Business lines

Property and casualty insurance

Premium development

Premium volume written in property and casualty insurance

In property and casualty insurance, the UNIQA Group was able to continue the extremely positive developments of the previous year again in 2008, increasing the premiums written by 9.3% to €2,401 million (2007: €2,198 million). Despite the continued intense competition, the premium volume in Austria rose by 2.1% to €1,294 million (2007: €1,268 million). In the Central and Eastern European regions (CEE & EEM), the considerably more rapid growth also continued in 2008. The premiums written grew by 33.1% to €702 million (2007: €528 million), thereby contributing 29.2% (2007: 24.0%) to the Group premiums in property and casualty insurance. In the Western European markets, however, only moderate growth was experienced in 2008. Here, the premiums written increased slightly by 0.8% to €405 million (2007: €402 million). Overall, the international share of Group premiums in this segment amounted to 46.1% (2007: 42.3%).

Details on the premium volume written in the most important risk classes can be found in the Group notes (cf. Group notes No. 31).

The retained premiums earned (according to IFRS) in casualty and property insurance totalled €2,214 million at the end of the year (2007: €1,858 million) – representing a major increase of 19.1%.

Property and casualty insurance segment	2008 € million	2007 € million	2006 € million	2005 € million	2004 € million
Premiums written	2,401	2,198	2,037	1,934	1,656
Share CEE & EEM	29.2%	24.0%	21.0%	18.7%	18.6%
Share WEM	16.9%	18.3%	18.5%	19.6%	13.4%
International share	46.1%	42.3%	39.4%	38.3%	32.0%
Premiums earned (net)	2,214	1,858	1,716	1,628	1,394
Net investment income	42	258	141	131	89
Insurance benefits	–1.412	-1,251	-1.130	-1,106	-908
Net loss ratio (after reinsurance)	63.8%	67.3%	65.9%	68.0%	65.1%
Gross loss ratio (before reinsurance)	62.2%	67.9%	64.1%	66.4%	63.6%
Operating expenses less reinsurance commissions	–740	-606	-569	-553	-479
Cost ratio (after reinsurance)	33.4%	32.6%	33.2%	34.0%	34.4%
Net combined ratio (after reinsurance)	97.2%	99.9%	99.0%	101.9%	99.5%
Gross combined ratio (before reinsurance)	94.2%	98.7%	95.4%	98.2%	95.8%
Profit on ordinary activities	113	238	129	81	59
Net profit	104	193	104	54	53

Developments in insurance benefits
The total retained insurance benefits rose in 2008 by 12.8% to €1,412 million (2007: €1,251 million), which represents a disproportionately high increase relative to the increase in premiums. Insurance benefits increased in Austria by 5.7% to €808 million (2007: €765 million) and in Western European countries (WEM) by 15.3% to €248 million (2007: €215 million). In the Central and Eastern European regions (CEE & EEM), the insurance benefits increased in line with the increased premium volume by 31.0% to €356 million (2007: €272 million).

As a result of this development, the net loss ratio (retained insurance benefits relative to premiums earned) fell by 3.5 percentage points to 63.8% (2007: 67.3%). At the end of 2008, the gross loss ratio (before reinsurance) was even lower at 62.2% (2007: 67.9%). In Austria, the net loss ratio for the past financial year fell to 65.3% (2007: 70.2%) and in Western Europe to 69.2% (2007: 73.1%), while in the CEE & EEM regions it remained stable at 57.7% (2007: 57.3%).

Operating expenses, combined ratio
Total operating expenses in property and casualty insurance less reinsurance commissions and profit shares from reinsurance business ceded rose by 22.2% to €740 million (2007: €606 million). In the process, acquisition costs rose by 11.5% to €497 million (2007: €445 million), which was a disproportionately low increase compared with the rise in premiums, while other operating expenses increased by 52.0% to €244 million (2007: €160 million) due to lower retained reinsurance commissions.

The cost ratio in property and casualty insurance therefore increased slightly in the past financial year to 33.4% (2007: 32.6%). The net combined ratio fell due to the excellent loss ratio and lay significantly below 100% in 2008 at 97.2% (2007: 99.9%). The combined ratio before reinsurance fell even further to reach 94.2% (2007: 98.7%).

Investment results
Net income from investments less financing costs decreased in the past financial year by 83.7% to €42 million (2007: €258 million). The capital investments in property and casualty insurance declined by 7.7% to €3,315 million (2007: €3,590 million).

