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Non-Financial Report 2021 | UNIQA Group

Non-financial report

About this report

This report was prepared in accordance with the Austrian Sustainability and Diversity Improvement Act (NaDiVeG) (Directive 2014/95/EU) and covers those sustainabili-ty concerns that also reflect our material sustainability issues.

The concepts described in this report correspond to the content of the 2021 Sustainability Report, which was pre-pared in accordance with the "Core option" of the Global Reporting Initiative (GRI) standards. The report will be published together with the Group Report on 8 April 2022. This non-financial report, which forms part of our 2021 Group Report, covers the 2021 financial year and, thus, the period running from 1 January 2021 to 31 December 2021. Where appropriate to do so, we compare our progress with the targets communicated the previous year and give an insight into our targets for next year.

Since UNIQA Insurance Group AG (headquartered in Vien-na) does not directly operate the insurance business either domestically or abroad, measures to address environmen-tal, social and employee concerns along with observing human rights, anti-corruption and bribery issues are conceived on a Group level and subsequently implemented in the operating Group companies. Accordingly, as regards the separate financial statements, no other modified or restricted concept is being pursued in any other way. The present report therefore constitutes the separate summa-rised non-financial report of UNIQA Insurance Group AG in accordance with Section 267a of the Austrian Commer-cial Code.

As has been the case in previous year, Pricewaterhouse-Coopers GmbH Wirtschaftsprüfungsgesellschaft has once again been commissioned to undertake the limited assurance audit in 2021. Further details on the audit out-comes can be found in the audit opinion for the non-fi-nancial reporting. References to sources outside of the Group Report are made exclusively to the 2021 Sustaina-bility Report, which is also subject to a limited assurance audit.

Company description

The UNIQA Group is one of the leading insurance groups in its two core markets of Austria and Central and East-ern Europe (CEE). We offer our customers property and casualty insurance as well as life and health insurance products. As a financial services provider, our aim is to con-sider sustainability-related risks and take opportunities arising from ESG trends (ESG - Environment, Social, Gov-ernance). The following part illustrates our management approach. Further information on our business model can be found in the "Strategy" section of the Group Report.

Sustainability strategy and ESG integration

We engage carefully with those framework conditions that we consider conducive to ensuring a better life. To do this, we enter into dialogue with stakeholders, experts and the public, share our own approaches and play an active role. Sustainability is therefore a key part of how we act. Thanks to our clear position on this matter, we can encourage un-derstanding and support from all our stakeholders, namely employees, customers, investors and the public.

Our sustainability strategy is set up in an holistic way. It ties our economic ambitions to a clear environmental and social commitment to protecting the environment and social responsibility.

Materiality concept

UNIQA's success is built on the fact that we understand how the world is changing and how we need to be able to respond to this. We therefore conducted a new materiality analysis in the summer of 2021, which we used to identify ESG topics that are perceived by our stakeholders and our business to be the most important. We also conducted a new stakeholder identification process, including the associated weighting. We defined four stakeholder groups

in total who are directly affected by our business activities, namely customers, employees, investors and the public.

The materiality analysis forms the basis for our sustaina-bility approach, sustainability strategy and our reporting. The four most important material topics from a stakehold-er perspective in 2021 were cyberrisk, digital service and customer focus, advice and prevention for natural disasters as well as training and education of employees.

The four most important topics from UNIQA's perspective were employee health and safety, engagement for climate change, engagement for the environment as well as diversi-ty and equal opportunity.

More in-depth information on the process and the results from the materiality analysis can be found in the 2021 Sustainability Report.

ESG integration within UNIQA

Our key body for sustainability agendas is the Group ESG Committee, which was formed in 2021. It consists of members of the Management Board of UNIQA Insur-ance Group AG and heads of key departments, meets on a quarterly basis and provides the Management Board with recommendations to help them make decisions on ESG topics. The Committee is responsible for integrating and enhancing ESG aspects in insurance, investment and asset management activities, along with the strategic definition and continuous development of ESG-related ambitions for the entire UNIQA Group. Its tasks also include drafting and introducing appropriate guidelines.

Other responsibilities include supervising the implementa-tion of the Group-wide climate strategy and environmental management, as well as supporting implementation of the strategic measures and projects in the subsidiaries.

