Property and casualty insurance

Premium volume written in property and casualty insurance

Premium development
Due to the extremely positive development in the year 2007, the UNIQA Group was able to increase its premiums written by 7.9% to €2,198 million (2006: €2,037 million). Despite the sometimes intense competition situation, in the automotive segments in particular, the premium volume in Austria increased by 2.8% to €1,268 million (2006: €1,234 million). In the Central and Eastern European regions (CEE & EEM), the rapid growth continued in 2007 as well. The premiums written grew by 23.6% to €528 million (2006: €427 million), thereby contributing 24.0% (2006: 21.0%) to the Group premiums in property and casualty insurance. However, considerable growth was also achieved in the Western European markets (particularly in Italy and Germany), with premiums written in this region rising by 6.9% to €402 million (2006: €376 million). Overall, the international share of Group premiums in this segment was 42.3% (2006: 39.4%).

Details on premium volume written in the most important risk classes can be found in the Group notes (cf. Group notes no. 30).

The retained premiums earned (according to IFRS) in casualty and property insurance totalled €1,858 million at the end of the year (2006: €1,716 million) – representing an increase of 8.3%.

Property and casualty insurance segment	2007 € million	2006 € million	2005 € million	2004 € million
Premiums written	2,198	2,037	1,934	1,656
Share CEE & NEEM	24.0%	21.0%	18.7%	18.6%
Share WEM	18.3%	18.5%	19.6%	13.4%
International share	42.3%	39.4%	38.3%	32.0%
Premiums earned (net)	1,858	1,716	1,628	1,394
Net investment income	258	141	131	89
Insurance benefits	-1,251	-1,130	-1,106	-908
Net loss ratio (after reinsurance)	67.3%	65.9%	68.0%	65.1%
Gross loss ratio (before reinsurance)	67.9%	64.1%	66.4%	63.6%
Operating expenses less reinsurance commissions	-606	-569	-553	-479
Cost ratio (after reinsurance)	32.6%	33.2%	34.0%	34.4%
Administrative cost ratio (net after reinsurance)	8.6%	9.2%	9.4%	8.4%
Net-Combined ratio (after reinsurance)	99.9%	99.0%	101.9%	99.5%
Gross-Combined ratio (before reinsurance)	98.7%	95.4%	98.2%	95.8%
Profit on ordinary activities	238	129	81	59
Net profit	193	104	54	53

Developments in insurance benefits
Due to the storm losses over the course of the year and reserve-strengthening measures, the total retained insurance benefits increased in 2007 by 10.7% to €1,251 million (2006: €1,130 million). Insurance benefits increased in Austria by 7.0% to €765 million (2006: €715 million) and in Western European countries by 20.5% to €215 million (2006: €178 million) as a result of an accumulation of major losses. In the Central and Eastern European regions (CEE & EEM), insurance benefits were up only moderately – compared with the rise in business volume – by 14.7% to €237.2 million (2006: €272 million).

As a result of this development and despite the continued, consistent implementation of reorganisation measures and risk-oriented underwriting policies, the net loss ratio (retained insurance benefits relative to premiums earned) increased by 1.4 percentage points to 67.3% (2006: 65.9%). The gross loss ratio (before reinsurance) at the end of 2007 was 67.9% (2006: 64.1%). In Austria, the net loss ratio for the past financial year was 70.2% (2006: 67.9%) and in Western Europe 73.1% (2006: 67.2%), while in the CEE & EEM regions it amounted to 57.3% (2006: 59.7%).

The level of reserves in property and casualty insurance (retained technical provisions in relation to earned premiums) rose slightly again in 2007, reaching 112.2% at the end of the year (2006: 110.9%).

Operating expenses, combined ratio
The total operating expenses less reinsurance commissions and profit shares from reinsurance business ceded increased in the property and casualty segment by 6.5% to €606 million (2006: €569 million) representing a lower rate of increase than the premiums. In the process, acquisition costs rose in line with premium income by 8.1% to €445 million (2006: €412 million), while other operating expenses increased only moderately by 2.1% to €160 million (2006: €157 million).

