Croatia osiguranje d.d. Annual Report 2009 003...Šenoa, supported by other members of the political...

Croatia osiguranje d.d. Annual Report 2009 003

ContentsPresident's Report to the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 005

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 009Basic Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 013Market Position of CROATIA osiguranje d.d. . . . . . . . . . . . . . . . . . . . . . . . . 031Major Business Events After Expiry of the Business Year . . . . . . . . . . . . . . . . . . . 033Expected Future Development of the Company . . . . . . . . . . . . . . . . . . . . . . . 035Financial Business Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 037Premium and Claim Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 040Comparative Analysis of Insurance Products . . . . . . . . . . . . . . . . . . . . . . . . 051Investment of Means . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 055Statement on Application of Corporate Management Code . . . . . . . . . . . . . . . . 063Independent Auditor's Report – the Company . . . . . . . . . . . . . . . . . . . . . . . 067Basic Financial Reports of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 073 Profi t and Loss Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 076 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 078 Report on Changes in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 079 Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 080Basic Accounting Policies' Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 081Financial Risk Management (FRM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 089Notes to the Profi t and Loss Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 091Notes to the Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

CROATIA osiguranje Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129Description & Business Results of the Daughter Companies . . . . . . . . . . . . . . . . . 132Management Board's Report on Business Results of the Group . . . . . . . . . . . . . . . 141Independent Auditor's Report – Group . . . . . . . . . . . . . . . . . . . . . . . . . . . 149Basic Financial Reports – Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Consolidated Profi t and Loss Account . . . . . . . . . . . . . . . . . . . . . . . . . 157 Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 Consolidated Report on Changes in Capital . . . . . . . . . . . . . . . . . . . . . . 159 Consolidated Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 160Notes to the Consolidated Financial Reports . . . . . . . . . . . . . . . . . . . . . . . . 161


Dear shareholders,

We proudly emphasize that in 2009 CROATIA osiguranje d.d. cel-

ebrated 125 years of its existence, even though quietly and cutting

down on expenses, yet with good business results.

Since its foundation until today the oldest insurance company in

Croatia has resisted great historical and market changes. Last year

CROATIA osiguranje d.d. as well as the Group Croatia osiguranje

faced the global economic crisis of almost historical proportions and

by fi ghting it still managed to retain the leading position in our coun-

try and in the region. We also realized the planned gross profi t and

thereby justifi ed the trust of our investors and clients.

The credit given to the strength and quality of our Company is clearly

refl ected in the price of our common share that on the trading day

in 2008 amounted to HRK 3,161.00, while on the same day 2009

despite the pessimism at the investor market it amounted to as much

as HRK 5,000.00.

In the year behind us we tried to expand our sales network, so for the

fi rst time our products became available in all post offi ces and FINA

offi ces throughout Croatia.

Here we were not primarily led by profi t, but also took into consid-

eration the social benefi t, i.e the needs of our insureds, as well as

the development of the insurance market as a whole. The Croatian

post offi ces network, especially in rural areas, provides an important

infrastructure for our insureds, as well as for the development of the

insurance market, while FINA is going to offer our insurance products

as a part of the fi nancial future planning program for Croatian citizans

and their families.

In the previous year we showed ability and innovativeness by launch-

ing new insurance products such as Aktiv & Aktiv Plus Personal Ac-

cident Insurance Policy. Also, our transferable license plate insurance

for plates used on unregistered vehicles is a unique product at the

insurance market in Croatia. Furthermore, we expanded our travel

insurance program with special terms and conditions, as well as of-

fered the most comprehensive personal accident insurance package

for pupil and student population. At the end of the year 2009 we

also concluded the fi rst cooperation agreement with Privredna banka

Zagreb for the new line of loan repayment insurance covering the risk

of death, unemployment and disability.

We also continued the strategic expansion in the region. In Macedo-

nia a total of EUR 3.25 million was invested to set up a new daughter

company dealing in non-life business.

The new corporate web site of CROATIA osiguranje d.d. represents our

new profi t center by providing our clients with fast and safe way of

buying an insurance. By establishing the corporate data warehouse we

have implemented a brand new business intelligence system.

President's Report to the Shareholders

Croatia osiguranje d.d. Annual Report 2009006

We are aware that the year 2010 is not going to be easy. Stagnation

in insurance industry as well as in the national economy is to be ex-

pected. However, our goal is to maintain the Company’s stability and

the corresponding growth, so that at the end of 2010 we will once

again be able to share the satisfaction with good business results with

you. We will do our utmost to increase sales, consolidate our insur-

ance portfolio and increase effi cient use of all Company’s resources.

We intend to bring the management of business process risk to the

highest level. Also, we plan to include new sales channels in order to

make our products even more available, as well as to optimize busi-

ness processes and realize cost savings.

In the following period we plan to prepair the Company for the Euro-

pean Union, since the oldest insurance company in Croatia should be

ready to meet the strong competition at this great and united market.

In order to achieve these goals it is of tremendous importance that

CROATIA osiguranje d.d. has the support of all those it takes care

of or depends upon, i.e. its owners, insureds, business partners and

employees. That is why we immensely appreciate the support that we

have so far enjoyed from you our respected shareholders.

We sincerely thank you for the trust placed in us and strongly believe

that we will continue to do business to the satisfaction of all parties

involved, as well as to the advantage of the wider social community

and the Croatian economy as a whole.

Sincerely yours,

Member of the Management Board

President of the Management Board


Introduction

Despite the global recession affecting economy in general as well as in-

surance industry, in the year 2009 CROATIA osiguranje d.d. managed to

keep the leading position in the Republic of Croatia and in the region.

Due to the decrease in purchasing power in 2009 people were buying

only necessities. Consequently, they only concluded obligatory insur-

ance, which led to the most tough competition in the TPL insurance.

The drastic fall in new cars sales in 2009 also played an important role

in this line of insurance business.

Insurance market did not grow in 2009. Due to the economic crisis

small businesses disappear, and those that survive buy only the very

basic insurance policies. Bigger, stronger companies handle the crisis

more easily. However, due to the closed circle of insolvency they too,

have a hard time paying off their liabilities, including, those for insur-

ance premium.

In the year 2009 CROATIA osiguranje d.d. realized written insurance

premium in the amount of HRK 3,029.5 million which is a decrease of

6.6% or HRK 214.5 million in comparison to the same period of the

previous year. Non-life written premium amounted to HRK 2,673.1

million, which is by 7.2% less than at the end of 2008. At the same

time life written premium amounted to HRK 356.4 million, which is a

decrease of 2.0%.

Total income in 2009 amounted to HRK 3,233.9 million. It did not

decrease signifi cantly in comparison to 2008, as it is the case with

premium, due to the increased investment in property as well as due

to the increased income generated by fi nancial investments.

Total expenses of CROATIA osiguranje d.d. in 2009 amount to HRK

3,136.9 million. The single biggest expense in insurance business is

represented by the paid claims amounting to HRK 2,073.9 million,

which is an increase of 0.1% in comparison to 2009.

During the whole previous year the Company managed to uphold a

very high liquidity ratio that of 6.1% (as at December 31. 2009).

In accordance with the Insurance Act, the Company determines the

capital adequacy ratio. The Company’s capital in non-life business is

by 20.7% above the solvency margin (Art. 98 of the Insurance Act),

and in life business by 61.2%. The amount of the Company’s equity

capital is several times higher than the legally prescribed level of 1/3

of the solvency margin and the minimal capital stock.

On June 4, 2009 CROATIA osiguranje d.d. celebrated its 125th anniver-

sary. The Company’s long presence and high reputation in the Republic

of Croatia and in the region represent an advantage in comparison to

other insurers at the market. Clients have, among other things, learned

to trust the quality of our approach to business, quick claims payment

and the adequate level of know-how on the part of our employees.

Share price growth

On December 31, 2009 the price of common shares of CROATIA

osiguranje d.d. amounted to HRK 5,000.00, while it amounted to

HRK 3,161.00 on that very day in 2008. On December 31, 2009 the

price of preferred shares of CROATIA osiguranje d.d. amounted to

HRK 6,000.00, while it amounted to HRK 4,959.99 on that very day

in 2008.

010 Croatia osiguranje d.d. Annual Report 2009

Realized profi t

The gross profi t of the Company in 2009 amounts to HRK 97.0 mil-

lion and it is an increase of 41.7% in comparison to the previous year.

The Company’s profi t after tax amounts to HRK 69.7 million and it is

an increase of 19.6% in comparison to 2008. The gross profi t of the

Group amounts to HRK 198.5 million. The profi t of the Group intended

for the Company’s shareholders reduced for the profi t of the minor

shareholders amounts to HRK 152.5 million.

Written premium

CROATIA osiguranje d.d. realized written insurance premium in the

amount of HRK 3,029.5 million, which is a decrease of 6.6% or HRK

214.5 million in comparison to the same period of the previous year.

92.5% of the plan for 2009 has been realized. CROATIA osiguranje d.d.

makes up for 32.2% of the total written premium of all insurance

companies operating in the Republic of Croatia, while together with

the written premium of Croatia zdravstveno osiguranje d.d. it makes

up for 33.3%.

Claims settlement effi ciency

In 2009 paid claims amounted to HRK 2,073.9 million, which is

an increase of 0.1%. In the period I-XII 2009 215,107 losses were

reported, which is by 1.9% or 4,144 losses less than in the same

period of the previous year. Including claims from the claims provision

a total of 252,523 claims were in the process of handling, of which

216.492 or 85.7% were settled. The effi ciency of claims settlement

was increased by 0.2% in comparison to the same period of the

previous year.

Basic Data

AVAILABILITY.from one generation to another

015Croatia osiguranje d.d. Annual Report 2009

CROATIA osiguranje was founded in 1884.The foundation and the

beginning of the fi rst Croatian insurer coincided with the historical

period in which Croatian national and economic identity was looking

for wider space as an answer to numerous attempts to suppress it. The

enthusiasm and persistence of Gjuro Deželi�, Ivan Von�ina and August

Šenoa, supported by other members of the political elite in Zagreb and

at the time when not many European countries could pride themselves

on having a national insurer, enabled the foundation of Croatia osig-

uranje Association on 4th June 1884.

For the past 125 years i.e. during the great historical, economic and so-

cial changes, the First and Second World War and the Croatian National

War CROATIA osiguranje d.d. has rightfully had the position of the

biggest as well as the most successful insurance company in Croatia

and even in the wider region.

Registration and Company's activities

CROATIA osiguranje d.d. (Company) with the seat in Zagreb, Miramarska

22 is entered into the court register of companies at the Commercial court

in Zagreb under the company number (MBS): 080051022. The Company's

business activities are made up of almost all classes of life and non-life

insurance business, as well as other closely connected activities.

Company's business activities include writing insurance business which

implies concluding life and non-life insurance contracts as well as ful-

fi lling obligations arising out of them, and these, in particular, include

the following: life insurance, annuity insurance, additional life insurance,

other life insurance,

unit-linked life and annuity insurance,

personal accident insurance,

health insurance,

road motor vehicle insurance,

rolling stock insurance,

aircraft insurance,

vessel insurance,

goods in transit insurance,

fire and natural disaster,

other property insurance,

third party motor liability insurance,

aircraft liability insurance,

vessel liability insurance,

other liability insurance,

credit insurance,

guaranty insurance

miscellaneous financial loss insurance,

legal protection insurance,

travel insurance.

The Company also performs the following activities directly or indirectly

related to the core insurance business:

mediation during sale, i.e. sale of objects acquired by the

Company in the course of insurance activities,

taking measures aimed at prevention of and averting danger

from insured persons and property,

risk exposure estimation and loss assesment,

other intelectual and technical services related to the insurance

business.

Basic Data on CROATIA Osiguranje d.d.


Organization

The Company's organization is determined by the Articles of

Association, the Decision of the Supervisory Board and the Decision

of the Management Board on organization of business. The Company's

organizational structure consists of the Head Offi ce and subsidiaries.

Company's subsidiaries are called branch offi ces, i.e. each branch offi ce

is named after the town where its business activities are performed.

The organization of the Head Offi ce is determined by the

Decision on coordination of business activities as well as the Decision

on job classifi cation in CROATIA osiguranje d.d. – Head Offi ce, defi ning

organization forms and management hierarchy. Business functions in

the Head Offi ce are defi ned by groups of business activities coordi-

nated by individual members of the Management Board in charge of

a particular activity.

The subsidiaries (23) cover the whole territory of the Republic of

Croatia and are grouped in fi ve regions: REGION 1: Branch offices Dubrovnik, Split, Šibenik and Zadar REGION 2: Branch offices Gospi�, Karlovac, Pula and Rijeka REGION 3: Branch offices �akovec, Koprivnica, Varaždin and

Zabok REGION 4: Branch offices Bjelovar, Kutina, Sisak and Zagreba�ki

Prsten- Velika Gorica REGION 5: Branch offices Osijek, Požega, Slavonski Brod, Vinkovci

and Virovitica

Based on the Decision on coordination of regional managers dated

June 1 2009 subsidiaries of CROATIA osiguranje d.d. are coordinated by

regional managers appointed by the Company’s Management Board.

Branch offi ce Zagreb and Branch offi ce TIC (Transport and Credit)

Zagreb coordinate their business activities directly with the Company’s

Management Board.

All branch offi ces except the specialized Transport and credit Zagreb

branch offi ce share the same basic activity with the Company, i.e. writ-

ing all types of life and non-life business.

Branch offi ce Velika Gorica started its business activities on January 1

2009, and changed its name into Branch offi ce Zagreba�ki Prsten –

Velika Gorica on January 1 2010.


Branch offi ces of Croatia osiguranje d.d. in the Republic of Croatia

Velika Gorica

Organization chart of CROATIA osiguranje d.d.

Regional Managers' Office

PRODUCTION UNITS

TERRITORIAL UNITS

Management Board's Office

Reinsurance Division Marketing Division

Region 1 Region 2 Region 3 Region 4 Region 5 Zagreb

FUNCTION UNITS

Corporate accounting, Controling and Risk

Management

Development and Improvement of Claims Handling Process

Human resources, Quality and Education

Management

Corporate Finance and Investment

IT Support

Corporate Communications and Safety

Legal Business

Real estate Management and Procurement

Subsidiaries Development

Motor Vehicle Insurance Department

Life Insurance Department

Transport and Credit Department

Personal Non-life Insurance Department

Property Insurance Department

Development and Improvement of

Distribution Channels

MANAGEMENT BOARD


According to the Law on Commercial Companies, Insurance Law and the Articles of Association the Company is governed by by the following bod-

ies: Management Board, Supervisory Board and General Assembly. Obligations and responsibilities of the members of these bodies are determined

by the above mentioned acts.

