Profitable growth in the core business

In summer 2011, we launched the long-term strategic programme UNIQA 2.0, which runs until 2020. We are concentrating on our core business as a primary insurer in our two core markets of Austria and Central and Eastern Europe (CEE). Our business model is geared towards profitable growth and long-term value creation in these markets. We intend to boost profitability at UNIQA Austria, increase productivity of Raiffeisen Insurance in Austria, tap the growth potential in the CEE region and establish a consistent risk-return approach.

With “UNIQA”, we have the leading insurance brand in Austria, while Raiffeisen Insurance profits from the “Raiffeisen” brand, the strongest bank brand in Austria. Both brands are also well positioned in the CEE region. We put great emphasis on the bundled expertise of an international group that is active in 20 European countries and in close proximity to customers.

In 2012, we took the first step in the implementation of UNIQA 2.0. We have delivered on our promise to our shareholders: earnings before taxes (EBT) of €205.4 million were up 44.9 per cent on the 2010 earnings of €141.8 million. EBT in 2011 were burdened by significant non-recurring items – value adjustments on Greek government bonds and expenditure on the repositioning of UNIQA – (2011: minus €322.3 million). The solvency ratio rose to 214.9 per cent as at 31 December 2012. The return on equity (ROE) before taxes was 13.2 per cent. ROE after taxes and minority interests was 9.1 per cent. The return on sales (ROS) was 3.9 per cent.

EBT of €205.4 million are distributed as follows between the three segments: The health insurance segment generated EBT of €106.9 million, while the life insurance segment generated €119.5 million. In contrast, the property and casualty insurance segment reported a loss of €20.3 million. These figures include a consolidation effect of minus €0.7 million.

We are working intensively on making the property and casualty insurance segment profitable. The combined ratio after reinsurance improved to 101.3 per cent in 2012 (2011: 104.9 per cent). However, our target is to achieve and maintain a figure significantly lower than the 100 per cent mark over the medium term. A similar situation applies to the Group cost ratio: although it fell to 25.0 per cent in 2012 (2011: 26.8 per cent), we intend to achieve a further significant improvement in this figure in the medium term.

As a part of the implementation of the risk-return approach, UNIQA started to restructure its portfolio in 2012. Against the backdrop of a low-interest environment, this restructuring had a positive effect on investment income in the life insurance segment despite de-risking measures and led to an increase in EBT there. This was supported by an adjustment that we made in 2011 to bring profit sharing into line with current economic conditions. The low interest level also exerts a positive influence on the evaluation of investments in shareholders' equity. In contrast, a sustained low interest level impacts negatively on the economic assessment (embedded value), which takes into account the long-term nature of the life insurance business.

Value-oriented management of the life insurance segment according to economic principles combines with the focus on achieving the desired IFRS result to form a key component of UNIQA 2.0.

UNIQA introduced measures in 2012 in response to the low-interest environment: we are implementing a sustainable asset liability management policy in order to better balance the sensitivities of capital market investments with respect to actuarial liabilities. Furthermore, we are working intensively as part of the risk-return approach on product strategy and profitability management.

These measures began to take effect in 2012. We will publish data for embedded value when the first-quarter earnings for 2013 are announced on 17 May 2013.