11. Intangible assets

Goodwill

Ascertainment and allocation of goodwill

For the purpose of the impairment test, UNIQA has allocated the goodwill to the cash-generating units (CGUs) below, which coincide with the countries in which UNIQA operates. An exception to this was the SIGAL Group, in which the three countries of Albania, Kosovo and North Macedonia were combined as one CGU due to their similar development and organisational connection:

  • UNIQA Austria
  • Albania/Kosovo/North Macedonia as subgroup of the SIGAL Group (SEE)
  • Bulgaria (SEE)
  • Poland (CE)
  • Russia (RU)
  • Czechia (CE)
  • Hungary (CE)
Goodwill by CGU

In € thousand

31/12/2022

31/12/2021

Albania/Kosovo/North Macedonia as subgroup of the SIGAL Group

18,386

18,055

Bulgaria

5,411

5,412

Poland

40,790

41,534

Czechia

239,650

232,363

Hungary

13,340

14,485

UNIQA Austria

37,737

37,737

Other

2,472

3,467

Total

357,786

353,054

Impairment test for goodwill

The impairment test was performed during the preparation of the financial statements. In order to test the impairment for goodwill, the recoverable amount of the CGUs is determined. Impairment is recognised when the recoverable amount of a CGU is less than its value to be covered, consisting of goodwill and the proportional net assets. The impairment of goodwill is recognised in profit/(loss) for the period under the item “Amortisation of VBI and impairment of goodwill”.

Determination of the recoverable amount

The recoverable amount of the CGUs with goodwill allocated is calculated on the basis of value in use by applying generally accepted measurement principles by means of the dividend discount method. The budget projections (detailed planning phase) of the CGUs, the estimate of the long-term net profits achievable by the CGUs and long-term growth rates (perpetuity) are used as the starting point for determination of the capitalised value.

The capitalised value is determined by discounting the future profits with a suitable capitalisation rate after assumed retention to strengthen the capital base. In the process, the capitalised values are separated by the three business lines, which are then totalled to yield the value for the CGU.

Cash flow forecast (multi-phase model)

Phase 1: five-year company planning

The detailed company planning generally encompasses a period of five years. The company plans used for the calculation are the result of a structured and standardised management dialogue. This includes an integrated reporting and documentation process integrated into this dialogue and takes into account empirical values from previous planning periods. The plans are formally approved by the Group Management Board and also include material assumptions regarding the combined ratio, capital earnings, market shares and the like.

Phase 2: perpetuity growth rate

The last year of the detailed planning phase is used as the basis for determining cash flows in phase 2. From the 2020 financial year, the perpetuity growth rate is based on medium-term growth forecasts of the respective national economy and is not derived based on the insurance density as before. The underlying growth assumptions depend on the geographical location and range from 1 to 4 per cent. Various studies and statistical analyses were used as sources to provide a basis for determining the growth rates in order to consistently and realistically reflect the market situation and macroeconomic development. The reference sources include our own research, as well as country risks, growth rate estimations and multiples published by Damodaran (NYU Stern).

Determining the capitalisation rate

The assumptions with regard to risk-free interest rate, market risk premium and business line betas made for determining the capitalisation rate are consistent with the parameters used in the UNIQA planning and controlling process. They are based on the capital asset pricing model.

In order to depict the economic situation of income values as accurately as possible, considering the volatility on the markets, the capitalisation rate was calculated as follows: a uniform, risk-free interest rate according to the Svensson method (a 30-year spot rate for German federal bonds) was used as a base interest rate.

The beta factor was determined on the basis of the monthly betas over the last ten years for a defined peer group. The betas for the non-life, life and health insurance business lines were determined using the revenues in the relevant business lines of the individual peer group companies. The health insurance business line, which is strongly focused on the Austrian market, is operated in a manner similar to life insurance. A uniform beta factor for personal insurance is therefore used in relation to the health and life insurance lines.

In Austrian measurement practice, the market risk premium is derived at the reporting date from the implied market return based on capital market data. The growth factor is derived in the same manner as the growth in the profit from ordinary activities in the impairment test.

An additional country risk premium was defined in accordance with Professor Damodaran’s models. The basic principles for calculation of the country risk premium in accordance with the Damodaran method are as follows: the spread of credit default swap spreads in a rating class of “risk-free” US government bonds is determined starting from the rating of the country concerned (Moody’s). Then the spread is adjusted by the amount of the volatility difference between equity and bond markets.

The calculation also factored in the inflation differential for countries outside the eurozone. In general, the inflation differential represents inflation trends in different countries and is used as a key indicator in assessing competitiveness. In order to calculate the inflation differential, the deviation of the inflation forecast for the country of the CGU in question in relation to the inflation forecast for a risk-free environment (Germany, in this case) was used. This is adjusted annually in the detailed planning by the expected inflation, and is subsequently applied for perpetuity with the value of the last year of the detailed planning phase.

Capitalisation rate 2022

In per cent

Discount factor

Discount factor perpetuity

Property/casualty

Life & health

Property/casualty

Life & health

Albania/Kosovo/North Macedonia as subgroup of the SIGAL Group1)

11.8 – 13.9

12.1 – 14.1

14.5 – 17.1

14.8 – 17.3

Bulgaria

9.1

9.3

11.1

11.3

Austria

9.0

9.3

9.0

9.3

Poland

16.9

17.1

10.3

10.5

Czechia

10.7

11.0

9.3

9.6

Hungary

17.7

17.9

12.8

13.0

1)

The discount rate ranges listed for the SIGAL Group relate to the spread over the respective countries grouped under these headings.

