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Annual Report 2014PO

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POJIŠŤOVNA ČESKÉ SPOŘITELNY HAS BECOME THE LEADER ON THE LIFE ASSURANCE MARKET IN TERMS OF THE VOLUME OF PREMIUMS WRITTEN FOR 2014.

Contents5 YourEasyRoadtoLifeAssurance7 CompanyProfile10 IntroductoryWordbytheChairmanoftheBoardofDirectors12 DevelopmentintheMostImportantEconomicIndicators13 MembersoftheCompany‘sExecutiveBodies14 OrganizationalStructure15 ReportbytheBoardofDirectors24 ReportbytheSupervisoryBoard25 InformationaboutViennaInsuranceGroup28 FinancialSection84 Non-financialSection

3 Pojišťovna České spořitelny, a.s., Vienna Insurance Group

Annual Report 2014

Contents

(in thousands of Czech crowns CZK) 2014

Assets 32,686,701

Equity 3,543,822

Technicalprovisions 26,791,114

Profit(loss)ofcurrentaccountingperiod 855,121

Totalwrittenpremiums 11,918,758

ofthis: lifeassurance 11,201,393

non-lifeinsurance 717,365

Totalcostsofinsuranceclaims 7,837,144

ofwhich: lifeassurance 7,635,905

non-lifeinsurance 201,239

Key Figures


Annual Report 2014

Key Figures

Your Easy Road to Life Assurance

PojišťovnaČeskéspořitelnyisoneofthelargestinsurancecompaniesinthefieldofbankinsuranceontheCzechmarket.Thecomprehensivesaleofproducts,includingsubsequentclientservice,iscoveredbytwodistributionchannels.

THE BRANCH NETWORK OF ČESKÁ SPOŘITELNAClientsarecaredforbymorethan4,800consultantsatČeskáspořitelna.Theydeliverthemaximumavailabilityofinsuranceproductsforclientsaswellascomprehensivesalesandaftersalesserviceatmorethan670locationsintheCzechRepublic.

THE EXTERNAL NETWORK OF POJIŠŤOVNA ČESKÉ SPOŘITELNYAprofessionalclientserviceisprovidedbyapproximately167externalcontractualpartners.Consultantsmaintainaflexibleapproachtoclients,adaptingthetimeandplaceofappointmentstosuitclientneeds.Ourproductsarethusalwaysavailabletotheclient.


Annual Report 2014


LIFE ASSURANCE MARKET LEADER BY VOLUME OF WRITTEN PREMIUMS

Life assurance premiums written in 2014 amounted to CZK 11,201 million, representing a 15.74% share of the total life assurance market in the Czech Republic.


Annual Report 2014


Company Profile

2014PojišťovnaČeskéspořitelnylaunchedamarketingcampaignunderthebanner“TwiceasmuchwithFLEXI”,aimedatpromotingtheinclusionofcoverforseriousrisksinnewinsurancepolicies.Thestrategywasalsoreflectedinanadvertisingspot.TheCompanyfinanciallysupportedtheCentrumParaple(ParaplegicCentre)project“Mum-DadinaWheelchair”andmovedaheadincooperationwithNadaceJedličkovaústavu(JedličkaInstituteFoundation),supportingtheneedsandinterestsofhandicappedchildrenandadolescents.ThemoneywenttotheSFLEXIdoživota(LivelifeWITHFLEXI)transitprogrammeandtowardsspecificgiftsandaidsforclientsoftheJedličkaInstitute.TheCompany’semployeesalsomadefinancialcontributionstohelpchildrenandactivelyparticipatedinCharityDays.PojišťovnaČeskéspořitelnywonsecondplaceintheInsuranceCompanyoftheYear2013awardsandtookfirstplacewithFLEXILifeAssuranceinthecategoryofLifeAssuranceoftheYearintheZlatákoruna(GoldenCrown)competition.ThecompanyachievedCZK11.9billioninwrittenpremiumsandinsuredmorethan1.9millionclients.SinceJanuary2015,FLEXIhasalsobeenabletoinsuremoreseriousillnessesforthesamepriceandacceptmoreclientsforinsurance;itintroducesdecreasingannuitysumsinsuredforseriousrisksandoffersbettersecurityfordisabilityatthesamerates.

2013PojišťovnaČeskéspořitelnywontwoprestigiousawardsintheZlatákoruna(GoldenCrown)competition,thisbeingforfirstplace(withFLEXILifeAssurance)andthirdplace(withFLEXILifeAssurance–JUNIOR)inthecategoryLifeAssuranceoftheYear.TheCompanywasalsosuccessfulintheInsuranceCompanyoftheYear2012survey,winningfirstplaceintheLifeAssurancecategory.FLEXIunderwentinnovationattheendoftheyear.Itnowoffersclientsprogressivedailybenefits,incapacitybenefitsfromtheveryfirstdayandvariousrisksforchildreninsuredunderasinglecontract.PojišťovnaČeskéspořitelnyachievedalevelofpremiumswrittenofCZK11.4billionandinsuredmorethan1.9millionclients.TheinsurancecompanyisalsoactiveinthefieldofCSR.ItsemployeesactivelyparticipateinCharityDays.AfinancialcontributionwasawardedtoBambiriáda,aneventwhichsupportstheactiveandsafespendingofleisuretimebychildren.IncooperationwithCentrumParaple(ParaplegicCentre),theCompanycontinuestosupporthandicapped

fellowcitizensandfamilieswithchildren.Attheendoftheyear,theCompanyestablishedcooperationwiththeJedličkaInstitute(aninstituteforhandicappedchildren).

2012In2012PojišťovnaČeskéspořitelnydefendeditsgold-medalplaceintheZlatákoruna(GoldCrown)competitionandwonsilverintheHospodářskénovinycompetitioninthecategoryofBestInsuranceCompanyoftheYear.InMarchthecompanylaunchedanewproductonthemarket,funeralinsurance.InOctoberFLEXIunifiedtheratesforinsurancerisksandunderwentinnovation.Itnowoffersclientsdoubleindemnityfordeathinacaraccident,itextendedthird-degreedisabilityinsurancetoincludelong-termcareforfree,itenabledtheadvancepaymentofinsurancebenefitsandclientswhogosevenyearswithoutaserioushealthincidentareconsideredhealthy.PojišťovnaČeskéspořitelnyattainedCZK10.7billionofwrittenpremiumsandinsuredmorethan1.9millionclients.IncooperationwithCentrumParapleitcontinuestosupporthandicappedfellowcitizensandfamilieswithchildren.Bambiriáda,aneventtosupportactiveandsafewaysforchildrentospendtheirfreetime,alsoreceivedafinancialcontribution.OuremployeesareactivelyinvolvedintheDaysforCharity.

2011ThisyearPojišťovnaČeskéspořitelnycelebrateditsachievementswithFLEXILifeAssurance,whichwontheZlatákoruna(GoldenCrown)competition.Atthesametime,wewonthetitleBestInsuranceCompanyof2011andMostClientFriendlyInsuranceCompany2011.AtthestartoftheyearFLEXILifeAssuranceunderwentsomeinnovations,inwhichwepresentedauniqueprogramme,InSpiral,thatallowsthepolicyparameterstobemodifiedtotakeadvantageoftheproduct’sotherbenefits.Wealsointroducedbonusesforloyaltyandnoclaimsorinsuranceforrecreationalsportsrisks.WegeneratedmorethanCZK10billioninpremiumswrittenandinsuredover1.9millionclients.WorkingwithCentrumParapleandSPIDhandicap,o.p.s.,wecontinuetosupporthandicappedfellowcitizensandfamilieswithchildren.WealsomadeadonationtotheKrtek(Mole)children’scancerfoundation.OuremployeesareactivelyengagedintheDaysforCharityscheme.


Annual Report 2014

Company Profile

2010 InMarch2010,FLEXILifeAssurancecelebratedits10thanniversaryontheCzechmarketwithmorethan900,000peopleinsured.Thecompany’slong-termeconomicstabilitywasstrengthenedbythegeneralmeetinginMay,whenitwasdecidedtoincreasethebasiccapitalbyCZK782.9milliontoatotalofCZK1.9billion.PojišťovnaČeskéspořitelnyalsoenjoyedsuccessinvariouscompetitions.OurcoreproductFLEXILifeAssurancedefendeditsvictoryfromthepreviousyearintheZlatákoruna(GoldenCrown)competitionintheLifeAssurancecategory.WecamefirstinplaceinthecategoryInsuranceCompanyof2009–LifeAssuranceandinoneofthecompetition’smaincategories,InsuranceCompanyof2009,wedefendedourvictoryforthefourthtimeinarow.PetrZapletal,ChiefExecutiveOfficerofPojišťovnaČeskéspořitelny,alsowonanawardinthefirstyearoftheInsuranceOfficeroftheYearcompetition.Thesuccessof2010wasalsounderscoredbythefactthatforthefirsttimeinourhistorywemanagedtoexceedthelimitof9billioninwrittenpremiums.

2009 Atthebeginningof2009,wepresentedthenewcomprehensiveFLEXILifeAssurance,whichmergedtheproductsFLEXI,FLEXIINVEST2008andFLEXIH-FIXintoasingleproduct.Thequalityofthisinsuranceistestifiedtobythefactthatmorethan200,000clientsmadeuseofFLEXILifeAssurancein2009andalsobythenumberofawardstheinsuranceproductwon.IntheFincentrumBankoftheYearcompetitionFLEXILifeAssurancewontheLifeAssuranceof2009category,anditwontwoofthehighestawardsintheZlatákoruna(GoldenCrown)competition,thosebeinginthecategoriesofLifeAssuranceandInnovationoftheYear.IntheInsuranceCompanyof2008competition,wewoninallcategoriesrelatingtolifeassurance.TheAssociationofCzechInsuranceBrokersawardedusthehighestawardinthecategoriesofinsurancecompanyof2008inLifeAssurance,InnovationofInsuranceProducts,CooperationwithBrokersandinthecategoryofClaimsSettlement.TheFLEXILifeAssuranceproductcrowneditssuccesswithavictoryinthecategoryofInsuranceProductof2008.In2009,thecompanynamewaschangedtoPojišťovnaČeskéspořitelny,a.s.,ViennaInsuranceGroup.

2008InSeptember2008PojišťovnaČeskéspořitelnybecameamemberoftheViennaInsuranceGroup.InthesameyearFLEXIINVEST2008unit-linkedlifeassurancewasvotedwinnerinthecategoryofLifeAssuranceof2008intheMasterCardBankoftheYear2008competition.Atthesametime,wewontheSilverCrownintheLifeAssurancecategory.Likewisein2008,theAssociationofCzechInsuranceBrokersawardedusInsuranceCompanyof2007inlifeassuranceandtheFLEXIproductwonthehighestawardintheInsuranceProductcategory.WewereawardedthetitleofBestInsuranceCompanyintheareaofSettlementandInnovationinInsuranceProducts.

20072007wasmarkedbyimportantproductchanges.Weinnovatedoneofourmostsuccessfulproducts,FLEXIFlexibleLifeAssurance,weintroducedanewtypeofunit-linkedlifeassurance,FLEXIH-FIX,andfor2008wepreparedaninnovationtoFLEXIINVESTunit-linkedlifeassurance.

2006During2006,westrengthenedourpositioninthelifeassurancemarket,defendingthusvindicatingourrankingamongthefivemajorlifeassurancecompanies.Inaddition,wegainedthetitleInsuranceCompanyof2006intheLifeandAccidentInsurancecategoryinasurveyorganizedbytheAssociationofCzechInsuranceBrokers.Ourclientnumbersexceededhalfamillion.

2005In2005,wecameupwithseveralproductinnovations.TheKVATROandHYPOTÉKACreditLifeAssuranceproductsmadetheirmarkamonginsurancerepresentatives.Attheendoftheyear,theproductportfoliowasenrichedwithanewinsuranceschemeforchildren,characterizedbyhighflexibility,reflectingtheneedsofthechildorthefamily.ItwentunderthenameofJUNIORFlexiblelifeAssurance.


Annual Report 2014

Company Profile

2004From2004onwards,wespecializedinthesaleoflifeassuranceviatheČeskáspořitelnabranchnetworkandselectedexternalnetworks.However,theČeskáspořitelnaFinancialGroupcontinuestoofferitsclientscertainproductsthroughitsstrategicpartner.Weoperateasthe“competencecentre“oftheČeskáspořitelnaFinancialGroupand,togetherwithastrategicpartner,theKooperativainsurancecompany,weprovidehighlystandardizedgeneralinsuranceproductsintendedfortheČeskáspořitelnabranchnetwork.AsignificantadditiontoourproductswasFLEXIINVESTUnit-linkedLifeAssurance,whichoffersclientsachoiceofthreeinvestmentprogrammesandawiderangeofinsuranceforliferisks.

2003WithregardtothedevelopmentoftheinsurancemarketintheCzechRepublicandtheEuropeanUnion,andalsowithregardtothefactthatČeskáspořitelnaandtheErsteBankgroupspecializeintheareaoflifeassuranceandbancassurance,inlate2003theshareholdersofPojišťovnaČeskéspořitelnydecidedtosellthenon-lifeinsurancepartofthecompanytoKooperativa.

2001UndertheinfluenceofthetransformationofČeskáspořitelnaanditsentirefinancialgroup,asof17September2001wetookonthenewnameofPojišťovnaČeskéspořitelny.Thechangeinthebusinessnameisrelatedtothechangesinthecorporatecolours,namesandlogosoftheentireČeskáspořitelnaFinancialGroup,whicharebasedonthecompositionofitsmajorityowner–ErsteBank.Therewerealsochangesintheareaofprovidingservicestoclientsandthecompany’smanagementculture.TherewasdevelopmentinsalesofourinsuranceproductsofferedinČeskáspořitelna’snetworkofbranches,inwhatisnowcalledbancassurance.

2000WithintheframeworkofprivatizingČeskáspořitelnawealsounderwentathoroughlegalandfinancialaudit.Thisresultedinanewshareholderenteringattheendof2000.ThelargestAustrianlifeassurancecompany,SparkassenVerischerung,amemberoftheErsteBankFinancialGroup,acquireda45%stakeinthecompanybyincreasingthesharecapitalbyCZK500million.WeputFLEXIFlexibleLifeAssuranceonthemarket,auniqueproductforanewgeneration.

1995–1999In1995,wewerethefirstinsurancecompanyintheCzechRepublictoputinsuranceforveryseriousdiseasesontothemarket,underwhichclaimscanbemadeifaclientisdiagnosedwithadisease.AnimportantmilestoneintheCompany’shistorywasthecapitalinputofČeskáspořitelnain1995,which,inadditiontotherequiredcapitalbase,broughtthebackgroundofthestrongestfinancialgroupintheCzechRepublic.Theimportanceofagoodqualityshareholderstructurewasdemonstratedin1997,whenthewholeinsurancemarketwasnegativelyhitbytheimpactofextensiveflooding.

1992–1994PojišťovnaČeskéspořitelnywasfoundedin1992usingCzechprivatecapital.InJanuary1993,webeganourinsuranceactivitiesunderthenameŽivnostenskápojišťovna.Ouraimwastoprovideinsuranceservices,inparticulartotherisingentrepreneurialsphere.Withthedevelopmentofinsuranceactivities,wealsostartedtoexpandourofferofinsuranceschemesforthegeneralpublic.


Annual Report 2014

Company Profile

In the coming period, we intend to adhere to our strategy: point out critical life situations and be open and fair to our clients.

RNDr. Petr Zapletal, MBAChairman of the Board of Directors


Annual Report 2014

Introductory Word by the Chairman of the Board of Directors

Dearclients,shareholdersandbusinesscolleagues,

Lastyear,wefocusedonpromotinglifeassurance.Ourgoalwastoremindpeopleoftheimportantriskscoveredbylifeassuranceandwelaunchedamarketingcampaignunderthebanner“TwiceasmuchwithFLEXI”,aimedatpromotingandpopularizingtheinclusionofseriousrisksinnewinsurancepolicies.ThecompanyguaranteeddoubleindemnityforselecteddiagnosesofseriousillnessesoncontractsconcludedbeforeMarch,andforseriousinjuriesresultingfromtrafficaccidentsoncontractsconcludedfromMaytoJuly.Wethenpreparedadoublebonusforclientswhotookoutaninsurancepolicywithcoverageforthird-degreedisabilityfrommid-SeptembertotheendofNovember.Wealsopresentedourstrategy,aimedatserioussituationsineverydaylife,intheformofamorelight-heartedadvertisingspot.

Weenabledadvisorstoviewtheirclients’contractsusingamobileapplication,PČSAssistant,andmodifiedtheSmartClientapplicationfordraftingcontracts.Theapplicationisnowclearer,intuitiveandincludesaneasy-to-understandguidewhicheliminateserrorsthatfrequentlyoccurredonpaperforms.Inthepast,theonlydrawbackwasthatthedrafthadtobeprinted,signedandsenttothecompany.Wesolvedthistoo,andwereamongthefirsttoofferclientstheoptiontosignelectronicallyusingSignPad.Wecannowreceiveoffersforinsuranceinanextremelyshorttime.I’mveryproudthatPojišťovnaČeskéspořitelnaplaysaleadingroleininnovationontheinsurancemarket.

Attheendoftheyear,wecametogripswiththeamendmentoftheIncomeTaxAct.Therealtestwashowtoresolveasituationaffectingmorethan500,000clientsinanextremelyshortperiod.Werespondedverywell.Therewasarushonclientrequestsforextraordinarywithdrawalsandthedispatchofrequeststopreserveextraordinarywithdrawals.Everyonewhocouldwasinvolvedintheadministrativeprocess.Wehandleditwithcredit.It’sgreattoknowyoucanrelyonyourcolleagueswhentheneedarises.

Commercially,wemanagedtorecordhighergrowththantheaverageofthewholemarketagainthisyear.TotalwrittenpremiumsreachedCZK11.9billion,withamarketshareof15.74%.

Duringthecourseoftheyear,colleaguesworkedontheinnovationofourflagshipproduct,FLEXIlifeassurance.Themostimportantchangesoccurredinrelationtotheriskofdisability,wheretheclientcannowchooseadifferentsuminsuredforeachdegreeofdisabilityandreceiveindemnityforeachofthethreerecognizedlevels.Clientscanalsoinsurealoan–seriousriskscanbesetwithdecreasingannuityincombinationwithaconstantsuminsured.Wereducedthepricefortheriskofveryseriousillnessesandaddedfurtherdiagnoses.Ifthedoctordeliversaterminalprognosis,wewillpaytheclient60%oftheagreedsuminsured.Theremainingfundswillbepaidouttobeneficiariesfollowingtheclient’sdeath.

Attheendoftheyear,wecompletedthepreparationofournewwebsite,whichismorefocusedontheneedsofourexistingandpotentialclients.Wearealsocontinuingaprojectaimedatimprovingthelevelofcommunicationwiththeclient.Themajorityoflettersincirculationnowarewrittenineasy-to-understandlanguage.

WewonthegoldmedalintheZlatákoruna(GoldenCrown)competitioninthecategoryofLifeAssuranceoftheYear2014forthesixthtimeinarow,andrankedsecondintheInsuranceCompanyoftheYear2013awards.FLEXIlifeassuranceonceagainconfirmedthatitisagreatproductthathasauniqueplaceontheinsurancemarket.What’smore,thesynergybetweentheCompany,itsemployeesandbusinesspartnerswasincredible.

Iwouldliketothankallcolleaguesandbusinesspartnersfortheirprofessionalapproach.Thankstothem,three-quartersofCzechfamilieswithchildrenundertheageoffivearefamiliarwithFLEXIlifeassurance.

Petr ZapletalChairmanoftheBoardofDirectors



Annual Report 2014


in thousands CZK 2011 2012 2013 2014

Assets 27,044,503 29,262,587 30,877,537 32,686,701

Equity 2,694,637 3,355,574 3,225,270 3,543,822

Financialplacements 24,742,299 26,780,771 28,364,959 30,093,911

Technicalprovisions 22,935,205 24,007,183 25,616,623 26,791,114

Profit(loss)ofcurrentaccountingperiod 417,615 1,018,418 792,052 855,121

Totalwrittenpremiums 10,679,693 10,702,266 11,355,789 11,918,758

ofthis: lifeassurance 9,892,180 9,897,341 10,594,630 11,201,393

non-lifeinsurance 787,513 804,925 761,159 717,365

Totalcostsofinsuranceclaims 5,144,551 6,745,877 6,832,406 7,837,144

ofthis: lifeassurance 4,960,058 6,556,934 6,635,313 7,635,905


Numberofpoliciesconcludedasat31December 774,902 789,964 782,631 786,370

ofthis: lifeassurance 726,187 740,970 736,852 743,212


Averagenumberofemployees(FTE) 221 239 255 269

Economic Highlights


Annual Report 2014

Economic Highlights

Members of the Company‘s Executive Bodies at 31 December 2014Members of the Supervisory Board

Chairman of the Supervisory BoardIng.MartinDiviš,MBA–ChairmanoftheBoardofDirectorsofKooperativaPojišťovna,a.s.,ViennaInsuranceGroup

Vice-chairman of the Supervisory BoardDkfm.HansRaumauf–MemberoftheManagementBoardofthemajorityshareholder,WienerStädtischeWechselseitigerVersicherungsverein–Vermögensverwaltung–ViennaInsuranceGroup

Member of the Supervisory BoardDr.Hans-PeterHagen–CEOandChairmanoftheManagementBoard,ViennaInsuranceGroupWienerStädtischeVersicherungAG

Member of the Supervisory BoardMag.ErwinHammerbacher–memberoftheBoardofDirectorsofSparkassenVersicherungAG

Member of the Supervisory BoardMag.RolandGröll–DirectorofFinanceandAccounting,ViennaInsuranceGroup,AG

Member of the Supervisory BoardIng.JiříDrahoš–HeadoftheControllingandReportingDepartment,PojišťovnaČeskéspořitelny,a.s.,ViennaInsuranceGroup

Member of the Supervisory BoardIng.PetrKohoutek–HeadoftheInsuranceDepartmentofPojišťovnaČeskéspořitelny,a.s.,ViennaInsuranceGroup

Member of the Supervisory BoardIng.PetrProcházka–HeadoftheProductManagementDepartment,PojišťovnaČeskéspořitelny,a.s.,ViennaInsuranceGroup

Board of Directors

Chairman of the Board of DirectorsRNDr.PetrZapletal,MBA

Vice-chairman of the Board of DirectorsIng.JaroslavKulhánek

Member of the Board of DirectorsIng.TomášVaníček,MBA


Annual Report 2014

Members of the Company‘s Executive Bodies

Organizational Structure at 31 December 2014

TheCompanydoesnothaveanybranchabroad.