Sustainability strategy

Our sustainability strategy was approved in October 2020 and is based on five pillars:

An investment policy aligned with ESG criteria

A product policy that deals with the concept of ESG and, in doing so, creates additional benefits

Exemplary own operational management

The Group ESG Office at UNIQA is part of the Sustain-ability, Ethics and Public Affairs division, which was newly created in early 2020. It is responsible for operationally managing the integration of environment, social and governance aspects (ESG) into the core business segments of the UNIQA Group. Proposals regarding ESG integration within the company are drawn up and discussed within ESG working groups, which bring together ESG specialists and/or representatives of various operational units and departments.

Transparent reporting

Sustainability risks

Recognition and joint pursuit of social targets in stake-holder management

Our fundamental objective in 2021 was to put this sus-tainability strategy into operation and embed it within the company by using milestone schedules. Our operational fo-cus is on pillars 1 to 3, supported by transparent disclosure (pillar 4) and engagement of our stakeholders (pillar 5).

With a strong risk and sustainability culture, UNIQA has set the stage to ensure our business can be successful and profitable in the long term. In accordance with the latest amendment to the delegated act of the Solvency II Direc-tive (2009/138/EC) in April 2021, sustainability risks must be taken into account in the risk management system. Our objective is to develop an appropriate and consistent approach to considering sustainability risks, apply this ap-proach at all times and ensure it is updated regularly. With this in mind, we analyse climate-related risks and oppor-tunities as part of our risk management (when conducting our internal assessment of the risk and financial situation). With regard to climate risks, the risks particularly relevant to UNIQA are those resulting from increasing weather ex-tremes, which raise the loss ratio and also amplify default risks. The results from the sustainability risk identifica-tion and assessment process are intended to help support management decisions as part of UNIQA's product design or investment strategy.

Against this backdrop, in 2021 the Group Risk Management team conducted an impact and GAP analysis of current and future regulatory requirements, industry guidelines and market best practices. ESG was identified as a key focal point within the framework of the overall risk cycle (risk identification, risk assessment, limit setting, controlling and reporting), the design of climate risk scenarios and the integration of ESG into UNIQA's risk models. The develop-ment of ESG indicators within the investment and port-folio management process was also regarded as essential. Areas for improvement in conjunction with sustainability risks were identified, with a roadmap drawn up to safe-guard their implementation.

In order to adequately deal with climate risks, we also set up the NatCAT Competence Centre (NCCC), which allows us to observe and monitor emerging social and environ-mental risks. The Group's risk exposure and changes to said exposure, accumulations and annual expected losses, as well as the reinsurance cover required to protect the Group from major natural disasters, are all assessed in the NCCC. In our assessment, we use the very latest modelling techniques based on stochastic models that cover hundreds of thousands of hail, storm, flood and earthquake events. These models have either been procured from external providers or developed internally by the NCCC R&D team. Their outcomes form the basis of our Group-wide risk man-agement for natural disasters. These models are also used to calculate annual stress scenarios in order to test out the robustness of our underwriting and reinsurance coverage. The threat arising from the models can be visualised in maps that are fed into the Corporate Business Navigator (CBN), a risk review and assessment tool that is used by Group underwriters and risk engineers.

Sustainability risks are not currently dealt with as a separate risk category, but are instead taken into account within ten existing risk categories. During the course of the 2021 reporting year, no material reportable ESG risks were identified that were related to our business activities, commercial relationships, products or services, or that might have a severe negative impact on material non-financial concerns.

Environmental matters

This section describes the influence of environmental mat-ters on our business activities along with the impacts of our business activities on the environment. It explains both the concepts and measures in place as well as specific targets and impacts.

The following topics in particular are of material impor-tance in terms of environmental matters: engagement for climate change, engagement for European climate targets, advice on and prevention of natural disasters. We are tackling these challenges by supporting the transition to a low-carbon economy via our capital investments and our insurance products. It is also our aim to structure our own operational management in an exemplary fashion, taking into account our environmental and social targets.

