3.1. EU debt crisis
A few European member states have continued to experience financial pressure in 2011 due to the financial market crisis of recent years. Greece, Ireland, Italy, Portugal, Spain and Hungary have been named again and again in this context.
In particular, European and international initiatives should be mentioned with regard to risk assessment in terms of creditworthiness and collectability. Among others, in this context the European Financial Stabilisation Mechanism (EFSM), the European Financial Stability Facility (EFSF), the International Monetary Fund (IMF) and the European Central Bank (ECB) should be mentioned. Altogether, the EFSF, EFSM and IMF can currently raise € 750 billion. Ireland and Portugal have applied for and received financial aid through this mechanism.
In an additional step, the ECB’s Security Markets Programme is contributing to the stabilisation of the secondary market for government bonds by purchasing bonds from member states that are under pressure. In the case of Greece, the European states and the Institute of International Finance (IIF) have agreed to a partial debt waiver for private creditors. Even if the details of the debt refinancing arrangements at the balance sheet date are not yet set out in detail, we may proceed on the assumption that there will be a lasting reduction in the value of Greek bonds.
These aid measures are available to all member states. In the cases of Portugal and Ireland, the measures have proven their practicality. Hence, it does not currently look like we can assume there will be a long-lasting reduction in value of the affected government bonds, and collectability remains stable despite increased quality risk.
For direct and indirect investments in state bonds from the aforementioned countries, we refer to the chapter on disclosure and explanation of accounting and valuation methods in the Notes to the Group Financial Statements.
Significant events subsequent to the balance sheet date
Major risk positions were dismantled in the course of a “de-risking” programme in the first quarter of 2012. The Group risk positions were oriented towards solid Group solvency. In the investments area, all PIIGS bonds were sold and all Greek bonds held in the Austrian and international companies of the UNIQA Group were sold.
Furthermore, exposure in Portugal was almost halved, and holdings in Hungarian and Italian bonds were reduced.
3.2. Solvency II
The introduction of Solvency II is a major strategic element for the UNIQA Group. The UNIQA Group is intentionally preparing for future challenges related to Solvency II with specially designed Group projects.
One of UNIQA Group’s declared objectives is to meet all Solvency II requirements within the proper time frame and to implement them on the foundation of a business model. All implementation projects are designed in such a way that application will be possible by January 2014 at the latest.
The major challenge for UNIQA will be the punctual implementation of comprehensive requirements for risk management processes, associated documentation requirements and reporting requirements, especially because regulators have not yet fully clarified all of these requirements.
The implementation process is proceeding across the Group, and the challenge is to implement a uniform minimum standard in all UNIQA companies. A central topic in this task is the standardisation of processes, data structures, definitions and expertise.
The UNIQA Group is placing great value on the implementation of pillars r 2 and 3 – risk management processes. An essential aspect is the acceptance of the risk management system within the UNIQA subsidiaries. This is why we are communicating broadly within the company about the essence and utility of the risk management framework.
3.3. Reorientation of the UNIQA Group
We implemented the new strategy for the UNIQA Group in the summer of 2011. We are now implementing this growth strategy: we are optimising structures and accelerating processes to increase the company’s proximity to both customers and markets. These measures include human resources and process risks that are normal for such change processes. The UNIQA Group is therefore proceeding very carefully and is establishing internal controls to monitor risks.
Our goal in Austria with regard to bank assurance is to intensify cooperation between Raiffeisen insurance and the Raiffeisen banks significantly by aligning ourselves clearly with the needs of bank advisors and customers. If adjustments to collaboration among partners in the Raiffeisen banks are not adopted, then our growth targets cannot be met.