CEO

DEPUTY CEO(Division Finance, IT and Risk Management)

DEPUTY CEO(Sales Division)

DEPUTY CEO(Insurance and Administrative Division)

Investment Strategy Committee

Technical reserves and assumptions Committee

Committee for the Management and Control System

and Risk Management

Committee for products

GENERAL MEETING

BOARD OF DIRECOTRS

Chairman of the Board of Directors

Vice-chairman of the Board of Directors

Member of the Board of DirectorsSUPERVISORY BOARD AUDIT COMMITTEE

FinanceSection

Controllingand

Reporting

Accounting

AssetManagement

Maintenance

ICTSection

SoftwareDevelopment

RiskManagement

Section

RiskManagement

HardwareSupport

SoftwareSupport

Actuaries

SalesSupportSection

MarketingandPR

SalesReporting

ExternalNetworkSection

Regional SalesManagers

for VIP Clients

BancassuranceSection

RegionalSales

Managers

RegionalSales

Managers

ClientServiceSection

RegionalManagers

Help Desk

SalesDevelopment

ProductDevelopment

Section

Insurance Riskand Product Portfolio

Management

Productand processes

ProductDevelopmentApplication

AdministrativeSection

Legaland

Compliance

OrganizationDepartment

Internal Controland Security

HumanResources

DMS

InsuranceSection

PolicyAdministration

ClaimsHandling

Underwriting

DistributionNetworkSupport


Annual Report 2014

Organizational Structure

Report by the Board of Directors

Whensettinggoalsfor2014,weknewthatachievingthemwouldnotbeeasy.Financialmarketsoperatedinalow-inflationenvironmentthroughouttheyear;insomecaseswitharealthreatofdeflation.Domesticinflationarypressuresalsoremainedverylow.Thiswasreflectedinafurtherdeclineinrevenues,especiallyinbondswithlongermaturity.Newhistoriclowswererecordedonanumberofimportantmarkets.

Sharemarketsfluctuatedconsiderablymore,particularlyundertheinfluenceofgeopoliticalrisks.Thecloseoftheyearwasaffectedbyasharpdropinoilpricesandthusfurtherpressureonadecreaseinpriceindexesacrossglobaleconomies.

Thistrendinrevenues,accompaniedbyapersistinglow-interestenvironment,ultimatelyforcedtheCzechNationalBank,asthefinancialmarketregulator,toannounceareductioninthemaximumtechnicalinterestratefromthecurrent1.9%to1.3%inJanuary2015.

Legislativedevelopmentsweremuchcalmercomparedtothepreviousyearand,asidefromachangeinconditionsforthetaxadvantageoflifeassuranceattheendoftheyear,therewerenofurthersurprises.Basedonexperiencetodate,itcanbesaidwithsatisfactionthatthetransitionofinsurancetermsandconditionsunderthenewCivilCodewashandledwithmerit.

Therewerenosurprisesinthedevelopmentofwrittenpremiumsforlifeassuranceinthismacroeconomicenvironment.ThelifeassurancemarketfellyearonyearbyCZK329million,andinrelativetermsby0.7%(totalofCZK46.1billion).Thedeclineinthemarketcontinuedwithacoolingofinterestinsingle-premiuminsurance,whichremainedbehindlastyear’sfigureby0.8%(thisinsurancedroppedby4.2%in2013).Similarly,regular-premiuminsurancealsofailedtoexceedwrittenpremiumsfor2013,andfellyearonyearby0.7%.

Theyear2014wasalsomarkedbyafiercecompetitivebattleinproductoffersanddistributormotivation.Despiteallefforts,therewasnoturnaroundinthetrendofprematurepolicyterminationpromptedbytheconclusionofnewcontractswithsimilarparameters.Marketing

activitieswereconductedinanefforttoexpandthescopeofinsurancecoverageforthesameorlowerprices.Asarule,alltheseactivitiesincreasedtheeconomicdemandsofinsurance.

ThemaintasksoftheBoardofDirectorsofPojišťovnaČeskéspořitelnyin2014werebasedontheCompany’sbusinessstrategy,whichwastoofferprofitableproductswithhighaddedvaluefortheend-consumer.Thisvalueprimarilyliesintheflexibilityofinsurancecoverage,supportedbyfirst-classclientserviceforthedurationoftheinsurancepolicy.Intheyearunderreview,Companymanagementcontinuedtoimplementproductinnovations,buildcustomerandbusinesspartnerloyaltyandincreasethestabilityoftheinsuranceportfolio.

In2014,theCompanyalsofocusedontheneedtosecurethefamilyandindividualswhentacklingseriouslifesituationsthatcanoccurindailylife.However,theCompanychangeditscommunicationconceptbasedonapositiveapproachtolife,withtheslogan“Mysletepozitivně,životstojízato(“Thinkpositively,lifeisworthliving”).Asinpreviousyears,theflagshipproducttoaddressclients’needswasFLEXIlifeassurance.Thetargetgroupismainlyyoungfamilies,wherethetaskoflifeassuranceistosecuremembersofthefamilyinvariouslifesituations,evenunderchangingconditionsinthelivesofindividualfamilymembers.

TheCompanysubjugateditsfurtherdevelopmentin2014totheneedtomaintainbusinesscontinuity,whilemeetingitsbusinessgoalsandachievingfinancialstability.Growingcompetition,theregulator’sincreasingdemandsonthedemonstrationofthefinancialhealthofinsurancecompaniesandrequirementstoensureconsumerprotectionareallassociatedwithrisingcostsinbothpersonnelandmaterial.TheCompanycanonlyfacethesedemandsbyenhancingmanagementefficiencyandproductivity.Forthisreason,theCompanycontinuedtoincreaseelectroniccommunicationwithclientsinthewholeprocessofacquisitionandinsurancepolicymanagement.In2014,theCompanyfurtherimprovedsystemsfortheelectronicconclusionofinsurancepolicies,whichwasjoinedbythepilotdeploymentofbiometricsignaturesattheendoftheyear.Theintroductionof


Annual Report 2014


biometricsignatureswastheculminationofthepaperlessprocessofconcludingcontracts,whichwillsavetime,reducetheerrorrateindraftinsurancepoliciesand,lastbutnotleast,limitthepossibilityofpotentialfraud.

Businessgoalssetfor2014wereachievedthroughaprovenmixofdistributionchannels,i.e.theuseofexternalpartnersandtheČeskáspořitelnabranchnetwork.Intheyearunderreview,salesintheČeskáspořitelnanetworkbroughtpositiveresults.Individuallifeassurancepoliciesexceededthevolumeachievedin2013byalmost10%.Salesinexternalnetworksdevelopedequallywell,withsalesexceedingfiguresin2013bymorethan3%.TheresultsachievedinboththeCompany’sdistributionnetworksrepresentedanaggregateyear-on-yeargrowthof5%,whichisamajorsuccessgiventheoveralldeclineoftheinsurancemarket.

Inabsolutefigures,writtenpremiumsthusachievedhistorichighstotallingCZK11,919million,ofwhichwrittenpremiumsforlifeassurancewereCZK11,201million.

Thepercentageofregularlypaidpremiumsintotalwrittenpremiumsheldat53.5%duetogrowthinsingle-premiuminsurance.ThetotalofregularlypaidwrittenpremiumswasCZK6,382million,whichisCZK144millionmorethanthevolumeachievedin2013.SinglepremiumsreachedCZK5,537million.ThisisanincreaseofCZK419millioncomparedtothepreviousyear,whichwasachievedthroughsalesintheČeskáspořitelnanetwork.ThevolumeofwrittenpremiumsforlifeassuranceofCZK11,201million,reportedaccordingtoCzech

accountingstandards,earnedtheCompanyfirstplaceonthelifeassurancemarket.Thesebusinessresultsrepresentatotalshareofthelifeassurancemarketof15.74%.

Innon-lifeinsurance,theCompanyfailedtoreachthevolumeofwrittenpremiumsachievedin2013andthisinsurancefellyearonyearby5.8%,whichcorrespondstowrittenpremiumsintheamountofCZK717million.Thisconcernsstandalonepersonalaccidentinsurance,incapacityinsuranceandinsuranceforlossofemployment,especiallyforČeskáspořitelnaclients,suchaspaymentprotectioninsurance.Developmentsinthesaleofinsuranceinthiscasecopythetrendinthesaleofconsumerloans,whichthebankoffersitsclients,andwhichsawadeclineofinterestinthisfinancialservicein2014.Despitethispartialfailure,wewanttocontinuetodevelopthisformofinsurancesalesaspartofgroupinsurance.Themainreasonisthatthisrepresentsacomprehensiveofferoffinancialproductsintheformofbancassurance.

Thefollowinggraphsdocumentthedevelopmentofwrittenpremiumsandmarketshare.


Annual Report 2014


Development in written premiums (in thousands CZK)

Development in market share on the insurance market by written premium (%)

14,000,000

12,000,000

10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

0

18.00%

16.00%

14.00%

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%

2012 2013 2014

2012 2013 2014

Totalwrittenpremiums Lifeassurance Non-lifeinsurance

Total1a,2) Lifeassurance1a) Non-lifeinsurance2)

1a)theentiresinglepremiumisincluded(accordingtoCzechaccountingstandards),cross-bordertransactionsarenotincluded2)includingpremiumsfromnon-lifeinsuranceassignedtoCzechInsuranceAssociation(ČAP)members,

notincludingtheemployer’sstatutoryliabilityinsurance

10,702,26611,355,789

11,918,758

9,897,34010,594,630

11,201,393

804,924 761,159 717,365

7.56% 7.97% 8.24%

13.99%15.16%

16.15%

1.14% 1.05% 0.95%


Annual Report 2014


PojišťovnaČeskéspořitelnyreceivedthefollowingawardsin2014foritsproducts,mannerofcommunicationwithclientsandinsurance-management-relatedservices:

• Insurance Company of the Year 2013–AČPM–2ndplaceinthecategoryofInsuranceCompanyoftheYear2013

• Zlatá koruna (Golden Crown)–1stplaceinthecategoryofLifeAssuranceoftheYear,forthesixthtime

• Fincentrum Bank of the Year–2ndplaceinthecategoryofLifeAssuranceoftheYear2014

Productinnovationin2014wasbasedonexperiencegainedfromourclientsanddistributors.Thesechangeshaveimprovedinsurancecoverageandflexibility.Forexample,incapacityinsurancewithindemnitypaidfromthefirstday,subjecttoa63-daywaitingperiod;theabilitytoconcludesecond-degreedisabilityinsurancewithoutfirst-degreedisabilitywhenconcludingthird-degreedisabilityinsurance,acombinationofpermanentinjuriesfrom0.5%andfrom10%,andotherchanges.

In2014,clientswhomettheconditionsforbeingawardedano-claimsorloyaltybonuswereacquaintedwiththestatusoftheirbonusinannualreports.Theloyaltyprogrammemotivatesresponsiblebehaviourbytheclientintermsofalong-termformofinsurancecoverageandsettingasidefundsfortheirpost-workinglife,andrewardsno-claimsbehaviour.

TheCompanywantstocontinuetostrengthentheimplementedloyaltyprogrammeandotheractivitiesaimedatcontinuouslyimprovingthequalityoftheCompany’sclientapproach.Forthisreason,itbegantosystematicallymanageclientexperience.Thisresultedinachangeinorganizationalandproceduralconditionsin2014.Thecapacityrequiredtocontinuallymonitorandevaluatefeedbackfromourclientswascreated.NewclientexperiencemanagershavebeengraduallyincorporatedintoalltheCompany’sbusinessactivitiesandtheirmainroleistoprovideCompanymanagementwithobjectiveinformationonclientneedsfortheevaluationofprocessesandchanges.

Thefollowinggraphsgiveanoverviewofdevelopmentsinthestructureofpremiumsoverthelastthreeyears.


Annual Report 2014


Development in written premiums by manner of payment (in thousands CZK)

Structure of written premiums written in 2014

14,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0

6.02%

93.98%

2012 2013 2014

Regularpremiums Singlepremiums

Lifeassurance

Non-lifeinsurance

Thehighshareofregularlypaidpremiumsistheresultofalong-termstrategyfocusedongrowthinpreciselythisareaofregular-premiumlifeassurance,despitetheprovisionofinsuranceservicesincooperationwithČeskáspořitelna(bancassurance).

Theabovegraphshowsthatthecompanyalmostexclusivelyfocusesonthesaleoflifeassurance.

6,071,1206,238,286 6,382,074

4,631,144

5,117,502

5,536,684


Annual Report 2014


Financial resultsItwasverysatisfyingtoseethatthedevelopmentoftheCompany’seconomicmanagementdidnotlagbehinditsfinancialresultsin2014.TheCompanyreportedprofitaftertaxofCZK855.1millionaccordingtoCzechaccountingstandards.ThisresultisCZK63millionbetterthanthepreviousyear.

OveralltechnicalreservesreachedCZK26,791million,ofwhichtheprovisionforlifeassurance,wheretheinvestmentriskisbornebythepolicyholder,wasCZK3,365.7million.Thesereserveshadthefollowingstructureasatthebalancesheetdate:provisionsforunearnedpremiumsofCZK29.5million,provisionforlifeassuranceofCZK21,763.1million,provisionsforoutstandingclaimsofCZK1,488.7millionandotherreservesamountingto

CZK144.1million.In2014,totalreservesincreasedbyCZK1,174.5millioncomparedto2013.Theprovisionforlifeassuranceincreased,largelyduetoanincreaseinsingle-premiuminsurance.Thisincreasefellattheendoftheyearduetoextraordinarywithdrawalsfromcapitalvalueasaresultofchangesinthetaxadvantageoflifeassurance.Technicalreservesforlifeassurance,wheretheinvestmentriskisbornebythepolicyholder,increasedyearonyearbyCZK224.5million.Reservesarecreatedinaccordancewithcurrentlegislationandprovidethenecessarysecuritytocoverfutureinsuranceclaims.

Thefollowinggraphsshowthedevelopmentineconomicresults,reservesandtotalassetsupto2014.

Development in earnings by accounting period (in thousands CZK)

Development in total assets (in thousands CZK)

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0

33,000,000

32,000,000

31,000,000

30,000,000

29,000,000

28,000,000

27,000,000

1,018,418

792,052855,121

2012 2013 2014 2012 2013 2014

29,262,587

30,877,537

32,686,701


Annual Report 2014


Thevolumeoftechnicalreservesdeterminedthefinancialinvestmentoffunds;82%ofthesereservesrepresentthecompany’sassets.Thefinancialinvestmentportfolioisdividedbetweenindividualtypesoffinancialinstrumentsinaccordancewithconditionsstipulatedbylegislationgoverningbusinessintheinsurancesector,andwiththerequirementsofprudentriskmanagementestablishedbyCompanymanagement.Thestructureofthefinancialinvestmentportfolio,whichisdocumentedinthefollowinggraph,isdesignedtocoverinsuranceliabilitiesinthelongterm,whileensuringadequatesecurityofinvestedfundsforourclients.Thefinancialinvestmentoffundsismanagedin

cooperationwithČeskáspořitelna’sspecializedinvestmentbankingunits.

Inthecurrentlow-interestenvironment,theCompanyfocusesontheimportanceofprudentpolicyontheliabilitysideofthebalancesheet,withtheaimofensuringlong-termfinancialstabilityandareturnonthecommitmentsmade.Wecreditourclientswithashareofprofitsachievedfromfundsinvestedonfinancialmarketsinexcessoftheaveragetechnicalinterestrate,wheretheaverageappreciationoflifereservesin2014was3.33%.

Structure of technical reserves in 2014

Structure of financial investments in 2014

PojišťovnaČeskéspořitelnymeetstherequirementsanddemandsofsolvencyandcomplieswithsetlimitsforsolvencyimposedonlifeassuranceandnon-lifeinsurance.Indoingso,itcreatessufficientsecurityforitsclientscoveringliabilitiesarisingfromtheinsurancepoliciesconcluded.

Inthefieldofreinsurance,PojišťovnaČeskéspořitelnyproceedsaccordingtoaprudentstructureofreinsuranceandlong-termcooperation,especiallywiththerenownedreinsurancecompanySWISSRE.

Provisionforlifeassurance

Provisionsforunearnedpremiums

Provisionsforoutstandingclaims

Technicalprovisionforlifeassurance,wheretheinvestmentriskisbornebythepolicyholder

Otherreserves

Fixedincomesecurities

Variableincomesecurities(shares)

Variableincomesecurities(funds)

Financialinvestmentoflifeassurance,wheretheinvestmentriskisbornebythepolicyholder

Bankdeposits

Other

81.23% 78.56%

0.65%

6.85%

11.18%

2.70%0.06%

0.11%

5.56%

12.56%

0.54%


Annual Report 2014


The Company’s management and control systemOverthecourseof2014,theestablishmentofthebasicfeaturesoftheCompany’smanagementsystemaccordingtoriskswascompleted,basedontheconditionsprescribedunderSolvencyIIrequirements.

Theorganizationalstructuredefinesthreelinesofdefenceagainstpotentialrisks,includingthedeterminationofrolesandresponsibilitiesforindividuallines.Ariskmanagementdepartmentwasestablishedtoserveasthemaincoordinator,togetherwithmethodologyforriskmanagementattheCompany,althoughtheprimaryresponsibilityfortheoperationoftheriskmanagementsystemremainswiththeCompany’sBoardofDirectors.Themanagementandcontrolsystemthereforecoversalltheinsurancecompany’sactivities,whilemanagementcontinuallymonitorsitsfunctionalityandefficiency.Thesystemfacilitatestheconsistentandsystematicevaluationandmanagementofrisks.Themanagementsystemensures:

• thefunctionalityofthemanagementandcontrolsystem;• thatorganizationandprocessesaresetupsothereisno

conflictofinterestsandtheseparationoftheinsurancecompany’scommercialandotheractivitiesissecured;

• riskstowhichtheinsurancecompanyisexposedinrelationtoitsactivitiesareidentified,includingprocessesleadingtotheirmanagementandcontrol;

• thatthebasicstructureofreportsforindividualdecision-makinglevelsattheCompanyisdefined;

• thatfeaturesaredefinedinaccordancewithSIIandthatthoseresponsibleforthesefeaturesarenotified,and,atthesametime,thatrequirementsforthecompetenceandintegrityofthesepersonshavebeenset;

• thesolvencycapitalrequirementissetquarterlyaccordingtothestandardSIIformula;

• thattheBoardofDirectorsconducted,processedanddiscussedanORSAreview.TheresultingORSAreportdescribedandevaluatedmanagementandcontrolsystemprocesses,gaveaninventoryofrisks,withanevaluationoftheadequacyofprocessesandinformationonthecoverageoftheriskprofile,includingthesensitivityofthesolvencypositionanditsprojectionforthefuture.

Throughtheseanalyses,theCompanyevaluateditsfinancialstabilityintheyearunderreview.Accordingtointernalandexternalcontrolsandaudits,theCompany’smanagementandcontrolsystemisconsistentandefficient,andgivestheBoardofDirectorssufficientinformationfortheeffectiveandprudentmanagementoftheCompany.


Annual Report 2014


IN 2014, WE RECEIVED THE FOLLOWING AWARDS FOR OUR PRODUCTS, COMMUNICATION WITH CLIENTS AND SERVICE RELATED TO INSURANCE MANAGEMENT:

• Insurance Company of the Year 2013 – Association of Czech Insurance Brokers – 2nd place in the category Insurance Company of the Year 2013

• Golden Crown – 1st place in the category of Life Assurance of the Year, for the sixth consecutive time

• Fincentrum Bank of the Year – 2nd place in the category of Life Assurance of the Year 2014


Annual Report 2014


Report by the Supervisory Board

In2014,theSupervisoryBoardofPojišťovnaČeskéspořitelny,a.s.,ViennaInsuranceGroup,continuouslyperformedthetasksassignedtoitbylawandtheCompany’sArticlesofAssociation.AstheCompany’ssupervisoryandcontrolbody,itoversawtheactivitiesoftheBoardofDirectorsandtheCompany’sbusinessoperations.TheSupervisoryBoardwaskeptregularlyinformedoftheCompany’soperations,itsfinancialsituation,itcheckedthefulfilmentofGeneralMeetingresolutions,reviewedtheexternalauditor’sreports,andprovidedCompanymanagementwithsuggestionsandrecommendationsaimedatimprovingtheCompany’ssituation.TheSupervisoryBoardreviewedthesubmittedfinancialstatementsofPojišťovnaČeskéspořitelny,a.s.,ViennaInsuranceGroupasat31December2014andcametotheconclusionthataccountingrecordswerekeptinaclearandevidentiarymannerinaccordancewithvalidaccountingregulationsandtheCompany’sArticlesofAssociation.

TheannualfinancialstatementswereauditedbyKPMGČeskárepublikaAudit,s.r.o.,whichconfirmedthatthefinancialstatementsfairlypresent,inallmaterialrespects,theassets,liabilitiesandshareholders’equityofPojišťovnaČeskéspořitelny,a.s.,asat31December2014andtheresultofitsbusinessoperationsfor2014inaccordancewiththeAccountingActandotherapplicableregulationsoftheCzechRepublic.TheSupervisoryBoardtookduenoteoftheAuditor’sReport.

TheSupervisoryBoardreviewedtheReportonRelationssubmittedbytheCompany’sBoardofDirectorsinaccordancewithSection83oftheActonBusinessCorporationsandstatedthatPojišťovnaČeskéspořitelny,a.s.,ViennaInsuranceGroupdidnotincuranylossordamageasaconsequenceofcontracts,otherlegalactsorothermeasuresconcluded,takenoradoptedbyPojišťovnaČeskéspořitelny,a.s.,ViennaInsuranceGroupduringtheaccountingperiodof2014infavouroforattheinstigationofanyrelatedparties.

TheSupervisoryBoardalsodiscussedandtookintoaccounttheReportontheActivityoftheAuditCommitteeofPojišťovnaČeskéspořitelny,a.s.,ViennaInsuranceGroupfor2014.

Basedonallthesefacts,theSupervisoryBoardrecommendsthattheGeneralMeetingapprovethestateoftheCompany’sassetsandliabilitiesasat31December2014andtheproposeddistributionoftheCompany’sprofitsfor2014,includingthepaymentofdividendsinaccordancewiththeproposalsubmittedbytheBoardofDirectorsofPojišťovnaČeskéspořitelny,a.s.,ViennaInsuranceGroupfordiscussionbytheGeneralMeeting.


