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 as at 31 December 2018, the consolidated income statement from 1 January until 31 December 2018, 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 Group’s earnings position at 31 December 2018 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 Regulation (EU) No. 537/2014 (hereafter the EU Regulation) and following the Austrian principles of proper auditing of financial statements. These principles require the application of the International Standards on Auditing (ISAs). Our responsibilities according to these regulations and standards are outlined in detail in the section of our audit opinion entitled “Responsibilities of the auditor 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 data that, in our judgement, had a significant impact on our audit of the consolidated financial statements for the reporting year. These areas were taken into account in connection with our audit of the consolidated financial statements as a whole and in forming our audit opinion; we will not issue a separate opinion on these areas.

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

• Relevant facts
• Method of audit and findings
• Reference to additional information

1. Measurement of insurance provision and deferred acquisition costs (DAC) for life insurance contracts

• Relevant facts
  The carrying amount of €9,979,484 thousand in life insurance provision is determined in accordance with actuarial principles, based on the present value of future benefits to be paid by the UNIQA Insurance Group AG, Vienna, less the present value of future anticipated premiums. This is calculated according to contractually agreed principles. The liability adequacy test (LAT) evaluates whether the established provisions are sufficient. For this purpose a best estimate reserve is compared with the reserves as posted, less the deferred acquisition costs (DAC), plus the unearned revenue liability (URL). Acquisition costs with direct relevance to new business or to the extension of existing contracts are capitalised as DAC (€713,918 thousand) under intangible assets, and amortised over the duration of the contracts. Amortisation is calculated at a proportionate rate equivalent to that of the expected profit margin from these contracts as a proportion of total profits anticipated from life insurance.
  
  The principles used to evaluate insurance provision and the completion of the LAT require numerous assumptions, estimates and discretionary decisions. Minor alterations to these assumptions or the methodologies used could produce a significant change in the measurement.
  
  Based on the relevant facts as described, in our audit we paid particular attention to the measurement of the insurance provision and deferred acquisition costs.

• Method of audit and findings
  Across the Group, we have:
  • evaluated processes and tested core monitoring,
  • involved actuarial specialists from PwC and compared the models and assumptions used with industry-specific knowledge and our professional experience with recognised actuarial practices,
  • conducted spot-check comparisons between the data used for the evaluation and basic documentation,
  • assessed the plausibility of the modelled findings,
  • evaluated that measurement methods were applied consistently, and
  • carried out spot-checks to test their appropriateness.
  
  We consider that the assumptions and parameters on which the measurement is based are transparent and appropriate.

• Reference to additional information
  See the section in the general disclosures, in the notes to the consolidated financial statements: “Use of discretionary decisions and estimates” and “5. Technical provisions”.

2. Recognition and measurement of other intangible assets

• Relevant facts
  Other intangible assets in the amount of €160,587 thousand mainly comprise software. As part of the investment programme launched in the 2016 business year, significant sums are being invested in renewing the group-wide IT systems, continuing until the 2025 financial year. The first elements of the system already came into operation in the 2017 financial year.
  
  The recognition and measurement of other intangible assets related to the IT systems require discretionary decisions and assumptions and continuous monitoring, particularly where the total costs deviate from planned costs. Furthermore, company-internal contributions require an exact distinction to be made between capitalisable and non-capitalisable cost factors.
  
  Based on the relevant facts as described, in our audit we paid particular attention to the recognition and measurement of other intangible assets in our audit.

• Method of audit and findings
  We have:
  • evaluated the internal monitoring system established for these IT investments,
  • tested elements of the monitoring process,
  • compared the accounting and measurement methods used against appropriate benchmarks and against the accounting regulations of IAS 38, based on our knowledge of the industry and our experience,
  • made a critical examination of the assumptions with regard to recognition and measurement and
  • spot-checked the applied measurement methods.
  
  The accounting and measurement methods used are consistent with IFRS. We believe the assumptions and measurement parameters to be transparent and appropriate.

• Reference to additional information
  See the section in the general disclosures, in the notes to the consolidated financial statements: “Use of discretionary decisions and estimates” and “11. Intangible assets”.

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

The company’s management is responsible 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 auditor 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 the EU Regulation and with the Austrian principles of proper auditing of financial statements, which stipulate the application of ISA rules, will in each case reveal any essentially false representation that may exist. 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 any audit of financial statements that has been executed in compliance with the EU Regulation and the Austrian principles of proper auditing of financial statements, which require the application of the ISAs, we exercise due discretion and maintain a critical stance throughout the entire process of the audit.

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.
• We gain an understanding of the internal control system relevant for the audit of the consolidated financial statements in order to plan audit actions that are reasonable under the given circumstances, but not with the objective of providing an audit opinion on the effectiveness of the company’s internal control system.
• We assess the reasonableness of the accounting principles applied and of the validity of the values estimated by the legal representatives in the accounting along with an assessment of related statements.
• We draw conclusions with respect to the adequacy of the application of the going concern principle by the legal representatives and, on the basis of the audit evidence obtained, we evaluate 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 we come to the conclusion that a significant uncertainty does exist, we are obliged to call attention to the relevant entries in the consolidated financial statements or, if these entries are unsuitable, to modify our audit opinion. We draw our conclusions based on the audit evidence that was acquired up to the date of the audit opinion. However, future events or circumstances may result in the Group’s deviation from the going concern principle.
• 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 communicate 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 provide 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

Comments on the Group Management Report

Pursuant to statutory provisions, the Group Management Report 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 Group 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 Group Management Report 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 Group 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 Group 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.

Additional information in accordance with Article 10 of the EU Regulation

We were selected as the statutory auditor by the Annual General Meeting on 29 May 2017. We were appointed by the Supervisory Board on 9 October 2017. We have acted as statutory auditors continuously since 31 December 2013.

We hereby declare that the audit opinion in the section “Report on the consolidated financial statements” is in accordance with the additional report to the Audit Committee pursuant to Article 11 of the EU Regulation.

We hereby declare that we have not provided any prohibited non-audit services (Article 5(1) of the EU Regulation) and that we maintained our independence from the company audited in carrying out our audit of the consolidated financial statements.

Public accountant responsible for the project

The public accountant responsible for this project is Werner Stockreiter.

Vienna, 22 March 2019

PwC Wirtschaftsprüfung GmbH

Werner Stockreiter
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.