Profit on ordinary activities, net profit
Profit on ordinary activities in property and casualty insurance fell in 2008 by 52.4% to €113 million (2007: €238 million). Net profit was also down by 45.9% to €104 million (2007: €193 million).

Health insurance

Premium development

Premium volume written in health insurance

In comparison to the previous year, premiums written in health insurance increased by 4.4% to €948 million (2007: €908 million). In Austria, where UNIQA is the market leader in health insurance, the premium volume in 2008 grew over the previous year by 3.3% to reach €748 million (2007: €724 million). In the WEM region, the premiums written increased by as much as 6.4% to €191 million (2007: €180 million). In the countries of Eastern and South Eastern Europe, private health insurance continued to play a subordinate role with a premium volume of €8 million (2007: €4 million). Overall, the international share in the total health insurance premiums in 2008 was 21.1% (2007: 20.3%).

In 2008, the retained premiums earned (according to IFRS) in health insurance totalled €946 million at the end of the year (2007: €906 million), amounting to an increase of 4.5%.

Health insurance segment	2008 € million	2007 € million	2006 € million	2005 € million	2004 € million
Premiums written	948	908	890	845	745
International share	21.1%	20.3%	20.5%	17.9%	9.6%
Premiums earned (net)	946	906	887	849	742
Net investment income	14	134	114	101	81
Insurance benefits	–822	-811	-806	-773	-675
Acquisition expenses less reinsurance commissions	–134	-129	-137	-131	-119
Cost ratio (net after reinsurance)	14.2%	14.3%	15.4%	15.4%	16.1%
Profit on ordinary activities	3	96	54	41	23
Net profit	–1	72	35	35	20

Developments in insurance benefits
Despite the increased business volume, insurance benefits only rose slightly by 1.3% to €822 million (2007: €811 million). This also lowered the benefits ratio after reinsurance to 86.9% (2007: 89.6%). In Austria, insurance benefits even decreased by 1.1% to €641 million (2007: €649 million). In the international markets, the insurance benefits in 2008 increased by 11.1% to reach €181 million at the end of the year (2007: €163 million).

Operating expenses
Total operating expenses in health insurance less reinsurance commissions and profit shares from reinsurance business ceded rose in 2008 by 3.8% to €134 million (2007: €129 million), a disproportionately low increase compared with the premium volume. Despite the increased premium volume, acquisition expenses rose only slightly by 0.8% to €87 million (2007: €86 million). Other operating expenses increased by 10.0% to €47 million (2007: €43 million). As a result of this development, the cost ratio in health insurance decreased further in 2008 to 14.2% (2007: 14.3%).

Investment results
Net income from investments less financing costs fell by 89.7% to €14 million (2007: €134 million). In the health insurance segment, capital investments grew by 9.6% to €2,288 million (2007: €2,087 million).

Profit on ordinary activities, net profit
Profit on ordinary activities in health insurance fell in the reporting year due to the negative capital market environment by 96.4% to €3 million (2007: €96 million). Net profit declined in 2008 to €–1 million (2007: €72 million).

Life insurance

Premium development

International premium volume written in life insurance

The life insurance premium volume written, including the savings portion of unit- and index-linked life insurance, increased in 2008 by 14.1% to €2,476 million (2007: €2,170 million). Revenues from policies with recurring premium payments rose by 4.4% to €1,563 million (2007: €1,497 million). In the single premium business, premiums in the area of unit-linked life insurance decreased by 9.6% to €408 million (2007: €452 million), while classic single-premium policies climbed by 128.3% to €505 million (2007: €221 million). Overall, the single premium business grew by 35.7% to €913 million (2007: €673 million).

Although the premium development in Austria was still encumbered in 2008 by the loss of premium income from contracts with reduced payment terms, the premium volume still rose by 2.1% to €1,557 million (2007: €1,525 million) due to the continued growth in unit-linked life insurance products. Revenues from policies with recurring premium payments rose by 2.8% to €1,321 million (2007: €1,285 million). The single premium business remained roughly at the level of the previous year at €236 million (2007: €241 million). The Group companies in the Central and Eastern European regions (CEE & EEM) experienced growth in the life insurance segment that was many times stronger. The premium volume written including the savings portion of unit- and index-linked life insurance doubled to €569 million (2007: €285 million). The share of life insurance from these countries thus already amounted to 23.0% in 2008 (2007: 13.1%). In the Western European countries (WEM), on the other hand, the premium volume written declined slightly by 2.7% to €351 million (2007: €360 million). Overall, the Western European region (WEM) contributed 14.2% (2007: 16.6%) to the total life insurance premiums of the Group.