Capitalisation rate 2021

In per cent

Discount factor

Discount factor perpetuity

Property/casualty

Life & health

Property/casualty

Life & health

Albania/Kosovo/North Macedonia as subgroup of the SIGAL Group1)

12.8 – 13.8

13.5 – 14.5

12.1 – 14

12.8 – 14.7

Bulgaria

10.5

11.2

10.1

10.8

Austria

8.9

9.6

8.9

9.6

Poland

11.2

11.9

9.9

10.6

Czechia

9.9

10.6

9.1

9.8

Hungary

12.5

13.2

11.4

12.1

1)

The discount rate ranges listed for the SIGAL Group relate to the spread over the respective countries grouped under these headings.

Sensitivity analyses

In order to substantiate the results of the calculation and estimation of the value in use, sensitivity analyses with regard to the capitalisation rate and the main value drivers are performed.

These analyses show that sustained surpluses on the part of the individual CGUs are highly dependent on the actual development of these assumptions within the individual national or regional economies (GDP, insurance density, purchasing power parities particularly in the CEE markets) as well as the associated implementation of the individual profit goals. The greatest uncertainty with regard to the forecasts and the associated assessment of the future market situation is due to the fact that the markets have not yet fully recovered and due to the effects of the war in Ukraine.

In the event that the insurance markets develop entirely differently from the assumptions made in those business plans and forecasts, the individual goodwill amounts may incur impairment losses.

A sensitivity analysis shows that an assumed interest rate increase of 50 basis points and a simultaneous change in cash flows of –10 per cent would result in a shortfall in the value in use of € 1.1 million for the CGU SIGAL Group. However, a change in only one of these two parameters does not result in a shortfall in the value in use.

Other intangible assets

Other intangible assets include both purchased and internally developed software, which is depreciated on a straight-line basis over its useful economic life of 2 to 20 years.

Costs that are incurred at the research stage for internally generated software are recognised through profit or loss for the period in which they were incurred. Costs that are incurred in the development phase are deferred provided that it is foreseeable that the software will be completed, there is the intention and ability for future internal use, and this will result in a future economic benefit.

The amortisation of the other intangible assets is recognised in profit/(loss) for the period on the basis of allocated operating expenses under the items “Insurance benefits”, “Operating expenses” and “Net investment income”.

Measurement of non-financial assets

The carrying amounts of UNIQA’s non-financial assets – excluding deferred tax assets – are reviewed at every reporting date to determine whether there is an indication of impairment. If this is the case, the recoverable amount of the asset is estimated. The goodwill and intangible assets under development are tested for impairment annually, unless a triggering event occurs.

An impairment loss on goodwill is not reversed. In the case of other assets, an impairment loss is reversed only to the extent that it does not increase the carrying amount of the asset above the carrying amount that would have been determined net of depreciation or amortisation had no impairment loss been recognised.

Acquisition costs

In € thousand

Goodwill

Intangible assets under development

Other intangible assets

Total

At 1 January 2021

408,641

75,558

428,344

912,543

Currency translation

12,313

–12

990

13,291

Change in basis of consolidation

–58

0

9,760

9,702

Additions

0

76,958

188,584

265,542

Disposals

1,398

–35,985

–159,529

–194,116

Reclassifications

0

–12,131

12,127

–4

At 31 December 2021

422,294

104,389

480,275

1,006,958

At 1 January 2022

422,294

104,389

480,275

1,006,958

Currency translation

5,732

7

–1,863

3,877

Change in basis of consolidation

–930

0

0

–930

Additions

0

49,767

60,653

110,420

Disposals

–72

–3,864

–31,581

–35,517

Reclassifications

0

–1,877

1,781

–96

At 31 December 2022

427,025

148,422

509,266

1,084,713

Accumulated amortisation and impairment losses

In € thousand

Goodwill

Intangible assets under development

Other intangible assets

Total

At 1 January 2021

–55,719

0

–209,205

–264,924

Currency translation

0

0

–848

–848

Change in basis of consolidation

4

0

0

4

Additions from amortisation

0

0

–33,048

–33,048

Additions from impairment

–12,100

0

0

–12,100

Disposals

–1,425

0

17,669

16,244

Reclassifications

0

0

1

1

At 31 December 2021

–69,240

0

–225,431

–294,671

At 1 January 2022

–69,240

0

–225,431

–294,671

Currency translation

1

0

1,297

1,298

Additions from amortisation

0

0

–28,175

–28,175

Additions from impairment

–71

0

–2,916

–2,987

Disposals

72

0

26,286

26,357

At 31 December 2022

–69,239

0

–228,939

–298,178

Carrying amounts

In € thousand

Goodwill

Intangible assets under development

Other intangible assets

Total

At 1 January 2021

352,922

75,558

219,139

647,619

At 31 December 2021

353,054

104,389

254,844

712,287

At 31 December 2022

357,786

148,422

280,326

786,535

Intangible assets under development and other intangible assets mainly comprise software. The impairment of other intangible assets relates to a software development that can no longer be used.

Combined ratio
Total of operating expenses and insurance benefits divided by the (net) premiums earned in property and casualty insurance.
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Insurance benefits
Total of insurance benefit payments and changes in the claims provision during the financial year in connection with direct insurance and reinsurance contracts (gross). This involves net insurance benefits when reduced by the amount ceded to reinsurance companies. This does not include claims settlement expenses and changes in the provisions for claims settlement expenses.
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Net
The part of risk which is assumed but that the insurer/reinsurer does not cede as reinsurance.
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Operating expenses
This item includes acquisition expenses as well as portfolio management expenses and the expenses for implementing reinsurance. The operating expenses remain for the company’s own account following deduction of the commissions and profit participation received from the reinsurance business ceded.
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