Dear ladies and gentlemen,
“The course of the 2022 financial year, which we were looking forward to with joy and confidence just a few months ago, is now [following the Russian invasion of Ukraine on 24 February 2022, Ed.] naturally associated with considerable uncertainties” – these were the words that we wrote here one year ago. And our mood was still just as uneasy even as late as the midpoint of the year.
This was because, at the time, there was no way in the world of predicting that the 2022 financial year would go on to become the most successful in our company’s history: significant impairment losses on Russian bonds, rising interest rates eroding the fair values of fixed-income securities, considerable major claims at Austrian corporate customers, additional reserves for storm damage from summer 2021 set aside due to inflation – a whole series of events during the first six months of the year ultimately led us to communicate our more muted outlook for the year as a whole to the capital market via an ad hoc announcement in July.
Steady, marked improvement in core business
The third quarter then brought a reversal of this trend, however, which continued into the fourth quarter. The main contributing factors were our excellent technical result in CEE and a noticeable improvement in our core business in Austria. Ultimately, we succeeded in increasing our volume of premiums written by a total of 3.9 per cent to €6.605 billion and reducing our cost ratio by 0.2 of a percentage point to 27.2 per cent. The combined ratio improved significantly once again to a pleasing 92.9 per cent, boosted by considerable settlement gains in Austria from past conservative reserves, a modest trend in so-called basic losses in our private customer business, and the contributions of our international reinsurance partners.
Investments hit by high impairment losses
The 2022 financial year was a particularly challenging one for our investments for two reasons: firstly, the ever-increasing interest rates eroded the fair values of our fixed-income securities and fund certificates – in some cases significantly – after rigorous asset/liability matching had helped us cope well with the difficult period of low-interest rates that we had seen over the past twelve years. This forced us to recognise impairment losses that not only reduced our equity by €1.27 billion to €2.034 billion but also wiped €166 million off our income statement.
Secondly, the war in Ukraine necessitated significant impairment of our Russian and Ukrainian bonds in the amount of €142 million. Although these impairment losses coincided with a level of current income from other asset classes that was much higher than forecast, the latter was only able to partially offset the former. At €406 million, therefore, our net investment income was down a substantial 37.4 per cent on the previous year (€648 million). Our investment portfolio shrank by €3.359 billion to €18.426 billion, due also to the impairment of fixed-income securities and fund certificates prompted by the interest rate situation.
Earnings before taxes and net profit both up
Put simply, therefore, a further significant improvement in the technical result made up for the sharp fall in net investment income. This pushed our earnings before taxes up by 10.3 per cent to €422 million. At €174 million, the contribution by our international business outstripped that from Austria (€102 million). Our reinsurance subsidiary, Zurich-based UNIQA Re, contributed €75 million.
With a low tax rate of 7.7 per cent, our net profit for the year amounts to €383 million, a figure that allows us to propose a dividend of €0.55 per share – the same as in the previous year – to the Annual General Meeting on 6 June. This would result in a payout ratio of 44 per cent. The economic solvency ratio of the UNIQA Group increased by 50 percentage points to 246 per cent in 2022.
A bright outlook
In light of the lingering uncertainty on the capital markets, we are maintaining our cautious approach and – as in the previous year – will not be making any specific predictions for the current financial year, with the following three exceptions:
Firstly, we will continue to expect our technical core business in both Austria and CEE to generate healthy, robust earnings contributions.
Secondly, we will reaffirm our unqualified commitment to Ukraine, the Ukrainian insurance market and our 900 or so Ukrainian colleagues as the country’s second-largest insurer. These colleagues deserve our particular thanks and our immense respect, because they have provided outstanding help and support to our around 1.4 million Ukrainian customers with all means available, working under the toughest conditions imaginable and demonstrating peerless courage, a great deal of passion and impressively strong nerves.
Thirdly, the already minor role of our Russian subsidiary, which currently accounts for just 0.8 per cent of total Group premiums and contributes 6.1 per cent of earnings, will diminish even further. As we effectively stopped taking on new business as soon as war broke out, we continue to curtail our activities in Russia each day. We are weighing up all our strategic options, including selling the subsidiary.
Many things are overshadowed by the war in Ukraine and its economic fallout at the moment. Nevertheless, our three most important long-term tasks – further developing our services and processes in a customer-centric way, consistently aligning our company with ESG, and attracting the best minds of the younger generations as an employer – will receive as much focused and passionate attention as our day-to-day operations.
In the second full year of our “UNIQA 3.0 – Seeding the Future” strategic programme, we on the Management Board have put just as much joy, enthusiasm and pride into the work that we have done for your UNIQA Group as in the past. We are looking forward to having the opportunity to keep on doing so in the future and hope that, in a year’s time, we will be able to present you with yet another report that will meet with your satisfaction. This will be the first report to have a brand new look, because our reporting for the 2023 financial year will follow the new accounting standard IFRS 9/17.
on behalf of the Management Board