Capital – the foundation for our activities
Customer confidence in our ability to settle our liabilities at any time forms the basis of our business. A balance sheet that is strong and balanced is therefore a strategic must for UNIQA.
We have set ourselves the objective of attaining an economic capital ratio (ECR) within a fluctuation margin (target range) of between 155 and 190 per cent. This allows us to ensure that UNIQA always remains solvent, including under structural conditions that have deteriorated significantly, and is also able to make the most of any opportunities in the insurance business at all times.
With this objective in mind, we have consistently improved our capital position since 2011. As a result, UNIQA is now among the leading companies in European insurance in two aspects: not only is the achieved capital ratio very solid, but the calculation used to determine it is also very conservative compared to our European competitors. For example, UNIQA does not apply any of the temporary regulations, and additionally deposits all government bonds with risk capital.
Our strong capital position supports our existing business, but above all puts us in a position to look intensively for growth opportunities, since it is becoming increasingly difficult to invest excess capital at an appropriate rate of return. With our strong capital base, we can easily finance not only the organic growth that we expect above all in CEE; we are also in a position to generate additional external growth through acquisitions. Here, however, we set strict standards and assume that potential acquisitions will strategically complement our existing business, be of a significant size and generate economic value.
Capital – the foundation
While our capital ratio climbed steadily and significantly over the past years through ongoing reinforcement of our capital base, additional cash flows received from company sales (particularly of the business in Italy) and approval of a partial internal model, in 2018 our objective was to maintain the excellent level we achieved. Despite a more than challenging year on the financial markets, we achieved this objective with an economic capital ratio (ECR) of 205 per cent as at 31 December 2018. Our regulatory capital ratio (SCR) was even higher at 248 per cent, as some European government bonds are categorised as risk-free in the standard model.
Notwithstanding the improvements in recent years, we also dedicated ourselves to continuous improvement of our internal model. Preparations were already made in this regard in the reporting period aimed at bringing these improvements into effect in 2019. The central objective here is to harmonise the ECR and SCR and thereby also to bring our internal perspective in line with the regulatory perspective.