Annual Report 2014

Report by the Supervisory Board

Information about Vienna Insurance Group

Approximately23,000ViennaInsuranceGroup(VIG)employeesinaround50Groupcompaniesin25countriesgeneratedaroundEUR9.1billioninpremiumswrittenin2014.ThismakestheGrouponeoftheleadingexchange-listedinsurancegroupsinAustriaandCentralandEasternEurope.Asthenumberoneinitscoremarkets,VIGprovidesitscustomerswithanoutstandingportfolioofferingawiderangeofpropertyandcasualty,lifeandhealthinsuranceproductsandservices.

From Austria to Central and Eastern Europe VIG’srootsgoallthewaybacktotheyear1824inAustria:190yearsofhistoryinwhichtheCompanydevelopedfromasuccessfullocalinsurerintoaleadinginternationalinsurancegroup.ThestorybeginswithWienerStädtische,oneofthefirstWesternEuropeancompaniesinitsindustrytorecognisethegrowthopportunitiesinCentralandEasternEurope,andtotakeachanceonenteringthemarketintheformerCzechoslovakiain1990.Additionalmarketsfollowed,withthecompanyexpandingintoHungaryin1996,Polandin1998,Croatiain1999andRomaniain2001,tomentiononlyafewexamples.FollowingitsentryintotheMoldovanmarketin2014,ViennaInsuranceGroupnowoperatesin25markets.

Welcome to the family of Vienna Insurance Group AG Wiener Versicherung Gruppe


Annual Report 2014


Number-one in its core marketsVIG’scoremarketsincludeAustria,theCzechRepublic,Slovakia,Poland,Romania,Bulgaria,Croatia,Hungary,SerbiaandUkraine.Withamarketshareofmorethan19%,VIGistheclearnumber-oneinsurerinthesemarkets.

TheVIGmarketsinCentralandEasternEuropegeneratedmorethanhalfoftheapproximatelyEUR9.1billioninGrouppremiumswrittenin2014–aclearindicationofthesuccessoftheCEEexpansionstrategy.VIGisconvincedthattheregionwillcontinuetoconvergeeconomically,leadingtofurtherincreasesinthedemandforinsurance.

VIGRE,thereinsurancecompanythatwasestablishedbyVIGin2008,hasitsregisteredofficeintheCzechRepublic,therebystressingtheimportanceoftheCEEregionasagrowthmarketforVIG.

Customer proximity – in 25 marketsLocalentrepreneurship,andthecustomerproximityitbrings,playsakeyroleinVIG’ssuccessandisreflectedintheregionalties,multi-brandstrategyandthewidevarietyofdistributionchannelsused.TheGroupthereforeintentionallyreliesonestablishedregionalbrandsunitedundertheViennaInsuranceGroupumbrella,becauseitistheindividualstrengthsofthesebrandsandlocalexpertisethatmakeVIGsuccessfulasacorporategroup.

Success thanks to a focus on our core business and binding valuesVIGisaprogressive,highlyrisk-consciousinsurerthatfocusesonitscorebusiness,theinsurancebusiness.Itofferssecurityintheformofreliability,trustworthinessandsoundness–notonlytoitscustomers,butalsoinitsdealingswithbusinesspartners,employeesandshareholders.Allitsbusinessdecisionsinthisregardarebasedonethicalvaluessuchashonesty,integrity,diversity,equalopportunityandcustomerorientation.

Theeffectsofthisfundamentalapproachareshownnotonlybyitsstrategyofcontinuoussustainablegrowth,butalsoitsexcellentcreditworthiness.InJuly2014theinternationallyrecognizedratingagencyStandard&Poor’sconfirmeditsA+ratingwithastableoutlook.Asaresult,VIGcontinuestohavethebestratingofallcompaniesintheATX,theleadingindexoftheViennaStockExchange.

Two strong partners in the CEE region: VIG and the Erste GroupTheErsteGroupisoneoftheleadingbankinggroupsinCentralandEasternEurope,withstrongtiestoAustria.VIGandtheErsteGroupenteredintoastrategicpartnershipin2008thathasbenefitedbothofthem.Inmarketswherebothgroupsareactive,ErsteGroupbranchesmarketVIGinsuranceproductsandVIGGroupcompaniesofferErsteGroupbankproductsinreturn.


Annual Report 2014


Strong stock-exchange presence, long-term principal shareholderVIGshareshavebeenlistedontheViennaStockExchangesinceOctober1994.Attheendof2014,slightlymorethan20yearsafteritsIPO,VIGwasoneofthetopcompaniesinthePrimeMarketoftheViennaStockExchangewithamarketcapitalizationofaroundEUR4.7billion.WhiletheATXleadingindexfellby15.2%in2014,VIGsharesonceagainprovedtheirstabilitybyachievingapricegainofaround2.4%.Thecompany’sdividendpolicyisbasedonstabilityandcontinuity.VIGhaspaidadividendeveryyearsinceitsIPO,thelatestbeingEUR1.30persharein2013.

VIG’ssecondarylistingonthePragueStockExchangeinFebruary2008underscoresthegreatimportanceoftheCentralandEasternEuropeanregiontothecompany.WithamarketcapitalizationofaroundCZK132.1billion,VIGwasalsooneofthelargestcompaniesonthePragueStockExchangeattheendof2014.

Around70%ofVIG’ssharesareheldbyWienerStädtischeVersicherungsverein,astableprincipalshareholderwithalong-termorientation.Theremainingsharesareinfreefloat.

Employer of choiceInadditiontobeingfirstchoiceforinsuranceproducts,VIGalsowantstobethefirstchoiceasanemployerandtoattractthemosttalentedandintelligentemployees.Awidearrayofmeasures,suchasidentifyinganddevelopingeachemployee’sindividualskills,areimplementedbyamodernPeopleManagementDepartment.Diversityisseenasanopportunityandispartofday-to-daylifeatVIG.Importanceisattachedtocreatingtheconditionsneededtoenablewomentodeveloptheirfullpotential.ThisisbecauseViennaInsuranceGroupisawarethatitssuccessisbasedonpeople,andthereforeonthededicationofitsapproximately23,000employees.

FurtherinformationonVIGisavailableatwww.vig.comandintheVIGGroupAnnualReport.


Annual Report 2014


Contents of Financial Section29 IndependentAuditor‘sReport32 BalanceSheet35 ProfitsandLossAccount38 StatementofChangeinEquity39 NotesoftheFinancialStatements73 ReportonRelations

Financial Section

28 PojišťovnaČeskéspořitelny,a.s.,ViennaInsuranceGroup

Annual Report 2014

Financial Section

Independent Auditor’s Report


Annual Report 2014

Financial Section


Annual Report 2014

Financial Section

Balance Sheet as at 31 December 2014

(in thousands CZK) Line No. Gross Adjustment Net Prior

period

ASSETS

A.Receivablessforregisteredcapitalsubscribed 1

B.Intangiblefixedassets,ofwhich: 2 419,015 322,153 96,862 84,502

C.Financialplacements(investments) 5 26,728,243 0 26,728,243 25,223,756

I.Landandbuildings(realestate),ofwhich: 6 55,653 0 55,653 55,440

1.Land 1,900 0 1,900 1,900

2.Buildings 53,753 53,753 53,540

a)Landandbuildings–self-occupied 7 55,653 55,653 55,440

II.Investmentsinaffiliatedundertakingsandparticipatinginterests 8 305,553 0 305,553 304,506

3.Participatinginterestswithsignificantinfluence 11 305,553 305,553 304,506

III.Otherfinancialplacements 13 26,367,037 0 26,367,037 24,863,810

1.Sharesandothervariable-yieldsecurities,otherparticipatinginterests 14 1,950,877 1,950,877 1,950,853

2.Bondsandotherfixed-incomesecurities 15 23,640,466 23,640,466 21,698,068

a)Securitiesvaluedatfairvaluethroughprofitandloss 8,403,014 8,403,014 8,379,852

b)OECDbondsheldtomaturity 12,317,093 12,317,093 10,456,689

c)Othersecuritiesheldtomaturity 2,920,359 2,920,359 2,861,527

6.Depositswithfinancialinstitutions 18 814,025 814,025 1,205,494

7.Otherfinancialplacements 19 (38,331) (38,331) 9,395

D.Financialplacementsforthebenefitoflifeassurancepolicyholderswhobeartheinvestmentrisk 21 3,365,668 3,365,668 3,141,203

E.Debtors 22 785,760 122,972 662,788 551,166

I.Receivablesarisingfromdirectinsuranceoperations 23 165,404 122,731 42,673 61,456

1.Receivablesduefromthepolicyholders 24 144,193 102,654 41,539 58,183

2.Receivablesduefromintermediaries 25 21,211 20,077 1,134 3,273

II.Receivablesarisingfromreinsuranceoperations 26 398,740 398,740 309,387

III.Otherreceivables 27 221,616 241 221,375 180,323

F.Otherassets 28 160,438 79,346 81,092 101,565

I.Tangiblefixedassetsotherthanthoselistedunder"C.I.Landandbuildings",andinventories 29 125,754 79,346 46,408 66,440

II.Cashinaccountsinfinancialinstitutionsandcashinhand 30 34,684 34,684 35,125


Annual Report 2014

Financial Section


period

ASSETS

G.Temporaryassetaccounts 32 1,752,048 0 1,752,048 1,775,345

II.Deferredacquisitioncosts,ofwhich: 34 1,574,659 0 1,574,659 1,597,073

a)inlifeassurancebusiness 35 1,574,607 1,574,607 1,596,999

b)innon-lifeinsurance 36 52 52 74

III.Othertemporaryassetaccounts,ofwhich: 37 177,389 177,389 178,272

a)Estimatedreceivables 38 145,312 145,312 146,735

TOTAL ASSETS 39 33,211,172 524,471 32,686,701 30,877,537

LIABILITIES AND EQUITY

A.Equity 40 3,543,822 3,225,270

I.Registeredcapital,ofwhich: 41 1,900,100 1,900,100

IV.Othercapitalfunds 46 148,071 42,865

V.Statutoryreservefundandotherfundsfromprofit 47 364,344 326,457

VI.Profitorlossbroughtforward 48 276,186 163,796

VII.Profitorlossforthefinancialyear 49 855,121 792,052

C.Technicalprovisions 51 24,604,157 1,178,711 23,425,446 22,475,420

1.Provisionforunearnedpremiums,ofwhich: 52 53,716 24,243 29,473 32,786

a)Provisionforunearnedpremiumsrelatingtolifeassuranceclasses 53 25,112 9,923 15,189 17,726

b)Provisionforunearnedpremiumsrelatingtonon-lifeinsuranceclasses 54 28,604 14,320 14,284 15,060

2.Lifeassuranceprovision 55 21,763,106 0 21,763,106 20,841,133

3.Provisionforoutstandingclaims,ofwhich: 56 2,534,250 1,045,518 1,488,732 1,493,985

a)Provisionforoutstandingclaimsrelatingtolifeassuranceclasses 57 2,309,383 887,442 1,421,941 1,412,209

b)Provisionforoutstandingclaimsrelatingtonon-lifeinsuranceclasses 58 224,867 158,076 66,791 81,776

4.Provisionforbonusesandrebates,ofwhich: 59 131,432 108,950 22,482 24,168

a)Provisionforbonusesandrebatesrelatingtolifeassuranceclasses 60 22,304 0 22,304 23,994

b)Provisionforbonusesandrebatesrelatingtonon-lifeinsuranceclasses 61 109,128 108,950 178 174

7.Provisionforliabilitiesfromthetechnicalinterestrateapplied 63 121,653 0 121,653 83,348


Annual Report 2014

Financial Section


period

LIABILITIES AND EQUITY

D.Lifeassurancetechnicalprovisionwheretheinvestmentriskisbornebythepolicyholders 71 3,365,668 0 3,365,668 3,141,203

E.Provisionsforotherrisksandlosses 72 198,489 189,617

2.Provisionsfortaxation 74 198,489 189,617

F.Depositsreceivedfromreinsurers 76 961,164 811,793

G.Creditors 77 934,662 729,791

I.Payablesarisingfromdirectinsuranceoperations 78 363,678 308,047

II.Payablesarisingfromreinsuranceoperations 79 461,626 368,794

V.Otherpayables,ofwhich: 83 109,358 52,950

a)Taxliabilitiesandpayablesduetosocialsecurityandhealthinsuranceinstitutions 84 23,523 6,696

H.Temporaryliabilityaccounts 86 257,450 304,443

I.Accruedexpensesanddeferredincome 87 1 0

II.Othertemporaryliabilityaccounts,ofwhich: 88 257,449 304,443

a)Estimatedpayables 89 257,449 304,443

TOTAL LIABILITIES AND EQUITY 90 32,686,701 30,877,537


Annual Report 2014

Financial Section

(in thousands CZK) Line No. Base Subtotal Result Prior period

I. TECHNICAL ACCOUNT FOR NON-LIFE INSURANCE

1.Earnedpremiums,netofreinsurance: 1 × × × ×

a)grosspremiumswritten 2 717,365 × × ×

b)outwardreinsurancepremiums 3 655,035 62,330 × ×

c)changeinthegrossprovisionforunearnedpremiums(+/-) 4 (1,556) × × ×

d)changeintheprovisionforunearnedpremiums,reinsurers'share(+/-) 5 (780) (776) 63,106 67,042

2.Allocatedinvestmentreturntransferredfromthenon-technicalaccount(itemIII.6.) 6 × × 3,757 4,208

3.Othertechnicalincome,netofreinsurance 7 × × 1,578 1,527

4.Claimsincurred,netofreinsurance: 8 × × × ×

a)claimspaid: 9 × × × ×

aa)grossamount 10 201,239 × × ×

ab)reinsurers'share 11 158,157 43,082 × ×

b)changeintheprovisionforoutstandingclaims(+/-): 12 × × × ×

ba)grossamount 13 (40,537) × × ×

bb)reinsurers'share 14 (25,552) (14,985) 28,097 50,138

5.Changesinothertechnicalprovisions,netofreinsurance(+/-) 15 × × 0 0

6.Bonusesandrebates,netofreinsurance 16 × × 2,047 2,112

7.Netoperatingexpenses: 17 × × × ×

a)acquisitioncosts 18 × 1,304 × ×

b)changeindeferredacquisitioncosts(+/-) 19 × 22 × ×

c)administrativeexpenses 20 × 8,841 × ×

d)reinsurancecommissionsandprofitparticipation 21 × 29,844 (19,677) (16,521)

8.Othertechnicalexpenses,netofreinsurance 22 × × 1,243 1,307

10.Sub-total,balance(result)inthetechnicalaccountfornon-lifeinsurance(itemIII.1.) 24 × × 56,731 35,741

II. TECHNICAL ACCOUNT FOR LIFE ASSURANCE

1.Earnedpremiums,netofreinsurance: 25 × × × ×

a)grosspremiumswritten 26 × 11,201,393 × ×

b)outwardreinsurancepremiums 27 × 1,307,027 × ×

c)changeintheprovisionforunearnedpremiums,netofreinsurance(+/-) 28 × (2,536) 9,896,902 9,376,279

Profit and Loss Account as at 31 December 2014


Annual Report 2014

Financial Section


II. TECHNICAL ACCOUNT FOR LIFE ASSURANCE

2.Incomefromfinancialplacements(investments): 29 × × × ×

a)incomefromparticipatinginterests,withaseparateindicationofthatderivedfromcontrollinginfluence 30 × × ×

b)incomefromotherinvestments,withaseparateindica-tionofthatderivedfromcontrollinginfluence,ofwhich: 31 × × × ×

ba)incomefromlandandbuildings 32 0 × × ×

bb)incomefromotherfinancialplacements(investments) 33 652,058 652,058 × ×

c)valueadjustmentsonfinancialplacements 34 × 0 × ×

d)incomefromdisposaloffinancialplacements 35 × 1,760,829 2,412,887 1,739,676

3.Unrealizedgainsonfinancialplacements 36 × × 1,332,455 1,366,862

4.Othertechnicalincome,netofreinsurance 37 × × 142,759 118,044

5.Claimsincurred,netofreinsurance: 38 × × × ×

a)claimspaid: 39 × × × ×

aa)grossamount 40 7,635,905 × × ×

ab)reinsurers'share 41 664,260 6,971,645 × ×

b)changeintheprovisionforoutstandingclaims(+/-): 42 × × × ×

ba)grossamount 43 161,804 × × ×

bb)reinsurers'share 44 152,072 9,732 6,981,377 6,267,374

6.Changesinothertechnicalprovisions,netofreinsurance(+/-): 45 × × × ×

a)lifeassuranceprovisions: 46 × × × ×

aa)grossamount 47 921,973 × × ×

ab)reinsurers'share 48 0 921,973 × ×

b)othertechnicalprovisions,netofreinsurance 49 × 262,769 1,184,742 1,409,482

7.Bonusesandrebates,netofreinsurance 50 × × 252,915 263,152

8.Netoperatingexpenses: 51 × × × ×

a)acquisitionscosts 52 × 1,471,692 × ×

b)changeindeferredacquisitioncosts(+/-) 53 × 22,392 × ×

c)administrativeexpenses 54 × 554,051 × ×

d)reinsurancecommissionsandprofitparticipation 55 × 389,872 1,658,263 1,394,665

9.Expensesconnectedwithfinancialplacements(investments): 56 × × × ×

a)investmentmanagementcharges,includinginterest 57 × 199,802 × ×

b)valueadjustmentstofinancialplacements 58 × 0 × ×

c)bookvaluedisposed-offinancialplacements 59 × 1,736,818 1,936,620 1,284,701


Annual Report 2014

Financial Section


10.Unrealizedlossesonfinancialplacements(investments) 60 × × 655,864 934,954

11.Othertechnicalexpenses,netofreinsurance 61 × × 119,134 104,571

13.Sub-total,balance(result)inthetechnicalaccountforlifeassurance(itemIII.2.) 63 × × 996,088 941,962

III. NON-TECHNICAL ACCOUNT

1.Resultofthetechnicalaccountfornon-lifeinsurance(itemI.10.) 64 × × 56,731 35,741

2.Resultofthetechnicalaccountforlifeassurance(itemII.13.) 65 × × 996,088 941,962

3.Incomefromfinancialplacements: 66 × × × ×

a)incomefromparticipatinginterests,withaseparateindicationofthatderivedfromcontrollinginfluence 67 × × ×

b)incomefromotherinvestments,withaseparateindicationofthatderivedfromcontrollinginfluence: 68 × × × ×

ba)incomefromlandandbuildings 69 70 × × ×

bb)incomefromotherfinancialplacements(investments) 70 4,504 4,574 × ×

c)valueadjustmentstofinancialplacements 71 × 4,529 × ×

d)incomefromdisposaloffinancialplacements 72 × 5,911 15,014 153,498

5.Expensesconnectedwithfinancialplacements: 74 × × × ×

a)investmentmanagementcharges,includinginterest 75 × 2,556 × ×

b)valueadjustmentstofinancialplacements 76 × 2,263 × ×

c)bookvaluedisposed-offinancialplacements 77 × 6,438 11,257 149,290

6.Allocatedinvestmentreturntransferredtothetechnicalaccountfornon-lifeinsurance(itemI.2.) 78 × × 3,757 4,208

7.Otherincome 79 × × 19,757 21,094

8.Otherexpenses 80 × × 16,843 17,667

9.Incometaxonordinaryactivities 81 × × 200,191 188,795

10.Profitorlossonordinaryactivitiesaftertax 82 × × 855,542 792,335

15.Othertaxesnotshownundertheprecedingitems 87 × × 421 283

16.Profitorlossforthefinancialyear 88 × × 855,121 792,052


Annual Report 2014

Financial Section

(in thousands CZK) Registered capital

Other funds from profit

Changes in valuation

Statutory reserve fund

Retained earnings

Profit (loss) for the

current yearTotal

BALANCEAT1/1/2012 1,900,100 4,285 56,168 249,786 66,683 417,615 2,694,637

Additionstofunds 3,405 20,881 393,329 (417,615)

Utilizationoffunds (3,705) (3,705)

Changeinvaluationoffinancialplacements 39,553 39,553

Increase/reductioninregisteredcapital

Paymentofdividends (393,329) (393,329)

Profit/lossforthecurrentyear 1,018,418 1,018,418

BALANCE AT 31/12/2012 1,900,100 3,985 95,721 270,667 66,683 1,018,418 3,355,574

BALANCEAT1/1/2013 1,900,100 3,985 95,721 270,667 66,683 1,018,418 3,355,574

Additionstofunds 4,730 50,921 962,767 (1,018,418)


Changeinvaluationoffinancialplacements (52,856) (52,856)



Profit/lossforthecurrentyear 792,052 792,052

BALANCE AT 31/12/2013 1,900,100 4,869 42,865 321,588 163,796 792,052 3,225,270

BALANCEAT1/1/2014 1,900,100 4,869 42,865 321,588 163,796 792,052 3,225,270

Additionstofunds 3,179 39,602 749,271 -792,052


Changeinvaluationoffinancialplacements 105,206 105,206



Profit/lossforthecurrentyear 855,121 855,121

BALANCE AT 31/12/2014 1,900,100 3,154 148,071 361,190 276,186 855,121 3,543,822

Statement of Change in Equity for 2014


Annual Report 2014

Financial Section

Notes to the Financial Statements for 2014

I. GENERAL CONTENTS

I.1. Description and principal activitiesPojišťovnaČeskéspořitelny,a.s.,ViennaInsuranceGroup(“theCompany”)wasenteredintheCommercialRegisteron1October1992(identificationnumber:47452820).

Shareholders of the Company as at 31 December 2014:

VIENNAINSURANCEGROUPAGWienerVersicherungGruppe 90%

Kooperativapojišťovna,a.s.,ViennaInsuranceGroup 5%

Českáspořitelna,a.s. 5%

TheCompanyreceivedalicencetocarryoninsuranceactivitieson16December1992.TheCompanycommenceditsinsuranceactivitieson1January1993.

TheCompanycarriesonthefollowingclasses/groupsofinsurance:

Life assurance• assuranceondeath,assuranceonsurvivaltoacertain

age,andassuranceonsurvivaltoacertainageordeath• pensioninsurance• accidentorsicknessinsuranceasasupplementtothe

abovetypesofinsurance• marriageinsuranceandsavingsinsurancetoprovide

fundstoraisechildren• insuranceconnectedwithaninvestmentfund/unit-linked

insurance

Non-life insurance• accidentandsicknessinsurance• insuranceforvariousfinanciallosses

Apartfromtheabove,theCompany’sprincipalactivitiesincludealsonon-lifeinsurancebusiness,whichtheCompanyhasnotbeenactivelyprovidingsince2January2004.Thesearenon-lifeinsuranceclasses3,5,7,8,9,11,13,15and18listedinPartBofAppendixNo.1toActNo.277/2009Coll.andgroups,andgroupse)andf)ofnon-lifeinsurancelistedinPartCoftheAppendixtotheInsuranceAct.

