Uniqa Insurance : Group - Solvency and Financial Condition Report 2020

Seeding the

FUTURE

Solvency and Financial Condition Report 2020

/ UNIQA Insurance Group AG

2	2020/UNIQA GROUP

Ladies and gentlemen, dear shareholders, dear UNIQA customers,

With this Solvency and Financial Condition Report, we want to share with you the results achieved by our company in the areas of risk and capital management in what was a challenging 2020. It is intended to furnish detailed, transparent yet universally accessible insights without neglecting to provide a general overview of our company.

A sound solvency position and proactive approach to risks continue to form the basis of our business actions for the benefit of our customers, employees and shareholders.

The year 2020 was marked by the Covid-19 pandemic. In terms of the capitalisation ratio, the effects of the pandemic were particularly obvious in the results of the financial markets correction in the first quarter of the year. While the stock markets began to recover from the second quarter, the long-term downward trend continued on the interest rate markets. This continues to be a challenge for insurance companies with long-term life and health insurance business.

However, the biggest influence on capitalisation was the purchase of AXA S.A.'s subsidiaries in Poland, the Czech Republic and Slovakia, which was completed last year and has positive prospects for the future. This acquisition, the largest in the company's history to date, has sustainably strengthened UNIQA's market position in the highly competitive CEE growth markets.

With the new "UNIQA 3.0 - Seeding the Future" growth programme, UNIQA is proactively taking measures both to meet the expected challenges, as well as to be able to embrace these as opportunities. This also includes a commitment to further developing the risk management and the models and systems used to measure and control.

We hope that this report on the 2020 solvency and financial condition of our company helps to further strengthen your trust in UNIQA and our products and services.

Thank you for this trust.

Yours sincerely,

Kurt Svoboda

CFO/CRO UNIQA Insurance Group AG

2020/ UNIQA GROUP

3

Contents
Executive summary................................................................................................................................................................	5
A Business and performance ................................................................................................................................................	10
A.1 Business activities........................................................................................................................................................	10
A.2 Technical result ............................................................................................................................................................	14
A.3 Investment performance ..............................................................................................................................................	18
A.4 Performance of other activities.....................................................................................................................................	19
A.5 Any other information ...................................................................................................................................................	21
B System of governance .......................................................................................................................................................	22
B.1 General information on the system of governance.......................................................................................................	22
B.1.1 Supervisory Board .................................................................................................................................................	23
B.1.2 Management Board and committees .....................................................................................................................	24
B.1.3 Key functions .........................................................................................................................................................	28
B.1.4 Remuneration ........................................................................................................................................................	34
B.1.5 Significant related party transactions with companies and individuals ...................................................................	36
B.2 Fit and proper requirements.........................................................................................................................................	37
B.3 Risk management system including the company's Own Risk and Solvency Assessment ..........................................	40
B.3.1 General ..................................................................................................................................................................	40
B.3.2 Risk management, governance and organisational structure ................................................................................	40
B.3.3 Risk strategy ..........................................................................................................................................................	41
B.3.4 Risk management process ....................................................................................................................................	42
B.3.5 Risk-related committees ........................................................................................................................................	43
B.3.6 Governance of the partial internal model ...............................................................................................................	43
B.3.7 The company's Own Risk and Solvency Assessment (ORSA) ..............................................................................	44
B.4 Internal control system .................................................................................................................................................	47
B.4.1 Overview of the internal control system .................................................................................................................	47
B.4.2 Compliance function ..............................................................................................................................................	47
B.5 Internal audit function...................................................................................................................................................	47
B.6 Actuarial function..........................................................................................................................................................	47
B.7 Outsourcing..................................................................................................................................................................	48
B.8 Any other information ...................................................................................................................................................	48
C Risk profile.........................................................................................................................................................................	49
C.1 Underwriting risk ..........................................................................................................................................................	53
C.1.1 Description of the risk ............................................................................................................................................	53
C.1.2 Risk exposure ........................................................................................................................................................	54
C.1.3 Risk assessment....................................................................................................................................................	56
C.1.4 Risk concentration .................................................................................................................................................	58
C.1.5 Risk mitigation .......................................................................................................................................................	59
C.1.6 Stress and sensitivity analyses ..............................................................................................................................	60
C.2 Market risk ...................................................................................................................................................................	61
C.2.1 Description of the risk ............................................................................................................................................	61
C.2.2 Risk exposure ........................................................................................................................................................	61
C.2.3 Risk assessment....................................................................................................................................................	61
C.2.4 Risk concentration .................................................................................................................................................	62
C.2.5 Risk mitigation .......................................................................................................................................................	62
C.2.6 Stress and sensitivity analyses ..............................................................................................................................	63
C.3 Credit risk/default risk ..................................................................................................................................................	64
C.3.1 Description of the risk ............................................................................................................................................	64
C.3.2 Risk exposure ........................................................................................................................................................	64