The cost ratio in property and casualty insurance sank in the past financial year to 32.6% (2006: 33.2%). The administrative cost ratio also declined 8.6% (2006: 9.2%). However, the net combined ratio increased due to the rise in the loss ratio and was at 99.9% in 2007 (2006: 99.0%). The combined ratio before reinsurance was 98.7% (2006: 95.4%). Excluding the losses from the storm “Kyrill”, the net combined ratio was 99.2%, placing it only slightly above the level of the previous year. The adjusted combined ratio before reinsurance was 95.9%.

Investment results
The net income from investments less financing costs increased in the past financial year by 83.4% to €258 million (2006: €141 million), primarily due to the exceptional profits from the capital increases of STRABAG SE. The capital investments in property and casualty insurance increased by 7.4% to €3,590 million (2006: €3,343 million).

Profit on ordinary activities, net profit
Profit on ordinary activities increased in property and casualty insurance in 2007 by 85.0% to €238 million (2005: €129 million). Net profit was up by 86.2% to €193 million (2006: €104 million).

Health insurance

Premium volume written in health insurance

Premium development
In comparison to the previous year, premiums written in health insurance increased by 2.0% to €908 million (2006: €890 million). In Austria, where UNIQA is the clear market leader, premiums of €724 million were achieved in 2007 (2006: €707 million). This was an increase of 2.3%. In the WEM region, health insurance premiums remained below the level of the previous year at €180 million (2006: €180 million). In the countries of Eastern and south-eastern Europe, private health insurance continued to play a subordinate role, with premiums income of €4 million (2006: €3 million). Overall, the international share in the total health insurance premiums in 2007 was 20.3% (2006: 20.5%).

In 2007, the retained premiums earned in health insurance totalled €906 million at the end of the year (2005: €887 million), amounting to an increase of 2.1%.

Health insurance segment	2007 € million	2006 € million	2005 € million	2004 € million
Premiums written	908	890	845	745
International share	20.3%	20.5%	17.9%	9.6%
Premiums earned (net)	906	887	849	742
Net investment income	134	114	101	81
Insurance benefits	-811	-806	-773	-675
Acquisition expenses less reinsurance commissions	-129	-137	-131	-119
Cost ratio (net after reinsurance)	14.3%	15.4%	15.4%	16.1%
Administrative cost ratio	4.8%	5.6 %	6.2 %	7.1 %
Profit on ordinary activities	96	54	41	23
Net profit	72	35	35	20

Developments in insurance benefits
Despite the increased business volume, insurance benefits only rose marginally by 0.7% to €811 million (2006: €806 million). This lowered the benefits ratio after reinsurance to 89.6% (2006: 90.9%). In Austria, insurance benefits also exhibited only moderate growth in comparison with the increase in premiums, increasing by 0.6% to €649 million (2006: €644 million). The insurance benefits in the international markets also hardly increased and totalled €163 million in 2007 (2006: €161 million).

Operating expenses
Total operating expenses less reinsurance commissions and profit shares from reinsurance business ceded fell significantly in 2007 by 5.5% to €129 million (2006: €137 million). Acquisition expenses declined by 1.1% to €86 million (2006: €87 million). Other operating expenses for health insurance decreased even more significantly by 13.2% to €43 million (2006: €50 million) despite the increase in premium volume. As a result of this development, the cost ratio in health insurance decreased in 2007 to 14.3% (2006: 15.4%). The administrative cost ratio decreased to 4.8% (2006: 5.6%).

Investment results
Net income from investments less financing costs rose in 2007 by 17.3% to €134 million (2006: €114 million). In the health insurance segment, capital investments grew by 1.0% to €2.087 million (2006: €2,067 million).

Profit on ordinary activities, net profit
Profit on ordinary activities in health insurance rose again in the reporting year by 79.7% to €96 million (2006: €54 million). Net profit was up by 107.3% to €72 million (2006: €35 million).