TheCompany’sprincipalactivitiesalsoincludeactivitiesrelatingtoinsurancebusinesspursuanttoSection3(1)(n)oftheInsuranceAct,i.e.intermediaryactivitycarriedoninconnectionwithinsurancebusinessundertheInsuranceAct,advisoryactivityinconnectionwiththeinsuranceofindividualsandcorporateentities,investigationofclaimscarriedonunderacontractwithaninsurancecompany,intermediaryactivityintheareaofbuildingsavingschemesandsupplementarypensioninsurance,andEducationactivityforinsuranceintermediariesandindependentlossadjusters.

Registered officePojišťovnaČeskéspořitelny,a.s.,ViennaInsuranceGroupnám.Republiky11553002Pardubice

MembersoftheBoardofDirectors,SupervisoryBoardandAuditCommitteeasat31December2014:

Board of DirectorsChairman:RNDr.PetrZapletal,MBANaZahrádkách307,Praha4,Šeberov

Vice-chairman:Ing.JaroslavKulhánekZalomená175,HradecKrálové11,Roudnička

Member:Ing.TomášVaníček,MBADonínská1778,Praha9,ÚjezdnadLesy

StatementsofwillandsigningofdocumentsonbehalfoftheCompanymustalwaysbeconductedjointlybytwomembersoftheBoard.NoauthorizationforindividualrepresentationinanymatterrelatedtotheoperationsoftheCompanyispossible.WhensigningdocumentsonbehalfoftheCompany,therequirednumberofrepresentativesshalladdtheirsignaturesandstatetheirofficestotheprintedorwrittennameoftheCompany.


Annual Report 2014

Financial Section

Organizational Structure at 31 December 2014

TheCompanydoesnothaveanybranchabroad.

CEO

DEPUTY CEO(Division Finance, IT and Risk Management)

DEPUTY CEO(Sales Division)

DEPUTY CEO(Insurance and Administrative Division)

Investment Strategy Committee

Committee for the Management and Control System

and Risk Management

GENERAL MEETING

BOARD OF DIRECOTRS

Chairman of the Board of Directors

Vice-chairman of the Board of Directors

Member of the Board of DirectorsSUPERVISORY BOARD AUDIT COMMITTEE

FinanceSection

Controllingand

Reporting

Accounting

AssetManagement

Maintenance

ICTSection

SoftwareDevelopment

RiskManagement

Section

RiskManagement

HardwareSupport

SoftwareSupport

Actuaries

SalesSupportSection

MarketingandPR

SalesReporting

ExternalNetworkSection

Regional SalesManagers

for VIP Clients

BancassuranceSection

RegionalSales

Managers

RegionalSales

Managers

ClientServiceSection

RegionalManagers

Help Desk

SalesDevelopment

ProductDevelopment

Section

Insurance Riskand Product Portfolio

Management

Productand processes

ProductDevelopmentApplication

AdministrativeSection

Legaland

Compliance

OrganizationDepartment

Internal Controland Security

HumanResources

DMS

InsuranceSection

PolicyAdministration

ClaimsHandling

Underwriting

DistributionNetworkSupport

Technical reserves and assumptions Committee

Committee for products


Annual Report 2014

Financial Section

ProxyIng.FrantišekMarešNo.78,Stéblová

Supervisory BoardChairman:Ing.MartinDiviš,MBADivokáŠárka39,Praha6,Liboc

Vice-chairman:Dkfm.HansRaumaufBiedermannsdorf,Borromäumstrasse38,2362,Austria(since14.4.2014;until19.3.2014Mag.ErwinHammerbacherSeyring,Helmaweg29,2201,Austria)

Members:Dr.Hans-PeterHagenVienna,LaudonGasse20/10,1080,Austria(since28.3.2014)

Mag.ErwinHammerbacherSeyring,Helmaweg29,2201,Austria(since20.3.2014,until19.3.2014VeronikaMaderová,Nechvílova1826/2,Praha4,Chodov)

Ing.PetrKohoutekVaňkova1341,Chrudim,ChrudimIV

Mag.RolandGröllVienna,NeuwaldeggerStr.37/1,1170,Austria

Ing.JiříDrahošNo.181,CerekvicenadLoučnou(since26.6.2014,until26.6.2014JUDr.KarelKopecký,Bělehradská396,Pardubice)

Ing.PetrProcházkaVěryJunkové92,Pardubice,Studánka(since26.6.2014)

Audit CommitteeIng.MartinDiviš,MBADr.Hans-PeterHagenIng.HynekVodička

I.2. Compliance with legislationAtthebalancesheetdatetheCompanyfullycompliedwithActNo.277/2009Coll.oninsurance,asamended(“theInsuranceAct“),ActNo.89/2012Coll.,theCivilCode,asamended,ActNo.38/2004Coll.oninsuranceintermediariesandindependentlossadjusters,asamended,includingtheapplicableimplementingregulations,andwithotherlegislationinforce.

I.3. Basis of preparation of the financial statements

TheaccountingrecordsoftheCompanyaremaintainedandthefinancialstatementsoftheCompanyhavebeenpreparedinaccordancewithActNo.563/1991Coll.onaccounting,asamended,ImplementingDecreeNo.502/2002Coll.implementingcertainprovisionsofActNo.563/1991Coll.onaccounting,asamended,foraccountingunits,whichareinsurancecompanies,asamended(“RegulationNo.502/2002”),andwiththeCzechAccountingStandardsforaccountingunitsthatmaintaintheiraccountingrecordsincompliancewithRegulationNo.502/2002Coll.andotherrelevantlegislation.

TheaccountingrecordsoftheCompanyaremaintainedinsuchamannerthatthefinancialstatementspreparedbasedontheserecordspresentatrueandfairviewoftheaccountingandfinancialpositionoftheCompany.

I.4. Significant accounting policies

(a) Tangible and intangible fixed assetsTangibleandintangiblefixedassetsarestatedatacquisitioncost.

TangiblefixedassetscostinglessthanTCZK40andintangiblefixedassetscostinglessthanTCZK60arechargedtotheprofitandlossaccountintheyearinwhichtheyareacquired.Theannualdepreciationratereflectstheassets’expectedusefullives.


Annual Report 2014

Financial Section

Thefollowingdepreciationratesareusedfortheindividualassetclasses:

Fixed assets Method Depreciation period in years

Software Straight-line 4

Motorvehicles Straight-line 4

ITequipment Straight-line 3

Fixturesandfittings Straight-line 8

Other Straight-line 15

(b) Investments

Land and buildings (real estate)Landandbuildings(realestate)areinitiallyrecordedattheiracquisitioncostandarenotsubsequentlydepreciated.

Atthebalancesheetdate,landandbuildings(realestate)arevaluedattheirfairvalue.Thefairvaluemeansthemarketvaluedeterminedbyanexpertappraisalasthepriceforwhichsuchlandandbuildings(realestate)couldbesoldonthedateofvaluation.

Thefairvalueisdeterminedthroughaseparatevaluationofeachitemoflandandbuildings(realestate)byanexpertappraisalasatthebalancesheetdate.

Anychangeinthefairvalueoflandandbuildings(realestate)isrecognizedinequity.

Debt securities Attheacquisitiondatedebtsecuritiesarestatedatacquisitioncost.

Acquisitioncostistheamountforwhichadebtsecurityhasbeenacquiredandincludesaproportionatepartofanyaccruedinterestandexpensesdirectlyassociatedwiththeacquisition.

TheCompanyamortizespremiumsanddiscountsonalldebtsecurities.Premiumsanddiscountsareamortizedtotheprofitandlossaccountonthebasisoftheeffectiveinterestratemethodfromthedateofacquisitiontotheirmaturity.

AmortizeddebtsecuritiesarerevaluedattheirfairvalueasatthebalancesheetdatewiththeexceptionofbondsheldtomaturitythathavebeenissuedbyamemberstateoftheOrganizationforEconomicCooperationandDevelopmentandawardedaratingattheleveloftheCzechRepublicorhigherbyatleasttworeputableratingagencies(“OECDbondsheldtomaturity“).

TheCompanyrecognizestheOECDbondsheldtomaturityattheiramortizedcostasatthebalancesheetdate.

Fairvaluemeansthemarketpricepublishedbyadomesticorforeignstockexchangeorotherpublic(organized)market.TheCompanyappliesthemostrecentpublishedmarketpriceasatthedateofthefinancialstatements(balancesheetdate).Ifthereisnoavailablepriceorifitdoesnotsufficientlyrepresentthefairvalue,thefairvalueisdeterminedonthebasisofaqualifiedestimate.

Amortizedcostmeansthepriceusedwhenfirstrecognized(theacquisitioncost),whichisgraduallyincreasedbyaccruedinterestincome,adjustedbyamortizationofthediscount/premiumanddecreasedbytheamountofadjustments.

Debtsecuritiesareclassifiedassecuritiesvaluedatfairvaluethroughprofitandlossorsecuritiesavailableforsale,OECDbondsheldtomaturityandothersecuritiesheldtomaturity.

Achangeinthefairvalueofdebtsecuritiesvaluedthroughprofitandlossoravailableforsaleisrecognizedintheprofitandlossaccount.Achangeinthefairvalueofdebtsecuritiesheldtomaturitythatarerevaluedatfairvalueisrecognizedinequity.

Wheredebtsecuritiesaredenominatedinaforeigncurrency,theirvalueistranslatedtoCzechcrownsusingthecurrentexchangeratepublishedbytheCzechNationalBank(“CNB”).Theappropriateexchangeratedifferenceisincludedinthefairvalue.


Annual Report 2014

Financial Section

Shares and other variable-yield securitiesAttheacquisitiondate,sharesandothervariable-yieldsecuritiesareaccountedforatacquisitioncost.

Acquisitioncostistheamountforwhichthesharesorothervariable-yieldsecuritieswereacquiredandincludesallexpensesdirectlyassociatedwiththeacquisition.

Atthebalancesheetdate,sharesandothervariable-yieldsecuritiesarerevaluedattheirfairvalue.

Fairvaluemeansthemarketpricepublishedbyadomesticorforeignstockexchangeorotherpublic(organized)market.TheCompanyappliesthemostrecentpublishedmarketpriceasatthedateofthefinancialstatements(balancesheetdate).Ifnomarketpriceisavailableorifitdoesnotsufficientlyrepresentthefairvalue,thefairvalueisdeterminedonthebasisofaqualifiedestimate.

Sharesandothervariable-yieldsecuritiesareclassifiedassecuritiesvaluedatfairvaluethroughprofitandlossorsecuritiesavailableforsale.Thechangeinfairvalueofsharesorothervariable-yieldsecuritiesisrecognizedintheprofitandlossaccount.

Wheresharesandothervariable-yieldsecuritiesaredenominatedinaforeigncurrency,theirvalueistranslatedbasedonthecurrentexchangeratepublishedbyCNB.Theappropriateexchangeratedifferenceisincludedinthefairvalue.

Participating interestsParticipatinginterestsincontrolledpersonsareparticipationsinanotherenterpriseinwhichtheCompanyholdsacontrollinginfluence.Inaddition,othercaseswheretheinsurancecompanyisacontrollingpersonarereportedunderthisitem.

ParticipatinginterestswithsubstantialinfluenceareparticipationsinanotherenterpriseinwhichtheCompanyholdsasubstantialinfluence.Unlessproventothecontrary,substantialinfluenceisconsideredtobeaholdingofatleast20%ofthevotingrights.

Participatinginterestsintheformofsecuritiesissuedbythecontrolledpersonsorpersonsinwhichtheaccountingunitexercisessubstantialinfluence,andwhichareheldfortradingorareavailableforsaleareshowninitemC.II.2Debtsecurities.

Attheacquisitiondate,participatinginterestsarestatedattheiracquisitioncost.Theacquisitioncostistheamountforwhichtheparticipatinginterestswereacquiredandincludesallexpensesdirectlyassociatedwiththeacquisition.

Atthebalancesheetdate,participatinginterestsarerevaluedattheirfairvaluebasedontheCompany’sshareinthenetassetvalue.Changesinfairvaluearerecognisedinequity.

Deposits with financial institutionsDepositswithfinancialinstitutionsareinitiallyrecognizedatnominalvalue.Atthebalancesheetdate,theseassetsarerevaluedattheirfairvalue.Thefairvalueofshort-termdepositswithfinancialinstitutionsisdeterminedastheirnominalvalueincludingaccruedinterest.

DepositsdenominatedinaforeigncurrencyaretranslatedtoCzechcrownsusingthecurrentexchangeratepublishedbytheCNB,andtheappropriateexchangeratedifferenceisincludedinthefairvalue.ChangesinfairvaluearereflectedintheCompany’sprofitandlossaccount.

DerivativesDerivativesarevaluedatfairvalue.Thefairvalueoffinancialderivativesisdeterminedasthepresentvalueofexpectedcashflowsfromthesetransactions.

Financialderivativesthatdonotmeettherequirementsfortheapplicationofhedgeaccountingor,ifappropriate,derivativesinrespectofwhichtheCompanyhasdecidednottoapplyhedgeaccountingarecarriedatfairvalueandthegainsorlossesarisingfromtheirrevaluationarerecognizedintheprofitandlossaccount.ThederivativesareusedbytheCompanytohedgecurrencyrisks,i.e.currencyswaps.


Annual Report 2014

Financial Section

(c) Financial placements for the benefit of life assurance policyholders who bear the investment riskFinancialplacementsforthebenefitoflifeassurancepolicyholderswhobeartheinvestmentriskareaccountedforseparatelyfromotherfinancialplacements.

Atthebalancesheetdate,financialplacementsforthebenefitoflifeassurancepolicyholderswhobeartheinvestmentriskarerevaluedattheirfairvalue.InordertopreservethetrueandfairviewoftheCompany’sresultfortheyear,allchangesresultingfromrevaluationatfairvaluearerecognizedintheCompany’sprofitandlossaccount.

(d) AdjustmentsTheCompanyestablishesadjustmentstoreceivablesandotherassetsexceptforfinancialplacementsreportedatfairvalue.Adjustmentsrepresentatemporarydecreaseinthevalueofindividualassets.TheamountofthedecreaseisdeterminedonthebasisofaprofessionalriskassessmentcarriedoutbytheCompany’smanagement.

Adjustmentstoreceivablesfrompolicyholdersareestablishedbasedonananalysisoftheirrecoverability.Theanalysisincludesanageinganalysisofthereceivables.

AdjustmentstoOECDbondsheldtomaturityareaccountedforonlyifthereisariskthatthenotionalprincipalamountofthebondorthebondyieldorboththevalueandtheyieldwouldnotberepaid.

(e) Impairment of assetsAtthebalancesheetdate,theCompanyassesseswhetherthoseassets,whicharenotcarriedatfairvalueorforwhichchangesinfairvaluearerecognizedinequity,areimpaired.Impairmentofanassetisrecognizedintheprofitandlossaccount.

(f) Deferred acquisition costsDeferredacquisitioncostsrepresenttheproportionofacquisitioncostsincurredduringthecurrentfinancialyearthatrelatestotherevenuesofsubsequentfinancialyears.AttheendofeachfinancialyeartheCompanycarriesoutaliabilityadequacytesttodeterminewhethertheamountofthedeferredacquisitioncostsisappropriate.

Non-life insuranceInrespectofnon-lifeinsurance,deferredacquisitioncostsarebasedontotalacquisitioncostsincurredinthecurrentperiodandtheratioofthegrossprovisionforunearnedpremiumsatthebalancesheetdatetothetotalgrosspremiumswrittenforthefinancialyear.Deferredacquisitioncostsaredeterminedforallindividualclassesofnon-lifeinsurance.

Life assurance (other than assurance connected with an investment fund/unit-linked insurance)InlifeassurancetheCompanydeterminesdeferredacquisitioncostsusingthezillmerizationmethod,whichisthemethodusedtocalculatethelifeassuranceprovision,seenoteI.4.(i).

Life assurance connected with an investment fund/unit-linked insuranceDeferredacquisitioncostsinunit-linkedassurancearedeterminedusingactuarialmethodsandreflectingtheexpectedcancellationratebasedonthevalueofexpectedfuturedeductionsfrominitialfeesandfromtheexpectedrepaymentofthenegativecapitalvaluearisingfrominsurancecontractsduringtheperiodinwhichtheinitialcostsarededucted.Theexpectedrepaymentofthenegativecapitalvalueisdeterminedusingtheprospectivemethodtakingintoconsiderationallrelevantfuturecashflowsandusingprudentassumptionsregardingthecancellationrate,claimfrequencyandinsurancecontractdurationperiod.

(g) Income taxIncometaxontheprofitfortheyearcomprisescurrentincometaxandthechangeindeferredtax.Currentincometaxcomprisesthetaxliabilitycalculatedfromthetaxbaseusingtheeffectivetaxrateandanyadditionalpaymentsorrefundsoftaxforpreviousyears.

Deferredtaxisprovidedonalltemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandtheamountsusedfortaxationpurposesandothertemporarydifferences(taxlossescarriedforward,ifany)multipliedbytheincometaxratesexpectedtobevalidfortheperiodsinwhichthetaxasset/liabilityisexpectedtobeutilized.


Annual Report 2014

Financial Section

Adeferredtaxassetisrecognizedonlytotheextentthatthereisnodoubtthatfuturetaxableprofitswillbeavailableagainstwhichthisassetcanbeutilized.

(h) Provision for unearned premiumsTheprovisionforunearnedpremiumsiscreatedinrespectoflifeassuranceandnon-lifeinsurance,exceptforsinglepremiumlifeassurance.Theprovisionamountrepresentsthepartofgrosspremiumswrittenwhichistobeallocated,intermsoftime,tothesubsequentfinancialyearortofuturefinancialyearsandisdeterminedasthesumofallamountscalculatedforindividualcontractsusingthe“proratatemporis”method.

(i) Life assurance provision Thelifeassuranceprovisioncomprisesthesumoftheprovisionsforindividuallifeassurancepolicies.ThelifeassuranceprovisionrepresentsthevalueoffutureliabilitiesoftheCompanyandiscalculatedusingactuarialmethods,includingprofitsharesdeclaredandallocatedandaprovisionforexpenses,relatedtotheadministrationofcontracts,afterdeductingthevalueoffuturepremiums.

TheCompanyaccountsfortheprovisionusingthezillmerizationmethod.Thezillmerizationmethodresultsinthedeferralofacquisitioncostsforlifeassurancecontracts.Thesecostsareincludedwithinthelifeassuranceprovisionthroughactuarialmethodsaftereliminatingtemporarynegativebalances,whicharecapitalizedandpresentedasdeferredacquisitioncosts.Theacquisitioncostsarecapitalizedanddeferredinaccordancewiththeprudenceprincipleandtakingintoaccounttheriskoflapsesandcancellations.

Forunit-linkedassurancethatinvolvesinvestmentfundswheretheCompanyguaranteesaminimumreturnoninvestment,thispartoftheprovisionsisaccountedforasalifeassuranceprovision.Theprovisioniscalculatedbasedonthenumberandpriceofunitscreditedtotheinsurancecontracts.

Withsomeunit-linkedassurancecontracts,anoclaimsbonusoraloyaltybonuscanbearrangedinaccordancewiththeinsurancetermsandconditionsandthetariffofrates.Withinthedefinedassessmentperiod,thebonusisrecognizedaspartofthelifeassuranceprovisionandamountstothe

estimatedpresentvaluedeterminedbasedondiscountingandnetoftheexpectedprobabilityofbreachofthetermsandconditionsuntiltheendoftheassessmentperiod.Uponfulfilmentoftheconditionsattheendoftheassessmentperiod,thebonusiscreditedtotheinsurancecontractintheformofpurchasedunitsanditbecomesacomponentpartofthecapitalvalueofthecontract.

(j) Provision for outstanding claimsTheprovisionforoutstandingclaimsinrespectofbothlifeandnon-lifeinsurancecomprisestheamountofexpectedcostsinrespectofclaims:

• reportedbutnotsettledduringtheperiod(RBNS),• incurredbutnotreportedduringtheperiod(IBNR).

Theprovisionforoutstandingclaimsreportedbytheendoftheyearrepresentsthesumofallamountscalculatedforindividualclaims.

Theprovisionforoutstandingclaimsincurredbutnotreportedasatthebalancesheetdateisdeterminedusingthechainladdermethod.

Theprovisionforoutstandingclaimsincludesanestimateofallrelatedexternalandinternalclaimshandlingcosts.Theprovisionforoutstandingclaimsisreducedbythevalueofsalvageandothersimilarrecoveries.

Whencalculatingtheprovisionforoutstandingclaims,nodiscountingiscarriedout.

AlthoughtheBoardofDirectorsconsiderstheprovisionforoutstandingclaimstobefairlystatedonthebasisoftheinformationcurrentlyavailabletoit,theultimateliabilitymayvaryasaresultofsubsequenteventsornewinformation,whichmayresultinsignificantadjustmentstotheamountsprovidedfor.Adjustmentstotheamountsoftheprovisionsarereflectedinthefinancialstatementsfortheperiodinwhichtheadjustmentsaremade.Theproceduresandmethodsusedinmakingestimatesarereviewedregularly.


Annual Report 2014

Financial Section

(k) Provision for bonuses and rebatesTheprovisionforbonusesandrebatesiscreatedinaccordancewiththerespectivetermssetoutininsurancecontracts,i.e.theGeneralTermsandConditionsofInsuranceorspecificcontractualarrangements.

Changesintheprovisionforbonusesandrebatesarepresentedintheprofitandlossaccountunder“Bonusesandrebates”.

(l) Provision for liabilities arising from the technical interest rate applied and other calculation parametersTheCompanycarriesoutalifeassuranceliabilityadequacytestasatthebalancesheetdate(“theliabilityadequacytest”)inordertoassesstheadequacyofthelifeassuranceprovisions(provisionforunearnedpremiums,lifeassuranceprovision,provisionforoutstandingclaims,provisionforbonusesandrebatesandlifeassuranceprovision,wheretheinvestmentriskisbornebythepolicyholder).

Theliabilityadequacytestisperformedusingdiscountedprojectedcashflows.

Theliabilityadequacytestresultsintheminimumvalueofliabilitiestopolicyholdersbasedonbestestimatesofthefuturedevelopmentofentryparametersadjustedbymarketvaluemargins.