Management and organization

Supervisory Board and Management Board

Members of the Supervisory Board: Ivan Šuker, Chairman Ph. D. Sc. Andrija Hebrang, Deputy Chairman Miroslav Hraš�anec, Member Stjepan Koži�, Member Miljenko Boban, Member Dr. Gzim Redžepi, Member

Members of the Management Board: Hrvoje Vojkovi�, President from 16 July, 2004

until 17 March, 2010 Silvana Ivan�i�, Member from 10 December, 2009 Damir Mihanovi�, Member from 1 January, 2006

until 1 March, 2010 Ljerka Šeparovi�, Member from 16 July, 2004

until 16 July, 2009

General Assembly

In the period from January 1 until December 31 2009 the General Assembly of CROATIA osiguranja d.d. had 2 meetings.


Capital stock and shares

31/12/2009

No. of Amount % Capital

shares HRK stake

Hrvatski fond za privatizaciju 253.961 355.545.400,00 80,28

Raiffeisenbank Austria d.d.- custodial account 20.341 28.477.400,00 6,43

Hrvatska poštanska banka d.d.-basic and custodial account 6.919 9.686.600,00 2,19

Societe Generale- Splitska banka d.d.- custodial account 4.502 6.302.800,00 1,42

PBZ d.d.-custodial account 2.422 3.390.800,00 0,77

Julius k.d.d. 2.122 2.970.800,00 0,67

Kraš d.d. 1.400 1.960.000,00 0,44

Hypo alpe-adria-bank d.d.- custodial account 1.109 1.552.600,00 0,35

Auto Hrvatska d.d. 1.004 1.405.600,00 0,32

Erste&Steiermarkische b dd.- basic and custodial account 873 1.222.200,00 0,28

Zagreba�ka banka d.d.- custodial account 736 1.030.400,00 0,23

Komercijalna banka d.d. in bankruptcy 700 980.000,00 0,22

Bahovec Sre�ko 540 756.000,00 0,17

Adriacommerce 500 700.000,00 0,16

Radi� Antun 414 579.600,00 0,13

Tankerska plovidba 400 560.000,00 0,13

Škaro Miroslav 380 532.000,00 0,12

Fran Mihaljevi� - klinika za infekt. bolesti 330 462.000,00 0,10

Dalmacijacement d.d. 249 348.600,00 0,08

Abanka d.d. 244 341.600,00 0,07

Other shareholders 17.202 24.082.800,00 5,44

TOTAL 316.348 442.887.200,00 100,00

Ownership structure of 20 major shareholders on December 31, 2009.

The capital stock of the Company amounts to HRK 442,887,200.00 and

is divided in 316,348 shares at par value of HRK 1,400.00 per share. All

shares are shares of the I. issue and are marked as follows: 307,598 shares are common shares marked as CROS-R-A 8,750 shares are preferred shares marked as CROS-P-A.

Each share, either common or preferred one, corresponds to one (1)

vote at the General Assembly of the Company. All shares are paid in

total, issued in non-materialized form, can be freely transferred and are

recorded in the register of the Central Depository Agency.

CROATIA osiguranje d.d.has no own shares in its ownership.


Since 2004 the shares of the Company are listed in the fi rst quotation of the Zagreb Stock Exchange and so for the fi rst time trading with the shares

of one majority state-owned company in the Republic of Croatia started.

In 2009 the highest price of common shares of CROATIA osiguranje d.d. amounted to HRK 6,000.00, while the lowest amounted to HRK 2,200.00.

In 2009 the highest price of preferred shares of CROATIA osiguranje d.d. amounted to HRK 6,000.00, while the lowest amounted to HRK 2,300.00.

On December 31, 2009 the price of common shares of CROATIA osiguranje d.d. amounted to HRK 5,000.00, while it amounted to HRK 3,161.00 on

that very day in 2008. On December 31, 2009 the price of preferred shares of CROATIA osiguranje d.d. amounted to HRK 6,000.00, while it amounted

to HRK 4,959.99 on that very day in 2008.

Share Price Movement Chart

3.161,00

2.405,00

3.500,00

4.651,005.000,00

4.959,99

2.550,12

31/12/2008 31/03/2009 30/06/2009 30/09/2009 31/12/2009

3.752,18

5.250,00

6.000,00

2.000

0

4.000

6.000

8.000

in H

RK


Human resources – invaluable asset of CROATIA osiguranje d.d.

Human resources represent the most important, dynamic and creative

asset of our Company. They generate ideas, plan, start and complete

certain actions in the Company. Human resources imply the knowledge,

skills, and especially the ability to think and make quality decisions of

not only the Company’s employees, but also of all other parties partici-

pating in the business activities.

In year 2009 the Company paid special attention to human resources

and their development. Consequently, the project ''Optimization of

organization structure of the Head Offi ce“ has been completed and

implemented as well as the opitimization project of CROATIA osiguranje

Ljubuški in Bosnia and Herzegowina. The Company furthermore began

the optimization project in the daughter company Milenijum Belgrade

by establishing the new organization and employee remuneration sys-

tem in line with the uniform methodology used at the level of the

Group. Also, great efforts were made in order to establish a knowledge

management system through centralized education of all employees

of the Company. In addition to it we also started the project aimed

at examining the organization climate in the Company subjected to

the recession related government measures having great effect on the

Company’s employees. On December 31, 2009 the number of em-

ployees in CROATIA osiguranja was 2,853. During 2009 40 employees

were retired.


SOURCE: HANFA

* Written premium with coinsurance premium** Under health insurance coverage CROATIA osiguranje d.d. offers travel health insurance and other voluntary health insurance. Supplemen-

tary and additional health insurance is exclusively offered by the daughter company Croatia zdravstveno osiguranje.

Market Position of the Company

Gross written premium per insurance class in the Republic of CroatiaHRK 000

INSURANCE CROATIAN MARKET CROATIAN MARKET INDEX

CLASS I-XII 2008 I-XII 2009 3:2

1 2 3 4

Personal Accident 547.549 547.071 99,9%

Health 316.774 308.929 97,5%

Motor hull 1.155.556 1.007.235 87,2%

Motor TPL 2.922.560 2.922.150 100,0%

Property 1.352.057 1.363.257 100,8%

Transport and Credit 520.530 460.434 88,5%

Liability 319.384 312.797 97,9%

NON-LIFE INSURANCE 7.134.410 6.921.874 97,0%

LIFE INSURANCE 2.545.930 2.488.859 97,8%

TOTAL 9.680.340 9.410.733 97,2%

HRK 000

INSURANCE CROATIAN MARKET Croatia osiguranje d.d. SHARE

CLASS I-XII 2009 I-XII 2009* 3:2

1 2 3 4

PERSONAL ACCIDENT 547.071 213.751 39,1%

HEALTH** 308.929 29.850 9,7%

MOTOR HULL 1.007.235 367.556 36,5%

MOTOR TPL 2.922.150 854.970 29,3%

PROPERTY. 1.363.257 762.843 56,0%

TRANSPORT AND CREDIT 460.434 287.048 62,3%

LIABILITY 312.797 161.941 51,8%

TOTAL INSURANCE. 6.921.874 2.677.959 38,7%

LIFE INSURNCE. 2.488.859 356.410 14,3%

TOTAL 9.410.733 3.034.369 32,2%

SOURCE: HANFA

CROATIA osiguranje d.d.’s share in the total written premium per insurance class

At present, 27 insurance companies and two reinsurance companies

operate at the market of the Republic of Croatia. According to the

insurance class the breakdown is as follows: 8 insurance companies in

life business, 9 insurance companies in non-life and 10 companies in

both life and non life business. The total gross written premium of all

insurance and reinsurance companies for the accounting period January

– December 2009 amounted to HRK 9.4 billion which is a 2.8% de-

crease when compaired to the same period 2008. (Source: HANFA)

In the period I-XII 2009 the total written premium of CROATIA osi-

guranje d.d. makes up for 32.2% of the total written premium of

all insurance companies operating in the Republic of Croatia, while

together with the written premium of Croatia zdravstveno osiguranje

d.d. it makes up for 33.3% of the total written premium of all insur-

ance companies. (Source:HANFA)


HRK 000

GROSS WRITTEN PREMIUM OF TOTAL TOTAL TOTAL TOTAL

INSURANCE COMPANIES I-XII 2008 I-XII 2009 I-XII 2008 I-XII 2009

AGRAM ŽIVOTNO 235.798 227.755 2,4% 2,4%

ALLIANZ ZAGREB 1.121.070 986.164 11,6% 10,5%

BASLER 27.326 28.190 0,3% 0,3%

BASLER ŽIVOTNO 64.702 49.818 0,7% 0,5%

CARDIF 25.205 35.526 0,3% 0,4%

COSMOPOLITAN LIFE VIG 81.804 87.805 0,8% 0,9%

CROATIA 3.243.958 3.034.369 33,5% 32,2%

CROATIA zdravstveno 88.600 97.007 0,9% 1,0%

ERSTE VIG 75.267 88.820 0,8% 0,9%

EUROHERC 1.086.299 1.043.601 11,2% 11,1%

GENERALI 266.443 272.077 2,8% 2,9%

GRAWE HRVATSKA 429.907 416.041 4,4% 4,4%

HELIOS VIG 113.116 100.028 1,2% 1,1%

HOK 105.058 145.128 1,1% 1,5%

JADRANSKO 680.210 661.028 7,0% 7,0%

KD LIFE 812 4.246 0,0% 0,0%

KVARNER VIG 538.327 540.536 5,6% 5,7%

MERKUR 296.706 295.938 3,1% 3,1%

SOCIETE GENERALE 0 17.701 0,0% 0,2%

SUNCE 186.370 180.611 1,9% 1,9%

TRIGLAV 377.861 400.087 3,9% 4,3%

UNIQA 183.567 234.341 1,9% 2,5%

VELEBIT 38.468 51.818 0,4% 0,6%

VELEBIT ŽIVOTNO 7.948 9.913 0,1% 0,1%

VICTORIA 0 131 0,0% 0,0%

VICTORIA ŽIVOTNO 979 31.158 0,0% 0,3%

BASLER OSIGURANJE ZAGREB 396.875 370.895 4,1% 3,9%

Total 9.672.679 9.410.733 100,0% 100,0%

Gross written premium of insurance companies in the Republic of Croatia

Total written premium share of 8 biggest insurance companies in 2009

BASLER ZAGREB 3,9%

ALLIANZ ZAGREB 10,5%

CROATIA OSIGURANJE 32,2%

EUROHERC OSIGURANJE 11,1%

GRAWE HRVATSKA 4,4%

JADRANSKO OSIGURANJE 7,0%

KVARNER VIG 5,7%

TRIGLAV OSIGURANJE 4,3%

TRIGLAV

OSIGURANJE

KVARNER VIGBASLER ZAGREB

JADRANSKO OSIGURANJEALLIANZ ZAGREB

GRAWE HRVATSKA

CROATIA

OSIGURANJEEUROHERC

OSIGURANJE


Description of all Major Business Events Occurring After the End of the Business Year

Despite the changed market conditions in 2010, CROATIA osiguranje

d.d. continued to perform its business activities successfully, thereby

confi rming its reputation and leading position at the Croatian and

regional insurance market.

In line with its vision of expanding business activities beyond insur-

ance industry, CROATIA osiguranje d.d. acquired 16.9% equity stake

in Adriatica-Net d.o.o., Zagreb at the beginning of 2010.

After the end of the business year 2009 the Company has continued

to develop its corporate web site and its Internet presence. New items

have been added to the webshop, so clients can now buy motor vehi-

cle insurance, travel health and accident insurance as well as property

insurance and it has been noticed that gradually more and more people

decide to shop for their polices online.

In February 2010 the FAQ section of our website (in which we daily re-

ceive dozens of different questions related to our products and services

and answer them within 24 hours) fi nally started operating completely.

The Company also intensifi ed its presence on popular social networking

sites (Facebook, Twitter, YouTube) aiming at interactive communication

with younger population using those networking sites every day. Our

goal is to offer them even more affordable services that meet even

higher quality standards and in order to achieve this we should listen

to their needs. It is important to be aware that these networking sites

provide a new advertising channel and yet another possibility to make

contact with our potential clienst.

At the beginning of year 2010 there were changes in the Management

Board of the Company. Damir Mihanovi� was relieved of his post as

Member of the Management Board on March 1, 2010. On March 17,

2010 Hrvoje Vojkovi� was relieved of his duties as President of the

Management Board. Zdravko Zrinuši� was appointed President of the

Management Board on March 18, 2010.


Although this year the crisis will, according to announcements, affect

the insurance industry as well, CROATIA osiguranje d.d. has come up

with a business strategy that will ensure further growth and positive

business results in all lines of business. An important starting point

and the essential prerequisite are the reduction of business costs and

increase of sales activities. CROATIA osiguranje plans to continue its

expansion in the region by opening new companies in Serbia and

Montenegro, as well as to move on with the development of the al-

ready existent daughter companies.

In 2010 the Company wants to stay in the leading position at the life

insurance market in Croatia by continuous improvement of current and

development of new products. The goal is to stabilize the portfolio by

collecting the due premium, reducing the number of redemptions by

introducing changes, loans on policies, grace period for premium pay-

ment of up to one year, and concluding new insurances at policy ma-

turity date. Among new products the Company plans to launch a new

type of classic life insurance covering death and survivorship. Changes

and additions in the child saving insurance and collective life insurance,

as well as the optimization of business process are under way. This year

we also plan to introduce the new All Risk conditions prepared in line

with the standards currently applied at the international market.

We will continue to improve our offer of personal non-life insurance

by introducing new risks, clauses and models of insurance. Croatia

zdravstveno osiguranje plans to keep one of the leading positions at

the voluntary health insurance market ensuring also that its market

share continues to grow. The opening of a new polyclinic in Koprivnica

is planned for April this year, while the next long-term strategic goal

is opening of polyclinics in major regional centres, depending on the

number of the insureds and the potential of the health insurance

market.

In motor insurance the Company continues to develop new products

suited to the market conditions. In motor hull insurane these are MINI

and FLEKSI products. The main feature characterizing these new prod-

ucts is individual approach to both current and new insureds, so that

we also expect to keep the leading position in this line of business.

This year a great emphasize is put on TPL and motor hull insurance

sale over the Internet as the cheapest sales channel. Also the process

of centralization and integration of data collected through TPL policies

that have been sold at MOT test stations, predominantly owned by

CROATIA osiguranje d.d., is being continued. The goal is to increase

the number of motor TPL policies with the additional AO plus risk that

has proved to be an extraordinary positive insurance.

In cooperation with IT Support Department the project of motor hull

insurance sale over the Internet will be fi nished by the end of 2010.

This service will enable the insureds to renew car and motorcycle hull

policies online. The Company plans further strengthening its presence

in the Internet by regular refreshing of the web site and following the

global standards in development of new services and products with

the aim of even more transparent and faster information fl ow and

relations improvement with potential customers. This year is certainly

the year of geolocation services (services personalized according to

the current location of a client that can be accessed by GPS device or

mobile phone), so CROATIA osiguranje wishes to take that direction

too, in order to stay innovative and up to date.