The risk premium share of unit- and index-linked life insurance included in the consolidated financial statements totalled €97 million in 2008 (2007: €86 million). The savings portion of the unit- and index-linked life insurance lines amounted to €823 million (2007: €748 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- and index-linked life insurance (after reinsurance) in the amount of €774 million (2007: €695 million), the premiums earned in life insurance rose by 15.1% to €2,344 million (2007: €2,037 million). The retained premiums earned (according to IFRS) increased in 2008 by 17.0% to €1,570 million (2007: €1,342 million).

Life insurance segment	2008 € million	2007 € million	2006 € million	2005 € million	2004 € million
Premiums written	1,653	1,422	1,605	1,591	1,199
Savings portion of premiums from unit- and index-linked life insurance	823	748	559	360	178
Premiums written incl. savings portion of premiums from unit- and index-linked life insurance	2,476	2,170	2,164	1,951	1,377
Share CEE & EEM	23.0%	13.1%	9.7%	6.1%	5.2%
Share WEM	14.2%	-16.6%	22.0%	17.1%	2.1%
International share	37.1%	29.7%	31.7%	23.2%	7.3%
Premiums earned (net)	1,570	1,342	1,527	1,523	1,166
Savings portion of premiums from unit- and index-linked life insurance (net after reinsurance)	774	695	499	311	129
Premiums earned (net) incl. the savings portion of premiums from unit- and index-linked life insurance	2,344	2,037	2,027	1,834	1,295
Net investment income	133	563	610	731	580
Insurance benefits	–1,328	-1,534	-1,780	-1,898	-1,451
Operating expenses less reinsurance commissions and change in deferred acquisition costs	–347	-328	-304	-284	-253
Cost ratio	14.8%	16.1%	15.0%	15.5%	19.6%
Other operating expenses less insurance commissions	–363	-321	-261	-244	-231
Cost ratio (net after reinsurance)	15.5%	15.7%	12.9%	13.3%	17.8%
Profit on ordinary activities	–27	5	56	69	39
Net profit	–37	4	37	44	29

Developments in insurance benefits
The retained insurance benefits decreased in the reporting period by 13.5% to €1,328 million (2007: €1,534 million). In Austria, insurance benefits also decreased by 36.8% to €838 million (2007: €1,326 million). In the Western European region (WEM), insurance benefits decreased by 11.4% to €105 million (2007: €118 million), while they rose in Central and Eastern Europe (CEE & EEM) by 325.2% to €385 million (2007: €91 million) due to the strong premium growth.

Operating expenses
Total operating expenses in life insurance less reinsurance commissions and profit shares from reinsurance business ceded rose in 2008 by 13.1% to €363 million (2007: €321 million). Acquisition expenses rose by 9.2% to €286 million (2007: €262 million). In line with the extremely positive development of new business, an increase in expenses due to the change in deferred acquisition costs was observed again in 2008 in the amount of €23 million. Because the reinsurance commissions received also declined to €6 million (2007: €11 million), among other factors, other operating expenses increased by 30.8% to €76 million (2007: €58 million). However, since the premium volume in life insurance developed even more rapidly, the cost ratio, i.e. the ratio of all claims incurred to the Group premiums earned, including the savings portion of unit- and index-linked life insurance, declined to 15.5% (2007: 15.7%). Adjusted for the change in deferred acquisition costs, the cost ratio even declined to 14.8% in 2008 (2007: 16.1%).

Investment results
The net income from investments less financing costs declined in the reporting year by 76.4% to €133 million (2007: €563 million) due to consequences of the financial crisis. The capital investments including the investments for unit- and index-linked life insurance shrank slightly in 2008 by 0.8% to €15,739 million (2007: €15,867 million).

Profit on ordinary activities, net profit
The profit on ordinary activities in life insurance was negative in 2008 due to the negative capital markets environment, and amounted to €–27 million (2007: €5 million). The net profit was also negative at €–37 million (2007: €4 million).

Glossary

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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.

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