"UNIQA is still very highly capitalized. Even the effects of the ongoing COVID-19 pandemic, the associated macroeconomic developments and non-recurring extraordinary charges from the AXA acquisition as well as restructuring provisions have not changed the outlook," declared Kurt SVOBODA, CFO/CRO of the UNIQA Insurance Group AG.
He added: "For the first quarter of 2021, we assume that the capital requirement ratio will again exceed 170 per cent, primarily thanks to a slight increase in interest rate levels since 31 December 2020 and the effects of the UNIQA 3.0 strategy programme starting to improve profitability. The solvency ratio is expected to again head towards 200 per cent in the mid-term."
The verified regulatory capital requirement ratio will be published in mid-May in the Solvency and Financial Condition Report. As part of Solvency II, besides the regulatory defined standard formula, there is an option for insurance companies to use an internal model to calculate the risk capital requirement. UNIQA has been using such a model for the underwriting risk of property and casualty insurance since 2017. The Austrian Financial Market Supervisory Authority approved the extension of the model to include market risks in 2019, so the extended model was used for the second time to calculate the capital requirement ratio for the 2020 financial year.
The regulatory capital requirement ratio, for which UNIQA utilises no transitional provisions, is the ratio of own funds of EUR 4,471 million (2019: EUR 4,865 million) to the capital requirement of EUR 2,628 million (2019: EUR 2,203 million). The share of particularly secure Tier 1 capital (core capital) currently accounts for 74 per cent of capital at UNIQA.
Embedded Value: UNIQA achieves high profitability even in low interest rate environment
The sharp decline in interest rates caused the Market Consistent Embedded Value after minority interests of the UNIQA Group's life, health and pension fund business to decline by 5.3 per cent (not including dividend payment and exchange rate effects) in the past year to EUR 3,419 million. This relative decline takes into account the ex-AXA portfolio, which made a strong and stable contribution of EUR 862 million to Embedded Value in 2020. In line with international guidelines, the Market Consistent Embedded Value measures the value of the portfolio of insurance policies and comprises the net assets plus the present value of future income from the existing life, health and pension fund portfolio. The value of in-force business (VIF) in life, health and pension funds decreased to EUR 2,376 million (2019 incl. ex-AXA acquisition: EUR 2,549 million).
The new business margin - a ratio for profitability of the new business in life, health and pension funds - fell to 3.6 per cent (2019 incl. ex-AXA acquisition: 4.7 per cent); for CEE, it remained at a high level of 4.7 per cent in 2020 as before (2019 incl. ex-AXA acquisition: 5.8 per cent). The well-diversified composition of new business is particularly positive, ensuring that earnings expectations remain at a strategically sound level including the ex-AXA companies, despite the significant deterioration in interest rates and negative effects of COVID-19 on new business volumes.
The Market Consistent Embedded Value of the UNIQA Group's life, health and pension fund business is derived from the Solvency II models.
The 2020 annual report was also published today at https://reports.uniqagroup.com/2020/ar