Business lines

The UNIQA Group provides life and health insurance and is active in almost all lines of property and casualty insurance. With over 13 million insurance policies being managed at home and abroad, a gross premium volume written (including the savings portion of the unit-linked and index-linked life insurance) of €5.3 billion (2006: €5.1 billion) and capital investments of more than €21.5 billion (2006: €21.2 billion), the UNIQA Group is one of the leading insurance groups in Central and Eastern Europe.

Group pre-tax results hit record level

Dividend

In the 2007 financial year, the UNIQA Group was able to further improve its profits and earned a profit on ordinary activities that was 42.7% higher than the previous year at €340 million (2006: €238 million). Sales profitability was thereby increased to 8.3% (2006: 5.8%). Due to this development, the Management Board intends to propose a dividend payment of 50 cents per share to the Supervisory Board and the general assembly – an increase of 42.9% compared to the previous year.

Premium development

Premium volume written

Taking the savings portion of the unit-linked and index-linked life insurance in the amount of €748 million (2006: €559 million) into account, the total premium volume of the UNIQA Group grew in 2007 by 3.6% to €5,276 million (2006: €5,091 million). The total consolidated premiums written in 2007 remained at the level of the previous year at €4,528 million (2006: €4,532 million). While the area of recurring premium insurance developed satisfactorily with a growth of 4.4% to €4,602 million (2006: €4,410 million), the single-premium business declined by 1.2% to €673 million (2006: €681 million). The Group premiums earned, including the savings portion of the unit-linked and index-linked life insurance (after reinsurance) in the amount of €695 million (2006: €499 million), rose by 3.7% to €4,801 million (2006: €4,629 million). The retained premiums earned (according to IFRS) declined by 0.6% to €4,106 million (2006: €4,130 million).

In 2007, 41.7% of the premium volume was contributed by property and casualty insurance (2006: 40.0%), 17.2% by health insurance (2006: 17.5%) and 41.1% by life insurance (2006: 42.5%).

In Austria, premium volume written, including the savings portion from the unit-linked and index-linked life insurance, increased in 2007 by 2.8% to €3,517 million (2006: €3,420 million). Including the savings portion from the unit-linked and index-linked life insurance, the premiums earned rose by 3.4% to €3,249 million (2006: €3,143 million). The retained premiums earned (according to IFRS) in Austria amounted to €2,885 in 2007 (2006: €2,916 million).

In the growth markets of Eastern and south-eastern Europe (CEE & EEM), the premium development was noticeably accelerated in 2007. Premium volume written, including the savings portion from the unit-linked and index-linked life insurance, increased in 2007 by 27.6% to €816 million (2006: €640 million). This put the share of Group premiums coming from CEE & EEM at 15.5% (2006: 12.6%). Including the savings portion from the unit-linked and index-linked life insurance, the premiums earned rose by 25.0% to €760 million (2006: €608 million). The retained premiums earned (according to IFRS) grew by 19.8% to €627 million (2006: €523 million).

In the Western European Markets (WEM), the premiums written in 2007 decreased by 8.7% to €942 million (2006: €1,031 million) due to the decline in the single-premium business. On the other hand, recurring premiums developed positively and grew by 4.5% to €688 million (2006: €658 million). Overall, the share in Group premiums in 2007 was 17.9% (2006: 20.3%). Including the savings portion from the unit-linked and index-linked life insurance, the premiums earned decreased by 9.7% to €793 million (2006: €878 million). The retained premiums earned (according to IFRS) fell by 13.9% to €594 million (2006: €690 million).

Developments in insurance benefits

Insurance benefits

The insurance benefits before reinsurance of the UNIQA Group decreased in 2007 by 1.1% to €3,897 million (2006: €3,939 million). The consolidated retained insurance benefits even decreased last year by 3.2% to €3,597 million (2006: €3,716 million).

While the insurance benefits in Austria declined by 2.2% to €2,744 million (2006: €2,807 million), and in Western European Markets (WEM) by as much as 15.3% to €493 million (2006: €583 million), the insurance benefits in the Central and Eastern European regions (CEE & EEM) increased due to the rise in premium volume. Compared with the premium volume, however, they rose only moderately by 12.0% to €365 million (2006: €326 million).