Wherethisamountexceedsthetotalamountofthelifeassuranceprovisionsreducedbytherespectiveunamortizedacquisitioncostsandotherintangibleassets,thedeficiencyisrecognizedthroughtheestablishmentofaprovisionforliabilitiesarisingfromthetechnicalinterestrateappliedandothercalculationparameters.

IncompliancewithSection66(2)oftheInsuranceAct,theCompanyinformedtheCNBofthemethodforcalculatingtheprovisionforliabilitiesarisingfromthetechnicalinterestrateappliedandothercalculationparameters.

ThechangeinthisprovisionispresentedinitemII.6.(b)intheprofitandlossaccount.

(m) Life assurance provision where the investment risk is borne by the policyholdersThelifeassuranceprovisionwheretheinvestmentriskisbornebythepolicyholdersisintendedtocovertheliabilitiesoftheCompanyduetoinsuredpersonsinthoseclassesoflifeassurancewhere,basedonaninsurancecontract,theinvestmentriskisbornebythepolicyholders.

Theamountoftheprovisionisdeterminedasthesumofliabilitiesduetoinsuredpersonsintheamountoftheirsharesofinvestedpremiumsfromindividuallifeassurancecontractsinaccordancewiththeprinciplesincludedintheinsurancecontracts.

(n) Reinsurers’ share of technical provisionsTechnicalprovisionsarepresentedasanetliability,i.e.afterdeductionofthereinsurers’share.Theamountofthisshareiscalculatedbasedonthetermsoftherelatedreinsurancecontracts,themethodofsettlementwithreinsurersandinconsiderationoftheprudenceprinciple.

TheCompanypresentsthereinsurers’shareoftheprovisionforunearnedpremiums,theprovisionforoutstandingclaimsandtheprovisionforbonusesandrebates.Thereinsurersdonotparticipateintheothertechnicalprovisions.

(o) Provisions Provisionsareintendedtocoverrisks,lossesandotherrespectivepayables,whichareclearlydefinedandtheoccurrenceofwhichiseitherprobableorcertainbutwhoseamountortimingareuncertain.

Provision for taxesTheprovisionfortaxesisestablishedatthebalancesheetdateandamountstotheestimatedcorporateincometaxliabilitydue.Theutilization(release)oftheprovisionisaccountedforwhenthetaxreturnisfiled.

(p) Gross premiums writtenGrosspremiumswrittencompriseallamountsdueduringthefinancialyearinrespectofinsurancecontractsregardlessofthefactthatsuchamountsmayrelateinwholeorinparttofuturefinancialyears.


Annual Report 2014

Financial Section

(q) Claims paidClaimspaidcomprisetheamountassessedforpaymentbasedontheclaimsinvestigationprocess,externalandinternalclaimshandlingcostsandadeductionforthesalvagevalueandotherrecoveries.

Claimspaidarerecordeduponcompletionoftheinvestigationoftheclaimandintheamountoftheassessedsettlement.

(r) Acquisition costsAcquisitioncostscomprisealldirectandindirectcostsarisingfromtheconclusionofinsurancecontracts.

(s) Expenses and income from financial placements

Allocation of expenses and income from financial placements between life assurance and non-life insurance accounts:Expensesandincomefromfinancialplacementswhicharedirectlyrelatedtolifeassuranceactivitiesarerecordedinthelifeassurancetechnicalaccount.

Otherexpensesandincomefromfinancialplacementswhicharenotrelatedtolifeassuranceactivitiesarerecordedinitiallyinthenon-technicalaccountandsubsequentlyallofthemaretransferredtothenon-lifeinsurancetechnicalaccount.

Method of accounting for realized gains and losses upon disposal of financial placementsThedisposaloffinancialplacementsisrecognizedonagrossbasis,wherebytherevenuesfromdisposalintheamountofthesellingpriceoftherelevantfinancialinstrumentsarerecordedseparatelyfromtheexpensesintheamountofthecarryingvalueoftherelatedfinancialplacements.

(t) Allocation of items between life assurance and non-life insuranceInordertoaccountforitemscommontobothlifeassuranceandnon-lifeinsurance,theCompanyusesamethodincompliancewithRegulationNo.502/2002Coll.Underthismethodindividualitemsaregroupedaccordingtotheclassofinsurancetowhichtheyrelate.Foritemsthatcannotbeallocateddirectly,theratioofpremiumswrittenandclaims

paidforindividualclassesofinsurancetototalpremiumswrittenandtotalclaimspaidisusedasabasisforallocationofexpensesandincomebetweenlifeassuranceandnon-lifeinsurance.

Expenses and revenues from financial placementsExpensesandrevenuesfromfinancialplacementsareallocatedbetweenlifeassuranceandnon-lifeinsuranceusingthemethodstatedinpointI.4.(s).

Other expenses and revenuesDuringtheaccountingperiod,clearlyattributableexpensesandrevenuesarerecordeddirectlyinthelifeassuranceornon-lifeinsurancetechnicalaccountorthenon-technicalaccount.Expensesandrevenuesthatcannotbedirectlyattributedarerecordedprimarilyinthenon-technicalaccountandsubsequentlyallocatedtothetechnicalaccountforlifeassuranceornon-lifeinsuranceusingthemethodstatedinnoteI.4.(t).

Theallocationisnotappliedtotaxes,fees,orotherexpensesincurredoutsideinsuranceorreinsuranceactivities.

(u) Foreign currency translationTransactionsduringtheyeararerecordedattheCNBexchangerateeffectiveasatthetransactiondateorattherateatwhichthetransactionwasrealized.

Atthebalancesheetdate,foreigncurrencyassetsandliabilitiesaretranslatedattheCNBofficialrateforthatdate.Unlessstatedotherwise,foreigncurrencygainsandlossesarerecordedintheprofitandlossaccount.


Annual Report 2014

Financial Section

I.5. Changes in accounting policies and procedures

During2014,therewerenochangesinaccountingpoliciesandproceduresmadebytheCompany,andduringthefinancialyeartheCompanydidnotapplyanydeviationsfromthesepoliciesandprocedures.

I.6. Risk managementIncompliancewithRegulationNo.434/2009Coll.,toimplementcertainprovisionoftheActonInsurance,theCompanyhasensuredthattheset-upoftheinternalcontrolsystemcoversallofitsoperations.

Theset-upoftheinternalcontrolsystemenablesconsistentandsystematicriskmanagement.

TheCompanyisexposedtoinsuranceriskwhichnaturallyresultsfromtheunderwritteninsurancecontractsaswellasotherrisks,mainlythemarketrisk,creditrisk,operationalrisk,liquidityriskandconcentrationrisk.

Thepoliciesandproceduresforriskmanagementarecomprehensiveandinterrelatedwiththepoliciesandproceduresformaintenanceofthecapitaldeterminedtocovertheserisks.

TheCompany’sBoardofDirectorshastheprimaryresponsibilityforriskmanagementsystemeffectiveness.Theriskmanagementdepartmentisresponsibleforperformanceofriskmanagementactivities.Simultaneously,therehavebeendefinedtheindividuallinesofprotectionagainstrisks,includingtheirtasksandresponsibilitiesforriskmanagementwithintheCompany.

(a) Non-life insurance riskTheCompanyisexposedtoinsuranceriskandunderwritingrisksfollowingfromthesaleofnon-lifeinsuranceproducts.

Insuranceriskrelatestouncertaintyinrespectoftheperiod,frequencyandamountofdamagecoveredbyinsurancecontracts.

Themostsignificantcomponentsofinsuranceriskarethereserveriskandthepremiumrisk.Thepremiumamountisdeterminedusinghistoricalassumptions,whichmaydifferfromtheactualsituation.Theriskoftrend,riskofestimate,

changeinassumption,etc.,mayhaveasignificantimpactondeterminingtheamountofprovisions.Theliabilityadequacytestsandanalysisofsensitivitytochangeinassumptionsareusedtoeliminatethereserverisk.

InordertomanagetheinsurancerisktheCompanyappliesinternalpoliciesforthedevelopmentandvaluationofproducts,thedeterminationoftheamountoftechnicalprovisions,reinsurancestrategyandunderwritingrules.

Concentration of insurance riskConcentrationofinsuranceriskmayexistintheeventthataparticulareventoraseriesofeventsmayimpactsignificantlyupontheCompany’sliabilities.TheconcentrationofinsuranceriskthendeterminestheextentofthepossibleimpactoftheseeventsontheamountoftheCompany’sliabilities.Suchconcentrationmayarisefromasingleinsurancecontractorthroughasmallnumberofrelatedcontracts,andrelatestocircumstancesthathavegivenrisetosignificantliabilities.Concentrationofinsuranceriskmayarisefromtheaccumulationofrisksintheframeofseveralindividualgroupsofcontracts;itmayalsoariseinlow-frequency,high-severityeventsorintheeventofsignificantlitigationsorlegislativeamendments.

Geographic concentrationTherisksunderwrittenbytheCompanyareprimarilylocatedintheCzechRepublic.Fromageographicalpointofview,theCompanyhasnosignificantconcentrationofexposuretoanygroupofpersonsinsured,measuredbysocial,professionaloragecriteria.

Reinsurance strategy for non-life insuranceTheCompanyreinsuressomeoftherisksitunderwritesinordertocontrolitsexposurestolossesandprotectitsowncapitalresources.Innon-lifeinsurance,theCompanyhasbaseditsreinsuranceschemeonacontractwithanexternalreinsurer.

TheCompanyconcludesproportionatereinsurancecontractstreatiestoreduceitsnetexposure.Themaximumnetexposurelimits(ownretentions)forparticularbusinesslinesarereviewedannually.

TheCompanycooperateswithreinsurersrated“A”andhigherandcarriesoutregularmonitoringoftheirfinancialcondition.


Annual Report 2014

Financial Section

(b) Life assurance riskTheCompanyisexposedtorisksresultingfromanunfavourabledevelopmentofassumptionscomparedtotheirdeterminationatthemomentofvaluationofproducts.Thisinvolves,forexample,theriskofunfavourabledevelopmentofmortalityorsurvival,riskofadifferentdevelopmentofinvestmentreturn,riskresultingfromanunexpecteddevelopmentofcostinflationorbehaviourofclientsuponcancellationofthecontract.IntheabovecasestheCompanyisexposedtothedangerofalossresultingfromthediscrepancybetweencollectedpremiumsandclaimspaid,investmentreturnsandexpenses.

Otherrisksare,forexample,theobjectiveandsubjectiveriskoftheinsured.Theobjectiveriskisdeterminedbyobjectivefactorssuchastheage,sex,healthconditionorprofession.Thesubjectiveriskisdeterminedbysubjectivefactorssuchastheeffortoftheinsuredtosurviveormaintainahealthylifeorthepoorfinancialconditionoftheinsured.

OtherriskstowhichtheCompanyisexposedareasfollows:

• riskswithalow-frequencyoccurrenceandasignificantimpact,whichinlifeassurancemayrepresentanyclaimthataffectsseveralpersonsinsuredatthesametimeandinthesameplace(e.g.naturaldisasters),

• theriskofconcentrationofhighsumsassuredwhichdonotconstituteasignificantpartoftheportfoliobutwhichmayhaveasignificantimpactontheamountofsettlementsandasaresultalsotheprofit(loss)oftheCompany.

Thegoalofriskmanagementistheidentification,quantificationandeliminationofrisksinordertopreventchangesthathaveanegativeimpactontheprofit(loss)oftheCompanyandtheCompany’sequity.

TheCompanyappliesprofittestingwhenvaluinginsuranceproductsand,furthertheliabilityadequacytestinordertoidentify,quantifyandeliminatetherisks.Profittestingisusedtodetermineadequateinsuranceratesfortheinsuranceandfinancialguaranteesforindividualproductsandfortheassumptionsdetermined.

Thepurposeoftheliabilityadequacytestistoassesstheamountofthelifeassuranceprovisionsintermsoftheupdatedassumptions.Thelevelofsensitivityoftheresultstoachangeintheindividualassumptionsisalsoacomponentoftheseprocedures.

Inrespectoftheobjectiveandsubjectiverisksoftheinsured,theserisksmustbeassessedindividuallyuponconclusionofthecontract,primarilyintheeventofahighersumassured.Thereareproceduresforidentifyingandassessingtheserisks;aspartofsuchproceduresitisnecessarytocarryoutaqualifiedassessmentofthehealthcondition,or,ifappropriate,thefinancialconditionoftheclient,ortoassessthelevelofrisktowhichtheinsuredisexposed.Basedoninformationonthehealthcondition,subjectiveriskandotheractuarialrisks,thepremiumrateisdetermined.Inadditiontoasurchargeonthepremium,certainrisksmaybeexcludedfromtheinsurance,ortheamountofthesumassuredmaybelimited.

TheCompanyhasnosignificantconcentrationofexposuretoanygroupofpersonsinsured.

Inordertomanagetheinsurancerisk,theCompanyprimarilyusesreinsuranceandaprudentunderwritingpolicy.

Reinsurance strategy for life assuranceTheCompanyreinsuressomeoftherisksitunderwritesinordertocontrolitsexposurestolossesandprotectitsowncapitalresources.TheCompanyhasbaseditsreinsuranceschemeonacomplementarycombinationofcontractswithexternalreinsurers.

Inlifeassurance,theCompanyconcludesnon-proportionatereinsurancetreatiestoreduceitsnetexposure.

TheCompanycooperateswithreinsurersrated“A”andhigherandcarriesoutregularmonitoringoftheirfinancialcondition.

(c) Market riskTheCompanyisexposedtomarketrisk,whichfollowsfromtradingpositionsininterestrate,currencyandequityinstrumentsthatareallexposedtocommonandspecificchangesinthemarket.


Annual Report 2014

Financial Section

Themainexposureisthattherevenuesfrominvestmentswillnotbesufficienttocovertheliabilitiesfrominsurancecontracts.

Themarketriskisconstantlymonitored,measuredandmanagedusingasset/liabilitymanagement(ALM).ThebasicmethodofALMinvolvesadjustingtheduedateofassetstotheliabilitiesfrominsurancecontracts.

Asset/liability management (ALM)ThebasicgoalofALMistoachievebalanceinthestructureofassetsandliabilities,inparticularfromthepointofviewoftheirmaturity,interestratesandcurrencystructure.Theaimistoensurethattheassetspermanentlygeneratesufficientcashflowsintherequiredcurrencystructurenecessarytocoverthedueliabilitiestoclients(includingtheguaranteedrevenues)andatthesametimetoensurethatthesystemenablesthegenerationofadequateprofitforshareholders.

ForthispurposetheCompanyperformsregularmonitoringofassetsandliabilities,followedbyALMcalculation,whichenablestheCompanytomonitorandcomparethestructureofitsassetsandliabilitiesintermsoftheirmaturity,theinterestratesachievedandguaranteed,andintermsoftheircurrencystructure.Thistypeofoutputisoneoftheunderlyingtoolsformakingdecisionsonthefurtherallocationoffinancialinvestments.

Interest rate riskTheCompanyisexposedtointerestrateriskduetotheimpactofup-to-datemarketinterestratefluctuations.Thefairvalueandinvestmentreturnmaybothgrowordecreaseasaresultofthesefluctuations.

Besideschangesinthevalueofassets,theinterestratefluctuationsmayalsoresultinchangesofliabilities.

Basedonacashflowanalysis,theCompanypreparestheportfolioofsecuritiesthevalueofwhichchangestogetherwithachangeinthevalueofliabilitiesuponachangeintheinterestrate.

Theriskofchangesincashflowsasaresultofachangeininterestraterepresentsexposureprimarilytoinsurancecontractswithaguaranteedinterestrate,wheretheclient

comparestherevenueguaranteedbythecontractwiththerevenueofferedinthemarket.Wherethemarketinterestratesincrease,sometypesofcontractsmayshowanincreaseinthelapserate,orviceversa.

Price fluctuation riskTheCompanyisexposedtopricefluctuationrisk,whichconsistsinthefactthatthevalueofthefinancialinstrumentwillchangeduetochangesinthemarketprices.Thesechangesmaybecausedbyfactorsspecifictoasingleinstrumentorbytheissuersoftheinstrumentsorbyfactorsaffectingallinstrumentstradedinthecapitalormoneymarkets.

TheCompanymanagesitsuseofequityinvestmentsbymaintainingadiversifiedportfolio.

Currency riskTheCompanyisexposedtocurrencyriskthroughtransactionsinforeigncurrenciesandthroughitsassetsandliabilitiesdenominatedinforeigncurrencies.AsthecurrencyinwhichtheCompanypresentsitsfinancialstatementsistheCzechcrown(CZK),movementsintheexchangeratesbetweenthesecurrenciesandtheCZKaffecttheCompany’sfinancialstatements.

TheCompanyusescurrencyswapsinordertohedgeagainstcurrencyrisk.

(d) Credit riskTheCompanyisexposedtothecreditrisk,whichfollowsfromthecounterpartyfailingtopaytheamountsdueinfull.

ThemainareasoftheCompany’sexposuretothecreditrisk:• reinsurers’shareininsuranceliabilities,• reinsurers’debt,which,relatingtoaclaimthathasalready

beenpaid,• outstandingpremiums,• receivablesfrominsuranceintermediaries,• counterpartyriskrelatingtocurrencyswaps,• riskoffailuretorepaytheprincipalorincomefrom

financialinvestments.

Concentrationsofcreditriskarisewheregroupsofcounterpartieshavesimilareconomiccharacteristicsthat


Annual Report 2014

Financial Section

wouldcausetheirabilitytomeettheircontractualobligationstobesimilarlyaffectedbychangesineconomicorotherconditions.

Thecreditriskislimitedbyexternallimitsregulatingthestructureoffinancialplacement(RegulationNo.434/2009Coll.implementingcertainprovisionsoftheActonInsurance.).

Theoutstandingpremiumsareregularlymonitored,andthemethodofcreatingadjustmentsisdescribedinpointI.4.(d).

RecoveryofdebtfrominsuranceiscarriedoutbytheCompanyincooperationwithexternalpartners.

(e) Operational riskOperationalriskistheriskarisingfromthefailureofinternalprocesses,humanresourcesorsystems,ortheriskoflossthatmayariseduetoexternalevents,includingtheriskoflossarisingfromabreachofornoncompliancewithalegalstandard.

LossmeansanyharmordamageincurredbytheCompany.

TheCompanymonitorstheserisks,designsmodificationstoworkproceduresandprocessestoeliminatethelossevents,andbuildsasystemtoanalyseoperationalrisks.

(f) Liquidity riskTheCompanyisexposedtorequirementsforliquidityonadailybasis.Theserequirementsarerelatedtoclaimsettlements.Theliquidityriskisariskthatthecashnecessaryforpaymentofliabilitieswillnotbeavailableattheduedateandatadequatecost.

Theneedforliquidityiscontinuouslymonitoredinordertoensurenecessaryresources.

TheCompanyhasaccesstoadiversefundingbase,andincompliancewithlegislationinforceithasinvestedasufficientportionofitsfinancialplacementinliquidfinancialinstruments.

II. ADDITIONAL DISCLOSURES IN RESPECT OF THE BALANCE SHEET

II.1. Intangible fixed assetsIntangiblefixedassetsoftheCompanyasat31December2014comprisethefollowingitems:

(in thousands CZK) Software Total

Acquisitioncostat1/1/2014 369,410 369,410

Additions 51,346 51,346

Disposals (1,741) (1,741)

Acquisition cost at 31/12/2014 419,015 419,015

Accumulateddepreciationat1/1/2014 284,908 284,908

Depreciation 38,749 38,749

Disposals (1,504) (1,504)

Accumulated depreciation at 31/12/2014 322,153 322,153

Netbookvalueat1/1/2014 84,502 84,502

Net book value at 31/12/2014 96,862 96,862


Annual Report 2014

Financial Section

II.2. Investments

(a) Land and buildings (real estate)

Operating (in thousands CZK) 2014 2013

Land 538 538

Valuationdifferences 1,362 1,362

Buildings 70,381 70,169

Valuationdifferences (16,628) (16,629)

Total operating land and buildings at fair value 55,653 55,440

Themostrecentvaluationoflandandbuildings(realestate)basedonanexpertappraisalwascarriedoutasat31December2014.

(b) Participating interests with significant influence

2014 (in thousands CZK)

Share in registered

capital in %

Acquisition cost Fair value

Total registered

capitalTotal equity

Profit or loss for the

financial year

Dividend income/profit

share

V.I.G.ND,uzavřenýinvestičnífonda.s. 10,48 299,773 305,553 2,671,000 2,702,904 58,812 6,055

Total 299,773 305,553 N/A N/A N/A 6,055

2013 (in thousands CZK)

Share in registered

capital in %

Acquisition cost Fair value

Total registered

capitalTotal equity

Profit or loss for the

financial year

Dividend income/profit

share

V.I.G.ND,uzavřenýinvestičnífonda.s. 10,48 299773 304506 2671000 2880278 60797 6373

Celkem 299 773 304 506 N/A N/A N/A 6 373

Thefinancialdataarebasedonnon-auditedpreliminaryfinancialstatementsasat31December2014.V.I.G.ND,uzavřenýinvestičnífonda.s.isacompanyunderfullandjointcontrolofentitieswithintheVIGfinancialgroup.


Annual Report 2014

Financial Section

(c) Shares and other variable-yield securities, other participating interests

(in thousands CZK)Fair value Acquisition cost

2014 2013 2014 2013

Issued by financial institutions

– ListedonarecognizedCRexchange 138,288 151,158 122,033 122,033

– Unlisted 1,755,262 1,728,896 1,388,888 1,419,904

Issued by non-financial institutions


Total 1,950,877 1,950,853 1,561,351 1,617,077

Unlistedsecuritiesissuedbyfinancialinstitutionscompriseparticipationcertificates/units.

(d) Debt securities valued at fair value through profit and loss and available for sale securities


2014 2013 2014 2013



– Listedelsewhere 1,695,588 1,397,893 1,611,030 1,344,050

– Unlisted 50,842 281,508 46,707 228,510


– ListedonarecognizedCRexchange 50,391 0 49,792 0

– Listedelsewhere 139,870 179,671 129,235 159,851

Issued by government sector

– ListedonarecognizedCRexchange 5,338,554 5,570,770 5,093,624 5,419,213


Total 8,403,014 8,379,852 7,907,599 8,007,422

SecuritieslistedelsewherearetradedmainlyonEuropeanmarkets.


