Austria’s economy has two very good years behind it. Economic momentum is expected to weaken somewhat in 2019, but still remain solid. Above all, the positive development on the Austrian labour market should continue to support private household consumption in 2019. In the eurozone, economic growth slowed mainly due to a weakening in export demand. However, the foundation for continued economic expansion is likely to remain intact due to solid domestic demand. Central and Eastern Europe (CEE) managed to continue the process of catching up with the eurozone. Economic researchers expect gross domestic product in CEE (not including Russia) to increase by 3.6 per cent in 2019. On the financial markets, political uncertainties (trade war, Brexit) and lower growth prospects have increased volatility. The ECB has announced an increase in the key interest rate for autumn 2019 at the earliest. However, the start of a cycle of interest rate hikes depends to a large extent on solid economic momentum and sustained stable inflation rates. UNIQA does not expect any significant rise in the general interest rate level in the eurozone.
Outlook for the insurance industry
According to forecasts by the Austrian Insurance Association, total premium revenues in Austria are expected to increase again by 1.5 per cent to around €17.6 billion in 2019. Growth of 2.9 per cent is forecast for property insurance; personal insurance is only likely to grow by 0.1 per cent. Life insurance continues to hold back performance with a decline of an estimated –2.0 per cent, especially in the area of single premiums (–6.1 per cent). Health insurance, on the other hand, is expected to grow by 3.5 per cent.
The sustained positive economic performance in Central and Eastern Europe should also lead to further increases in income over the next few years and to increased consumer spending by households. The fact that the insurance industry still needs to catch up in CEE is reflected in the so-called insurance density (per capita spending on insurance products). In Ukraine, per capita insurance spending is just €30; in the countries of Southeastern Europe this number is around €130, and in Central Europe it is around €360. In comparison, the insurance density in Austria is just under €2,000 and is at €2,200 for the EU as a whole.
UNIQA expects long-term growth dynamism in the CEE markets and therefore assumes that the insurance industry in Eastern Europe will continue to develop much more dynamically in 2019 than in Western Europe and Austria.
The outlook for the UNIQA Group for 2019 is subject to the following assumptions:
- The global economic upturn continues in 2019, although it is expected to weaken slightly.
- The ECB’s monetary policy remains loose in 2019. UNIQA does not expect any significant rise in the general interest rate level in the eurozone.
- No major disruptions occur on the capital markets.
- There are no drastic finance policy-related, regulatory or legal interventions.
- Damages from natural disasters remain within the average of previous years.
Changes in premiums and income position
UNIQA expects moderate growth in the total premium volume of approximately 1 per cent for 2019. Premium growth of around 2 per cent is expected in property and casualty insurance in 2019. In line with the long-term trend, UNIQA also anticipates growth of around 3 per cent in health insurance, driven primarily by business in Austria. In life insurance, on the other hand, a further decline can be expected due to the continuing low interest rate environment and the subdued demand for long-term provision products.
In 2016, UNIQA began the largest investment programme in the company’s history and is currently investing around €500 million in redesigning the business model and developing the required staff competencies and necessary IT systems. This significant investment in the future will continue to impact earnings before taxes in the 2019 financial year as well as in the following years.
UNIQA expects a decline in net investment income for 2019 compared to 2018, mainly due to the non-recurring effect from the sale of Casinos Austria Aktiengesellschaft.
UNIQA aims to improve the combined ratio (after reinsurance) further in 2019 compared with 2018. Increased profitability in the core technical business for property and casualty insurance should provide the basis for this.
Thus overall UNIQA expects an improvement in earnings before taxes for the 2019 financial year – adjusted for the non-recurring effect from the sale of Casinos Austria Aktiengesellschaft.
UNIQA also intends to continue increasing its annual distribution per share over the next few years as part of a progressive dividend policy.