was even able to decrease insurance benefits by an impressive 5.2% to € 2,807.4 million (2005: € 2,960.3 million). In the CEE & NEEM regions, because there was a rise in premium volume, the insurance benefits were also higher. They increased by 16.5% to € 325.6 million (2005: € 279.5 million). In Western Europe insurance benefits grew by 8.5% to € 582.7 million (2005: € 537.1 million).

Development of operating expenses

Total consolidated operating expenses (cf. Group notes, no. 36) less reinsurance commissions and profit shares from reinsurance business ceded (cf. Group notes, no. 32) increased only slightly in the 2006 financial year, despite the increase in the number of companies to be consolidated and the rise in premiums, by 4.2% to € 966.9 million (2005: € 927.7 million). Acquisition expenses incl. the change in the deferred acquisition costs and less the reinsurance commissions received rose by 8.4% to € 627.6 million (2005: € 579.1). Other operating expenses decreased in comparison to the previous year due to successful cost reduction measures as part of the 2004–2006 profit improvement plan by 2.7%, from € 348.7 million to € 339.4 million.

The cost ratio of the UNIQA Group, i.e. the relation of total operating expenses to the Group premiums earned, including the savings portion of premiums from unit- and index-linked life insurance, decreased in 2006 to 20.9% (2004: 21.5%). The administrative cost ratio sank even more, coming to 7.3% at the end of the year (2005 8.1%).

Investment portfolio exceeded e 21 billion

Total investments
in € million

Total investments incl. land and buildings used by the Group, real estate held as investments, shares in associates and investments in unit-linked and index-linked life insurance increased in the reporting year by € 1,787.8 million or 9.2% to € 21,155.2 million (2005: € 19,367.3 million).

Net investment income less financing costs sank by 10.2% to € 865.0 million (2005: € 962.9 million). In 2005, UNIQA recorded an unusually high level of realised capital gains that was used to compensate the additional provisions needed for retirement annuities due to the adjustment of the Austrian mortality tables. In 2006, the performance of the stock markets was slightly weaker compared to the years before and this, together with the rising interest-rate environment, were additional reasons why the investment results were lower. Nevertheless, a solid profit could be made over the past year due to the broad distribution of asset investments and the use of alternative investment instruments.

A detailed description of the investment income can be found in the notes to the financial statements. (cf. note no. 33).

Own funds and total assets

Return on equity
in %

The UNIQA Group’s total equity increased in 2006, by € 196.1 million to € 1,329.8 million (2005: € 1.133.7 million). This included minority interests amounting to € 207.3 million (2005: € 203.2 million). The pre-tax return on equity – the ratio of profit on ordinary activities to average total equity (without taking into consideration the included net profit for 2006) amounted to 20.8% in the past financial year ( 2005: 19.7%).

In light of the obvious growth of the Group, UNIQA Versicherungen AG issued subordinated debt amounting to € 250 million to further strengthen own funds, that was placed in December 2006 and early 2007 in two tranches.

The total assets of the Group increased in the past financial year, by 8.9% and totalled € 24,587.1 million (2005: € 22,568.4 million) on 31 December 2006.

Cash flow

The cash flow from operating activities increased by 136.0% to € 1,237.0 million (2005: € 524.1 million) in 2006. Cash flow from investing activities of the UNIQA Group amounted to € –1,280.4 million (2005: € –799.7 million). There was an outflow of cash due to the acquisition of companies of € –159.8 million (2005: –69.5 million). The financing cash flow remained stable due to the issuance of subordinate capital, and came to € 100.7 million (2005: € 104.4 million). A total of € 31.1 million were spent on the dividends from the 2005 financial year. The amount of liquid funds changed in total by € 71.1 million (2005: € –163.3 million). At the end of 2006, funds amounting to € 263.2 million (2005: € 192.0 million) were available.

Staff

The average number of employees in the UNIQA Group increased in the 2006 financial year to 10,748 (2005: 9,943 employees). Of these, 3,957 (2005: 3,469) were in sales (employed sales force) and 6,791 (2005: 6,474) were in administration. In the New Eastern Emerging Markets (NEEM) UNIQA employed a staff of 547 in 2006 (2005: 0), 2,930 people (2005: 2,800) in Central Eastern Europe (CEE) and 989 (2005: 968) in the Western European Markets (WEM). In Austria, 6,282 people were employed (2005: 6,175). This corresponded to a share 58.4%

Staff by region
in %

Half of the staff employed in administration in Austria in the past year were women, 17.6% of the employees were working part time. The average age in 2006 was 43 years. In total, 11.1% of the employees participated in UNIQA’s result-oriented remuneration system – a variable payment system that is tied both to the success of the company and to personal performance. In addition, the new UNIQA apprentice exchange programme offers young people in training the opportunity to get to know foreign cultures and make international contacts.

The productivity of UNIQA’s employees continued to rise in the past financial year as well – the income before taxes per employee in 2006 came to € 22,190 (2005: € 19,139).