Annual Report 2014

Financial Section

(e) OECD bonds held to maturity

(in thousands CZK)Fair value Amortized value Acquisition cost

2014 2013 2014 2013 2014 2013

– ListedonarecognizedCRexchange 13,987,168 11,229,149 12,317,093 10,456,689 12,306,599 10,395,740

Total OECD bonds held to maturity 13,987,168 11,229,149 12,317,093 10,456,689 12,306,599 10,395,740

(f) Other debt securities held to maturity


2014 2013 2014 2013




– Unlisted 268,817 615,904 250,478 549,628


– ListedonarecognizedCRexchange 1,236,230 1,061,109 1,172,036 1,048,752


Total other debt securities held to maturity 2,920,359 2,861,527 2,653,304 2,650,304

(g) Deposits with financial institutions

(in thousands CZK) 2014 2013

Duewithin1year 814,025 1,205,494

Total 814,025 1,205,494


Annual Report 2014

Financial Section

(h) Other financial placements – derivativesOther derivatives – derivatives held for trading

Fixed term contracts with a positive fair value (in thousands CZK)

Nominal value Fair value

2014 2013 2014 2013

Termcurrencytransactions 1,619,406 9,395

Total 1,619,406 9,395

Fixed term contracts with a negative fair value (in thousands CZK)

Nominal value Fair value

2014 2013 2014 2013

Termcurrencytransactions 2,187,491 (38,331)

Total 2,187,491 (38,331)

TheCompanyconcludesderivativessolelytohedgeagainstcurrencyrisk.Alltheabovefinancialinstrumentswereconcludedontheinterbankmarket(OTC).

ThenominalvalueoffixedtermcontractsistheamountinCZKoftheCompany’sshort-termcurrencyposition.Thefairvalueoffixedtermcontractsistherevaluationofthecontractsasatthebalancesheetdate,i.e.thedifferencebetweenthepresentvaluesofexpectedcashinflowsandoutflows.

Asat31December2014theremainingmaturityofderivativesamountingtoTCZK(38,331)(TCZK9,395asat31December2013)waslessthan3months.


Annual Report 2014

Financial Section

II.3. Financial placements for the benefit of life assurance policyholders who bear the investment risk

Description (in thou sands CZK)Fair value Acquisition cost

2014 2013 2014 2013

Sharesandothervariable-yieldsecurities 818,922 787,408 727,091 731,133

Debtsecurities 2,546,746 2,353,795 1,802,620 1,830,535

Total 3,365,668 3,141,203 2,529,711 2,561,668

II.4. Currency structure of the financial placement

Currency (in thou sands CZK)

Variable-yield securities Fixed income securities Deposits and other financial placements Total

2014 2013 2014 2013 2014 2013 2014 2013

CZK 1,146,506 1,159,270 22,564,861 20,875,682 4,124,968 4,340,389 27,836,335 26,375,341

EUR 335,341 310,115 831,556 757,093 19,194 6,578 1,186,091 1,073,786

GBP 112,563 105,262 (2,680) 629 109,883 105,891

USD 662,020 680,712 244,049 (120) 8,496 905,949 689,208

PLN 65,293 0 65,293

Total 2,256,430 2,255,359 23,640,466 21,698,068 4,141,362 4,356,092 30,038,258 28,309,519

Variable-yieldsecuritiescompriseaparticipatinginterestwithsignificantinfluenceamountingtoTCZK305,553(2013:TCZK304,506).AllsecuritieswheretheinvestmentriskisbornebythepolicyholdersaredenominatedinCZK.Allfinancialplacementsinthetableabovearestatedatbookvalue.


Annual Report 2014

Financial Section

II.5. Receivables

At 31 December 2014 (in thou sands CZK)

Receivables from policyholders

Receivables from insurance intermediaries

Receivables from reinsurance

operationsOther receivables Total

Due 5,146 398,740 221,463 625,349

Overdue 139,047 21,211 153 160,411

Total 144,193 21,211 398,740 221,616 785,760

Adjustment 102,654 20,077 241 122,972

Total net 41,539 1,134 398,740 221,375 662,788

At 31 December 2013 (in thou sands CZK)

Receivables from policyholders

Receivables from insurance intermediaries

Receivables from reinsurance

operationsOther receivables Total

Due 8,180 2,000 309,387 179,874 499,441

Overdue 149,717 19,712 581 170,010

Total 157,897 21,712 309,387 180,455 669,451

Adjustment 99,714 18,439 132 118,285

Total net 58,183 3,273 309,387 180,323 551,166

Other receivables

(in thou sands CZK) 2014 2013

Inter-companyreceivables 2,437 1,561

Incometaxprepayments 214,721 171,319

Otherreceivables 4,458 7,575

Total other receivables (gross) 221,616 180,455


Annual Report 2014

Financial Section

II.6. Other assets

(a) Tangible fixed assets

(in thou sands CZK) Cars IT equipment Fixtures and fittings Other

Acquisition of assets and

advances paid

Total

Acquisitioncostat1.1.2014 29,792 59,026 24,306 11,397 1,581 126,102

Additions 4,967 1,194 60 8,169 1,075 15,465

Disposals (4,573) (1,340) (2,920) (8,867) (1,613) (19,313)

Acquisition cost at 31/12/2014 30,186 58,880 21,446 10,699 1,043 122,254

Accumulateddepreciationat1/1/2014 16,439 31,420 12,712 835 0 61,406

Depreciationexpense 6,436 16,732 1,759 1,092 26,019

Disposals (3,268) (1,340) (2,669) (802) (8,079)

Accumulated depreciation at 31/12/2014 19,607 46,812 11,802 1,125 0 79,346

Netbookvalueat1/1/2014 13,353 27,606 11,594 10,562 1,581 64,696

Net book value at 31/12/2014 10,579 12,068 9,644 9,574 1,043 42,908

Asat31December2014,theCompanyalsoreportedinventoriesintheamountofTCZK3,500(2013:TCZK1,743).

II.7. Temporary asset accounts

(a) Deferred acquisition costs for life assurance contracts


Lifeassuranceconnectedwithaninvestmentfund/unit-linked 1,574,607 1,596,999

Total 1,574,607 1,596,999

ThecalculationoftheamountreportedinDeferredacquisitioncostsforunit-linkedinsurancecontractsdependsontwocalculationbases.ThevolumeofexpectedfuturedeductionsoftheinitialallocationfeesisusedtocreateanassetofTCZK608,860(2013:TCZK591,405)andthevolumeofthenegativecapitalvalueofinsurancecontractsisusedtocreateanassetofTCZK965,747(2013:TCZK1,005,594).


Annual Report 2014

Financial Section

(b) Estimated receivables


Estimatedwrittenpremiums 104,952 109,843

Estimatedreinsurancecommissions 22,931 20,292

EstimatedshareintheprofitofthereinsurerBNP 11,417 10,228

Other 6,012 6,372

Total 145,312 146,735

Estimated written premiumsTheCompanyinestimatedreceivablesdisclosesanestimateofthewrittenpremiumsforDecemberinrespectofgeneralinsurancecontractswherethepolicyholdersreporttotheCompanyonamonthlybasisinarrears.

(c) Other temporary asset accounts


Prepaidexpensesrelatingtocommissionsonpremiumsnotyetrecorded 28,816 22,354

Postage 0 7,000

Prepaidsoftwareservices 2,208 916

Other 1,053 1,267

Total 32,077 31,537


Annual Report 2014

Financial Section

II.8. Equity

(a) Share capitalTheregisteredsharecapitalcomprises8,180registeredordinarysharesinbookedformwithanominalvalueofTCZK45and15,320ordinarybearershareswithanominalvalueofTCZK100.Asat31December2014,100%,i.e.TCZK1,900,100,ofthesharecapitalwaspaidup.Intheaccountingperiodsof2014and2013,thesharecapitaldidnotchange.

Issue Type of security Form Nominal value

(in CZK)Number

of securitiesTotal volume

(in CZK)

Information on public

marketability

CZ0008040706 share book-entry 45,000 8,180 368,100,000 Notmarketable

CZ0008040698 share book-entry 100,000 15,320 1,532,000,000 Notmarketable

Total 23,500 1,900,100,000

ThesharecapitalamountcomplieswiththerequirementsoftheInsuranceAct,withregardtotheinsuranceclassesinwhichtheCompanyisauthorizedtocarryoninsuranceactivities.

(b) Other capital funds(in thou sands CZK) 2014 2013

Revaluationofassetsandliabilitiesatfairvalue 148,071 42,865

Total 148,071 42,865

Revaluation of assets and liabilities at fair value


Balanceat1/1 42,865 95,721

Changeinfairvalueoffinancialplacement 129,884 (65,255)

Changeindeferredtax (24,678) 12,399

Balance at 31/12 148,071 42,865

Planned distribution of the current period profit

(in thou sands CZK)

Profit for the current period 855,121

Transfertostatutoryreservefund 42,756

Transfertosocialfund 5,248

Dividend(CZK29.19pershare) 686,050

Profit to be added to retained earnings 121,067

Theproposeddistributionofprofitissubjecttotheapprovalofthegeneralmeeting.


Annual Report 2014

Financial Section

II.9. Technical provisions

(a) Life assurance provision


Unzillmerizedprovision 6,051,902 8,203,997

Zillmeradjustment 14,893 12,985

Eliminationofnegativereserves 2,341 1,992

Zillmerized provision presented in the balance sheet 6,039,350 8,193,004

Flexiprovision 14,932,176 11,943,371

Provisionforprofitsharecommitments 329,288 360,349

Annuityprovision 7,066 7,640

Provisionforbonuses 455,226 336,769

Total life assurance provision 21,763,106 20,841,133

(b) Provision for outstanding claimsThenetprovisionforoutstandingclaimsattheendofthefinancialyeariscreatedasfollows:


RBNS 358,277 333,214

IBNR 1,130,455 1,160,771

Total 1,488,732 1,493,985

Claims run-off resultTheclaimsrun-offresultisthedifferencebetweentheprovisionforoutstandingclaimsasat31December2013,theclaimspaymentsduring2014(withrespecttoclaimsincludedwithinthisprovision)andtheresidualamountofthisprovisionasat31December2014.


Grossprovisionforoutstandingclaimsasat1January 2,412,983 2,034,766

Claimspaymentsinthecurrentperiodinrespectofpriorperiodclaims 1,173,560 1,068,845

Provisionforoutstandingclaimsasat31Decemberintendedforpriorperiodclaimsnotpaidyet 911,461 768,944

Run-off result 327,962 196,977


Annual Report 2014

Financial Section

Thegrossrun-offresultbyclassesofinsurance:

Class of insurance (in thou sands CZK) 2014 2013

Accidentandsickness–non-lifeinsurance 34,593 40,983

Otherlosses–non-lifeinsurance 483 6,074

Assuranceondeath,assuranceonsurvival 44,437 9,760

Accidentandsicknessinsuranceasarider 236,995 151,263

Marriageinsurance 3 (10)

Lifeassuranceconnectedwithaninvestmentfund/unit-linked(notincludingaccidentalriders) 11,451 (11,093)

Total 327,962 196,977

II.10. Provisions Type of provision (in thou sands CZK) Opening balance Creation Release Closing balance

Provisionfortaxes 189,617 198,489 189,617 198,489

Total 189,617 198,489 189,617 198,489

TheincometaxprepaymentsofTCZK214,721(2013:TCZK171,319)arerecognizedinOtherreceivables.

II.11. Payables

31 December 2014 (in thou sands CZK)

Payables to policyholders

Payables to insurance

intermediaries

Payables from reinsurance

operationsOther payables Total

Due 235,081 128,577 461,626 109,175 934,459

Overdue 20 183 203

Total 235,081 128,597 461,626 109,358 934,662

31 December 2013 (in thou sands CZK)

Payables to policyholders

Payables to insurance

intermediaries

Payables from reinsurance

operationsOther payables Total

Due 192,063 115,984 368,794 52,822 729,663

Overdue 128 128

Total 192,063 115,984 368,794 52,950 729,791


Annual Report 2014

Financial Section

Otherpayablescomprisethefollowingitems:


Payablestoemployees 33,236 7,968

Socialsecurityandhealthinsuranceliabilities 13,166 4,419

Payablestosuppliers 12,030 25,749

Deferredtaxliability 40,569 12,536

Othertaxliabilities 10,357 2,278

Total 109,358 52,950

(a) Social security and health insurance liabilitiesLiabilitiesinrespectofsocialsecurityandhealthinsurancetotalTCZK13,166(2013:TCZK4,419)ofwhichTCZK6,815(2013:TCZK2,916)relatestosocialsecurityandTCZK6,351(2013:TCZK1,503)relatestohealthinsurance.Noneoftheseliabilitiesisoverdue.

(b) Tax liabilities TaxliabilitiesamounttoTCZK10,357(2013:TCZK2,278),noneofwhichisoverdue.

(c) Long-term payables (maturity over five years)TheCompanydoesnothaveanylong-termpayableswitharemainingmaturityofoverfiveyears.

(d) Payables and receivables due to or from reinsurersTheCompanyhasanetpayabletoreinsurersintheamountgiveninthefollowingtable:


Receivablesfromreinsurers 398,740 309,387

Payablestoreinsurers 461,626 368,794

Depositsduetocedents 961,164 811,793

Net (+ receivable, – payable) (1,024,050) (871,200)

ThedepositofTCZK961,164(2013:TCZK811,793)relatestoreinsurancecontractswithVIENNAINSURANCEGROUPAGWienerVersicherungGruppe.


Annual Report 2014

Financial Section

II.12. Temporary liability accounts

(a) Other temporary liability accounts


Accruedexpenses 1 0

Estimatedpayables 257,449 304,443

Total 257,450 304,443

Adetailedbreakdownofestimatedpayablesisasfollows:

(b) Estimated payables


Alliancepartnercommission 96,790 89,519

Reinsurancepremiumsoninsurancepremiumsnotyetrecorded 54,907 57,654

Performance-basedcommissionofinsuranceintermediaries 42,935 26,498

Annual,extraordinarybonusesanduntakenholidays 23,419 68,651

Assetmanagementfees 12,997 26,631

Operatingsystemrepairsandmaintenance 10,389 9,164

Servicesnotyetinvoicedbyothercreditors 6,852 9,715

Lawsuitsandlitigations 5,721 5,721

Advancepaymentsforservicesrelatingtorent 2,940 2,753

Consultingservices 499 8,137

Total 257,449 304,443

Alliance partner commissionTheCompanydisclosesunderAlliancepartnercommissiontheexpectedamountofcommissionrelatingtoadistributionagreementbetweenentitiesofErsteBankfinancialgroupandentitiesofViennaInsuranceGroup.

Estimated reinsurance premiumsTheCompanydisclosesunderestimatedreinsurancepremiumsanestimateoftherelevantreinsurers’shareintheestimateofgrosspremiumswrittendisclosedintheestimatedreceivables,seepointII.7.(b).


Annual Report 2014

Financial Section

II.13. Inter-company receivables and payables

(a) Other inter-company receivables and payables

(in thou sands CZK)Receivables Payables

2014 2013 2014 2013

Short-term 374,617 285,016 397,539 302,199

Kooperativapojišťovna,a.s.,ViennaInsuranceGroup 3,237 3,570 2,648 2,769

Českápodnikatelskápojišťovna,a.s.,ViennaInsuranceGroup 89 50

VIENNAINSURANCEGROUPAGWienerVersicherungGruppe 371,291 281,396 394,891 299,430

Total 374,617 285,016 397,539 302,199

AsspecifiedinsectionII.11.(d),theCompanyalsorecordsadepositrelatingtoreinsurancecontractswithVIENNAINSURANCEGROUPAGWienerVersicherungGruppe.

Allsignificanttransactionswithrelatedpartieswerecarriedoutundercommonmarketconditions.

III. ADDITIONAL DISCLOSURES IN RESPECT OF THE PROFIT AND LOSS ACCOUNT

III.1. Non-life insuranceNon-lifeinsurancefor2014and2013brokendownintoclassesofinsurance:

(in thou sands CZK)

Class of insurance

Gross premiums written

Gross premiums earned Gross claims paid Gross operating

expensesReinsurance

balance

Direct insurance

Accidentandsickness 1,2

2014 484,195 485,751 142,639 8,701 (100,855)

2013 513,554 515,505 193,849 9,471 (84,860)

Miscellaneouslosses 16

2014 233,170 233,170 18,063 1,466 (67,373)

2013 247,605 247,605 19,172 1,499 (72,160)

Total

2014 717,365 718,921 160,702 10,167 (168,228)

2013 761,159 763,110 213,021 10,970 (157,020)


Annual Report 2014

Financial Section

III.2. Life assuranceGrosspremiumswritteninlifeassurance:


Individualpremiums 10,516,473 9,897,314

Premiumsundergroupcontracts 684,920 697,316

Total 11,201,393 10,594,630

Regularpremiums 5,664,709 5,477,128

Singlepremiums 5,536,684 5,117,502

Total 11,201,393 10,594,630

Premiumsfromnonprofit-sharingcontracts 1,040,957 1,434,438

Premiumsfromprofit-sharingcontracts 8,769,390 7,746,546

Premiumsfromcontractswheretheinvestmentriskisbornebypolicyholders 1,391,046 1,413,646

Total 11,201,393 10,594,630

Reinsurance balance (107,845) (112,076)

III.3. Total amount of gross premiums written by countryIn2014and2013,thetotalamountofgrosspremiumswrittenwasgeneratedoncontractsconcludedintheCzechRepublic.

III.4. Bonuses and rebatesTheCompanygrantedthefollowingbonusesandrebatesbasedonpolicytermsandconditionsandinsurancecontracts:


Gross

Non-lifeinsurance 333,528 382,787

Lifeassurance 254,606 263,971

Total gross amount 588,134 646,758

Reinsurers’share(non-lifeinsurance) 331,485 380,665

Total net amount 256,649 266,093


Annual Report 2014

Financial Section

InaccordancewiththeproceduresstatedinpointI.4.(k)pointoftheNotestheCompanyaccountedforthefollowingchangesintheprovisionforbonusesandrebates:

2014 (in thou sands CZK) Gross Reinsurers´ share Net

Non-life insurance

Creation 328,058 326,014 2,044

Release 333,874 331,834 2,040

Changeofbalance (5,816) (5,820) 4

Life assurance

Creation 252,915 252,915

Release 254,606 254,606

Changeofbalance (1,691) (1,691)

Total change of balance (7,507) (5,820) (1,687)


Non-life insurance

Creation 354,714 352,602 2,112

Release 386,183 384,061 2,122

Changeofbalance (31,469) (31,459) (10)

Life assurance

Creation 265,322 265,322

Release 266,141 266,141

Changeofbalance (819) (819)

Total change of balance (32,288) (31,459) (829)


Annual Report 2014

Financial Section

III.5. Commissions and other acquisition costs for insurance contracts

(in thou sands CZK)2014 2013

Non-life insurance

Life assurance Total Non-life

insuranceLife

assurance Total

Commissions

Initial 129 1,243,490 1,243,619 281 1,046,011 1,046,292

Renewal 4,611 271,203 275,814 4,788 241,908 246,696

Total commissions 4,740 1,514,693 1,519,433 5,069 1,287,919 1,292,988

Otheracquisitioncosts 1,175 228,202 229,377 1,575 221,828 223,403

Changeindeferredacquisitioncosts 22 22,392 22,414 5 (12,122) (12,117)

Total commissions and other acquisition costs 5,937 1,765,287 1,771,224 6,649 1,497,625 1,504,274

TheCompanydisclosesrenewalcommissionsinadministrativeexpenses.

Otheracquisitioncostsprimarilycomprisecostsforwagesandsalaries,promotion,advertisingandotheradministrativeexpensesassociatedwiththeconclusionofinsurancecontracts.

III.6. Administrative expenses


Personnelexpenses(payroll,socialsecurityandhealthinsurance,remunerationtomembersoftheSupervisoryBoard,BoardofDirectorsandAuditCommittee)

99,674 101,022

Renewalcommissions 275,814 246,696

Rentandrelatedservices 6,022 7,185

Consultancyandexternalaudit 11,257 23,076

Consumptionoflow-valuetangibleandintangibleassetsandothermaterial 9,414 10,624

Depreciationandrepairsandmaintenanceoftangibleassets 30,033 28,263

Operatingsystemsadministrationandmaintenance 27,565 23,719

Postalandtelecommunicationservices 29,096 23,830

Bankfees 7,929 11,433

Otherservices 16,514 16,874

Otheradministrativeexpenses 49,574 42,690

Total administrative expenses 562,892 535,412

Otherpersonnelexpensesareincludedinotheradministrativeexpenses.


Annual Report 2014

Financial Section

III.7. Other technical expenses and income


Non-life insurance

Othertechnicalexpenses 1,243 1,243

Othertechnicalincome (1,578) (1,578)

Balance – non-life insurance (335) 0 (335)

Life assurance



Balance – life assurance (23,625) 0 (23,625)


Non-life insurance



Balance – non-life insurance (220) 0 (220)

Life assurance



Balance – life assurance (13,473) 0 (13,473)

III.8. Employees and managementPersonnelexpensesandaveragecalculatednumberofemployeesbyindividualcategoriesfor2014and2013:

Personnel expense – type (in thou sands CZK)

Employee categoryTotal

Year Acquisition, sales Claims handling Administration

Payrollexpense2014 81,922 12,617 73,216 167,755

2013 77,423 11,477 77,182 166,082

Socialsecurityandhealthinsurance

2014 23,096 4,355 19,209 46,660

2013 19,550 3,661 18,194 41,405

Otherpersonnelexpenses2014 4,790 1,419 4,527 10,736

2013 4,512 1,287 4,282 10,081

Total personnel expenses2014 109,808 18,391 96,952 225,151

2013 101,485 16,425 99,658 217,568

Averagenumberofemployees

2014 121 35 113 269

116 32 107 255


Annual Report 2014

Financial Section

Theabovefiguresdonotincluderemunerationpaidtostatutory,executiveandsupervisorybodymembers.

Asat31December2014,themanagementoftheCompanycomprised13managers:theCEO,3deputyCEOsand9sectiondirectors.Personnelexpenses(payroll,socialsecurityandhealthinsurance,otherpersonnelexpenses)relatingtomanagerstotalledTCZK33,654in2014(2013:TCZK27,185).

ExpensesrelatingtothejobpositionsofdeputyCEOinchargeofthesalesdivision,salesdivisionsectiondirectorsandproductmanagementdirectorarepresentedunderacquisitioncosts.Expensesrelatingtoothermanagementpositionsarepresentedunderadministrativeexpenses.

