We are one-third of the way there

Dear Shareholders,

2014 was the third full year of our long-term strategic programme UNIQA 2.0, which we presented to you in the middle of 2011. We have accomplished a great deal over these past 12 months in a challenging environment, albeit not everything we set out to do. We are moving full steam ahead to fulfil our objectives and thus to continue UNIQA’s step-by-step development towards its long-term goal of becoming the leading insurer in Central and Eastern Europe.

In the 19 European countries in which we are active, we have won the trust of a total of more than 10 million customers whom we have to thank for €6.1 billion in premium income. For this, I would like to sincerely thank those customers, as well as our approximately 22,000 employees and business associates.

The composition of this growth of around 3 per cent compared to 2013 is not entirely in line with our strategy: Strong growth in life insurance, carried above all by our Italian subsidiary, and systematic, solid growth in health insurance stand in contrast to the growth that was below expectations in property and casualty insurance. The reasons for this lie in currency losses in Eastern Europe and in turnaround measures in automobile insurance in several CEE countries.

2014 – Increased profitability and lower costs

We have further improved profitability of our technical results in our two core markets, Austria and CEE, in particular as a result of the first positive effects of strict cost management.

In property and casualty insurance, the combined ratio declined by 0.3 percentage points to 99.5 per cent, following 105.1 per cent in 2011. Despite a significantly reduced cost ratio, the improvement in the combined ratio moved more slowly than planned. The primary reason for this is found in run-off losses in Austria, Poland and Romania. In both life insurance and health insurance, where in Austria we are the market leader with a market share of 48 per cent, we were able to improve the technical results.

With regard to profit from ordinary activities (POA) in our operating segments, both of our companies that are active in the home market in Austria did very well. Both UNIQA Österreich and Raiffeisen Versicherung AG, with a POA of €273.9 million and €108.6 million respectively, not only clearly exceeded the previous year’s results, they also performed better than planned. In addition to technical improvements in insurance, positive one-time effects in net investment income were at the centre of this development.

In contrast, with a loss from ordinary activities of €–1 million, UNIQA International came in under the previous year’s results and also fell considerably short of the planned performance. Weak operating developments in Hungary and Romania, where we also recognised an impairment loss on goodwill of €25 million, clouded the outlook for otherwise marked positive performance in the other international markets. Special attention should be paid to the continued satisfying business trend in Ukraine and Russia, despite the difficult general conditions. Not only did we generate double-digit growth in premiums here on the basis of the local currencies, we also had clearly positive contributions to net profit.

The overall good net profit before taxes of €377.9 million for 2014 allows us to propose an increase in the dividend from €0.35 per share to €0.42 per share to the Annual General Meeting.

2015 – The environment makes it a challenge

The operating goals for 2015 are clear: Maintaining good technical profitability in health and life insurance and in particular a clear improvement in property and casualty insurance. This is even more important in that in the medium term net investment income, which in 2014 turned out to be remarkably positive with a return of 3.8 per cent in a phase of realigning our asset allocation, cannot be maintained at this level.

At the end of November 2014, we resolved and communicated a reduction of our POA planning for 2015 by around 20 per cent from “up to €550 million” to a range of “between €425 and €450 million”, which still corresponds to a double-digit percentage increase. The determining factors for this were the low interest environment, the weak macroeconomic trend in some of our markets and the political instability around the armed conflict in eastern Ukraine.

We will attempt to compensate for a portion of the negative effects of these external factors through further improvement in the core underwriting business. Following years of intensive preparations within our Company, we are pleased that the Europe-wide regulatory framework Solvency II goes into effect beginning 1 January 2016, which will entail a stronger focus on the diligent, long-term economic approach to managing insurance undertakings.

In the name of the Management Board, I would like to express our sincere gratitude to our shareholders for their interest in UNIQA. We will continue to work consistently to fulfil your expectations.

Andreas Brandstetter

© UNIQA Group 2015