Uniqa Jumps After Defusing Concern Dividend Might Be ScrappedAlexander Weber
Uniqa Insurance Group AG, the Austrian insurer that’s 31 percent-owned by Raiffeisen Zentralbank AG, rose the most since July 2013 after it said it isn’t considering scrapping its 2014 dividend, a possibility raised earlier today by a Deutsche Bank AG analyst.
The shares rose as much as 7.3 percent in Vienna and closed at 7.47 euros, up 6.1 percent. They had fallen more than 20 percent since Nov. 26, when Uniqa cut its profit target for 2015 on deteriorating growth prospects in Europe. Uniqa’s 350 million-euro hybrid bond has declined 6.8 percent this year.
Uniqa’s economic capital ratio, a measure of financial strength, may fall by about five percentage points because of its holdings of bonds issued by Russian entities and its ties to the Raiffeisen banking group, Olivia Brindle, a London-based analyst at Deutsche Bank, wrote in a note to clients today.
“This suggests to us that the dividend, while it would not ‘have’ to be cut, probably should be,” Brindle said. The insurer isn’t considering such a move, Norbert Heller, a company spokesman, said by telephone. “We feel well capitalized,” he said. The shares climbed after his comment.
Raiffeisen’s woes in eastern Europe, which may cause its Raiffeisen Bank International AG unit to post a 2014 loss of as much as 500 million euros, raised the risk that the bank may sell some or all of its shares in Uniqa, according to Brindle. Even if the longer-term effects might be positive, this creates an “overhang risk” on the shares, she said.
Raiffeisen Bank International shares and bonds soared today after the bank pledged to cut its business by more than a fifth in order to avoid having to raise capital. Potential writedowns on Raiffeisen group securities may bring Uniqa’s capital ratio close to a threshold where “it needs to start taking action,” Brindle said.
In November, Uniqa projected that it would have an economic capital ratio of 140 to 145 percent at the end of 2014. The ratio may actually be around 135 percent, which is where “some sort of remedial action would need to begin,” Brindle said.
ECR represents the ratio of capital a company would need in times of stress in relation to the equity it has.