(a) Statutory, executive and supervisory body members’ remunerationTheCompanyhasprovidedthefollowingmonetaryandnon-monetaryremunerationtothestatutory,executiveandsupervisorybodymembersforthefinancialyears2014and2013:


MembersoftheBoardofDirectors 7,080 517

Proxyholder 60 60

MembersoftheSupervisoryBoard 1,271 980

AuditCommittee 14 14

Total remuneration paid 8,425 1,571

ThemembersoftheCompany’sBoardofDirectorsareatthesametimeemployeesoftheCompanyexercisingtheofficeofDeputyCEOortheCEOoftheCompany.

TheproxyholderisalsoanemployeeoftheCompany,exercisingtheofficeofDeputyCEO.

ThemembersofstatutorybodiesandtheproxyholderareentitledtoremunerationthatisdeterminedbytheSupervisoryBoardinlinewiththeArticlesofAssociationandwithrespecttothescopeoftheworkperformed.AmemberoftheAuditCommitteeispaidafixedannualfeeunlessreceivingatthesametimeremunerationasamemberofanothercontrollingorsupervisorybodyoftheCompany.

ThefeesarespecifiedinTableIII.8.(a)basedonthetypeofstatutorybody.

TheincreaseinremunerationpaidtothemembersoftheBoardofDirectorsresultedfromachangeintheremunerationschemeandtheincreaseinremunerationpaidtoSupervisoryBoardmembersresultedfromanincreaseinthenumberofitsmembers.

TheCompanypresentednoreceivablesfrommembersoftheBoardofDirectors,SupervisoryBoard,AuditCommitteeortheproxyholderrelatingtoloansgrantedoradvancespaid,eitherin2014or2013.


Annual Report 2014

Financial Section

(b) Information on remuneration for statutory auditorsInformationaboutremunerationforstatutoryauditorsisprovidedintheNotestotheconsolidatedfinancialstatementsoftheparentcompanyVIENNAINSURANCEGROUPAGWienerVersicherungGruppe.

III.9. Expense allocation between technical accounts and non-technical accountAsatthebalancesheetdate,thetotalamountofexpensesallocatedbetweenthetechnicalaccountsforlifeassurance,non-lifeinsuranceandthenon-technicalaccountbymeansofthemethodstatedinnoteI.4.(t)amountedtoTCZK72,782(2013:TCZK64,084).

III.10. Result of non-technical accountTheresultofthenon-technicalaccountasat31December2014amountedtoTCZK2,914(2013:TCZK3,427).

III.11. Result before taxTheresultbeforetaxasat31December2014amountedtoTCZK1,055,312(2013:TCZK980,847).

III.12. Taxation

(a) Income tax in the profit and loss account(in thou sands CZK) 2014 2013

Provisionforcurrentperiodincometax 198,489 189,617

Differencebetweenthecurrentincometaxrelatingtopriorperiodsandreleaseoftheprovisionforincometaxrelatingtopriorperiods

(1,653) (595)

Currentincometaxrelatingtopriorperiods 0 531

Changeindeferredtaxasset/Changeindeferredtaxliability 3,355 (758)

Income tax in profit and loss account 200,191 188,795

(b) Deferred tax assets and liabilitiesReporteddeferredtaxassetsandliabilitiesareasfollows:

Temporary differences (in thou sands CZK)

Assets Liabilities Net

2014 2013 2014 2013 2014 2013

Tangiblefixedassets 6,743 6,751 (6,743) (6,751)

Intangiblefixedassets 4,362 2,609 (4,362) (2,609)

Receivables 1,045 1,140 1,045 1,140

OthertemporarydifferencerecordedinProfitandlossaccount

4,224 5,739 4,224 5,739


Annual Report 2014

Financial Section

Temporary differences (in thou sands CZK)

Assets Liabilities Net

2014 2013 2014 2013 2014 2013

Effectonprofitandlossaccount 5,269 6,879 11,105 9,360 (5,836) (2,481)

Revaluationofassetsandliabilities 34,733 10,055 (34,733) (10,055)

Effectonequity 0 0 34,733 10,055 (34,733) (10,055)

Deferredtaxasset/(liability) 5,269 6,879 45,838 19,415 (40,569) (12,536)

Off-settingofrelateddeferredtaxassetsandliabilities (5,269) (6,879) (5,269) (6,879)

Deferred tax asset/(liability) 0 0 40,569 12,536 (40,569) (12,536)

InaccordancewiththeaccountingpolicydescribedinpointI.4.(g),deferredtaxwascalculatedusingthetaxratesvalidfortheperiodsinwhichthetaxasset/liabilityisexpectedtobeutilized,i.e.19%.

IV. OTHER DISCLOSURES

IV.1. Group relationsTheCompanyhasnotconcludedacontrollingagreementwithitsmajorityshareholderVIENNAINSURANCEGROUPAGWienerVersicherungGruppe,havingitsregisteredofficeinVienna,Austria.Areportonrelationsbetweenrelatedpartieswillbeapartoftheannualreport.

IV.2. Contingent liabilities and transactions not disclosed in the financial statements TheCompanyisnotawareofanyevenpotentialcommitmentsortransactionsnotdisclosedinthefinancialstatements.

IV.3. Subsequent eventsTheCompany’smanagementisnotawareofanymaterialsubsequenteventsthathaveoccurredsincethebalancesheetdatethatwouldrequireanadjustmenttothefinancialstatementsasat31December2014.

InPardubice,20February2015

RNDr. Petr Zapletal, MBA ChairmanoftheBoardofDirectors

Ing. Jaroslav Kulhánek Vice-chairmanoftheBoardofDirectors


Annual Report 2014

Financial Section

ThisreportonrelationsbetweentheentitieslistedbelowwascompiledinaccordancewithSection82ofActNo.90/2012oncompaniesandcooperatives(theBusinessCorporationsAct),asamendedfortheaccountingperiodfrom1January2014to31December2014(hereinafterthe“accounting period”).

Pojišťovna České spořitelny, a.s., Vienna Insurance Group,havingitsregisteredofficeinPardubice,nám.Republiky115,53002,IDNumber:47452820,enteredinthecommercialregisteradministeredbytheRegionalCourtinHradecKrálové,SectionB,File855(hereinafterthe“Processor”)isapartoftheVIENNAINSURANCEGROUPAGWienerVersicherungGruppe.Withinthisbusinessgroup,theProcessorprovidesfinancialservicesinthescopeofalicencetooperateinsuranceactivityintheCzechRepublic.

ControlisensuredthroughmanagementbymeansofrepresentationofthecontrollingentityintheProcessor’ssupervisoryboardandvotingatthegeneralmeeting,wherethecontrollingentity’sownershipinterestis90%.Withinthegroup,otherinstrumentsareusedintheformofcontractualagreements,themainsubjectofwhichcomprisesthedeliveryofservicesandtheconditionsofseparationofselectedactivities.Thepurposeofthisformofmanagementisprimarilytoimprovethefinancialservicesprovidedandsavecosts.AnoverviewoftheexistingrelationsbetweentheProcessorandcontrollingentities,andbetweentheprocessorandentitiescontrolledbythesamecontrollingentities(hereinafterthe“Affiliated Entities”),isprovidedbelow:

Report on Relations

1. OVERVIEW/DIAGRAM OF THE STRUCTURE OF RELATIONS BETWEEN ENTITIES IN THE ENTIRE VIENNA INSURANCE GROUP AG WIENER VERSICHERUNG GRUPPE, RESPECTIVELY, OR ENTITIES WHOSE RELATIONS ARE DESCRIBED

Controlling entities VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe,Schottenring30,A1010Vienna,enteredintheCommercialRegisteradministeredbytheCommercialCourtinVienna,SectionFN,File75687F(hereinafter“WienerStädtische”)

Company Country Current capital interest in %

Consolidated companies

"BULSTRADLIFEVIENNAINSURANCEGROUP"JOINTSTOCKCOMPANY,Sofia Bulgaria 95.53

"GrünerBaum"Errichtungs-undVerwaltungsges.m.b.H.,Vienna Austria 100.00

"POLISA-ZYCIE"TowarzystwoUbezpieczenSpolkaAkcyjnaViennaInsuranceGroup,Warsaw Poland 98.57

ASIGURAREAROMANEASCA–ASIROMVIENNAINSURANCEGROUPS.A.,Bucharest Romania 99.44

AndělInvestmentPrahas.r.o.,Prague CzechRepublic 100.00

ArithmeticaVersicherungs-undFinanzmathematischeBeratungs-Gesellschaftm.b.H.,Vienna Austria 100.00

BCRAsigurarideViataViennaInsuranceGroupS.A.,Bucharest Romania 93.98

BMLVersicherungsmaklerGmbH,Vienna Austria 100.00

BenefiaTowarzystwoUbezpieczenSpolkaAkcyjnaViennaInsuranceGroup,Warsaw Poland 100.00

BlizzardRealSp.zo.o.,Warsaw Poland 100.00

BulgarskiImotiAsistansEOOD,Sofia Bulgaria 100.00

BusinessInsuranceApplicationConsultingGmbH,Vienna Austria 100.00

BusinessparkBrunnEntwicklungsGmbH,Vienna Austria 100.00


Annual Report 2014

Report on Relations



CALICAL"Globus",Kiev Ukraine 80.00

CAMEHoldingGmbH,Vienna Austria 100.00

CAPITOL,akciováspoločnost',Bratislava Slovakia 100.00

CENTERHotelbetriebsGmbH,Vienna Austria 80.00

COMPENSAHoldingGmbH,Wiesbaden Germany 100.00

CentralPointInsuranceIT-SolutionsGmbH,Vienna Austria 100.00

Českápodnikatelskápojišt'ovna,a.s.,ViennaInsuranceGroup,Prague CzechRepublic 100.00

CompensaLifeViennaInsuranceGroupSE,Tallinn Estonia 100.00

CompensaTowarzystwoUbezpieczenNaZycieSpolkaAkcyjnaViennaInsuranceGroup,Warsaw Poland 100.00

CompensaTowarzystwoUbezpieczenSpolkaAkcyjnaViennaInsuranceGroup,Warsaw Poland 99.92

CompaniadeAsigurari"DONARISVIENNAINSURANCEGROUP"SocietatepeActiuni,Kishinev Moldova 99.98

DBLVImmobesitzGmbH,Vienna Austria 100.00

DBLVImmobesitzGmbH&CoKG,Vienna Austria 100.00

DBR-LiegenschaftenGmbH&CoKG,Stuttgart Germany 100.00

DBR-LiegenschaftenVerwaltungsGmbH,Stuttgart Germany 100.00

DONAUVersicherungAGViennaInsuranceGroup,Vienna Austria 99.24

DVIBGmbH,Vienna Austria 100.00

Deutschmeisterplatz2ObjektverwaltungGmbH,Vienna Austria 100.00

DonauBrokerlineVersicherungs-ServiceGmbH,Vienna Austria 100.00

ELVPBeteiligungenGmbH,Vienna Austria 100.00

ERSTEViennaInsuranceGroupBiztositóZrt.,Budapest Hungary 95.00

ErsteosiguranjeViennaInsuranceGroupd.d.,Zagreb Croatia 95.00

GPIHB.V.,Amsterdam Netherlands 91.11

GesundheitsparkWien-OberlaaGesellschaftm.b.H.,Vienna Austria 100.00

INSURANCEJOINT-STOCKCOMPANY"BULSTRADVIENNAINSURANCEGROUP",Sofia Bulgaria 99.21

INTERSIGVIENNAINSURANCEGROUPSh.A.,Tirana Albania 89.98

JointStockCompanyforInsuranceandReinsuranceMakedonijaSkopje–ViennaInsuranceGroup,Skopje Macedonia 94.25

InterRiskLebensversicherungs-AGViennaInsuranceGroup,Wiesbaden Germany 100.00

InterRiskTowarzystwoUbezpieczenSpolkaAkcyjnaViennaInsuranceGroup,Warsaw Poland 99.98

InterRiskVersicherungs-AGViennaInsuranceGroup,Wiesbaden Germany 100.00

InternationalInsuranceCompany"IRAO"LTD,Tbilisi Georgia 100.00

JointStockCompanyInsuranceCompanyGPIHolding,Tbilisi Georgia 90.00


Annual Report 2014

Report on Relations



WienerOsiguranjeViennaInsuranceGroupad,BanjaLuka BosniaandHercegovina 100.00

KOMUNÁLNApoisťovňa,a.s.ViennaInsuranceGroup,Bratislava Slovakia 100.00

KOOPERATIVApoisťovňa,a.s.ViennaInsuranceGroup,Bratislava Slovakia 100.00

Kaiserstraße113GmbH,Vienna Austria 100.00

Kapitolpojišťovacíafinančníporadenství,a.s.,Brno CzechRepublic 100.00

Kooperativa,pojišťovna,a.s.ViennaInsuranceGroup,Prague CzechRepublic 98.39

KÁLVINTOWERImmobilienentwicklungs-undInvestitionsgesellschaftm.b.H.,Budapest Hungary 100.00

LVPHoldingGmbH,Vienna Austria 100.00

MAPBürodienstleistungGesellschaftm.b.H.,Vienna Austria 100.00

MH54ImmobilienanlageGmbH,Vienna Austria 100.00

NeueHeimatOberösterreichHoldingGmbH,Vienna Austria 90.00

OMNIASIGVIENNAINSURANCEGROUPS.A.,Bucharest Romania 99.47

PensionInsuranceCompanyDoverieAD,Sofia Bulgaria 92.58

PFGHoldingGmbH,Vienna Austria 89.23

PFGLiegenschaftsbewirtschaftungsGmbH&CoKG,Vienna Austria 92.88

PrivateJoint-StockCompany"Insurancecompany"Ukrainianinsurancegroup",Kiev Ukraine 100.00

PRIVATEJOINT-STOCKCOMPANY"UKRAINIANINSURANCECOMPANY"KNIAZHAVIENNAINSURANCEGROUP",Kiev Ukraine 99.99

PrivateJoint-StockCompany"JUPITERLIFEINSURANCEVIENNAINSURANCEGROUP",Kiev Ukraine 97.80

PROGRESSBeteiligungsges.m.b.H.,Vienna Austria 60.00

PalaisHansenImmobilienentwicklungGmbH,Vienna Austria 56.55

PassatRealSp.zo.o.,Warsaw Poland 100.00

PoisťovňaSlovenskejsporitel'ne,a.s.ViennaInsuranceGroup,Bratislava Slovakia 95.00

PojišťovnaČeskéspořitelny,a.s.ViennaInsuranceGroup,Pardubice CzechRepublic 95.00

ProjektbauGesmbH,Vienna Austria 100.00

ProjektbauHoldingGmbH,Vienna Austria 90.00

Rathstraße8LiegenschaftsverwertungsGmbH,Vienna Austria 100.00

RaySigortaAnonimSirketi,Istanbul Turkey 94.96

SECURIAmajetkovosprávnaapodielovás.r.o.,Bratislava Slovakia 100.00

SIGMAINTERALBANIANVIENNAINSURANCEGROUPSh.A.,Tirana Albania 89.05

SkandiaZycieTowarzystwoUbezpieczenSpolkaAkcyjna,Warsaw Poland 100.00

SVZGmbH,Vienna Austria 100.00

SVZIGmbH,Vienna Austria 100.00

Schulring21BürohausErrichtungs-undVermietungsGmbH,Vienna Austria 100.00


Annual Report 2014

Report on Relations



Schulring21BürohausErrichtungs-undVermietungsGmbH&CoKG,Vienna Austria 100.00

SeniorenResidenzFultererparkErrichtungs-undVerwaltungsGmbH,Vienna Austria 100.00

SeniorenResidenzVeldidenaparkErrichtungs-undVerwaltungsGmbH,Innsbruck Austria 66.70

SparkassenVersicherungAGViennaInsuranceGroup,Vienna Austria 95.00

T125GmbH,Vienna Austria 100.00

TBIBULGARIAEAD,Sofia Bulgaria 100.00

TBIHFinancialServicesGroupN.V.,Amsterdam Netherlands 100.00

UNIONViennaInsuranceGroupBiztositóZrt.,Budapest Hungary 100.00

V.I.G.ND,uzavřenýinvestičnífonda.s.,Prague CzechRepublic 100.00

VIGFUNDuzavřenýinvestičnífond,a.s.,Prague CzechRepublic 100.00

VIGREzajišťovna,a.s.,Prague CzechRepublic 100.00

VIGREALESTATEDOO,Belgrade Serbia 100.00

VIGRealEstateGmbH,Vienna Austria 100.00

VIG-CZRealEstateGmbH,Vienna Austria 100.00

VLTAVAmajetkovosprávníapodílováspol.s.r.o.,Prague CzechRepublic 100.00

ViennaLifeViennaInsuranceGroupBiztositóZártkörüenMüködöRészvénytársaság,Budapest Hungary 100.00

Vienna-LifeLebensversicherungAGViennaInsuranceGroup,Bendern Lichtenstein 100.00

VIGPropertiesBulgariaAD,Sofia Bulgaria 99.97

WGPVHoldingGmbH,Vienna Austria 100.00

"WIENERRE"akcionarskodruštvozareosiguranje,Belgrade Serbia 100.00

WIENERSTÄDTISCHEBeteiligungsGmbH,Vienna Austria 100.00

WIENERSTÄDTISCHEFinanzierungsdienstleistungsGmbH,Vienna Austria 100.00

WIENERSTÄDTISCHEVERSICHERUNGAGViennaInsuranceGroup,Vienna Austria 99.90

WIENERVEREINBESTATTUNGS-UNDVERSICHERUNGSSERVICE-GESELLSCHAFTM.B.H.,Vienna Austria 100.00

JointStockInsuranceCompanyWINNER-ViennaInsuranceGroup,Skopje Macedonia 100.00

WSBVBeteiligungsverwaltungGmbH&CoKG,Vienna Austria 100.00

WSVImmoholdingGmbH,Vienna Austria 100.00

WILAGmbH,Vienna Austria 100.00

WIENERSTÄDTISCHEOSIGURANJEakcionarskodrustvozaosiguranje,Belgrade Serbia 100.00

Wienernekretnined.o.o.zaposlovanjenekretninama,Zagreb Croatia 100.00

WienerosiguranjeViennaInsuranceGroupdioničkodruštvozaosiguranje,Zagreb Croatia 99.47


Annual Report 2014

Report on Relations


Companies consolidated using the equivalence method

AISServis,s.r.o.,Brno CzechRepublic 100.00

AlpenländischeHeimstätte,gemeinnützigeWohnungsbau-undSiedlungsgesellschaftm.b.H.,Innsbruck Austria 94.00

Benefita,a.s.,Prague CzechRepublic 100.00

Beteiligungs-undImmobilienGmbH,Linz Austria 25.00

Beteiligungs-undWohnungsanlagenGmbH,Linz Austria 25.00

ČPPServis,s.r.o.,Prague CzechRepublic 100.00

CROWN-WSFspol.s.r.o.,Prague CzechRepublic 30.00

ErstegemeinnützigeWohnungsgesellschaftHeimstätteGesellschaftm.b.H.,Vienna Austria 99.77

GLOBALASSISTANCE,a.s.,Prague CzechRepublic 100.00

GemeinnützigeIndustrie-Wohnungsaktiengesellschaft,Leonding Austria 55.00

GemeinnützigeMürz-YbbsSiedlungsanlagen-GmbH,Kapfenberg Austria 55.00

Gewista-Werbegesellschaftm.b.H.,Vienna Austria 33.00

GlobalExpert,s.r.o.,Pardubice CzechRepublic 100.00

HOTELYSRNÍ,a.s.,Prague CzechRepublic 100.00

KIP,a.s.,Prague CzechRepublic 100.00

MedialBeteiligungs-Gesellschaftm.b.H.,Vienna Austria 29.63

NEUEHEIMATOberösterreichGemeinnützigeWohnungs-undSiedlungsgesmbH,Linz Austria 99.81

NeulandgemeinnützigeWohnbau-Gesellschaftm.b.H.,Vienna Austria 50.12

ÖsterreichischesVerkehrsbüroAktiengesellschaft,Vienna(groupfinancialstatements) Austria 36.58

S–budovy,a.s.,Prague CzechRepublic 100.00

SIMMOAG,Wien(groupfinancialstatements) Austria 10.22

S-správanemovitostí,a.s.,Prague CzechRepublic 100.00

SCHWARZATALGemeinnützigeWohnungs-undSiedlungsanlagenGmbH,Vienna Austria 55.00

SOZIALBAUgemeinnützigeWohnungsaktiengesellschaft,Vienna Austria 50.12

SURPMO,a.s.,Prague CzechRepublic 100.00

SanatoriumAstoria,a.s.,KarlovyVary CzechRepublic 92.71

TECHGATEVIENNAWissenschafts-undTechnologieparkGmbH,Vienna Austria 60.00

WNHLiegenschaftsbesitzGmbH,Vienna Austria 100.00

UrbanbauGemeinnützigeBau-,Wohnungs-undStadterneuerungsgesellschaftm.b.H.,Vienna Austria 50.12

VBV–BetrieblicheAltersvorsorgeAG,Vienna(groupfinancialstatements) Austria 23.56


Annual Report 2014

Report on Relations


Unconsolidated companies

"AssistanceCompanyUkrainianAssistanceService"LLC,Kiev Ukraine 100.00

"Auto-Ekspert"Spolkazorganiczonaodpowiedzialnoscia,Warsaw Poland 100.00

"CompensaServices"SIA,Riga Latvia 100.00

"DUNAJ–Finanse"–Spolkazorganiczonaadpowiedzialnoscia,Warsaw Poland 50.00

MedicalClinic"DIYA"LLC,Kiev Ukraine 100.00

AISMPMeditzinskiTsentarBulstradZdraveEOOD,Sofia Bulgaria 100.00

AkcionarskodrustvozazivotnoosiguranjeWienerStädtischePodgorica,ViennaInsuranceGroup,Podgorica Montenegro 100.00

AlpenlachsSoraviaGmbH,Vienna Austria 33.30

AmadiGmbH,Wiesbaden Germany 100.00

AQUILAHausmanagementGmbH,Vienna Austria 100.00

AREALISLiegenschaftsmanagementGmbH,Vienna Austria 50.00

AutosigSRL,Bucharest Romania 100.00

B&AInsuranceConsultings.r.o.,MoravskáOstrava CzechRepublic 49.00

BrunnN68SanierungsGmbH,Vienna Austria 50.00

BulstradTrudovaMeditzinaEOOD,Sofia Bulgaria 100.00

CamelotInformatikundConsultingGesellschaftm.b.H.,Villach Austria 99.48

CAPITOLBROKERDEPENSIIPRIVATES.R.L.,Bucharest Romania 100.00

CAPITOLINTERMEDIARDEPRODUSEBANCARES.R.L.,Bucharest Romania 100.00

CAPITOLINTERMEDIARDEPRODUSEDELEASINGS.R.L.,Bucharest Romania 100.00

CAPITOLSpolkazOgraniczonaodpowiedzialnoscia,Warsaw Poland 100.00

CARPLUSVersicherungsvermittlungsagenturGmbH,Vienna Austria 100.00

CCAEDVfürVersicherungswirtschaftGmbH,Vienna Austria 24.28

DIRECT-LINEDirektvertriebs-GmbH,Vienna Austria 100.00

DVSDonau-VersicherungVermittlungs-undService-Gesellschaftm.b.H.,Vienna Austria 100.00