Page

1 of 11 Next page

Go to page:

Top

Glossary

Close Glossary

Acquisition costs		The amount paid in currency or currency equivalent in acquiring an asset, or the current fair value of another form of payment at the time of acquisition.
Actuarial provision		Provision in the amount of the existing obligation to pay insurance claims and premium refunds, mainly in life and health insurance. The provision is calculated in line with actuarial methods as the balance of the cash value of future obligations less the cash value of future premiums.
Affiliated companies		Affiliated companies are the parent and its subsidiaries. Subsidiaries are companies in which the parent may exercise a controlling influence on business policy. This is the case, for instance, if the parent directly or indirectly holds more than half of the voting rights, if control agreements have been concluded or if the parent is in a position to nominate the majority of the members of the Management Board, or of other controlling bodies of the subsidiary.
Asset allocation		The structure of the investments, i.e. the portion of the total investments invested in the different vehicles of investment (e.g. shares, fixed income securities, holdings, real estate, money market instruments).
Asset liability management		Management concept in which decisions regarding company assets and liabilities are coordinated. This involves a continuous process in which strategies for assets and liabilities are formulated, implemented, monitored and revised, in order to achieve the financial goals with defined risk tolerances and restrictions.
Associated companies		These are participating interests consolidated at equity, i.e. by including them in the consolidated financial statements with the corresponding share in the equity. The major prerequisite for doing so is the possibility of the Group exercising a decisive influence on the operating and financial policy of the associated companies, regardless of whether the Group actually exercises that influence.
At amortised cost		Recognised on the balance sheets at the amortised cost, i.e. the difference between acquisition costs and the redemption amount is spread out over the corresponding pro rata term or capital share.
Benchmark method		An accounting and valuation method preferred under IFRS.
Book value (amortised acquisition costs)		The original acquisition costs minus lasting reduction in value and differences between acquisition costs and redemption amount are credited or debited to acquisition costs, with an effect on income until the amount falls due.
Cash flow statement		Shows the cash surplus from operating, investing and financing activities generated by the company during a specific period (source and use of funds).
Combined ratio		Sum of the operating expenses and the insurance benefits (both retained) in relation to the premiums earned in property and casualty insurance.
Corporate governance		Corporate governance refers to the legal and factual framework of the management and monitoring of companies. Corporate governance regulations are geared towards transparency and thus strengthen the trust in management and control focusing on value creation.
Cost ratio		Operating expenses (retained) in relation to premiums earned.
Deferred acquisition costs		These comprise the expenses incurred by an insurance company for concluding new insurance policies or renewing existing policies. Amongst other costs, they include acquisition commissions and expenses for handling the proposal form and risk underwriting.
Deferred taxes (active/passive)		Deferred taxes arise from temporary differences between the commercial balance sheet and the balance sheet for tax purposes, and those resulting from uniform valuation standards throughout the Group. The calculation of deferred taxes is based on the specific tax rates of each country that the Group companies are based in; changes in the tax rate that have been decided on as at the balance sheet date are included.
Deposits receivable/payable under reinsurance business		Amount receivable by the reinsurance company from the ceding company on the basis of the reinsurance business accepted by the reinsurer and which, for the latter, is similar to an investment. The amount equals the amount the ceding company provides as collateral. Analogously: deposits payable.
Derivatives		Financial contracts whose value depends on the price development of an underlying asset.
Direct insurance business		Insurance contract taken out by a direct (primary) insurance company with a private person or company, as opposed to reinsurance business accepted (indirect business) which refers to the business accepted from another direct (primary) insurer or reinsurance company.
Diversification		Diversification is a business policy instrument that generally involves positioning or distributing the activities of a company over various areas to avoid dependence on single factors.
Duration		The weighted average maturity of an interest-sensitive financial investment or a portfolio. It is a risk measure of the sensitivity of financial investments to changes in the rate of interest.
Earnings per share		The consolidated profit for the year divided by the average number of shares outstanding. Diluted earnings per share include subscription rights exercised or to be exercised in the number of shares, and in the consolidated profit for the year.
Earned premiums		The premiums earned on an accrual basis, which determine the year's income. For calculating the amount of earned premiums, in addition to gross premiums written, the change in unearned premiums in the business year, the provision for expected cancellations and other receivables from unwritten premiums are considered.
Equity method		Method used for recognising the interests in associated companies. They are, in principle, valued at the Group's share in the equity of these companies. In the case of interests in companies which also prepare consolidated financial statements, the valuation is based on the share in Group equity. Under current valuation, this measurement is to be adjusted for proportional equity changes, with the interest in the net income for the year being allocated to the consolidated result.
FAS		US Financial Accounting Standards laying down specifics of US GAAP (Generally Accepted Accounting Principles).
Goodwill		Excess over the purchase price for a subsidiary and the share in its equity after winding up the hidden reserves attributable to the purchaser on the date of acquisition.