Expected Future Development of the Company

FinancialIndicators

SAFETY.from one generation to another


Financial Indicators

PLAN FOR 2009 31/12/2008 31/12/2009 Index Index4 : 2 4 : 3

1 2 3 4 5 6Total income (HRK 000) 3.225.918 3.244.860 3.233.947 100,2 99,7Total expense (HRK 000) 3.130.232 3.179.949 3.136.942 100,2 98,6

Written premium (HRK 000) 3.276.396 3.243.961 3.029.486 92,5 93,4 - non-life 2.909.096 2.880.265 2.673.076 91,9 92,8 - life 367.300 363.697 356.410 97,0 98,0

Paid claims (HRK 000)* 1.836.075 2.070.909 2.073.897 113,0 100,1 - non-life 1.666.142 1.888.097 1.897.251 113,9 100,5 - life 169.933 182.812 176.647 104,0 96,6

Profi t before tax (HRK 000) 95.686 68.473 97.005 101,4 141,7Profi t after tax (HRK 000) 76.549 64.911 69.690 91,0 107,4

Total assets (HRK 000) 7.969.923 7.144.267 7.635.103 95,8 106,9

Capital and provisions (HRK 000) 1.553.340 1.162.994 1.535.447 98,8 132,0 - capital stock 442.887 442.887 442.887 100,0 100,0 - revaluation provision 419.400 102.407 462.272 110,2 451,4 - legal reserves 13.867 10.732 13.977 100,8 130,2 - statutory provision 67.180 52.290 67.706 100,8 129,5 - other provision 342.211 342.211 342.211 100,0 100,0 - retained profi t 191.246 147.556 136.703 71,5 92,6 - current accounting period profi t 76.549 64.911 69.690 91,0 107,4

Technical provisions (HRK 000) 5.953.415 5.648.950 5.594.096 94,0 99,0 - unearned premium 1.255.329 1.169.864 1.052.556 83,8 90,0 - life insurance mathematical provision 1.637.408 1.497.408 1.636.192 99,9 109,3 - claims provision 3.045.478 2.967.478 2.890.948 94,9 97,4 - other insurance-technical provisions 15.200 14.200 14.400 94,7 101,4

Life insurance technical provison when policyholderbears the investment risk (HRK 000)

20.687 13.687 22.328 107,9 163,1

Investments (HRK 000) 5.140.070 4.803.567 4.974.818 96,8 103,6

ROA (return on assets %) 0,9 0,9 100,0(net profi t / assets)ROE (return on equity %) 5,6 4,5 81,3(net profi t / capital and provision)Gross profi t margin (%) 2,1 3,0 142,1(gross profi t / total income )

Number of employees 2.658 2.853 107,3

* Not including recoveries

Premium and Claims

Analysis


Written premium

Written premium for the reporting period I-XII 2009 totals: non-life insurance HRK 2,673.1 million life insurance HRK 356,4 million Total HRK 3,029.5 million

There is a decrease of 6.6% (HRK 214.5 million) in the total written premium when compared to the same period of the previous year, yet 92.5% of the

plan for 2009 has been realized.

Premium and Claims Analysis

Written premium

INSURANCECLASS

PLAN FOR2009

REALIZEDI-XII 2008

REALIZEDI-XII 2009

INDEKS4 : 2

INDEX4 : 3

1 2 3 4 5 6

PERSONAL ACCIDENT 222.184 211.899 213.751 96,2 100,9

HEALTH INSURANCE 39.300 37.041 29.850 76,0 80,6

MOTOR HULL 436.614 449.272 367.556 84,2 81,8

MOTOR TPL 903.277 880.725 843.537 93,4 95,8

PROPERTY INSURANCE 804.751 779.952 775.264 96,3 99,4

TRANSPORT AND CREDIT 327.686 354.300 281.178 85,8 79,4

LIABILITY INSURANCE 175.284 167.076 161.941 92,4 96,9

TOTAL NON-LIFE INS. 2.909.096 2.880.265 2.673.076 91,9 92,8

LIFE INSURANCE 367.300 363.696 356.410 97,0 98,0

TOTAL 3.276.396 3.243.961 3.029.486 92,5 93,4

HRK 000

An increase in premium in comparison to the same period of the previous year is realized only in the segment of personal accident insurance (0.9%).

Graphic presentation of the gross written premium development

PERSONAL ACCIDENT

HEALTH MOTOR HULL

MOTOR TPL PROPERTY TRANSPORT & CREDIT

LIABILITY LIFE INSURANCE

REALIZED I - XII 2009

REALIZED I - XII 2008

HRK

000


100.000 200.000 300.000 400.000 500.000 600.000 700.000 800.000 900.000 1.000.0000

Gross written premium - structure

PERSONAL ACCIDENT 7,1%

HEALTH INSURANCE 1,0%

MOTOR HULL 12,1%

MOTOR TPL 27,8%

PROPERTY INSURANCE 25,6%

TRANSPORT & CREDIT 9,3%

LIABILITY INSURANCE 5,3%

LIFE INSURANCE 11,8%

Graphic presentation of the gross written premium’s share in the plan for 2009

PLAN FOR 2009 REALIZED I - XII 2009

PERSONAL ACCIDENT

HEALTH INSURANCE

MOTOR HULL

MOTOR TPL

PROPERTY

TRANSPORT & CREDIT

LIABILITY INSURANCE

LIFE INSURANCE

96,2%

76,0%

84,2%

96,3%

93,4%

85,8%

97,0%

92,4%

PERSONALACCIDENT

LIFE INSURANCE HEALTH INSURANCE

LIABILITY INSURANCEMOTOR HULL

TRANSPORT & CREDIT

MOTOR TPL

PROPERTY INSURANCE


Invoiced premium

Invoiced premium

Invoiced premium for the accounting period I-XII 2009 has been realized in the amount of HRK 3,065.8 million, which is a decrease of 4.0% or HRK

127.1 million less than for the same period of the previous year. Consequently, 94.5% of the plan for 2009 has been realized.

HRK 000INSURANCECLASS

PLAN FOR2009

REALIZEDI-XII 2008

REALIZEDI-XII 2009

INDEX

4:2 4:3

1 2 3 4 5 6



MOTOR HULL 433.342 424.719 394.546 91,0 92,9

MOTOR TPL 899.568 873.766 839.132 93,3 96,0


TRANSPORT AND CREDIT 323.027 357.171 279.664 86,6 78,3



LIFE INSURANCE 375.796 368.568 359.594 95,7 97,6

TOTAL 3.245.065 3.192.866 3.065.801 94,5 96,0

Graphic presentation of the invoiced premium development

PERSONAL ACCIDENT

HEALTH MOTOR HULL

MOTORTPL

PROPERTY TRANSPORT & CREDIT

LIABILITY LIFEINSURANCE

I-XII 2009

I-XII 2008

HRK

000


Invoiced premium share in the plan for 2009



MOTOR HULL 12,9%

MOTOR TPL 27,2%





PLAN FOR 2009 REALIZED I-XII 2009

PERSONAL ACCIDENT

HEALTH INSURANCE

MOTOR HULL

MOTOR TPL

PROPERTY

TRANSPORT & CREDIT

LIABILITY INSURANCE

LIFE INSURANCE

Invoiced premium - structure

100.000 200.000 300.000 400.000 500.000 600.000 700.000 800.000 900.000 1.000.0000

98,7%

96,8%

91,0%

98,1%

93,3%

86,6%

95,7%

99,2%

PERSONAL ACCIDENTLIFE INSURANCE

HEALTH INSURANCE


TRANSPORT & CREDIT

MOTOR TPL

PROPERTY INSURANCE


Premium received

Premium received

For the accounting period I-XII 2009 the total of HRK 2,972.6 million has been received, which is 5.8% or HRK182.2 million less than for the same

period of the previous year. Consequenty, 93.0% of the plan has been realized.

Graphic presentation of

the premium received and

its development

I-XII 2008

I-XII 2009

HRK 000INSURANCECLASS

PLAN FOR2009

REALIZED I-XII 2008

REALIZED I-XII 2009

INDEX

4:2 4:3

1 2 3 4 5 6



MOTOR HULL 429.308 427.282 389.609 90,8 91,2

MOTOR TPL 894.611 870.582 833.212 93,1 95,7


TRANSPORT & CREDIT 323.325 357.600 278.868 86,3 78,0



LIFE INSURANCE 367.300 363.696 356.410 97,0 98,0

TOTAL 3.196.512 3.154.793 2.972.633 93,0 94,2

PERSONALACCIDENT

HEALTH INSURANCE

MOTOR HULL

MOTORTPL

PROPERTY INSURANCE

TRANSPORT & CREDIT

LIABILITY INSURANCE

LIFEINSURANCE

HRK

000


Premium received for 2009 – plan and its realization

PERSONAL ACCIDENT

HEALTH INSURANCE

MOTOR HULL

MOTOR TPL

PROPERTY INSURANCE

TRANSPORT & CREDIT

LIABILITY INSURANCE

LIFE INSURANCE

100.000 200.000 300.000 400.000 500.000 600.000 700.000 800.000 900.000 1.000.0000

97,8%

101,8%

90,8%

92,7%

93,1%

86,3%

97,0%

95,8%

PLAN FOR 2009 REALIZED I-XII 2009



MOTOR HULL 13,1%

MOTOR TPL 29,1%





Premium received - structure

PERSONAL ACCIDENTLIFE INSURANCE

HEALTH INSURANCE


TRANSPORT & CREDIT

MOTOR TPL

PROPERTY INSURANCE


INSURANCECLASS

Premiumreceivables

Invoiced premium

Written-off premium

Total prem. receivab.

Premium received

Premium receivables

% of total prem. re.

collection

Prem. receiv. index

% premium

collection

31/12/2008 I-XII 2009 I-XII 2009 I-XII 2009 I-XII 2009 31/12/2009 6:5 7:2 6:3

1 2 3 4 5 6 7 8 9 10

PERSONAL ACCIDENT 27.720 213.575 978 240.317 208.348 31.969 86,7 115,3 97,6

HEALTH INSURANCE 9.772 36.618 123 46.267 36.649 9.618 79,2 98,4 100,1

MOTOR HULL 90.031 394.546 5.468 479.109 389.609 89.501 81,3 99,4 98,7

MOTOR TPL 66.829 839.132 3.164 902.797 833.212 69.585 92,3 104,1 99,3

PROPERTY INSUR. 210.870 775.822 5.278 981.414 716.099 265.315 73,0 125,8 92,3

TRANSPOT & CREDIT 74.201 279.664 458 353.407 278.868 74.540 78,9 100,5 99,7

LIABILITY INSURANCE 44.795 166.850 725 210.920 153.438 57.482 72,7 128,3 92,0

TOTAL NON-LIFE INSUR. 524.218 2.706.207 16.194 3.214.231 2.616.222 598.009 81,4 114,1 96,7

LIFE INSUR. 41.882 359.594 401.476 356.410 45.066 88,8 107,6 99,1

TOTAL 566.100 3.065.801 16.194 3.615.707 2.972.633 643.074 82,2 113,6 97,0

HKR 000

NO. INSURANCE Total premium receivables Value adjustment INDEX

CLASS 31/12/2009 31/12/2009 4:3

1 2 3 4 5

1 PERSONAL ACCIDENT 31.969 9.308 29,1

2 HEALTH INSURANCE 9.619 4.419 45,9

3 MOTOR HULL 89.501 40.894 45,7

4 MOTOR TPL 69.584 24.138 34,7

5 PROPERTY INSURANCE 265.314 98.710 37,2

6 TRANSPORT & CREDIT 74.540 28.796 38,6

7 LIABILITY INSURANCE 57.482 17.806 31,0

8 TOTAL NON-LIFE INSUR. 598.009 224.071 37,5

Premium receivables on 31/12/2009

Value adjustment to the total non-life premium receivables on December 31, 2009

Together with the transferred premium receivables from year 2008

in the amount of HRK 566.1 million the total premium receivables in

the period I-XII 2009 amounted to HRK 3,615.7 million, of which HRK

2,972.6 million or 82.2% has been collected.

Total premium receivables on 31 December, 2009 amounted to HRK

643.1 million, which is an increase of 16.6% in comparison to 31

December, 2008. Total non-life premium receivables on 31 December

2009 amounted to HRK 598.0 millon, while total life premium re-

ceivables on December 31, 2009 amounted to HRK 45.1 million.

Value adjustment as reduction in the premium receivables is made on

all uncollected receivables that have been due 180 days or more. In

the period I-XII 2009 value adjustments to the premium receivables

amounted to HRK 224.1 million or 37.5% of the due uncollected

premium receivables.


HRK 000

INSURANCE PAID CLAIMS PAID CLAIMS INDEX


1 2 3 4

PERSONAL ACCIDENT 90.520 87.310 96,5

HEALTH INSURANCE 33.804 31.387 92,8

MOTOR HULL 326.578 316.407 96,9

MOTOR TPL 585.815 513.234 87,6

PROPERTY INSURANCE 549.754 560.664 102,0

TRANSPORT & CREDIT 205.506 308.142 149,9

LIABILITY INSURANCE 96.120 80.108 83,3

TOTAL NON-LIFE INSURANCE 1.888.097 1.897.251 100,5

LIFE INSURANCE 182.812 176.647 96,6

TOTAL 2.070.909 2.073.897 100,1

Paid claims

In the period I-XII 2009 the total of HRK 2,073.9 million was spent on paid claims, which is an increase of 0.1%.

Paid claims


Graphic presentation of the paid claims development

PERSONAL ACCIDENT

HEALTH INSURANCE

MOTOR HULL

MOTORTPL

PROPERTY TRANSPORT & CREDIT

LIABILITY INSURANCE

LIFE INSUR.

I-XII 2008 I-XII 2009

600.000

500.000

400.000

300.000

200.000

100.000

0



MOTOR HULL 15,3%

MOTOR TPL 24,7%




LIFE INSURANCE 8,5%

Paid claims - structure

PERSONAL ACCIDENTLIFE INSURANCE HEALTH INSURANCE

LIABILITY INSURANCE

MOTOR HULL

TRANSPORT & CREDIT

MOTOR TPL

PROPERTY INSURANCE


HRK 000

INSURANCE PAID CLAIMS NET PREMIUM PORTION


1 2 3 4

PERSONAL ACCIDENT 87.310 148.179 58,9

HEALTH INSURANCE 31.387 26.430 118,8

MOTOR HULL 316.407 308.255 102,6

MOTOR TPL 513.234 737.876 69,6

PROPERTY INSURANCE 560.664 576.178 97,3

TRANSPORT & CREDIT 308.142 230.593 133,6

LIABILITY INSURANCE 80.108 126.850 63,2

TOTAL NON-LIFE INSUR. 1.897.251 2.154.360 88,1

LIFE INSURANCE 176.647 296.223 59,6

TOTAL 2.073.897 2.450.583 84,6

At Company level, paid claims take up 84.6% of the net premium. The portion of paid claims in the net premium is biggest in the following insurance

classes: health (118.8%), motor hull (102.6%) and transport and credit (133.6%).