EBSWohnungsgesellschaftmbHLinz,Linz Austria 25.00

EBV-LeasingGesellschaftm.b.H.,Vienna Austria 49.49

EGWWohnbaugemeinnützigeGes.m.b.H.,WienerNeustadt Austria 100.00

ERSTEdrustvosogranicenomodgovornoscuzaupravljanjeobveznimidobrovljnimmirovinskimfondovima,Zagreb Croatia 29.00

ErsteSBiztositasiAlkuszKft,Budapest Hungary 100.00

EuropeanInsurance&ReinsuranceBrokersLtd.,London UnitedKingdom 85.00

EXPERTASchadenregulierungs-GesellschaftmbH,Vienna Austria 100.00

FinanzpartnerGmbH,Vienna Austria 50.00

Foreignlimitedliabilitycompany"InterInvestUchastie",Minsk Belarus 100.00


Annual Report 2014

Report on Relations



GainCapitalSA,SICAV-FISRealEstateCarParksI,Luxemburg Luxemburg 40.01

GELUPGmbH,Vienna Austria 33.33

GEOHOSPITALSLLC,Tbilisi Georgia 100.00

GlamasBeteiligungsverwaltungsGmbH,Vienna Austria 23.33

GlamasBeteiligungsverwaltungsGmbH&Co"Beta"KG,Vienna Austria 23.33

GLOBALASSISTANCESERVICESs.r.o.,Prague CzechRepublic 100.00

GLOBALASSISTANCESLOVAKIAs.r.o.,Bratislava Slovakia 100.00

HendersonGlobalInvestorsImmobilienAustriaGmbH,Vienna Austria 35.00

HORIZONTPersonal-,Team-undOrganisationsentwicklungGmbH,Vienna Austria 100.00

IICS/Polskazograniczonaodpowiedzialnoscia,Warsaw Poland 100.00

InterRiskInformatikGmbH,Wiesbaden Germany 100.00

Jahorinaautod.o.o.,Brcko BosniaandHercegovina 100.00

JahorinaKonsekoProgresa.d.,Pale BosniaandHercegovina 28.00

JointStockCompany"Curatio",Tbilisi Georgia 100.00

JointStockInsuranceCompanyWINNERLIFE–ViennaInsuranceGroupSkopje,Skopje Macedonia 100.00

KUPALABelarusian-AustrianClosedJointStockInsuranceCompany,Minsk Belarus 98.26

KWCCampusErrichtungsgesellschaftm.b.H.,Klagenfurt Austria 50.00

LeadEquitiesIIAuslandsbeteiligungsAG,Vienna Austria 21.59

LeadEquitiesII.PrivateEquityMittelstandsfinanzierungsAG,Vienna Austria 21.59

LiSciVMuthgasseGmbH&CoKG,Vienna Austria 23.33

MCEINSInvestmentGmbH,Vienna Austria 50.00

Money&MorePénzügyiTanácsadóZártkörüenMüködöRészvéntársaság,Budapest Hungary 100.00

People'sPharmacyLLC,Tbilisi Georgia 50.00

PFGLiegenschaftsbewirtschaftungsGmbH,Vienna Austria 83.57

PrivatJoint-StockCompany"OWNSERVICE" Ukraine 100.00

RenaissanceHotelRealbesitzGmbH,Vienna Austria 40.00

RISKCONSULTSicherheits-undRisiko-ManagementberatungGesellschaftm.b.H.,Vienna Austria 51.00

S.C.CLUBA.ROS.R.L.,Bucharest Romania 100.00

S.O.S.-EXPERTd.o.o.zaposlovanjenekretninama,Zagreb Croatia 100.00

SeniorenResidenzengemeinnützigeBetriebsgesellschaftmbH,Vienna Austria 100.00

Slovexperta,s.r.o.,Žilina Slovakia 100.00

SoletaBeteiligungsverwaltungsGmbH,Vienna Austria 23.33

SoraviaFoodMarketGmbH,Vienna Austria 33.33


Annual Report 2014

Report on Relations



Sparkassen-VersicherungsserviceGesellschaftm.b.H.,Vienna Austria 100.00

SpoldzielniaUslugowaVIGEKSPERTWWARSZAWIE,Warsaw Poland 100.00

SVZImmoholdingGmbH,Vienna Austria 100.00

SVZImmoholdingGmbH&CoKG,Vienna Austria 100.00

TBIAssetManagementEAD,Sofia Bulgaria 100.00

TBICONSULTINGEOOD,Sofia Bulgaria 100.00

TBIInfoEOOD,Sofia Bulgaria 100.00

TBIInvestEAD,Sofia Bulgaria 100.00

ThermenlandCongressCenterLoipersdorfGmbH&CoKG,Loipersdorf Austria 32.26

TOGETHERInternetServicesGmbH,Vienna Austria 24.99

UAB"CompensaServices",Vilnius Lithuania 100.00

UNION-InformatikaiSzolgáltatóKft.,Budapest Hungary 100.00

UntereDonaulände40GmbH,Vienna Austria 100.00

UntereDonaulände40GmbH&CoKG,Vienna Austria 100.00

VersicherungsbüroDr.IgnazFialaGesellschaftm.b.H.,Vienna Austria 33.33

CompensaDystrybucjaSpolkazograniczonaodpowiedzialnoscia,Warsaw Poland 100.00

ViennaInsuranceGroupContactCenterBulgariaAD,Sofia Bulgaria 100.00

ViennaInsuranceGroupPolskaSpolkazograniczonaodpowiedzialnoscia,Warsaw Poland 100.00

ViennaInternationalUnderwritersGmbH,Vienna Austria 100.00

VIGAssetManagementinvestičníspolečnost,a.s.,Prague CzechRepublic 100.00

VIGManagementServiceSRL,Bucharest Romania 100.00

VIGServicesBulgariaEOOD,Sofia Bulgaria 100.00

VIGServicesShqiperiSh.p.K.,Tirana Albania 100.00

VIGServicesUkraine,LLC,Kiev Ukraine 100.00

VILEBAREDINEd.o.o.,Zagreb Croatia 30.00

VÖBDirektVersicherungsagenturGmbH,Graz Austria 50.00

VVTVermögensverwaltungGmbH,Vienna Austria 33.33

VVTHGmbH,Vienna Austria 33.33

WAGWohnungsanlagenGesellschaftm.b.H.,Linz Austria 25.00

Wien3420AspernDevelopmentAG,Vienna Austria 33.33

WienerStädtischeDonauLeasingGmbH,Vienna Austria 100.00

WSBVBeteiligungsverwaltungGmbH,Vienna Austria 100.00

WSVVermögensverwaltungGmbH,Vienna Austria 100.00


Annual Report 2014

Report on Relations

ConclusionBasedontheinformationavailable,noconductwasundertakenattheinstigationorintheinterestofthecontrollingentityoritscontrolledentitiesinthecourseoftheaccountingperiodwhichinitsnaturewouldaffecttheProcessor’sassetsinexcessof10%ofitsequitydeterminedaccordingtothelastfinancialstatements.

2. OVERVIEW OF MUTUAL CONTRACTS WITH CONTROLLED ENTITIES: VIENNA INSURANCE GROUP AG WIENER VERSICHERUNG GRUPPE

Contracts

Sale of servicesDuringtheaccountingperiod,theProcessorprovided/receivedservicesbasedonthesecontractsconcludedinpastaccountingperiodsorinthecurrentaccountingperiod:

Contract name Contractual party Date of conclusion Effective date Deliverable Note

Agreementoncooperationinusingbuildingno.115andNo.1400inPardubiceNo.46/2013–asamendedbySupplementNo.1

Kooperativapojišťovna,a.s.,ViennaInsuranceGroup,Pobřežní665,18600Prague8

27Jun.2013SupplementNo.1dated5Mar.2014

1Jun.2013SupplementNo.1dated1Jan.2014

Regulationofmutualrightsandobligationswhenusingcommercialpremisesatbothpropertiesservingbothparties

Agreementonsubleaseofcommercialpremisesforadefiniteterm–sub-lesseeKooperativa–asamendedbySupplementNo.1–leaseuntil31Jul.2019andSupplementNo.2

Kooperativapojišťovna,a.s.,ViennaInsuranceGroup,Pobřežní665/21,18600Prague

20Jan.2010SupplementNo.1dated27Sep.2013SupplementNo.2dated05Mar.2014

1Jan.2010SupplementNo.1dated1Oct.2013SupplementNo.2dated1Jan.2014

Leaseofofficeno.m.371withatotalareaof298.22m2inthebuildingatnám.Republiky1400,Pardubice

AgreementonsubleaseofcommercialpremisesforadefinitetermasamendedbySupplementNo.13andSupplementNo.14


10Dec.2004SupplementNo.13dated5Mar.2014SupplementNo.14dated05.062014

2Jan.2004SupplementNo.13dated01Jan.2014SupplementNo.14dated01.052014

Leaseofofficesno.m.241,361and431withatotalareaof1378.74m2inthebuildingatnám.Republiky1400,Pardubice

InsurancePolicyNo.2268707823until28Feb.2015asamendedbySupplementsNo.26throughNo.38


29Feb.2012SupplementNo.26dated30Dec.2013SupplementNo.38dated18Nov.2014

1Mar.2012SupplementNo.26dated2Jan.2014SupplementNo.38dated19Nov.2014

Motorhullinsuranceforcompanycars

InsurancePolicyNo.7720795825until31.12.2014asamendedbySupplementNo.2


31Dec.2013SupplementNo.2dated16Sep.2014

1Jan.2014SupplementNo.2dated16Sep.2014

Agreementoninsuranceofcompanypropertyandliabilityinsurance


Annual Report 2014

Report on Relations


InsurancePolicyNo.2060001407onsupplementaryvehicleinsurance–H73asamendedbySupplementsNo.41throughNo.53


29Oct.2010SupplementNo.41dated30Dec.2013SupplementNo.53dated18Nov.2014

1.11.2010SupplementNo.41dated30Dec.2013SupplementNo.53dated18Nov.2014

VehicleinsuranceNA100PRO–nofaultaccident

InsurancePolicyNo.8603105774


31Jul.2014 1Aug.2014

InsurancepolicyforgroupliabilityinsuranceofPojišťovnaČeskéspořitelnyemployees

CostSharingAgreement–asamendedbySupplementNo.2


16Dec.2010SupplementNo.2dated17Feb.2014

1Jan.2011SupplementNo.2dated1Jan.2014

Outsourcingfor:– internalauditincluding

ongoingŘKSmonitoring;– informationtechnologies;

payrollprocessing,– CustomerSupport

Centreservice

AgreementonInternalGroupCooperation

Kooperativapojišťovna,a.s.,ViennaInsuranceGroup,Pobřežní665/21,18600PragueČeskápodnikatelskápojišťovna,a.s.,ViennaInsuranceGroup,Pobřežní665/21,18600Prague

13Aug.2010 13Aug.2010

DefinitionofbasiccompetencesandresponsibilitiesintheprocessofdevelopmentmanagementandcoordinationoftheVIGgroupintheCzechRepublic

DataCenterServiceFrameAgreement

VIENNAINSURANCEGROUPAGWienerVersicherungGruppe,Schottenring30,1010Wien,Austria

14Jan.2014 1Jan.2013

Regulationoftheconditionsofprovidedservicesrelatedtouseofcentraldatasystems

QuataShareReinsuranceAgreementNo.17/2014


28Feb.2014 1Jan.2014Organisationofnon-lifesupplementaryaccidentinsurancefor2014

QuataShareReinsuranceAgreement18/2014


28Feb.2014 1Jan.2014Organisationofnon-lifesupplementaryaccidentinsurancefor2014

Agreement3/2015


1Jan.2014SimCorp–conditionsofoperationoftheassetmanagementsystem


Annual Report 2014

Report on Relations

Contracts on brokering activityTheprocessorconcludedthefollowingcontractsonbrokeringactivity,basedonwhichitprovidedthefollowingfulfilment:


ContractonexclusivebusinessrepresentationNo.4600-400500/01-2005-A(134/04)asamendedbySupplementNo.9


29.12.2004SupplementNo.9dated31Dec.2013

1Jan.2005SupplementNo.9dated1Jan.2014

Brokeringofnon-lifeinsurancesales

SupplementNo.9–Citizens’propertyinsuranceonline(DS2,RD8,BT8),from1Mar.2014,citizens’propertyinsurance(DS2,SB2,SN2),businessinsurance(PS1/T14)

Commentary:AlltherelationssetoutinthisannexwereestablishedbetweentheAffiliatedEntities,namelytheProcessorandVIENNAINSURANCEGROUPAGWienerVersicherungGruppe.

Intheconclusionoftheserelations,thevalidlawsoftheCzechRepublicwererespectedandpriceswerestipulatedwithregardtotheIncomeTaxAct,i.e.accordingtothearm’slengthprinciple.InsurancebrokeringaccordingtoActNo.38/2004isregulatedincontractualrelationsbydefiningthemutualrightsandobligationsofthecontractualparties,withthesimultaneousdefinitionofconditionsofthecourse,claimandpaymentofremunerationforserviceprovisionrelatedtothesaleofinsurance.Thesecontractsincludetheauthorizationgrantedbytheaffiliatedentityfortheprovisionoftheseservices,undertheconditionsstipulatedbytheaforementionedlaw.

ConclusionInthecourseoftheaccountingperiod,nocontractualpartyclaimedanypropertylosses.Theadvantagesoftheconcludedcontractualrelationsaretheeffectiveuseofresourcesandservicesduringregulareconomicactivityand/orcostsavings.

Pardubice,10March2015

Pojišťovna České spořitelny, a.s., Vienna Insurance Group

RNDr. Petr Zapletal, MBAChairmanoftheBoardofDirectors

Ing. Jaroslav KulhánekDeputyChairmanoftheBoardofDirectors

Ing. Tomáš Vaníček, MBAMemberoftheBoardofDirectors


Annual Report 2014

Report on Relations

1. OUTLOOK

TheCompany’slong-termbusinessstrategyistofocusonprovidingprofitableproductswithhighaddedvalue,managingandplanningproductinnovations,buildingrelationshipswithclientsandbusinesspartners,increasingthestabilityoftheinsuranceportfolioandcontinuallyimprovingthesystemofclientserviceforbusinesspartnersandend-consumersofinsuranceservices.

AnyfurtherdevelopmentwillbedrivenbyeffortstocontinuallymeetrequirementstoachievetheCompany’sbusinessobjectivesandfinancialstability.TheCompany’sactivityisaffectedbyevergrowingcompetitionandpersistentlyadverseconditionsonfinancialmarkets,includingasharpdeclineininterestrates.Theseconditionsarecharacterizedbyalow-interestenvironmentandincreasinglystrongstateintervention.Thelong-awaitedlastingimprovementintheeconomicsituationhasnotarrivedbutinsteadwemustfacenewrisksandanenvironmentoftighterregulationoftheinsuranceindustryandrapidlydevelopinglegislation.TheCompanywillhavetodealwithnewrequirementsarisingfromtheplannedamendmenttolegislationgoverninginsuranceactivities,especiallyinrelationtotheanticipatedeffectivedateofconditionsforthemanagementofinsuranceactivitiesaccordingtoSolvencyII.

In2014,theCompanyfinishedsettingupbasicfunctionalitiesandprocessesassociatedwiththetransition(orfinalizationthereof)toconditionsnecessaryforeffectivecompanymanagementaccordingtorisks.Theresultoftheseactivitiesisthedivisionofresponsibilitiesforriskmanagementatindividualmanagementlevels,theverificationofproceduresassociatedwiththeidentificationoftheCompany’sriskpositionsandtheirreportingandtheiruseinmanagementatindividualmanagementlevels.Atthesametime,relatedformalstepsassociatedwiththeadjustmentoftheCompany’sorganizationalandprocessstructuresweretaken.ThecomingyearwillbeayearfortheverificationandconfirmationofthecorrectnessofthechangesmadebytheCompanyforasmoothtransitiontotheconditionsofSolvencyIIin2016.

In2014,theCompanyemployedacommunicationconceptbasedonapositiveapproachtolifewiththeslogan“Thinkpositively,lifeisworthliving”.Asinpreviousyears,thiscommunicationwasbuiltonthecoreproduct,FLEXIlifeassurance.Thephilosophyoftheprojectfocusedoncommunicatingtheneedforsecurityincaseofseriouslifesituations.Thetargetgroupwasyoungfamilies,wheretheroleoflifeassuranceistosecurethefamilyinvariouslifesituations,eveninthechangingconditionsofafamilywithgrowingchildren.

Productchangesaimedatfulfillingthecompany’scommunicationconceptandconditionsforresolvingseriouslifesituations.Theessenceofthesechangeswastheexpansionofdisabilityinsurance,insurance,andinsuranceofincapacityduetoillnessandacombinationofpermanentinjuries.In2014,weverifiedhowwellwehadmanagedtodealwiththenewCivilCodeandnewrequirementsforinsuranceinpractice.Basedontheresponsefromclientsandtheverificationofcompliancewiththeserequirementsbyaninternalauditandthesupervisorybody,itisfairtosaythatwesuccessfullyachievedthischallengingtask.Attheendoftheyear,wehadtoadjustinsurancecontractsinresponsetothechangeinconditionsforthetaxadvantageoflifeassurance,which,giventhatthisaffectedmorethanhalfamillionclients,placedconsiderabledemandsonhuman,operatingandtechnicalresources.

Tomaintaincustomerloyaltyandresponsiblebehaviour,theCompanycontinueditsloyaltyandbonusprogrammesmotivatingclientstowardslong-termpartnershipsandrewardingthemformakingnoorfewclaimsinthedurationoftheircontracts.Clientsinthisprogrammewillbeinformedofthestatusofbonusesontheirinsurancepoliciesfor2014.

TheCompanyconstantlyinnovatesinsurancemanagementprocedures,asevidencedbythecontinuedcomputerizationofinsurancecontractadministration.Lastyear,theCompanyfurtherdevelopedtheseinnovations,whichareaimedatstreamliningtheacquisitionprocessbyintroducingelectronicinsurancepolicyformsforourbusinesspartners.Apilotprogrammealsotestedtheelectronicconclusionofcompleteinsurancepolicies,includingtheclient’selectronicsignature.

Non-financial Section


Annual Report 2014


Thisapplicationfullyreplacesthetraditionalpaperformofconcludingcontracts,includingtheelectronictransferofdatatotheCompany’ssystems.Inadditiontoacceleratingandimprovingtheprocessofconcludinginsurancepolicies,italsocutscostsforinsurancemanagementandlimitsthepossibilityoffraud.

Thewholeprocessofinnovatinginsurancemanagementisaimedatincreasingproductivityandthequalityofoutputassociatedwithprocessinginsurancepolicieswhilesavingtimeandcosts.TheCompanyintendstofurtherstrengthentheseactivities,includingthequalityofitsclientapproach.Forthisreason,ithasbeguntomonitortheso-calledclientexperience,andhascreatedorganizationalandproceduralconditionsforthefulfilmentoftheseambitions.First,itchangedtheCompany’sorganizationalstructureandcreatedthepositionofaclientexperiencemanager,whilethuscreatingthenecessaryprerequisitesfortheevaluationofprocessesandchangeswithregardtoclientexperience.

2. ACTIVITY IN THE FIELD OF RESEARCH AND DEVELOPMENT

Givenitslineofbusiness,theCompanyhaslimitedoptionsinthefieldofresearchanddevelopment.Forthisreason,developmentisfocusedontheincorporationofnewinformationtechnologiesandformsofcommunicationintotheprocessofprovidinginsuranceservices.

3. ENVIRONMENTAL PROTECTION AND EMPLOYMENT RELATIONS

DuetothenatureoftheCompany’sbusiness,itplacesaminimumburdenontheenvironmentandmeetstherequirementsimposedbylegalstandardsintheCzechRepublicintheperformanceofitsactivities.Despitelimitedoptionsinviewofitslineofbusiness,theCompanydoesnotdismisstheissueofenvironmentalprotection.Intheyearunderreview,weimplementedasystemofsortingwasteanditsdisposalaccordingtoitsnature.AdecisionontherenewalofITinfrastructurewasalsoveryimportant,whichaimsnotonlytoensureadequatecapacityandquality,butalsofullrecyclingandasignificantreductioninenergydemandsfortheCompany’soperation.

Inthefieldofemploymentrelations,theCompanystrivestobeapreferredemployer.Forthisreason,itdevotesgreatattentiontothedevelopmentofitsemploymentpolicyandsocialprogrammes,withtheaimofbeinganattractiveemployeronthelabourmarket.TheCompanyusesmodernmethodsinthefieldofhumanresourcemanagementformotivationsystems,withtheutilizationofremunerationsurveysconductedincooperationwiththeHayGroup.TheCompanyprovidesemployeeswithawiderangeoffinancialandnon-financialbenefits.TheCompanycontinuallyevaluatestheconditionsoftheworkenvironmentsothatitmeetsrequirementsfortheperformanceofworktasks,andcomplieswithoccupationalsafetyprinciples,includingregularandcontractuallyprovidedhealthcareforitsemployees.EmployeeeducationandprofessionaldevelopmentareamongtheCompany’sdevelopmentpriorities.TheCompanyhasanestablishedsystemofemployeeassessmentanddevelopment,basedonwhichitenablesemployeestotakeadvantageofvariousformsofeducation/training,includingupgradingandaugmentingtheirqualifications.

4. THE COMPANY’S ORGANIZATIONAL UNITS ABROAD

TheCompanyhasnoorganizationalunitsabroad.

5. OTHER REQUIREMENTS ACCORDING TO SPECIAL LEGAL REGULATIONS

TheCompanymeetsrequirementsforitslineofbusiness–insurance,asprescribedby,inparticular,theInsuranceAct,ortheActonInsuranceIntermediariesandIndependentLossAdjusters.NootherspecialrequirementsaresetfortheCompany’sactivity.


Annual Report 2014


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