Life insurance

Premium volume written in life insurance

Premium development
The life insurance premium volume written, including the savings portion from the unit-linked and index-linked life insurance, increased in 2007 by 0.3% to €2,170 million (2006: €2,164 million). Revenues from policies with recurring premium payments rose by 0.9% to €1,497 million (2006: €1,483 million). In the single-premium business, the classic single premiums decreased by 39.1% to €221 million (2006: €363 million), while the single premiums in the area of unit-linked life insurance climbed by 41.9% to €452 million (2006: €318 million). Overall, the single-premium business declined by 1.2% to €673 million (2006: €681 million).

Although the premium development in Austria was encumbered by the loss of premium income from contracts with a reduced payment term once again in 2007, the premium volume still rose by 3.1% to €1,525 million (2006: €1,479 million), due to the continued growth in unit-linked life insurance products. The income from contracts with recurring premium payment remained at the level of the previous year at €1,285 million (2006: €1,287 million). The single-premium business increased in the past financial year by 25.7% to €241 million (2006: €191 million) – driven by the single premiums in unit-linked life insurance. The Group companies in the Central and Eastern European regions (CEE & EEM) enjoyed significantly greater growth in the life insurance segment. The premium volume written, including the savings portion from the unit-linked and index-linked life insurance, increased by 35.4% to €285 million (2006: €210 million). The share of life insurance from these countries thus already amounted to 13.1% in 2007 (2006: 9.7%). In Western European Markets (WEM), on the other hand, premium volumes decreased by 24.3% to €360 million (2006: €475 million), due to the decline in the single-premium business in Italy. In contrast, the recurring premium volumes saw satisfactory developments with a growth of 3.4% to €106 million (2006: €103 million). Overall, the WEM region contributed 16.6% (2006: 22.0%) to the total life insurance premiums of the Group.

The risk premium share of unit-linked and index-linked life insurance included in the consolidated financial statements totalled €86 million in 2007 (2006: €67 million). The savings portion of the unit-linked and index-linked life insurance lines amounted to €748 million (2006: €559 million) and was, in accordance with FAS 97 (US-GAAP), balanced out by the changes in the actuarial provision.

Including the savings portion of the unit-linked and index-linked life insurance (after reinsurance) in the amount of €695 million (2006: €499 million), the premiums earned in life insurance rose by 0.5% to €2,037 million (2006: €2,027 million). The retained premiums earned (according to IFRS) fell by 12.1% in 2007 to €1,342 million (2006: €1,527 million).

Life insurance segment	2007 € million	2006 € million	2005 € million	2004 € million
Premiums written	1,422	1,605	1,591	1,199
Savings portion of premiums from unit-linked and index-linked life insurance	748	559	360	178
Premiums written incl. savings portion of premiums from unit-linked and index-linked life insurance	2,170	2,164	1,951	1,377
Share CEE & NEEM	13.1%	9.7%	6.1%	5.2%
Share WEM	-16.6%	22.0%	17.1%	2.1%
International share	29.7%	31.7%	23.2%	7.3%
Premiums earned (net)	1,342	1,527	1,523	1,166
Savings portion of premiums from unit-linked and index-linked life insurance (net after reinsurance)	695	499	311	129
Premiums earned (net) incl. the savings portion of premiums from unit-linked and index-linked life insurance	2,037	2,027	1,834	1,295
Net investment income	563	610	731	580
Insurance benefit	-1,534	-1,780	-1,898	-1,451
Operating expenses less reinsurance commissions and change in deferred acquisition costs	-328	-304	-284	-253
Cost ratio	16.1%	15.0%	15.5%	19.6%
Other operating expenses less insurance commissions	-321	-261	-244	-231
Cost ratio (net after reinsurance)	15.7%	12.9%	13.3%	17.8%
Administrative cost ratio (net after reinsurance)	2.9%	2.6%	4.2%	5.6%
Profit on ordinary activities	5	56	69	39
Net profit	4	37	44	29

Developments in insurance benefits
The retained insurance benefits saw heavy declines out of proportion with the decline in earned premiums, falling by 13.8% to €1,534 million (2006: €1,780 million). Insurance benefits also decreased in Austria by 8.5% to €1,326 million (2006: €1,448 million). While insurance benefits in Western Europe (WEM) decreased by as much as 51.6% to €118 million (2006: €244 million), they increased in Central and Eastern Europe (CEE & EEM) by only 3.7% to €91 million (2006: €87 million) despite the strong premium growth.