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 in the 2007 financial year by 9.2% to €1,056 million (2006: €967 million). Acquisition expenses before the change in deferred acquisition costs rose by 6.4% to €812 million (2006: €763 million). Taking into account the change in deferred acquisition costs, which represented an additional expense of €36 million in 2007 compared to the previous year, the acquisition expenses grew by 12.0% to €794 million (2006: €708 million). Other operating expenses less reinsurance commissions received rose only moderately by 1.4% to €262 million (2006: €258 million), in comparison with the increase in premium volume thanks to the cost-reduction measures implemented as part of the profit improvement programme.

In 2007, the cost ratio of the UNIQA Group after reinsurance, i.e. the relation of total operating expenses to the Group premiums earned, including the savings portion from the unit-linked and index-linked life insurance, was 22.0% (2006: 20.9%) due to an increase in expenses due to the change in deferred acquisition costs and lower reinsurance commissions received. Adjusted for the change in deferred acquisition costs, the cost ratio rose only slightly in 2007 to 22.4% (2006: 22.1%). The administrative cost ratio decreased in 2007 to 5.5% (2006: 5.6%).

Investment results

Investments

Total investments, including land and buildings used by the Group, real estate held as investments, shares in associates and investments of unitlinked and index-linked life insurance, increased in 2007 by 1.8% to €21,544 million (2006: €21,155 million).

Net income from investments less financing costs rose by 10.4% to €955 million (2006: €865 million). This result can, primarily, be attributed to two effects: On the one hand, UNIQA benefited from exceptional profit through two capital increases by STRABAG SE in 2007, and was thereby able to increase the profit from associated companies to €303 million (2006: €45 million). On the other hand, the investment results in the second half of the year were influenced by the sub-prime crisis and the resulting expansion of the risk surcharges for refinancing in all credit markets and credit classes. The negative developments on the credit markets, among asset-backed securities (ABS) and on the stock markets, were only partially compensated for by falling interest rates in the bond markets. The negative performance of the ABS portfolio due to the sub-prime crisis and its revaluation (“mark-to-market”) based on the drastically reduced liquidity encumbered the investment results with approximately €127 million – of which €101 million falls in the sub-prime area.

A detailed description of the investment income can be found in the Group notes. (cf. Group notes, No. 33)

Own funds and total assets

The UNIQA Group’s total equity increased in 2007 by €202 million to €1,532 million (31 Dec. 2006: €1,330 million). This included shares in other companies amounting to €196 million (31 Dec. 2006: €207 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 2007) – rose significantly in the past financial year to 26.2% (2006: 20.8%). The total assets of the Group increased in the past financial year by 4.1% and totalled €25,589 million on 31 December 2007 (31 Dec. 2006: €24,587 million).

Cash flow

The cash flow from operating activities in 2007 was 846 million (2006: €1,237 million). Cash flow from investing activities of the UNIQA Group amounted to €–510 million (2006: €–1,280 million). There was an outflow of cash due to the acquisition of companies of €–53 million (2006: €–160 million). The financing cash flow in 2007 was €51 million (2006: €101 million). A total of €42 million were spent on the dividends from the 2006 financial year. The amount of liquid funds changed in total by €384 million (2006: €71 million). At the end of 2007, funds amounting to €647 million (2006: €263 million) were available.

Employees

Staff by region

The average number of employees in the UNIQA Group increased in 2007 to 10,997 (2006: 10,748). Of these, 4,273 (2006: 3,957) were in employed in sales and 6,724 (2006: 6,791) in administration. In the Eastern Emerging Markets (EEM), UNIQA employed a staff of 864 in 2007 (2006: 547), 2,987 people (2006: 2,930) in Central Eastern Europe (CEE) and 982 (2006: 989) in the Western European Markets (WEM). In Austria, 6,164 staff were employed (2006: 6,282). Including the employees of the GeneralAgencies working exclusively for UNIQA, the total staff of the UNIQA Group amounts to over 15,800 persons.

Slightly over half of the administrative staff employed in Austria in 2007 were women, 18.2% (2006: 17.6%) of the employees were part-time. The average age in the past year was 42 years (2006: 43 years). In total, 10.5% (2006: 11.1%) of the managers 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.