Participation of paid claims in the net premium

Participation of paid claims in the net premium

Graphic presentation of the portion of paid claims in the net premium

PERSONAL ACIDENT

HEALTH INSURANCE

MOTOR HULL

MOTORTPL

PROPERTY INSURANCE

TRANSPORT & CREDIT

LIABILITY INSURANCE

LIFEINSURANCE

PAID CLAIMS

I-XII 2009

NET PREMIUM

I-XII 2009

800.000

700.000

600.000

500.000

400.000

300.000

200.000

100.000

0

HRK

000


Effi ciency in claims settlement

NO. DESCRIPTION I-XII I-XII INDEX

2008 2009 4:3

1 2 3 4 5

I CLAIMS FROM CLAIMS PROVISION

1 Number of claims in the provision 40.412 37.416 92,6

2 Number of paid claims from the provision 20.041 18.340 91,5

3 Number of claims settled at no cost 5.964 4.691 78,7

4 Number of settled claims 26.005 23.031 88,6

5 Number of unsettled claims 14.407 14.385 99,8

6 Percentage of settled claims from the claims prov. (4/1) 64,3 61,6 95,7

II CURRENT PERIOD CLAIMS

7 No. of claims reported in the current period 219.251 215.107 98,1

8 No. of claims paid in the current period 176.695 172.893 97,8

9 Number of claims settled at no cost 19.547 20.568 105,2

10 Number of settled claims 196.242 193.461 98,6

11 Number of unsettled claims 23.009 21.646 94,1

12 Percentage of claims settled in the current period (10/7) 89,5 89,9 100,5

III TOTAL CLAIMS IN THE PROCESS OF HANDLING

13 Number of claims being handled (1+7) 259.663 252.523 97,3

14 Number of paid claims (2+8) 196.736 191.233 97,2

15 Number of claims settled at no cost (3+9) 25.511 25.259 99,0

16 Number of settled claims (4+10) 222.247 216.492 97,4

17 Number of unsettled claims (5+11) 37.416 36.031 96,3

18 Percentage of settled claims (16/13) 85,6 85,7 100,2

Effi ciency in claims settlement

In the period I-XII 2009 215,107 losses were reported, which is 1.9% or 4,144 losses less than in the same period of the previous year. Including claims

from the claims provision a total of 252,523 claims were in the process of handling, of which 216.492 or 85.7% were settled. The effi ciency of claims

settlement was increased by 0.2% in comparison to the same period of the previous year.


Personal non-life insurance

CROATIA osiguranje d.d holds 39.1% insurance market share in the

segment of accident insurance. The accident insurance premium of

CROATIA osiguranje increased during 2009 more than the total growth

of the accident insurance market and at the same time it achieved a

very good technical result.

Having analyzed the possibility of the expansion of insurance cover as well

as the needs of the market in the fi eld of insurance of persons during their

journey and stay abroad, an expanded product of travel insurance was

prepared for the insurance of foreign citizens. Apart from the extension of

cover for the insurance of foreigners traveling to Croatia, some additional

expansions have also been prepared and they will be introduced to the

market during 2010 through Atlas Airtours (former adriatica.net) in whose

ownership structure CROATIA osiguranje entered at the end of 2009.

Through the new tariff of the travel health insurance a possibility to

conclude one-day premiums has been introduced. Likewise, in the A

Program certain restrictions of the insurance cover are being introduced,

protecting that way the technical result in the travel health insurance

and observing the offer of competitive companies.

Continuing the expansion of offer and better risk management through

variable scopes of insurance cover, the disability table Klasik started be-

ing used and one more reduced disability table was prepared, namely

Basic. The disability table Basic was prepared for the bank insurance,

tenders and bids in which the only criterion for the choice of an offer

is the price, i.e. the premium amount. In order to manage better the

technical result of other voluntary health insurance types, in the insur-

ance risk of sick-leave payment three new clauses have been prepared,

which when applied in combination make possible discounts of up

to 20.0% on the insurance tariff, while the technical result is being

protected at the same time.

In 2009 the Company offered also the widest market accident insurance

package for pupils and students with six accident risks included, and at

very affordable prices at that, already starting at HRK10.0 for annual

premium for the accident insurance of children 24 hours a day without

any territorial restrictions. With the new offer of insurance of pupils

and students the Company adapted its prices to the market conditions

and made possible the insurance for everyone at an affordable price,

and with the scope of insurance cover this product was brought to the

positive technical result, too.

In the cooperation with the owner of the recognizable brand “My doc-

tor” the sale of accident and travel health insurance is about to start

within the “My doctor” package thus entering the family segment

with the accident insurance. Beside the family accident insurance, two

packages of travel health insurance can additionally be contracted for:

one of them includes a travel insurance policy NORMA I with 30 days

cover abroad for Europe, for all members insured by the package “My

doctor” and another package including the annual policy MAKSIMA

for the bearers of the package “My doctor” (implying 365 day cover,

i.e. the whole year for the whole world) and the NORMA II policy that

includes 10 days cover abroad for Europe, for the whole family insured

by the “My doctor” package. The sale is realized through the web

service data exchange.

Motor vehicle insurance

The market share of CROATIA osiguranje d.d. in the insurance of motor

vehicles in the Republic of Croatia amounts to 30.9%. The share of

CROATIA osiguranje d.d. in the motor TPL insurance market amounts

to 29.1%.

CROATIA osiguranje d.d. holds 36.3% market share in the motor hull

insurance, while the market share in the motor hull insurance of railed

vehicles amounts to 98.4%. In 2009 the motor hull insurance market

share decreased by 13.0% in relation to the year 2008. Unfavourable

economic situation on the market brought about a decline in sales of

cars. Consequently, in 2009 there were 44,918 new passenger cars

registered, which represents a decrease of 49.1% compared to the

year 2008.

Analysis of Insurance Per Groups and Types


During 2009 special attention was given to negotiations with major leas-

ing companies and licensed dealers and auto repair shops for particular

car makes. As regards the cooperation with the leasing companies, an

agreement on a uniform approach to motor hull insurance risks in leas-

ing was reached. The afore-mentioned agreement represents a prereq-

uisite for the stabilization of the motor hull insurance market for leased

vehicles, which will lead to the stabilization of motor hull insurance and

stop the decline in the insurance premium for leased vehicles.

A new product was introduced in the motor TPL insurance for

TRANSFERABLE CAR PLATES that were introduced under the new Road

Traffi c Safety Law. This product is intended for car salons and auto repair

shops and all those dealing with vehicles. Beside this product, car salons

are offered also a package of products including motor TPL insurance

plus, motor hull insurance of vehicles in storehouse and motor hull

insurance of other people's vehicles in auto repair shops and car wash.

During this year the second phase of the implementation of the motor

vehicles loss assessment program Audatex in ISCROATIA OSIGURANJE

D.D. system has been carried out. The basic implementation, i.e. com-

puter-assisted connection of two independent systems has been made,

and the next step is working out possibilities of obtaining reports from

the IT system on the work of motor vehicle loss assessor.

Pursuant to the Agreement on use of Guarantee fund of the Croatian

Insurance Bureau, the Management Board of the Croatian Insurance

Bureau made a Decision on the account of residual losses from the un-

known and uninsured vehicles which were paid by CROATIA osiguranje

from 01/01/2000 to 31/12/2007. Under that account HRK24.1 million

were remitted to Croatia osiguranje, which was allocated to branch-of-

fi ces according to earlier paid losses for the above-stated time period.

Property insurance

In 2009 CROATIA osiguranje d.d. holds 58.4% market share in the

property insurance.

In 2009, a powerful competitiveness was present among the insurers in

the property insurance, which was refl ected in fall of prices of insurance

policies for all classes. With reference to insurance classes, an increase

was noted in fi re insurance, crop, plantation and animal insurance,

and a high competitiveness is visible in the liability insurance as well.

In the insurance of machinery breakdown, construction and installation

we have noted a minor decline in premium, which is a consequence

of a decline in number of investment projects in comparison to the

previous year.

As far as property insurance development is concerned, the insurance

terms and conditions have been changed and improved for the fol-

lowing: extra-contractual liability, contractual liability, private liability,

product liability, management liability, public commissioner liability,

receiver liability, package arrangement organizers’ liability, liability for

private security activities and real estate agents’ liability. A new tariff has

also been made for the earthquake insurance and subsidizing of crop,

plantation and animal insurance premium by the local self-government

has been developed.

Transport and credit insurance

In the insurance market CROATIA osiguranje d.d. has a 63.6% share

in the segment of transport and credit insurance.

Transport and credit insurance is an insurance group that has been

directly affected by unfavourable movements of capital and goods on

the international markets, which resulted in lower levels of the realized

premium income in comparison with the previous year.

The cooperation with the leasing companies fi nancing the purchase

of boats and yachts is still a very important sales channel. Review of

present agreements with the leasing companies planned for 2009 has

been partly fi nished, which after long negotiations resulted in the con-

clusion of the Agreement on cooperation with two most signifi cant

leasing companies in the fi eld of fi nancing vessels. Thereby a big step

was made towards achieving the planned equalization of conditions

and prices of cover for leasing companies.

Owing to the efforts made in 2009, the contract of insurance of the

only signifi cant national air operator that was not insured by CROATIA

osiguranje, namely TRADE AIR, was concluded.

An increase in the number of operators of smaller aircrafts oriented at

providing renting services and air-taxi, in that way activities related to

this insurance group direct at contacts and providing competitive offers


for this part of the Croatian air fl eet. Designing of the application for the

sale of hull and TPL insurance for light aviation has been completed.

There are 9 airports in the Republic of Croatia, out of which 7 are

insured by CROATIA osiguranje d.d. It is very important to point out

here that during 2009 in a tender for the insurance of the Zagreb

airport CROATIA osiguranje d.d. concluded a framework agreement

for a term of four years.

The liability insurance of owners of ports for tourist and sport vessels –

marina owners - shows continuing increase. CROATIA osiguranje covers

about 80.0% of the total number of licensed marinas in Croatia. Most

of them offer permanent berths. As the number of vessels increases

every year, so does the need for permanent annual berths as well as

for temporary berths in the summer due to an increased number of

tourists. The future of this insurance is unquestionable.

Life insurance

Despite unfavourable trends on the insurance market in 2009, CROATIA

osiguranje d.d. kept the leading position, by which it fulfi lled its vision

to be and remain the leader on the life insurance market in Croatia.

Croatia osiguranje d.d. has noted an increase of the market share for

the third subsequent year, from 13.6% in 2007 to 14.3% in 2009.

A new system of classic life insurance for the case of death and sur-

vival was introduced within the new life insurance products, whereby

we took into account changes on the market, business expenses and

interest changes. During the whole 2009 measures were taken for the

stabilization of the whole life insurance portfolio through the regular

activities concerning the collection of due premium and the reduction

of the number of repurchases by offering various changes under the

policy or by taking a loan. Very good results were also achieved in the

conclusion of new insurance after the expiry of an insurance policy.


Review of the fi nancial market in the Republic of Croatia

At the end of 2009 the domestic economy is still in recession, whereas

the situation in the most developed world economies, according to the

statistics, is somewhat better. The most developed world economies are

showing slight signs of recovery, which was to be expected due to the

enormous amounts of fi nancial means that were injected in their econo-

mies through various forms, from the reduction of interest rates to various

kinds of direct incentives. Croatia is still marked by high insolvency among

all economic subjects, having reached the amount of HRK25.0billion at

the beginning of 2010 according to some statements.

Bank rates for short-term investments varied depending of the keeping

of obligatory bank reserves with the Croatian National Bank. During

2009 average monthly interest rates on the fi nancial market ranged

from 0.9% to 18.6%. In the fourth quarter of 2009 the interest rate

for overnight deposits fell under 1.0%.

Investment of Means

Survey of general features of the market in 2009 in relation to 2008

Market capitalization 31/12/2008 31/12/2009 % changes

1 2 3 4

Shares (in mil. HRK) 142.064 135.368 -4,71

Bonds (in mil. HRK) 34.973 36.325 3,87

Total 177.037 171.693 -3,02

CROBEX-Offi cial index of the Zagreb Stock Exchange

points 1722,25 2004,06 16,36

CROBIS-Offi cial bond index of the Zagreb Stock Exchange

points 90,62 95,84 5,76

Assets of banks 30/09/2009*

370.092 374.127

*no data at 31/12


Treasury bills of the Ministry of Finance

In 2009 the Ministry of Finance issued about HRK10.8billion of treasury bills, out of which HRK4.3 billion with the time limit of 91 days at an average

interest rate of 6.7%, HRK1.4billion with the time limit of 182 days at an average interest rate of 7.1% and HRK5.1billion with the time limit of 364

days at an average interest rate of 7.4%.

Commercial bills

The year 2009 was also marked by the issue and reissue of commercial bills in view of great needs for the solvency of business subjects. The issuers of

commercial bills are respectable companies whose strength and credibility is recognized by the investors on the market. In 2009, unlike several previ-

ous years, the currency structure of issued commercial bills was beginning to change for the reason of fi nancial and economic crisis, i.e. the currency

risk of the local currency. Most bills issued in 2009 were denominated in EUR currency. Since the reference rate on issuing the commercial bills was

the interest rate on treasury bills of the Ministry of Finance the issuers had to offer relatively high returns in order to draw investors.

Open investment funds with public and private offer

According to the data of the Croatian Financial Services Supervisory Agency a total of 130 open investment funds are transacting business in the

Republic of Croatia at the end of 2009. Total net assets of open investment funds amounted to HRK12.0billion at the end of 2009, out of which 11.4

account for the funds with public offer, while a smaller part, i.e. HRK628.1million, accounts for the funds with private offer. In comparison with the

same period of 2008 total assets achieved an increase of 21.7%.


Total investments at 31/12/2008 and 31/12/2009

Graphical presentation of total investments

STATE BONDS AND TREASURY

BILLS

MUNICIPAL AND CORP.

BONDS AND COM.

BILLS

REAL ESTATE

TOTAL DEPOSITS

NET - LOANS

SHARES AND

STAKES

INVESTMENT FUNDS

31/12/2008 31/12/2009

1.600.000

1.400.000

1.200.000

1.000.000

800.000

600.000

400.000

200.000

0

Investment of the Company’s Means

In consistence with the legal provisions CROATIA osiguranje d.d. kept already invested means and invested new free means into available fi nancial instru-

ments in 2009 as well, while observing primarily the principles of safety and solvency aiming at realizing highest possible returns on invested means.

