Dec. 4 (Bloomberg) --Uniqa Insurance Group AG, Austria’s second-biggest insurer, said the national regulator’s order to build new provisions for life insurance won’t hurt its profit.
That’s because those provisions aren’t taken into consideration under International Financial Reporting Standards, or IFRS, Norbert Heller, a Uniqa spokesman, said by telephone today. Allianz SE’s local unit also sees no impact under IFRS, said Marita Roloff, a company spokeswoman. Vienna Insurance Group AG, Austria’s largest insurer, is still studying the effects of the regulation, said Silvia Polan, a spokeswoman.
The nation’s watchdog, the Financial Market Authority, said yesterday it ordered all life insurers to build provisions to meet policyholders’ claims amid low interest rates. The FMA said reserves would amount to 75 million euros ($102 million) to 80 million euros this year.
The regulatory intervention makes for “unwelcome uncertainty” even as Vienna Insurance’s long-term earnings prospects probably won’t be affected, Sami Taipalus, a London- based analyst at Berenberg Bank who recommends holding the shares, wrote in a note to clients dated Nov. 29.
How much an insurer has to set aside depends on the average guaranteed interest rate in its life insurance business as well as on general market rates. Companies with a higher average rate have to build more provisions, according to the FMA.
Vienna Insurance had about 29 percent of the nation’s life insurance market last year, while Uniqa had about 20 percent, according to the Austrian Insurance Association.
--Editors: Steve Bailey, Jon Menon