UNIQA climate strategy

As an insurer, UNIQA remains exposed to the impact of cli-mate change. The UNIQA climate strategy therefore forms part of our sustainability strategy. In order to counter the risks of climate change, we believe it is important to make protecting the environment part of our core business and structure our targets in line with the 1.5 degrees Celsius target set under the Paris Agreement. To do this, we are focused on three key areas, namely investment, underwrit-ing and our own operational management. The concepts in relation to this are illustrated below.

Environmental matters in investment

UNIQA is committed to implementing responsible and sustainable management of capital investments. We believe that a sustainable investment strategy can bring about financial success in the long term and is a positive addition to the traditional investment objectives of returns, security and liquidity.

Assessing environmental and social impacts on our in-vestments on an ongoing basis

Assessing the impact that companies and countries in which we have invested have on the environment and living conditions for communities

Establishing new ESG databases in order to ensure continuous integration of the latest assessments into our investment decision

Integrating indirect carbon emissions from our invest-ments into our management process

Introducing a 1.5 degrees Celsius climate target trajecto-ry, based on scientific data, to reduce carbon emissions in line with the Paris Agreement

By voluntarily signing up to the UN Principles for Respon-sible Investment (PRIs) and collaborating with all of its signatories, we are taking crucial steps to achieve this ambitious long-term target. At the same time, the PRIs also provide the framework for our Group-wide UNIQA Responsible Investments Guideline. This guideline governs our capital investment management, including binding exclusion criteria. The guideline was revised and updated in 2021.

We also acceded to the Net-Zero Asset Owner Alliance in 2021, whose principles represent an additional framework for our investment strategy and our reporting guidelines. It is on this basis that we are now drafting a climate trajec-tory in order to bring our investment closer to the climate target of 1.5 degrees Celsius set under the Paris Agreement and to achieve the goal of climate neutrality by 2040 for Austria, and 2050 for our international subsidiaries. A joint commitment by businesses and legislators to implement the required measures as well as strong coordination with the other members will help contribute to this.

In 2021, we also concluded a contract with ISS (Institu-tional Shareholder Services) in order to be able to better examine our investment portfolio with regard to ESG

Targets and target achievement: Investments

Topic

ESG integration in our investment portfolioSustainable investments

Target achievement in 2021

criteria. Assessments are undertaken for individual issuers (companies or countries) rather than specific asset classes. This means we can now also analyse individual aspects of ESG risks as well as climate data and climate risks for listed assets.

We continue to regard thermal coal as a red line criterion in our investment. We had already sold all of our investments in coal-based companies by the end of 2019. However, the integration of the former AXA companies in Poland, the Czech Republic and Slovakia has once again introduced to our portfolio a number of individual investments in com-panies with coal exposure. We are nevertheless determined to reduce these positions as soon as possible as part of our decarbonisation strategy.

During the period under review, we have been working intensively on dealing with the entry into force of the new EU Sustainable Finance Disclosure Regulation (SFDR) in March 2021 and its classification and reporting require-ments. An initial report on the two environmental aspects covered under EU Taxonomy classification is published in the section entitled "Disclosures according to the EU Taxonomy Regulation".

We have also switched our four managed unit-linked UNIQA Portfolio I to IV funds of funds to Article 8 prod-ucts as of 1 January 2022 and restructured the investment process.

Targets for 2022

Whilst our ESG targets are defined for the average of all of our financial investments, we need to analyse the ESG data for each individual asset in order to improve the level of quality based on the individual assets. We have already started work on this in 2021.

The overriding target for 2025 was to build up a volume of €1 billion worth of sustainable investments (green and sustainable bonds, infrastructure loans that will have a pos-itive impact on implementing SDGs and ESG equity funds). We have already managed to achieve this target in 2021. The issue of an additional green bond totalling €375 mil-lion in volume back in December 2021 will help to support the further development of our sustainable investments in the years to come.

Further expansion of volume of green assets and implementation of the revised Responsible Investment@UNIQA guideline.

In the years to come, we will get to work on developing a suitable climate target trajectory in line with the 1.5 de-grees Celsius target set under the Paris Agreement. We aim to achieve climate neutrality by 2040 in Austria, and by 2050 in our other international subsidiaries. Our member-ships will help us and pave the way to achieve this.

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