TYPE OF INVESTMENT 31/12/2008 31/12/2009 INDEX DIFFERENCE

4:2 4-2

1 2 3 4 5 6 7

STATE BONDS AND TREAS. BILLS 1.400.498 29,2% 1.341.723 27,0% 95,8 -58.775

MUNICIPAL AND CORP. BONDS AND COM. BONDS

180.930 3,8% 248.420 5,0% 137,3 67.490

TOTAL BONDS AND BILLS 1.581.428 32,9% 1.590.143 32,0% 100,6 8.715

REAL ESTATE 556.662 11,6% 653.700 13,1% 117,4 97.038

TOTAL DEPOSITS 1.257.542 26,2% 1.132.582 22,8% 90,1 -124.960

NET - LOANS 532.643 11,1% 458.098 9,2% 86,0 -74.545

SHARES AND STAKES 672.860 14,0% 670.598 13,5% 99,7 -2.262

INVESTMENT FUNDS 202.432 4,2% 469.698 9,4% 232,0 267.266

TOTAL 4.803.567 100,0% 4.974.819 100,0% 103,6 171.252

1.400.498

180.930

556.662

1.257.542

532.643

672.860

202.432

1.341.723

248.420

653.700

1.132.582

458.098

670.598

469.698

HRK 000

HRK

000


Investment of assets for covering technical provision, capital and non-life insurance provisions

At the end of 2009 the value of total investments increased by

HRK171.3million, i.e. by 3.6% in comparison with the total investment

value at the end of 2008. Compared to 31/12/2008 the investments

in investment funds increased most, whereas the investments in loans

and deposits in business banks were decreased. On grounds of low

interest rates on short-term time deposits, free fi nancial means were

more directed into money investment funds. Within the structure of to-

tal investments the state securities hold the biggest share with 27.0%,

and the corporate securities the smallest one with 5.0%.

Graphical presentation of assets investments for covering technical provisions, capital and non-life insurance provisions

STATE BONDS

MUNICIPAL AND CORP.

BONDS AND COM.

BILLS

REAL ESTATE

TOTAL DEPOSITS

NET - LOANS

SHARES AND

STAKES

IINVEST-MENT FUNDS

31/12/2008 31/12/2009

1.000.000

900.000

800.000

700.000

600.000

500.000

400.000

300.000

200.000

100.000

0


AMOUNT % AMOUNT % 4:2 4-2

1 2 3 4 5 6 7

STATE BONDS 459.747 14,3% 408.872 12,9% 88,9 -50.875

MUNICIPAL AND CORP. BONDS AND COM. BILLS

95.549 3,0% 153.228 4,8% 160,4 57.679

TOTAL BONDS AND BILLS 555.296 17,3% 562.100 17,7% 101,2 6.804

REAL ESTATE 556.662 17,3% 653.700 20,6% 117,4 97.038

TOTAL DEPOSITS 862.842 26,9% 666.921 21,0% 77,3 -195.921

NET - LOANS 493.178 15,3% 407.148 12,8% 82,6 -86.030

SHARES AND STAKES 625.540 19,5% 600.068 18,9% 95,9 -25.472


TOTAL 3.213.086 100,0% 3.169.480 100,0% 98,6 -43.606

in HRK 000

459.747

95.549

556.662

862.842

493.178

625.540

119.568

408.872

153.228

653.700 666.921

407.148

600.068

279.543

HRK

000


STRUCTURE OF ASSETS INVESTMENTS FOR COVERING TECHNICAL PROVISION, CAPITAL AND NON-LIFE INSURANCE PROVISIONS

Compared 31/12/2008 - 31/12/2009

Investments of assets for covering technical provisions, capital and non-

life insurance provisions amounted to HRK3.2billion at 31/12/2009,

having decreased by HRK43.6million, i.e. by 1.4%, in comparison to

31/12/2008. In relation to 31/12/2008 the investments in deposits

decreased most, namely by HRK195.9million, i.e. by 22.7%, and in

loans by HRK86million, i.e. 17.4%, whereas the investments in invest-

ment funds increased signifi cantly, namely by HRK159.9million, i.e. by

133.8%. In order to retain good solvency a signifi cant part of non-life

insurance means should be invested for a short term and because of

low interest rates for short-term deposits in banks, especially in the third

quarter, non-life insurance means that should be invested for a short

term were invested for the most part in money investment funds.

Value of investments in corporate securities at the end of 2009

compared to the same period of the previous year increased by

HRK57.7million, i.e. by 60.4%, and the value of investments in real

estate increased by HRK97.0million, i.e. by 17.4%. Investments in state

securities were increased by HRK50.9million, i.e. by 11.1%, and the val-

ue of investments in shares and stakes was reduced by HRK25.5million,

i.e. by 4.1%. In 2009 the EURO 2009 bonds matured to the amount

of HRK6.3million. In the structure of investments the biggest share is

still held by deposits, amounting to 21.0%, and the smallest one by

corporate securities with 4.8%.

31/12/2008 31/12/2009

INVESTMENT FUNDS 3,7%

SHARES AND STAKES 19,5%

NET - LOANS 15,3%

TOTAL DEPOSITS 26,9%

REAL ESTATE 17,3%

MUNICIPAL AND CORP.

BONDS AND COM. BILLS 3,0%

STATE BONDS 14,3%



NET - LOANS 12,8%

TOTAL DEPOSITS 21,0%

REAL ESTATE 20,6%

MUNICIPAL AND CORP.


STATE BONDS 12,9%

31/12/2008 31/12/2009


Investments of assets for covering mathematical provision, capital and life insurance provisions


AMOUNT % AMOUNT % 4:2 4-2

1 2 3 4 5 6 7

STATE BONDS AND TREAS. BILLS 940.751 59,1% 932.851 51,7% 99,2 -7.900

MUNICIPAL AND CORP. BONDS AND COM. BILLS

85.381 5,4% 95.192 5,3% 111,5 9.811

TOTAL BONDS AND BILLS 1.026.132 64,5% 1.028.043 56,9% 100,2 1.911

DEPOSITS 394.700 24,8% 465.661 25,8% 118,0 70.961

LOANS 39.465 2,5% 50.950 2,8% 129,1 11.485

SHARES AND STAKES 47.320 3,0% 70.530 3,9% 149,0 23.210


TOTAL 1.590.481 100,0% 1.805.339 100,0% 113,5 214.858

in HRK 000

Graphical presentation of assets investments for covering mathematical provisions, capital and life insurance provisions

STATE BONDS AND TREASURY

BILLS

MUNICIPAL AND CORP.

BONDS AND COM.

BILLS

DEPOSITS LOANS SHARES AND

STAKES

INVESTMENT FUNDS

31/12/2008 31/12/2009

1.000.000

900.000

800.000

700.000

600.000

500.000

400.000

300.000

200.000

100.000

0

940.751

85.381

394.700

39.465 47.32082.864

932.851

95.192

465.661

50.950 70.530

190.155


Investments of assets for covering mathematical provision, capital and

life insurance provisions amounted to HRK1.8billion at 31/12/2009,

representing an increase of HRK214.9million, i.e. 13.5%, when com-

pared to 31/12/2008. The value of investments in state securities at the

end of 2009 is almost the same as at the end of 2008, whereas the

values of all other investments were increased. Within the life insurance

means the investments in investment funds increased most, namely

by HRK107.3million, i.e. by 129.5%, because of the redirection of

means in money investment funds that were achieving higher returns

in relation to the short-term time deposits in banks. In the structure of

investments of life insurance means the biggest share is held by state

securities with a share of 51.7%, and the smallest one by loans with

a share of 2.8%. During 2009 in the investment activities CROATIA

osiguranje d.d. achieved a positive result amounting HRK331.6million,

which represents an increase of HRK223.6million, i.e. 206.7%, in com-

parison to the year 2008 when investments produced a positive result

amounting to HRK108.0million.

STRUCTURE OF ASSETS INVESTMENTS FOR COVERING MATHEMATICAL PROVISION, CAPITAL AND LIFE INSURANCE PROVISIONS

31/12/2008 31/12/2009



LOANS 2,5%

DEPOSITS 24,8%

MUNICIPAL AND CORP.


STATE BONDS AND

TREASURY BILLS 59,1%



LOANS 2,8%

DEPOSITS 25,8%

MUNICIPAL AND CORP.


STATE BONDS AND

TREASURY BILLS 51,7%

31/12/2008 31/12/2009


During 2007 the Company voluntarily started applying the principles

described in the Corporate Management Code that was drawn up

by the Zagreb Stock Exchange and the Croatian Financial Services

Supervisory Agency.

In the interest of the application of the Code, the Company undertook

a whole range of activities, among which we would like to point out

organized courses for the certifi cation of members of the supervisory

boards, that were attended by all members of the Management Board,

managers and members of the supervisory and managing boards of the

companies of CROATIA Group as well as by 38 managerial employees

of the Company, all of them having successfully passed fi nal exam. The

goal of this training primarily was to improve the corporate culture of

the Company and to introduce the corporate management as a good

practice into the companies of the CROATIA Group as well with the

aim to maximally unify the business processes and to achieve optimal

business results in the whole CROATIA Group.

During 2009 the Company made its business activities and business

results completely transparent and accessible to the public, pursuant to

the principles of the Corporate Management Code, which particularly

includes the following: all reports regularly updated list of shareholders data on securities candidacy of all candidates for the membership in the Supervisory

Board data on the structure of the Managing and Supervisory Board

and their assistant units agenda of the Assemblies all relevant information published in English as well together

with all the other information on business activities of Croatia

osiguranje d.d. available on our web-site

In 2009 pursuant to the rules of the Stock Exchange, the Company's

Statute and the Law on Commercial Companies almost all the principles

of the corporate management were observed, and that refers particu-

larly to the organization of the General Assembly of the Company and

to the delivery of the documents related to the General Assembly to

all shareholders.

Under the Insurance Law, section VIII, regulating the work of the

internal auditing of the insurance companies, the Internal Auditing

Department suggested a strategic work plan (a fi ve-year plan) that was

adopted by the Supervisory Board with the consent of the Company's

Management Board. The basis for the adoption of the strategic plan

was the risk assessment.

The goal and the task of the risk assessment process were to present

the priorities of certain audits in work plans for a certain period. On the

basis of determined business and auditing risks the business plan for

2009 was made as well as the plan of particular audits in 2009. On the

basis of the recommendations of the Company's Management Board

the plans were adopted by the Supervisory Board of the Company.

Business audits for 2009 were performed according to the adopted

work plan and in line with the Internal Audit Procedure Rules, the

International Internal Auditing Standards, Croatian Internal Auditing

Standards and the Code of Professional Ethics.

According to the Internal Audit Procedure Rules the report on the

audit of organizational parts of the Company (branch-offi ces and de-

partments in the Head Offi ce) is to be delivered to the Company's

Management Board and it is discussed by the Management Board at

its regular meetings.

Statement on Application of Corporate Management Code Under the Law on Commercial Companies, Article 272 p.


Furthermore, pursuant to the Insurance Law, Article 149, and the

Internal Audit Procedure Rules, Article 17, the report on performed

audits, on problems and defects discerned, the activities of the system

of internal controls, illicitness and irregularities and suggestions for their

elimination as well as on activities undertaken referring to the given

recommendations is sent from the Internal Auditing Department to

the Company's Management Board and to the Company's Supervisory

Board twice a year. The Management Board believes that in this way it

has feedback information on the course of business activities and that

it reduces possible risks to the acceptable level, thus contributing to

the credibility of the fi nancial reports for the Company.

Risk management is a fundamental function of all fi nancial institutions,

hence Croatia osiguranje d.d., as a fi nancial institution and the market leader

has to manage adequately all risks to which it is exposed in its business activi-

ties in order to accomplish safety and business sustainability and to actualize

fair compensation for a loss of the insured, adequate profi tability for the

owners and employees and to meet all legal and regulatory provisions.

The Company started certain activities in that area and in October

2009 it established the Department for Risk Management that should

implement and develop models, techniques and methods of managing

all risks at request of Solvency II (prepare data basis for Solvency II, as

well as develop its own model of risk assessment within the frame of

Solvency II). The Company elaborated the initiative of coordination with

the directives Solvency II and it initiated the project of “Gap Analysis”,

whose results will create the basis for making detailed plan for the

adjustment activities.

In the next period the risk management will be upgraded and a clear

system for risk management will be set up formally and actually as on

the level of the Company as a whole so too on the level of organiza-

tional units and dependent companies.

The Croatian Privatization Fund is the most signifi cant owner of the

Company's shares and it controls the number of shares as set out in

the table below:

Pursuant to the Company's valid Statute there is no restriction or any

partial restriction of the shareholders' voting right.

Under Article 24 subsection 2 of the Statute, the Croatian Privatiza-

tion Fund appoints one (1) member of the Supervisory Board, and it

has this authority as long as it owns at least 25% of the Company's

stock capital.

Members of the Management Board or the Supervisory Board are not

owners of the Company's shares. The Company does not have its own

shares, and the General Assembly did not empower the Company to

acquire its own shares, either. The data on the structure and activities

of the Management Board and the Supervisory Board are given in the

chapter on the Management Board and Management Organization.

Croatian Privatization Fund Number of

shares

Stake in capital

stock

1 2 3

1. HFP / CROS-P-A / 76 0,02

2. HFP / CROS-R-A / 242.586 76,68

3. HFP / State agency /CROS-R-A/-representation 11.145 3,52

4. HFP /Hrv. šume d.o.o. /CROA-R-A/- representation 50 0,02

5. HFP / HP d.d. / CROS-R-A/- representation 104 0,03

TOTAL 253.961 80,27

Independent Auditor's

Report

INSOUCIANCE.from one generation to another


Responsibility for the Financial Statements

Signed on behalf of the Management Board:

CROATIA OSIGURANJE d.d.

Miramarska 22

10000 Zagreb

Republic of Croatia

16 March 2010

The Company's Management Board is responsible for ensuring that

the fi nancial statements for the year ended 31 December 2009 are

prepared in accordance with the Accounting Law (National gazette No.

109/07) and the International Financial Reporting Standards (National

gazette No. 140/06, 30/08, 130/08, 137/08, 29/09), issued by the

Accounting Standards Board, so that they provide a true and fair view

of the fi nancial position, business results, the changes in capital and

the cash fl ows of the Company for that period.

On the basis of performed analysis the Management Board justly ex-

pects that the Company has adequate means to continue business

operations in the foreseeable future. In consistence with that, The

Management Board prepared fi nancial statements under the assump-

tion of the time limitlessness of the Company's business activities.

In preparing fi nancial reports the Management Board is responsible:

for the selection and thereafter a consistent application of ad-

equate accounting policies; for giving reasonable and rational judgments and estimations; for the application of valid financial reporting standards, publica-

tion and explanation of all substantially significant aberrations in

the financial statements; and for the creation of financial reports under the assumption of busi-

ness time limitlessness, unless the assumption is unsuitable.

