Audit opinion

Report on the consolidated financial statements

Audit opinion

We have audited the enclosed consolidated financial statements of UNIQA Insurance Group AG, Vienna, and its subsidiaries (the Group), consisting of the consolidated statement of financial position at 31 December 2016, the separate consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of cash flows and consolidated statement of changes in equity for the financial year ending on this reporting date as well as the notes to the consolidated financial statements.

In our opinion, the attached consolidated financial statements comply with the legal requirements and provide a true and fair view of the financial position and of the Groups’ earnings position at 31 December 2016 for the financial year ending on this reporting date, in accordance with the International Financial Reporting Standards (IFRSs) as applicable in the EU and the additional requirements of Section 245a of the Austrian Commercial Code and the supplementary provisions of Section 138(8) of the Austrian Insurance Supervision Act.

Basis for the audit opinion

We have conducted an audit of these financial statements in accordance with the Austrian principles of proper auditing of financial statements. These principles require the application of the international audit standards (International Standards on Auditing). Our responsibilities as in accordance with these regulations and standards are outlined in detail in the section of our auditor opinion entitled “Responsibilities of the auditors in auditing the consolidated financial statements”. Our work has been completed independently of the Group and is in line with Austrian company law and professional regulations, and our other professional duties have been discharged in line with these regulations. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our audit assessment.

Particularly relevant data related to the audit

Particularly relevant data related to the audit are those data that, in our judgement, had a significant impact on our audit of the consolidated financial statement for the reporting year. These data were treated in our audit of the consolidated financial statement as a whole and were considered as such in the preparation of this audit opinion. We do not deliver a separate audit opinion for this data specifically.

Our discussion of these particularly relevant data is structured as follows:

  • Data and statement of the problem
  • Method of audit and findings
  • Reference to additional information

1. Valuation of technical provisions

  • Data and statement of the problem
    Identifying assumptions related to interest rates, costs, mortality and lapses in valuating insurance provisions and assets in life insurance requires the Management Board to produce subjective estimates of future developments. Minor alterations to these assumptions and the methodologies used could produce a significant change in the valuation.
  • Method of audit and findings
    Across the Group, we have:
    • conducted spot-check comparisons between the data used for the evaluation and basic documentation,
    • involved actuarial specialists from PwC and compared the models and assumptions used with industry-specific knowledge and our professional experience with recognised actuarial practices,
    • assessed the plausibility of the modelled findings,
    • evaluated that valuation methods were applied consistently,
    • evaluated processes and tested core monitoring and
    • conducted actuarial assessments of the appropriateness of the insurance provisions.
  • Reference to additional information
    See Chapter 5 of the Annual Report: “Use of discretionary decisions and estimates”.

2. Appropriateness of the claim reserve

  • Data and statement of the problem
    The calculation of the claim reserve requires the Management Board to take discretionary decisions and provide estimates and assumptions. Minor alterations to these assumptions and the methodologies used could produce a significant change in the valuation.
  • Method of audit and findings
    Across the Group, we have:
    • conducted spot-check comparisons between the data used for the evaluation and basic documentation,
    • involved actuarial specialists from PwC and compared the models and assumptions used with industry-specific knowledge and our professional experience with recognised actuarial practices,
    • assessed the plausibility of the best-estimate reserves against PwC-internal calculations and identified a significant combined ratio on car insurance in the CEE region,
    • evaluated that valuation methods were applied consistently,
    • evaluated processes and tested core monitoring and
    • conducted actuarial assessments of the appropriateness of the insurance provisions.
  • Reference to additional information
    See Chapter 5 of the Annual Report: “Use of discretionary decisions and estimates”.

3. Valuation of investments

  • Data and statement of the problem
    The ongoing volatility in capital markets and challenging macroeconomic environment constitute an inherent risk in assessing valuations of investments insofar as these valuations are not based on stock exchange prices or other market prices, e.g. the ABS portfolio, structured and illiquid bonds. The Management Board will in this respect need to take discretionary decisions and provide estimates and assumptions. Minor alterations to these assumptions and the methodologies used could produce a significant change in the valuation.
  • Method of audit and findings
    Across the Group, we have:
    • conducted spot-tests of valuations,
    • validated external appraisals of significant investments and audited the balance sheet items’ recoverability,
    • involved actuarial specialists from PwC and compared the models and assumptions used with our industry-specific knowledge and our experience against suitable benchmarks,
    • evaluated that valuation methods were applied consistently,
    • evaluated processes and tested core monitoring and
  • Reference to additional information
    See Chapter 5 of the Annual Report: “Use of discretionary decisions and estimates”.

4. Impairment of goodwill

  • Data and statement of the problem
    The assessment of goodwill resulting from the acquisition of companies requires the Management Board to take discretionary decisions and provide estimates and assumptions.
  • Method of audit and findings
    We scrutinised the Management Board’s discretionary decisions and appointed evaluation specialists from PwC:
    • to compare the models and assumptions with our industry-specific knowledge and our experience against suitable benchmarks and
    • to audit and check the calculations of potential required depreciation in line with the IFRSs. Here, we placed our focus on Romania and Bulgaria.
  • Reference to additional information
    See Chapter 5 of the Annual Report: “Use of discretionary decisions and estimates”.

Responsibility of the Management and the Audit Committee for the consolidated financial statements

The Company’s management is responsible for the Group accounting system and for the preparation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and the additional requirements under Section 245a of the Austrian Commercial Code and the supplemental regulations under Section 138(8) of the Austrian Insurance Supervision Act that accurately reflects the Group’s assets, financial position and profitability. The legal representatives are additionally responsible for the internal controls which they consider to be required in order to enable the preparation of consolidated financial statements that are free from material intentional or unintentional false representations.