Gross amounts		Presentation of the balance sheet items prior to the deduction of the amount which is allocated to the business ceded to a reinsurer.
Hedging		A way of insuring oneself against unwanted price fluctuations by the use of adequate counter positions, particularly in derivatives.
IAS		International Accounting Standards.
IFRS		International Financial Reporting Standards. As of 2002, the term IFRS refers to the entire concept of standards adopted by the International Accounting Standards Board. Standards that were adopted before that are still called International Accounting Standards (IAS).
Insurance benefits		Expenses (net of the reinsurer's share) arising from claim settlement, premium refunds and profit participation, and from changes in the actuarial provisions.
Loss ratio		Retained insurance benefits in property and casualty insurance, in relation to premiums earned.
Minority interests		Shares in the equity of associated companies that are not held by Group companies.
Minority interests in net profit		The share of net profit allocated not to the Group, but to shareholders outside of the Group holding interests in associated companies.
Multitranches		Bonds involving a put option under which the seller can sell additional bonds (with an identical or shorter term) to the buyer. The buyer receives a premium which increases the yield on the security as opposed to a 'normal' security having the same term and yield.
Operating expenses		This item includes acquisition expenses, the handling of the policy portfolio and reinsurance expenses. After deduction of commissions and profit participations received under reinsurance business ceded, the remaining expenses are the net operating expenses.
Premiums		Total premiums written. All compulsory premiums in the financial year, from insurance policies in direct business and reinsurance business accepted.
Profit participation		In life and health insurance, the policyholders are entitled by law and by contract to an adequate share in the profits generated by the company. The amount is reset every year.
Provision for outstanding claims		This provision includes the obligations for payment of insurance claims which have already occurred on the reporting date, but which are not yet completely settled.
Provision for premium refunds and profit participation		The part of the profit to be distributed to the policyholders is appropriated to a provision for premium refunds and/or profit participation. The provision also includes deferred amounts.
Reinsurance		An insurance company would cede parts of its own risk to another insurance company.
Reinsurance premiums ceded		Share of the premiums paid to the reinsurer as a consideration for insuring certain risks.
Retention		The part of the risks assumed which the (re)insurer does not cede.
Retrocession		Retrocession is the ceding of reinsurance business accepted to a retrocessionaire. Professional reinsurance companies and also other insurance companies, within their internal reinsurance business, use retrocession as an instrument for spreading and controlling risks.
Return on equity		The return on equity (before tax) is the profit on ordinary activities in relation to the average total equity (without consideration of the contained net profit). It is used as a general indication of the company' s efficiency.
Revaluation reserves		Unrealised profits and losses resulting from the difference in the present market value and acquisition value and/or the amortised acquisition costs for fixed interest securities are allocated to this reserve, without affecting income, after the deduction of deferred taxes and provisions for deferred profit participation (in life insurance).
Risk		The possibility that negative factors could influence the future financial situation of the company. Furthermore, in the insurance business, risk is understood as the possibility that a claim will arise because a danger that has been ensured against occurs. The insured object or insured person is also frequently referred to as a risk.
Risk management		Ongoing, systematic and continuous identification, analysis, evaluation and management of potential risks that could endanger the assets, financial situation and profits of a company over the medium and long terms. Target: to ensure the continued existence of a company, secure the company goals against disruptive events, with the aid of appropriate measures, and improve the company value.
Securities available for sale		Available-for-sale securities are securities that are neither meant to be held until maturity nor have they been acquired for short-term trading purposes. Available for sale at any time, they are recognised at par value on the balance sheet date.
Securities held to maturity		Securities representing money claims which are held with the intention of keeping them to maturity. They are recognised at amortised cost.
Solvability		Level of own funds in an insurance company.
Stress test		Stress tests are a special form of scenario analysis with the goal of being able to quantify the potential loss of portfolios during extreme fluctuations in the market.
Subordinate debt		Debt which is honoured in the case of winding up or bankruptcy only after all the other debts have been settled.
Supplementary capital		Capital paid in which is agreed to remain at the insurance company's disposal for at least five years, with no cancellation possible; it accrues interest only to the extent that this is covered by the net profit for the year. It can only be repaid prior to liquidation after a pro rata deduction of the net losses incurred during the retention period; in the case of liquidation, it can only be redeemed after those payables have been settled or secured that do not constitute equity or participation capital.
Trading portfolio		Debt securities, shares and other securities (primarily derivatives and structured products) which are held mainly for short-term trading purposes. They are recognised at current market value.
Unearned premiums		That part of the premium income of the year which refers to periods of insurance that lie after the reporting date, i.e. which have not yet been earned on the reporting date. In the balance sheet, with the exception of life insurance, unearned premiums have to be shown as a separate line item under the actuarial provisions.
US GAAP		US Generally Accepted Accounting Principles.
Value at risk		A method for measuring market risks in order to calculate the expected value of a loss that might occur in an unfavourable market situation, with a determined probability within a defined period of time.

Close Glossary