The Management Board is responsible for keeping proper accounting

records that refl ect the fi nancial position and business results of the

Company with acceptable accuracy at any moment as well as their

compliance with the Accounting Law (National gazette No. 109/07)

and the International Financial Reporting Standards (National gazette

No. 140/06, 30/08, 130/08, 137/08, 29/09) issued by the Accounting

Standards Board. The Management Board is also responsible for the pro-

tection of the Company's assets and hence for taking justifi ed measures

in order to prevent and disclose fraud and other illegal acts as well.

Silvana Ivan�i�

Member of the Management BoardHrvoje Vojkovi�



Independent Auditor's ReportTo the shareholders of CROATIA OSIGURANJE d.d., Zagreb

1. We have audited the enclosed fi nancial statements of CRO-

ATIA OSIGURANJE d.d. Company, Zagreb, Miramarska 22

("Company") for the year ended 31 December 2009., which

include the Balance Sheet as at 31 December 2009, Profi t and

Loss Account, Statement of Changes in Capital and Cash Flow

Statement for the year ended then as well as the appertaining

Notes to the fi nancial statements providing a summary of signi-

fi cant accounting policies and other explanations.

Responsibility of the Company's Management Board

2. The Company's Management Board is responsible for the

preparation and a true and fair presentation of the enclosed

fi nancial statements in accordance with the International Financial

Reporting Standards being effective in the Republic of Croatia. This

responsibility includes: designing, implementing and maintaining

internal controls relevant for the preparation and fair presentation

of the fi nancial statements without any signifi cant erroneous

presentations caused either by deceit or mistake, selecting and

applying adequate accounting policies and making accounting

assessments that are reasonable in the given circumstances.

Auditor's Responsibility

3. It is our responsibility to express our opinion on the enclosed fi -

nancial statements on the basis of our audit. We conducted the

audit in accordance with the International Auditing Standards.

These standards require adherence to the ethical rules on part of

the auditor as well as the planning and performing of audit in order

to obtain reasonable confi dence as to whether the fi nancial state-

ments are presented without any signifi cant errors.

4. The audit includes performing of procedures aiming at gather-

ing evidence of amounts and statements in fi nancial reports.

The choice of procedures, including the assessment of risks of

signifi cant erroneous statements in fi nancial reports due to de-

ceit or mistakes, depends on the auditor's judgment. In assess-

ing these risks the auditor considers internal controls that are

important to the Company for the production and fair presen-

tation of the fi nancial statements in order to perform auditing

procedures that are adequate in the given circumstances, but

not also for the purpose of expressing opinion on the effi ciency

of internal controls. The audit also includes evaluating the ade-

quacy of accounting policies applied and the reasonableness of

accounting estimates made by the Company's Management,

as well as evaluating the overall presentation of the fi nancial

statements.


Audit d.o.o., Zagreb

Zdenko Balen, Certifi ed Auditor,


Zagreb, 16 March 2010

5. We believe that the audit evidences gathered by us are suffi cient

and appropriate as the basis for the expression of our opinion.

Opinion

6. In our opinion, the accompanying fi nancial statements, in all

substantially signifi cant aspects, give a true and fair presenta-

tion of the fi nancial position of the Company as at 31 Decem-

ber 2009 and the results of business operations, the changes in

capital and the cash fl ows of the Company for the year 2009

pursuant to the Accounting Law and the International Financial

Reporting Standards effective in the Republic of Croatia.

Special Emphasis

7. Without reference to our opinion expressed above in point 6,

we would like to draw your attention to Notes 5.2./i/ and 5.3.1.

to the fi nancial statements that outline the effects of the ad-

justment of the real estate book value to the estimated fair

value.

Financial Statements

for the Year 2009

PROTECTION.from one generation to another


1.1. Basis for Composing

The fi nancial statements of the Company for the year 2009 are prepared in

accordance with the Insurance Law (National gazette No. 151/05, 87/08,

82/09), Accounting Law (National gazette No. 109/07) and the International

Financial Reporting Standards (National gazette No. 140/06, 30/08, 130/08,

137/08, 29/09) issued by the Accounting Standards Board and in accord-

ance with the Ordinance on structure and content of annual fi nancial

statements of insurance companies (National gazette No. 31/08).

The fi nancial statements have been prepared by applying basic account-

ing assumption of the occurrence of a business event under which the

effects of transactions are recognized after they have occurred and they

are presented in the fi nancial statements for the period they refer to

by applying the basic accounting assumption of the time limitlessness

in business activities.

1.2. Report Currency

The fi nancial statements are presented in Croatian Kuna (HRK). At 31

December 2009 the offi cial exchange rate was HRK7.31 for 1 Euro

(HRK7.32 at 31 December 2008) and HRK5.09 for 1 USD (HRK5.16 at

31 December 2008).

1.3. Transactions in Foreign Currencies

Transactions presented in foreign currencies are converted into Croatian

Kuna (HRK) according to the exchange rate of the Croatian National

Bank being valid on the day of transaction or according to the exchange

rate agreed between the parties. Assets and liabilities presented in

foreign currencies were converted in HRK on the day of balance sheet

according to the medium exchange rate of the Croatian National Bank

valid on that day. Any income or expenditure resulting from a change

in the exchange rate after the transaction date is included in the profi t

and loss account within the investment income or expenditure.

1.4. Use of Estimates

Creation of financial reports in accordance with the International

Financial Reporting Standards requires the Management Board to

make evaluations, estimates and assumptions that affect the applica-

tion of policies and presented amounts of assets, liabilities, income

and expenditures. These estimates and related assumptions are based

on historical experience and other various factors deemed reasonable

under given conditions and with information available on the date of

the preparation of fi nancial reports, and the result of which makes

the basis for the estimation of the book value of assets and liabilities,

which is not easy to determine from other sources. Actual results may

differ from these estimates. Estimates and related assumptions are be-

ing continually reexamined. The changes of accounting estimates are

recognized in the period in which the estimate is also changed for the

future periods if they are affected by the change as well.

Basis of Preparation of Financial Statements


Profi t and Loss Account for the Period From 1 January to 31 December 2009

DESCRIPTIONI-XII 2008

Life Non-life Total

1 2 3 4 5

I Earned premiums (income) 363.607.233 2.409.221.424 2.772.828.657

II Investment income 105.552.938 199.779.630 305.332.568

III Income from commissions and fees 49.720 27.802.874 27.852.593

IV Other insurance-technical income, net of reinsurance 27.089.900 71.628.529 98.718.429

V Other income 168.104 39.960.092 40.128.196

VI Outlays for insured events, net -180.837.117 -1.597.110.403 -1.777.947.520

VII Change in other technical provisions, net of reinsurance -118.323.395 -200.000 -118.523.395

VIIIChange in life insurance technical provisions when policyholder bears investment risk, net of reinsurance (+/-)

-7.759.063 -7.759.063

IX Outlays for premium returns (bonuses and discounts), net of reinsurance

X Business expenditures (outlays for insurance activities), net -118.352.665 -895.227.327 -1.013.579.992

XI Investment expenses -68.355.048 -128.883.566 -197.238.614

XII Other technical expenses, net of reinsurance -1.895.295 -58.766.582 -60.661.877

XIII Other expenses, including value adjustments -676.633 -676.633

XIV Profi t or loss in accounting period before taxation 945.312 67.528.038 68.473.350

XV Profi t or loss tax -3.562.155 -3.562.155

XVI Profi t or loss in accounting period after taxation 945.312 63.965.883 64.911.195

1. TOTAL INCOME 496.467.895 2.748.392.549 3.244.860.443

2. TOTAL EXPENDITURES without profi t tax -495.522.583 -2.680.864.511 -3.176.387.094

in HRK


I-XII 2009 Indexes

Life Non-life Total 6:3 7:4 8:5

6 7 8 9 10 11

355.994.212 2.294.843.040 2.650.837.252 97,91 95,25 95,60

114.295.531 373.219.153 487.514.684 108,28 186,82 159,67

25.482 29.708.596 29.734.078 - 106,85 106,76

906.756 28.417.327 29.324.083 - 39,67 29,70

161.856 36.375.136 36.536.992 96,28 91,03 91,05

-179.367.288 -1.483.965.678 -1.663.332.966 99,19 92,92 93,55

-138.786.966 -200.000 -138.986.966 117,29 - 117,27

-6.412.230 -6.412.230 82,64 - 82,64

- - -

-121.383.508 -945.758.908 -1.067.142.416 102,56 105,64 105,28

-17.368.533 -138.553.744 -155.922.277 25,41 107,50 79,05

-2.801.772 -101.603.319 -104.405.091 147,83 172,89 172,11

-740.527 -740.527 - 109,44 109,44

5.263.540 91.741.076 97.004.616 - 135,86 141,67

-27.314.150 -27.314.150 - 766,79 766,79

5.263.540 64.426.926 69.690.466 - 100,72 107,36

471.383.837 2.762.563.252 3.233.947.089 94,95 100,52 99,66

-466.120.297 -2.670.822.177 -3.136.942.474 94,07 100,64 99,62

Profi t and Loss Account for the Period From 1 January to 31 December 2009 - continued

in HRK


ASSETS 31/12/2008 31/12/2009 INDEX

LIFE NON-LIFE TOTAL LIFE NON-LIFE TOTALLIFE

(2/5)NON-LIFE

(6/3)TOTAL

(7/4)

1 2 3 4 5 6 7 8 9 10

INTANGIBLE ASSETS 0 7.381.640 7.381.640 0 7.124.099 7.124.099 96,5 96,5

TANGIBLE ASSETS 0 808.995.463 808.995.463 0 1.284.357.002 1.284.357.002 158,8 158,8

TOTAL INVESTMENTS 1.590.481.407 3.213.085.996 4.803.567.403 1.805.338.359 3.169.479.901 4.974.818.260 113,5 98,6 103,6

INVESTMENTS FOR THE ACCOUNT AND RISK OF LIFE INSURANCE POLICYHOLDER

13.686.926 13.686.926 22.327.665 22.327.665 163,1 163,1

REINSURANCE STAKE IN TECHNICAL PROVISIONS 16.107 340.654.839 340.670.946 13.189 313.831.202 313.844.391 81,9 92,1 92,1

DEFERRED AND CURRENT TAX ASSETS 0 23.076.880 23.076.880 0 593.629 593.629 2,6 2,6

RECEIVABLES 78.162.392 976.257.228 1.054.419.620 50.622.824 918.818.819 969.441.642 64,8 94,1 91,9

OTHER ASSETS 5.756.379 65.904.973 71.661.351 211.022 41.341.035 41.552.057 3,7 62,7 58,0

PAID EXPENSES FOR FUTURE PERIOD AND UNDUE COLLECTION

34.022. 20.772.451 20.806.473 51.194 20.766.308 20.817.502 150,5 100,0 100,1

TOTAL ASSETS 1.688.137.233 5.456.129.470 7.144.266.703 1.878.564.253 5.756.538.125 7.635.102.378 111,3 105,5 106,9

Balance Sheet at 31 December 2009

Assets

in HRK

LIABILITIES 31/12/2008 31/12/2009 INDEX

LIFE NON-LIFE TOTAL LIFE NON-LIFE TOTALLIFE

(2/5)NON-LIFE

(6/3)TOTAL

(7/4)1 2 3 4 5 6 7 8 9 10

TOTAL CAPITAL AND PROVISIONS – OWN CAPITAL 80.183.727 1.082.809.871 1.162.993.598 117.496.786 1.417.950.202 1.535.446.988 146,5 131,0 132,0

TOTAL TECHNICAL PROVISIONS 1.541.085.859 4.107.864.273 5.648.950.132 1.682.927.894 3.911.168.399 5.594.096.293 109,2 95,2 99,0

LIFE INSURANCE TECHNICAL PROVISIONS WHEN POLICYHOLDER BEARS RISK

13.686.926 13.686.926 22.327.665 22.327.665 163,1 163,1

OTHER PROVISIONS 0 24.126.573 24.126.573 3.398.958 75.472.973 78.871.931 312,8 326,9

DEFERRED AND CURRENT TAX LIABILITY 0 2.338.424 2.338.424 0 144.131.062 144.131.062

FINANCIAL LIABILITIES 0 231.178 231.178 0 191.496 191.496 82,8 82,8

OTHER LIABILITIES 822.086 216.933.766 217.755.852 7.339.327 191.866.077 199.205.404 88,4 91,5

DEFERRED PAYMENT OF EXPENSES AND FUTURE PERIOD INCOME

52.358.635 21.825.385 74.184.020 45.073.623 15.757.916 60.831.539 86,1 72,2 82,0

TOTAL LIABILITIES 1.688.137.233 5.456.129.470 7.144.266.703 1.878.564.253 5.756.538.125 7.635.102.378 111,3 105,5 106,9

Liabilities


Statement of Changes in Capital at 31 December 2009

Principal

Item

Paid-in capital

common shares

Paid-in capital

preferred shares

Revaluation provision - land and buildings

Revaluation provision - fi nancial

investments

Legal provisions

Statutory provisions

Other provisions

Retained profi t

Total capital and provisions

Balance at 1 January 2009 430.637.200 12.250.000 209.510.191 (107.103.683) 10.731.893 52.289.963 342.210.827 212.467.205 1.162.993.596

Change in accounting policy - - - - - - - (56.122.580) (56.122.580)

Balance at 1 January 2009 (adjusted) 430.637.200 12.250.000 209.510.191 (107.103.683) 10.731.893 52.289.963 342.210.827 156.344.625 1.106.871.016

Change in fair value of fi nancial assets available for sale

- - - 52.388.700 - - - - 52.388.700

Realized profi ts/losses from fi nancial assets available for sale

- - - 19.035.194 - - - - 19.035.194

Other profi ts and losses credited directly to capital and provisions

- - 288.441.612 - - - - - 288.441.612

Net profi ts/losses - for payment) - - 288.441.612 71.423.894 - - - - 359.865.506

Profi t of the current period - - - - - - - 69.690.466 69.690.466

Dividends (profi t share - - - - - - - (980.000) (980.000)

Transfer of profi t to provisions - - - - 3.245.560 15.416.409 - (18.661.969) -

Balance at 31 December 2009 430.637.200 12.250.000 497.951.803 (35.679.789) 13.977.453 67.706.372 342.210.827 206.393.122 1.535.446.988

-

Balance at 1 January 2008 430.637.200 12.250.000 208.683.284 633.085.717 5.253.879 26.269.394 342.210.827 180.934.594 1.839.324.896

Change in fair value of fi nancial assets available for sale

- - - (730.828.161) - - - - (730.828.161)

Realized profi ts/losses from fi nancial assets available for sale

- - - (8.911.391) - - - - (8.911.391)

Other profi ts and losses credited directly to capital and provisions

- - 826.907 (449.847) - - - - 377.060

Net profi ts/losses - - 826.907 (740.189.399) - - - - (739.362.492)

Profi t of the current period - - - - - - - 64.911.195 64.911.195

Dividends (profi t share - for payment) - - - - - - - (1.880.000) (1.880.000)