The legal representatives are responsible as part of the preparation of consolidated financial statements to assess the Group’s ability to continue its business activities, to provide pertinent data related to the continuation of business activities and to apply relevant accounting standards to the continuation of business activities unless the legal representatives intend to liquidate the Group or discontinue business activities or have no other realistic alternative than to do so.

The Audit Committee is responsible for monitoring the Group’s accounting processes.

Responsibilities of the auditors in auditing the consolidated financial statements

Our goal is to secure an adequate level of certainty that the consolidated financial statements, as a whole, are basically free of erroneous representations, whether intentional or unintentional, and to provide a report containing our audit opinion. This adequate level of certainty provides a high degree of certainty, though not a full guarantee, that an audit conducted fully in line with Austrian regulations, which stipulate the application of ISA rules, will in every case discover an essentially false representation, provided one exists. False representations may be an instance of fraud or may be a result of errors and will in principal be identified as such in cases in which there is a reasonable expectation that a single instance or group of these could influence decisions taken by readers on the basis of information provided by the consolidated financial statements.

As part of the consolidated financial statements, prepared according to Austrian regulations that require the application of ISA rules, we exercise obligatory discretion and maintain a critical stance throughout.

In addition,

  • we identify and evaluate risks in the statements of intended or unintended false presentations, devise substantive procedures in response to these risks, execute them and obtain sufficient and appropriate audit evidence to serve as a basis for our audit opinion. There is a greater risk that a false presentation resulting from fraud will not be uncovered than one resulting from error since fraud could involve deceitful collusion, falsifications, purposeful omissions, deceptive presentations or the suspension of internal control measures.
  • In evaluating these risks, the auditor takes into account the internal control system in order to plan audit actions that are reasonable under the given circumstances, but not with the objective of providing an audit assessment on the effectiveness of the Group’s internal control system.
  • An audit also includes an assessment of the reasonableness of the accounting principles applied and of the validity of the values estimated by the legal representatives in the accounting along with as assessment of related statements.
  • We draw conclusions regarding the suitability of the accounting standards applied by the legal representatives to the continuation of business activities and, based on the solicited audit evidence, whether any fundamental uncertainty results from circumstances or events that could create significant doubt about the Group’s ability to continue its business activities. If it is concluded that a significant uncertainty does exist, we are required to draw attention in our audit report to the relevant entries in the consolidated financial statements or, if this type of statement is inappropriate, to modify our audit opinion. Conclusions are established based on the audit evidence that was acquired up to the date of the audit opinion. Future events or circumstances could lead the Group to abandon the continuation of business activities as a result.
  • We evaluate the consolidated financial statements’ overall presentation, its structure and contents, including the provided data and whether the consolidated financial statements present the business activities and circumstances in an honest and complete manner.
  • We request sufficient and relevant audit evidence regarding financial information related to the units or business activities within the Group in order to provide an audit opinion on the consolidated financial statements. We are responsible for guiding, monitoring and conducting the audit of the consolidated financial statements. We assume full and sole responsibility for our audit opinion.

We communicated with the Audit Committee regarding, among other things, the intended scope and scheduling of the audit and significant findings of the audit, including any significant shortcomings in the internal system of monitoring that we were able to identify over the course of our audit.

We provided the Audit Committee with a statement to the effect that we maintained the requirements for professional conduct and independence and provided said committee with information regarding all circumstances and facts which could reasonably be seen to have a possible effect on our independence and – when relevant – related precautionary measures.

We certify that the data that we shared with the Audit Committee were the most pertinent data in auditing the reporting year’s consolidated financial statements and therefore represented particularly significant audit data. We describe this data in our audit opinion unless there are laws or other legal regulations that preclude sharing this information or we have determined, in a very small number of cases, that any the benefit of sharing certain information in the audit opinion in the interest of serving the public interest is outweighed by the probable negative effects of publication.

Other legal and regulatory requirements

Report on the group management report

Pursuant to statutory provisions, the management report for the Group is to be audited as to whether it is consistent with the consolidated financial statements and whether it was prepared in line with applicable legal requirements.

The legal representatives are responsible for preparing the management report in line with Austrian company law and insurance supervisory regulations.

We prepared our audit in line with professional principles related to conducting audits of management reports.

Opinion

In our opinion, the management report for the Group has been prepared in line with applicable legal requirements and is consistent with the consolidated financial statements.

Declaration

Based on the data collected during the audit of the consolidated financial statements and familiarity with the Group and its circumstances, we have identified no erroneous information in the management report.

Other disclosures

The legal representatives are responsible for all other information. Other information includes all information in the annual report, excluding the consolidated financial statements, the management report and the audit opinion. The annual report was only provided after the date of the audit opinion.

Our audit opinion on the consolidated financial statements does not cover this other information, and we can offer no assurances of any kind with respect to it.

In conjunction with our audit of the consolidated financial statements, it is our responsibility to review this other information as soon as it is made available and determine whether it contradicts or compromises the validity of any of the findings of the audit in an essential way.

Public accountant responsible for the project

The public accountant responsible for this project is Liane Hirner.

Vienna, 10 March 2017

PwC Wirtschaftsprüfung GmbH

Liane Hirner
Chartered Accountant

Publication and duplication of the consolidated financial statements together with the audit opinion in a form differing from the version audited by us is not permitted. This audit opinion refers exclusively to the German version of the complete consolidated financial statements and the Group management report. For differing versions, the regulations of Section 281(2) Austrian Commercial Code apply.