4	2020/UNIQA GROUP

C.3.3 Risk assessment ...................................................................................................................................................	65
C.3.4 Risk concentration .................................................................................................................................................	65
C.3.5 Risk mitigation .......................................................................................................................................................	65
C.3.6 Stress and sensitivity analyses..............................................................................................................................	66
C.4 Liquidity risk.................................................................................................................................................................	66
C.4.1 Description of the risk ............................................................................................................................................	66
C.4.2 Risk exposure........................................................................................................................................................	66
C.4.3 Risk assessment and risk mitigation......................................................................................................................	66
C.4.4 Stress and sensitivity analyses..............................................................................................................................	67
C.5 Operational risk ...........................................................................................................................................................	67
C.5.1 Description of the risk ............................................................................................................................................	67
C.5.2 Risk exposure........................................................................................................................................................	67
C.5.3 Risk assessment ...................................................................................................................................................	67
C.5.4 Risk concentration .................................................................................................................................................	67
C.5.5 Risk mitigation .......................................................................................................................................................	68
C.5.6 Stress and sensitivity analyses..............................................................................................................................	68
C.6 Other material risks .....................................................................................................................................................	68
C.7 Any other information...................................................................................................................................................	69
C.7.1 Risk concentration .................................................................................................................................................	69
C.7.2 Risk mitigation from deferred tax ...........................................................................................................................	70
D Measurement for solvency purposes.................................................................................................................................	71
D.1 Assets..........................................................................................................................................................................	71
D.2 Technical provisions ....................................................................................................................................................	80
D.2.1 Non-life technical provisions..................................................................................................................................	81
D.2.2 Life and health (similar to life) technical provisions ...............................................................................................	86
D.2.3 Use of volatility adjustments ..................................................................................................................................	89
D.3 Other liabilities .............................................................................................................................................................	89
D.4 Alternative methods for measurement .........................................................................................................................	95
D.5 Any other information...................................................................................................................................................	95
E Capital management .........................................................................................................................................................	96
E.1 Own funds ...................................................................................................................................................................	96
E.2 Solvency capital requirement and minimum capital requirement ...............................................................................	101
E.3 Use of the duration-based equity risk sub-module in the calculation of the solvency capital requirements ...............	102
E.4 Differences between the standard formula and any internal models used.................................................................	102
E.5 Non-compliance with the minimum capital requirement or solvency capital requirement ..........................................	107
E.6 Any other information.................................................................................................................................................	107
Appendix I (Group) - QRTs.................................................................................................................................................	108
Appendix II (Group) - regulatory requirements for the SFCR .............................................................................................	135
List of figures.......................................................................................................................................................................	136
List of tables........................................................................................................................................................................	137
Glossary..............................................................................................................................................................................	139

2020/ UNIQA GROUP

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Executive summary

The following executive summary is aimed at providing a compact overview of the main content in this report on the solvency and financial condition of the UNIQA Group.

The figures stated here, both in the executive summary and in the report itself, relate exclusively to UNIQA Group.

Those for UNIQA Insurance Group AG and UNIQA Österreich Versicherungen AG can be found in the respective 2020 Solvency and Financial Condition Reports for the relevant companies (in German only).

We present the company and its underlying business model together with the most important figures related to premium reve- nues, benefits and investment performance in Chapter A, Business and performance. Overview:

• The UNIQA Group provides comprehensive products in property and casualty insurance, life insurance as well as health insurance to their customers.
• The listed holding company UNIQA Insurance Group AG manages the Group and operates in the indirect insurance business (i.e. inward reinsurance).
• UNIQA Österreich Versicherungen AG is a wholly owned subsidiary of UNIQA Insurance Group AG and has been the
  Group's only direct insurer on the Austrian market since 1 October 2016. Business activities include all product lines as in the UNIQA Group.

The UNIQA Group operates in the core markets of Austria and Central and Eastern Europe as well as, on a lesser scale, in Western Europe. The Group is now made up of more than 40 companies in 16 countries.

With its comprehensive product range, UNIQA is a multiline insurance company that sells its products based on a multi- channel strategy - that means using all sales channels likely to produce successful results (exclusive sales, insurance brokers, banks and direct sales). The objective is to achieve a balanced mix between the business lines, with a consciously managed surplus in property and casualty insurance in the current low interest rate en-

vironment.

UNIQA's total premium volume, including savings portions from unit-linked and index-linked life insurance in the amount of €304.1 million (2019: €309.8 million), increased by 3.6 per cent to €5,565.3 million in 2020 (2019: €5,372.6 million). Premiums written in property and casualty insurance grew by 5.7 per cent to €3,010.3 million in 2020 (2019: €2,846.8 million). In health insur- ance, premiums written in the reporting period increased by 3.2 per cent to €1,167.6 million (2019: €1,130.8 million). In life insurance, premiums written including savings portions from unit-linked and index -linked life insurance fell overall by 0.5 per cent to €1,387.5 million (2019: €1,394.9 million).

Figure 1: Distribution of premiums by business line

on the UNIQA Group's balance sheet