Transfer of profi t to provisions - - - - 5.478.014 26.020.569 - (31.498.583) -

Balance at 31 December 2008 430.637.200 12.250.000 209.510.191 (107.103.682) 10.731.893 52.289.963 342.210.827 212.467.205 1.162.993.598


Cash Flow Statement From 1 January to 31 December 2009

Position mark

Description of positionin HRK

2008 2009I CASH FLOW FROM BUSINESS OPERATIONS 142.402.529 9.407.4001. Cash fl ow before change in business assets and liabilities -610.798.856 -56.165.696

Profi t/loss before tax 68.473.350 97.004.616Adjustments -679.272.206 -153.170.312Amortization of real estate and equipment 46.682.906 45.618.352Amortization of intangible assets 4.873.049 3.783.160Value decrease and profi t/loss after adjustment to fair value -730.828.161 -193.479.550Interest expenses -5.279.383Profi t from interest Shares in profi t of associate companiesProfi t/loss from sale of tangible assets (including land and buildings) Other adjustments -3.812.891

2. Increase/decrease in business assets and liabilities 777.501.996 75.676.662Increase/decrease in investments available for sale 538.063.765 -51.215.766Increase/decrease in investments evaluated at fair value through the profi t and loss account 719.119.362 -261.659.667Increase/decrease in deposits, loans and receivables -496.332.251 199.505.286Increase/decrease in deposits in insurance business ceded to reinsurance Increase/decrease in investments for the account and risk of life insurance policyholders 3.563.230 -8.640.739Increase/decrease of reinsurance stakes in technical provisions -65.185.841 26.826.555Increase/decrease of tax assets -23.076.880 22.483.251Increase/decrease in receivables -177.660.235 78.204.872Increase/decrease in other assets Increase/decrease in paid expenses for future period and undue income collection -4.675.602 -237.161Increase/decrease in technical provisions 288.863.965 -54.853.839Increase/decrease in life insurance technical provisions when the policyholder bears investment risk -3.563.230 8.640.739Increase/decrease of tax liabilities -8.529.819 141.792.638Increase/decrease in deposits retained from business ceded to reinsurance Increase/decrease in fi nancial liabilities 231.178 -39.682Increase/decrease in other liabilities -14.090.923 -11.777.343Increase/decrease in deferred payment of expenses and future period income 20.775.277 -13.352.482

3. Profi t tax paid -24.300.611 -10.103.566II CASH FLOW FROM INVESTMENT ACTIVITIES -152.415.681 -38.661.139

Money received from sale of tangible assets 3.091.872 2.452.725Outlays for purchase of tangible assets -60.007.253 -116.170.212Money received from sale of intangible assets Outlays for purchase of intangible assets -4.122.449 -3.857.718Money received from sale of real estate not used by the Company for insurance activities 2.748.294 108.599Outlays for purchase of real estate not used by the Company for insurance activities -13.494.267 -27.772.970Increase/decrease of investments in branch-offi ces, associate companies and participating in joint investments -46.564.531 47.872.772Money received from sale of branch-offi ces and other business units, reduced by money and money equivalentsOutlays for acquiring branch-offi ces and other business units, reduced by gained money and money equivalentsMoney received from investments kept till maturity 8.887.092 437.420Outlays for investments kept till maturity -70.688.910 -9.152.262Money received from sale of securities and stakes Outlays for investments in securities and stakes Money received from dividends and profi t share 27.734.471 67.420.507Money received from repayment of granted short-term and long-term loans Outlays for granted short-term and long-term loans

III CASH FLOW FROM FINANCIAL ACTIVITIES -1.880.000 -949.703Money received from increase of capital stockMoney received from received short-term and long-term loansMoney outlays for repayment of received short-term and long-term loansMoney outlays for repurchase of own shares Money outlays for payment of profi t share (dividends) -1.880.000 -949.703NET CASH FLOW (I+II+III) -11.893.152 -30.203.442

IV EFFECTS OF FOREIGN CURRENCY RATE CHANGE ON MONEY AND MONEY EQUIVALENTS -6.729.545 94.147V NET INCREASE/DECREASE OF MONEY AND MONEY EQUIVALENTS -18.622.697 -30.109.295

Money and money equivalents at the beginning of period 90.284.049 71.661.352Money and money equivalents at the end of period 71.661.352 41.552.057


The basic accounting policies adopted for the elaboration and presenta-

tion of substantially signifi cant items that crucially determine the result

and the fi nancial position of the Company are as follows:

2.1. Gross written premiums

/i/ Written premiums represent basic operating income and they

include written non-life and life insurance premiums.

/ii/ Gross written non-life insurance premiums include all amounts

of premiums stipulated (written) in the current accounting pe-

riod, no matter whether these sums fully or partially refer to the

subsequent accounting period.

/iii/ Gross written life insurance premiums include all amounts of premi-

ums that are collected up to the end of the accounting period.

2.2. Investment income and expenses

/i/ Investment income includes income realized from the participating

interests (dividends, profit shares, book entries – value increase),

income from investments in land and buildings, income from inter-

est, unrealized returns from investments at fair value through the

profit and loss account, gains from investment sale (realization),

net positive exchange rate differences and other income from in-

vestments. Income from investments in land and buildings consists

of income from the increase in value of land and buildings, income

from sale of land and buildings, rental income and other income

related to investments in land and buildings. Income from rent

of land and buildings and other operative leases is recognized in

the profit and loss account through the linear method during the

whole period of lease. Income from interest is recognized in the

profit and loss account when accrued, taking into consideration

the effective return on adequate assets. Interest on monetary as-

sets at fair value through the profit and loss account is calculated

at the voucher interest rate and is presented within the figure of

interest income. Income from dividends is recognized in the profit

and loss account at the date when dividends are voted. The ac-

counting policy related to the recognition of financial income is

described in Note 3.7 “Financial assets”.

/ii/ Investment expenses include interest expenses, expenses for the

adjustment of investment value (decrease), losses from invest-

ment sale (realization), net negative foreign exchange rate dif-

ferences and other investment expenses..

2.3. Outlays for insured events

Outlays for insured events include all paid amounts of claims in the

accounting period, no matter in which accounting period the claims

occurred, reduced by the reinsurance stake in claims, collected recourse

claims, sold and salvaged parts and increased by the claims provisions

at the end of the accounting period, and reduced by the claims provi-

sions at the beginning of the accounting period. Gross amounts of

paid claims, apart from net paid claims, include expenses related to the

payment of claims (assessments, lawyer’s fees and the like), repurchases

and expenses under recourse claims.

2.4. Operating expenditures

Operating expenditures include costs of sale of insurance policies and

management costs. Sales costs include all direct costs resulting from

the conclusion of insurance contracts such as costs of agents, commis-

sions and promotion. Costs of commissions are recognized as they arise

pursuant to the principle of the accounting period. Management costs

include expenses resulting from the collection of insurance premiums,

portfolio management, outlays for employees and other tangible and

intangible costs.

2.5. Intangible and tangible assets and investments in real estate

Long-term intangible and tangible assets are initially reported under the

costs of procurement that include the purchase price, including import fees

and non-refundable taxes after deduction of commercial discounts and

rebates as well as all other costs that can be directly attributed to the setting

of assets in the place and working condition for the intended use. Long-

term intangible and tangible assets are recognized if it is likely that future

economic benefi ts that can be attributed to the assets will infl ow to the

Company, if the costs of the procurement of assets can be determined with

II. Summary of Basic Accounting Policies


confi dence and if a single procurement value of assets exceeds HRK2,000.

After the initial recognition the assets are presented under their procure-

ment costs reduced by the accumulated amortization and accumulated

losses from value decrease. After the initial recognition land and buildings

are presented at revaluated amount consisting of its fair value at the date

of revaluation reduced by subsequently accumulated amortization and

accumulated losses from the value decrease. The increase in the value of

assets due to the revaluation is credited directly to the capital as revalua-

tion provision. The revalution is performed regularly in a way that the book

amount does not differ signifi cantly from the one that would come out of

the determination of fair value at the balance sheet date. Costs of current

maintenance and repairs, replacement and investment maintenance on

a small scale are recognized as the expenditures of the period in which

they emerged. In situations where it is clear that the costs resulted in the

increase of future expected economic benefi ts that should be realized

through the use of assets above their originally assessed capabilities, they

are capitalized i.e. included in the book value of that means. Profi ts and

losses on the basis of the write-off or sale of assets are reported in the

profi t and loss account in the period in which they occur. The amortization

of assets begins when the assets are ready for use i.e. when they are in

the place and in a condition necessary for use. The amortization of assets

stops when the assets are classifi ed as assets kept for sale.

The amortization is calculated in a way that the costs of purchase of each

particular means, apart from land and long-term intangible and tangible

assets under preparation, are written off during the estimated period of

useful life of means by applying the linear method, as follows:

Amortization rate

(from – to %)

Concessions, patents, licences, software etc. 25

Other intangible assets 25

Buildings 2,5

Furniture and equipment 10 – 25

IT equipment 33,33

Means of transport 20

Investments in real estate (land, buildings) not used for insurance ac-

tivities and which are owned by the Company or in fi nancial lease are

kept in order for the Company to gain income from the lease or/and

because of the increase of market value of the assets, and they are set

out at fair value through the profi t and loss account.

2.6. Investments in subsidiaries and associate companies

Subsidiary companies are companies in which the Company has a

control over adoption and execution of fi nancial and business poli-

cies. Associate companies are companies in which the Company has a

signifi cant infl uence but not a control over adoption and execution of

fi nancial and business policies. Investments in subsidiary and associate

companies are set out by the cost method.

2.7. Financial assets

/i/ Financial assets at fair value in the profit and loss account

Financial instruments included in this portfolio are fi nancial instru-

ments kept for trade, and they were bought for the purpose of

gaining profi t from the short-term price fl uctuations or broker’s

commission or the securities are included in the portfolio in which

there is a pattern for the realization of short-term profi t. In consist-

ence with the investment policy of the Company each fi nancial

instrument may be classifi ed as assets set out at fair value through

the profi t and loss account, with the exception of investments in

equity instruments that do not have a listed price on an active

market and whose fair value cannot be reliably measured. These

instruments are initially set out under procurement costs, and later

on they are measured again at fair falue that is based on listed

purchase prices on active market. All related realized and unreal-

ized profi ts and losses are included in investment income / costs.

Earned interest that accrued while these instruments were kept is

set out as interest income. All purchases and sales of instruments

being kept for trade are recognized at the date the trade was

made, and that is the date when the Company undertakes to buy

or sell assets. Transactions not being recognized at the date the

trade was made are accounted as fi nancial derivatives..

/ii/ Loans and receivables

Loans and receivables are underivative fi nancial assets with fi xed

or determinable payments not listed on active market. Loans and

receivables arise when the Company grants fi nancial means without

the intention of trading with these receivables, and they include

loans to the insured and deposits at banks. Granted loans and re-

ceivables created by the Company are recognized at the moment of

transfer of means on the part of the Company. Loans and receivables

are set out reduced by provisions for a value decrease. Provisions for


the value decrease are determined if there is an objective evidence

that the Company will not be able to collect all receivables upon

maturity date. Provisions for identifi ed losses are estimated on the

basis of the loan capacity and business results of debtor, taking

into consideration the value of the collateral. The loan is written off

at the moment of understanding that it is not possible to collect

the loan anymore and that all legal possibilities for collection are

exhausted and that the amount of total loss is determined. If the

amount of the value decrease is subsequently diminished and the

diminution is objectively related to an event that occurred after the

value decrease, then the value decrease or provisions are diminished

through the profi t and loss account. In an event of default the

Company charges debtors for default interest that is computed on

the accounting basis and set out as income from interest.

/iii/ Financial assets available for sale

Financial assets available for sale are those underivative fi nancial

assets that are defi ned as available for sale or those not classifi ed

either as assets at fair value through the profi t and loss account or

as loans and receivables. Financial instruments included in the assets

available for sale consist of debt and equity securities. These instru-

ments are initially recognized according to the investment expenses,

and after the initial recognition they are set out at fair value based on

listed prices and amounts derived from the models of cash fl ows. In

cases when listed market prices are not available, fair value of debt

securities is estimated by applying current value of future fi nancial

fl ows, and fair value of unlisted equity instruments is estimated by

applying a correspondent ratio of price and earnings or price and

cash fl ow cleared in a way that it refl ects specifi c circumstances

connected with the issuer. Profi t and loss arising from change in

fair value of fi nancial assets available for sale are recognized directly

in the capital as revaluation provision, and are set out in the report

on changes in capital up to the moment of sale when cumulative

profi ts and losses previously recognized in the capital are included

in the profi t and loss account of the period. The interest earned in

the period of possession of securities available for sale is calculated

daily and set out as income from interest. Foreign exchange rate

differences under equity instruments in foreign means of payment

classifi ed as available for sale are set out in the capital, together with

the profi ts and losses from change in fair value up to the moment

of sale of instrument. Foreign exchange rate differences under debt

instruments in foreign means of payment classifi ed as available for

sale are set out in the profi t and loss account. Dividends under secu-

rities classifi ed as available for sale are booked when notifi ed.

/iv/ Investments kept till maturity

Investments kept till maturity are underivative fi nancial assets with

fi xed payment amounts or payments that can be determined, and

with fi xed maturity dates, which the Company intends and is able

to keep till maturity. Treasury bills and debt securities are included

in them, too. Investments kept till maturity are set out at amortized

costs by applying the method of effective interest rate decreased

by a potential value adjustment due to a decrease. The Company

checks regularly if there are objective evidences pointing to a de-

crease in investments kept till maturity. The value of a fi nancial

means is diminished if its book amount exceeds the estimated re-

coverable amount that equals the current value of expected future

cash fl ows discounted by the application of the original effective

interest rate for that instrument. The amount of loss from a decrease

of certain means set out at amortized costs is calculated as a differ-

ence between the book value of that means and the current value

of expected future cash fl ows discounted by the application of the

original effective interest rate for that instrument. When it is estab-

lished that a decrease in means arose, the Company recognizes a

decrease in value to the debit of the profi t and loss account.

2.8. Receivables

/i/ Receivables from insurance activities include receivables from the

insured under the non-life and life insurance premium. Receivables

under the non-life insurance premium include receivables for writ-

ten but non-invoiced premium as well as receivables for invoiced

but uncollected premium. Receivables under the life insurance pre-

mium and supplementary accident insurance include receivables for

invoiced but uncollected premium. The recognition of the insurance

premium is described in Note 3.1. – "Gross written premiums".

/ii/ Receivables for invoiced but uncollected premium are reported at par

value, and for doubtful and uncollectable claims a value adjustment

is determined. The value adjustment as a decrease in receivables

for premium is set out for all uncollected receivables whose matu-

rity period expired 180 days earlier. The value adjustment can be

decreased by those receivables under which a liability for the claim

indemnification to the debtor (claim provision) was established.