Operating expenses
Total operating expenses in life insurance less reinsurance commissions and profit shares from reinsurance business ceded rose in 2007 by 22.7% to €321 million (2006: €261 million). Acquisition expenses increased by 25.1% to €262 million (2006: €210 million) due to the satisfactory new business volume. In line with the development of new business, an increase in expenses due to the change in deferred acquisition costs in the amount of €36 million was also observed in 2007. Reinsurance commissions received decreased by €10 million to €11 million (2006: €21 million), while other operating expenses increased by 13.0% to €58 million (2006: €52 million). As a result of this development, the cost ratio in life insurance, i.e. the relation of all claims incurred to the Group premiums earned, including the savings portion from the unit-linked and index-linked life insurance, rose to 15.7% (2006: 12,9%). Adjusted for the change in deferred acquisition costs, the cost ratio in 2007 was 16.1% (2006: 15.0%). The administrative cost ratio increased slightly to 2.9% (2006: 2.6%).

Investment results
The net income from investments less financing costs declined in the reporting year by 7.7% to €563 million (2006: €610 million), due in part to consequences of the sub-prime crisis). The capital investments, including the investments for unit-linked and index-linked life insurance, increased in 2007 by 0.8% to €15,867 million (2006: €15,745 million).

Profit on ordinary activities, net profit
Due to the declining investment income and the profit-sharing allocations far exceeding the statutory requirements, the profit on ordinary activity in life insurance fell to €5 million (2006: €56 million). Net profit was down to €4 million (2006: €37 million).

International markets

International premium volume written in life insurance

The international premium volume of the UNIQA Group, including the savings portion from unit-linked and index-linked life insurance, rose in 2007 by 5.2% to €1,758 million (2006: €1,671 million), primarily, as a result of the strong organic growth of the companies in Eastern and southeastern Europe. This brought the international share of Group premiums up to 33.3% (2006: 32.8%).

Including the savings portion from the unit-linked and index-linked life insurance (after reinsurance), the premiums earned increased by 4.5% to €1,552 million (2006: €1,486 million). The retained premiums earned (according to IFRS) increased by 0.6% to €1,221 million (2006: €1,213 million).

Central and Eastern Europe (CEE & EEM)

The countries of Eastern and south-eastern Europe achieved very high growth rates in 2007, and were able to increase their total premiums written by 27.6% to €816 million (2006: €640 million). Due primarily to the dynamisation projects implemented in most of these countries in order to increase organic growth, the growth in 2007 was far above the growth in the respective markets. In the Eastern Emerging Markets, the premium volume grew by as much as 81.0% to €81 million (2006: €45 million). Overall, the CEE & EEM regions already contributed 15.5% (2006: 12.6%) to the Group premiums.

Western Europe (WEM)

In Western Europe, the year 2007 was characterised by the weak performance of the single-premium business in Italy. The premiums written declined as a result by 8.7% to €942 million (2006: €1,031 million). The recurring premium business improved in Italy by 4.4% to €90 million (2006: €86 million). Growth was satisfactory in Germany as well at 2.8% to €406 million (2006: €395 million). In 2007, The WEM region contributed 17.9% (2006: 20.3%) to the Group premiums.

The premium volume written, including the savings portion from the unitlinked and index-linked life insurance, was divided as follows among the various regions in the UNIQA Group:

The total insurance benefits in the international Group companies increased 5.5% in 2006 to €858 million (2005: €908 million). Consolidated operating expenses less reinsurance commissions and profit shares from reinsurance business ceded rose in the past financial year by 21.1% to €419 million (2006: €346 million).

The profit on ordinary activities earned by the companies in the three regions outside of Austria declined in 2007 prior to consolidation on the basis of geographic segments (see segment reporting) to €53 million (2006: €64 million) due to the pressure on the results of UNIQA Re from storm losses and the companies being established in the EEM. This amounted to a share in the Group results of 14.2% (2006: 26.2%).