/iii/ Receivables under the right to recourse are recognized for all

recourse cases from out-of-court procedure resulting from re-

ceivables from the other insurance company and recourses for

which a financial settlement was reached. The value adjustment

of recourse receivables is defined for all receivables not collected

within the period of 180 days.

/iv/ Other receivables refer to the receivables for interest on loans

and deposits, receivables for advance payments and the like.

2.9. Reductions

At each balance-sheet date the Company checks the book values of its

assets in order to establish whether there are any indications of the occur-

rence of losses due to a decrease in the value of assets. If such indications

are present, the recoverable amount of assets is estimated so that a possible

loss due to a decrease might be established. If the recoverable amount of

some assets is estimated at a value that is lower than the book value, then

the book value of these assets is reduced to the recoverable amount.

2.10. Cash and cash equivalents and short-term deposits

Statements of cash fl ow and cash equivalents fl ow include implicitly

cash at bank and till money as well as received cheques and bills of ex-

change. Deposits with the maturity period under one year imply short-

term deposits. Cash equivalents and deposits are set out at cost price,

and those set out in foreign currencies are converted at the medium

exchange rate of the Croatian National Bank at the end of the year.

2.11. Profi t tax

Profi t tax consists of current and deferred tax. Current tax represents the ex-

pected tax liability calculated on the profi t for the year and adjusted by the

amounts not included in the tax basis or tax nondeductible expenditures,

using tax rates that were in force on the report date. Deferred taxes are

recognized by the balance method, refl ecting temporary changes between

the book value of assets and liabilities for want of fi nancial reports and

amounts used for tax calculation. Deferred tax is not recognized in case of

investments in branch-offi ces if it is not to be refunded in the foreseeable

future. Deferred tax is calculated by applying tax rates that are expected to

be applied to temporary differences when they are refunded or settled on

the basis of the regulations that were in force or were essentially valid at the

balance sheet date. Deferred tax assets are recognized up to the amount

for which the future taxable profi t will probably be suffi cient for the use of

temporary differences. Deferred tax assets are examined at each reporting

date and they are diminished if the realization of the related tax benefi t is

not likely any more. Deferred tax assets and liabilities are not discounted

and they are set out as long-term assets and/or long-term liabilities.

2.12. Capital and provisions

In its books of accounts the Company reports the capital divided into:

subscribed capital, revaluation provisions, statutory provisions, legal

reserves, other provisions, retained profi t and current year profi t.

/i/ Subscribed capital represents an inseparable share capital of the

Company paid in full.

/ii/ The effect of an increase/decrease in the value of investments

classified as investments available for sale and real estate used

for insurance activities, as a result of adjustment to the estimated

market value is presented by the Company in the balance sheet

as the revaluation provision. During the period, the revaluation

provisions are increased / decreased due to the value adjustment

to the recoverable market value.

/iii/ Allocations for statutory provisions, legal reserves, other provi-

sions and retained profit were determined by the decisions of

the General Assembly of the Company.

/iv/ Current financial year profit is reported in the balance as of 31

December and transferred into the next financial year. The use,

i.e., the distribution of profit is determined by the decision of the

General Assembly of the Company.

2.13. Technical provisions

Technical provisions set out in the fi nancial statements refer to the un-

earned premiums, life insurance mathematical provisions, provisions for

claims and other insurance-technical provisions, and they are formed pursu-

ant to the Ordinance on minimal standards, accounting method and crite-

ria for calculation of technical insurance provisions. All technical provisions

were rated favorably by the appointed certifi ed actuary of the Company.

/i/ Unearned premiums

The Company accounts unearned premiums for those insurance

classes where the insurance cover is continued after the end


of the accounting period since the insurance year and the ac-

counting year do not overlap. The basis for the calculation of

gross non-life insurance unearned premiums is written (policy)

premium in the accounting period, while the basis for the calcu-

lation of gross unearned premium of supplementary insurance

with life insurance is collected premium in the accounting period.

Unearned premiums are calculated according to the pro rata

temporis method, except for the types of loan insurance where

the decrease of insurance cover during the validity period of a

contract is taken into consideration.

/ii/ Mathematical life insurance provision

Mathematical life insurance provision is accounted individually

under each insurance contract, and in a way described in the

report of the appointed certifi ed actuary of the Company on the

calculation of mathematical provision.

/iii/ Claims provisions

Claims provisions include provisions for reported losses, provi-

sions for incurred but not reported losses, provisions for costs

of claims handling and the reinsurance stake in them. Provisions

for reported losses are determined through an individual assess-

ment. Actuarial methods are applied in determining provisions

for claims handling costs and for incurred but not reported losses.

The reinsurance stake in provisions is determined in accordance

with the reinsurance contracts.

/iv/ Other insurance-technical provisions

Other insurance-technical provisions are determined for the

earthquake risk.

2.14. Technical life insurance provisions when the policyholder bears the investment risk

Since the Company concludes life insurance policy for which the poli-

cyholder bears the investment risk, a corresponding special provision

was made under each insurance contract.

2.15. Other liabilities

/i/ Liabilities resulted from direct insurance activities refer to the

liabilities under claims.

/ii/ Liabilities resulted from reinsurance activities refer to the liabilities

under stipulated sums for claims under reinsurance and liabilites

under the reinsurance premium.

/iii/ Other liabilities refer to the liabilities towards the inland suppliers,

liabilities for received advance payments, liabilities for commis-

sions and others.

2.16. Salaries of employees

Salaries, taxes and contributions from salaries and on salaries are account-

ed as expenses of the period to which the employee's work relates

2.17. Provisions

Provisions are recognized if and only if the Company has a current li-

ability as a result of a past event and if the liability settlement is likely

to require the outfl ow of resources with economic benefi ts and if the

amount of liability can be determined with a reliable estimate. Provisions

are examined at each balance sheet date and adjusted according to the

newest best estimates. Provisions are determined for costs of legal pro-

ceedings and expenses for employee rewards for their longtime work

as well as for the retirement (regular anniversary rewards and severance

pays). Provisions for costs of employee rewards for their longtime work

as well as for the retirement (regular anniversary rewards and severance

pays) were determined as a current value of future money outfl ows

using a discount rate equalling the interest rate on state bonds.

2.18. Potential liabilities and assets

Potential liabilities are not recognized in the fi nancial statements, but

are only set out in notes to the fi nancial statements. Potential assets are

not recognized in the fi nancial statements, but are recognized at that

moment when an infl ow of economic benefi ts becomes probable.

2.19. Events after the date of balance sheet

Events after the balance sheet date providing additional information on

the position of the Company at the balance sheet date (events resulting

in adjustments) are recognized in the fi nancial statements. Those events

that do not bring about the adjustments are presented in notes to the

fi nancial statements if they are substantially signifi cant.

2.20. Earnings per share

Earnings per share are accounted as profi t of the period decreased


by dividends of preferred shares divided by the weighted average of

common shares decreased by own shares.

2.21. Classifi cation of contracts

Contracts by which the Company undertakes a signifi cant insurance risk

of the other party (policyholder) accepting to indemnify the policyholder

or the other insurance benefi ciary for a loss if a particular indefi nite future

event (insured event) occurs that has a negative impact on the policy-

holder or the other insurance benefi ciary are classifi ed as insurance con-

tracts. Insurance risk differs from fi nancial risk. Financial risk is the risk of

a possible future change of one or several defi nite interest rates, price of

securities, price of goods, exchange rates, price or rate indexes, loan rating

or loan indexes or other variables provided that in case of a non-fi nancial

variable that variable is not specifi c for any of the contracting parties.

Insurance contracts can also transfer the fi nancial risk to some extent.

Contracts in which the transfer of insurance risk from the policyholder to

the Company is not signifi cant are classifi ed as investment contracts.

2.22. Concentration of insurance risk

The key aspect of the insurance risk to which the Company is exposed is

the level of insurance risk concentration that defi nes the level up to which

a certain event or a series of events may infl uence the liabilities of the

Company. Such concentration may arise from a single insurance contract

of from a fairly great number of contracts. A very important aspect of the

insurance risk concentration is that it may arise from the accumulation of

risks through various classes of insurance. The risk concentration may arise

from rare events with considerable consequences such as natural disasters, in

situations when the Company is exposed to unexpected changes in trends,

for example, unexpected change in human mortality or in the conduct of

the insured; or when signifi cant judicial or regulatory risks may cause big

individual losses or have a signifi cant impact on a large number of contracts.

Risks underwritten by the Company are primarily located in the Republic of

Croatia. The Management Board believes that in non-life insurance activities

the Company is not notably exposed to any group of the insureds according

to social, professional, generational or similar criteria. The greatest probability

of considerable losses emerges from disastrous events, such as fl oods, storms

or losses in consequence of an earthquake. Techniques and presumptions

used by the Company for the calculation of these risks include: Survey of geographical accumulations; Evaluation of the biggest possible loss; Reinsurance of excess of loss.

2.23. Insurance risk management

The Company is exposed to the actuarial risk and the sales risk resulting

from a wide offer of life and non-life insurance products: participating

traditional life products, policies linked to stakes and all classes of non-life

insurance. The insurance risk refers to the uncertainty of insurance activi-

ties. The most signifi cant components of insurance risk are the premium

risk and the provision risk. They refer to the adequateness of premium

tariffs and the adequateness of provisions in relation to the liabilities under

insurance and capital stock. The premium risk is present at the moment

of issuance of policy before the insured event occurs. There is a risk that

costs and losses that would come about might be higher than received

premiums. The provisions risk represents a risk that the absolute level of

technical provisions is wrongly assessed or that actual losses will vary around

statistical medium value. Non-life sales risk includes also the disaster risk

that arises from extraordinary events that are not covered by the premium

risk or provision risk in suffi cient degree. Life insurance sales risk includes

biometrical risk (that includes mortality, longevity, ailment risk and disability)

and the risk of withdrawal. The risk of withdrawal represents a higher or

lower rate of withdrawing from policies, breaks, changes in capitalization

(suspension of premium payment) and repurchase. The Company manages

the insurance risk through the limits of sale, procedure for the approval of

transactions that include new products or surpass certain limits, tariffi ng,

design of products and reinsurance management. Sales strategy pursues

diversity that would ensure a balanced portfolio and is based on a large

portfolio of similar risks over several years, which decreases the variability of

results. As a rule all non-life insurance contracts are on an annual basis and

the underwriters have a right to refuse the renewal of contract or change

the terms and conditions of contract at renewal. The Company reinsures

a part of a risk it underwrites in order to control the exposure to losses

and protect the capital stock. The Company purchases a combination or

proportional and disproportional reinsurance contracts in order to diminish

the net exposure to a particular risk depending on the insurance class.

2.24. Basic presumptions with the greatest impact on recognized assets, liabilities, income and expenditures from insurance operations

/i/ Non-life insurance

At the balance sheet date provisions are made for the assessed

fi nal expenses for the settlement of all incurred losses arising from

events that occurred up to that date, whether they were reported

or not, together with appropriate claims handling fees, reduced


by amounts already paid. The liability for reported but not paid

losses is estimated separately for each particular loss with regard

to the circumstances, available information from the assessor and

historical evidences of the amounts of similar claims. Particular

losses are regularly examined and provisions are regulary updated

with new information. The assessment of provisions for incurred

but not reported (IBNR) losses is generally subject to a higher

level of uncertainty than the provisions for reported losses. The

IBNR provision is assessed by actuaries of the Company applying

statistical and actuarial methods such as the chain-ladder method

and the Bornhuetter–Ferguson method. Key methods used for

the liability and accident insurance are the following: the chain-ladder method that uses historical data in order

to assess final costs of claims the Bornhuetter–Ferguson method that combines the es-

timated loss quota and the method of projections. This

method improves a raw use of loss quota taking into con-

sideration the information received from the newest pat-

tern of loss development. The actual method that is applied depends on the year of

the accident being under consideration, insurance class

and observed historical loss development.

To the extent to which these methods use historical loss develop-

ment it is assumed that the historical pattern of loss development

will repeat itself in the future as well. There are reasons why this

might not be the case, which are taken into consideration to the

extent to which they can be established and in a way that the

methods of estimate are modifi ed. Such reasons include: economic, political and social trends (causing a different

level of inflation in relation to the expected one); changes in the combination of types of insurance contracts

that are underwritten; random variations, including the influence of major losses.

For other insurance classes the IBNR is determined by fl at rate

methods.

The IBNR provisions are initially assessed in gross amount and a spe-

cial calculation is made in order to assess the reinsurance stake.

The assumptions that have the major infl uence on the measurement of

the amount of provisions for the non-life insurance are as follows: Residual factor of loss development

For the backlog of claims the level of provisions depends

to a large extent on the assessment of loss development

from the last year of development for which there are his-

torical data up to the fi nal development. The residual fac-

tors of loss development are assessed reasonably applying

mathematical methods of curves that project the observed

factors or are based on actuarial assessment. Discounting

Apart from the annuity claims, the non-life provisions are

not discounted. Provisions for liability insurance claims that

are paid as annuities were determined as the current value

of future liabilities on the basis of the annual discount

rate of 2.5% and the Table of mortality in the Republic of

Croatia from 2000 to 2002.

In 2009 on the basis of the Opinion of the Croatian Financial

Services Supervisory Agency a change occurred in the treat-

ment of unsettled motor TPL losses caused by unknown and

uninsured vehicles before 27 February 1997. The above-

mentioned losses became a liability of the Gurantee fund

and on 31 December 2009 the Croatian Insurance Bureau

included them in the provisions for claims of the Hence,

the provisions for motor TPL claims of the Company were

diminished, and a proportional part of claims provisions

(established as claims provisions of the Gurantee fund) that

refers to the Company, was entered as liabilities under the

claims provisions of the Gurantee fund.

/ii/ Life insurance

Mathematical provisions are calculated by net prospective method

using rational actuarial assumptions in accordance with the direc-

tives issued by the Croatian Financial Services Supervisory Agency.

The guaranteed technical interest rate in insurance policies ranges

from 3.5 - 5%. The insureds or insurance benefi ciaries in case of

survival or death are entitled to a share in the Company’s profi t

realized through the management of life insurance funds. The

right to a share is calculated at the end of a period after the

expiry of the third insurance year. The value of the profi t share is

determined by the Management Board.

2.25. Main sources of uncertainty related to assessments

/i/ Losses from a decrease in the value of loans and receivables

The need to diminish the value entered under the amortized costs

is evaluated as described in Note 3.7./ii/. The value decrease for


particular exposures in total losses from the value decrease is

based on the best estimate on the part of the managers regarding

the current value of expected future money receipts. When evalu-

ating these money receipts, the managers evaluate the fi nancial

position of a debtor and net sales value of the collateral. Any

assets that suffered a decrease in value are assessed separately

and the function of loan risk independently approves the recovery

strategy as well as the assessment of realizable cash fl ows.

/ii/ Determination of fair value

For the fi nancial instruments that are rarely traded with and that

have a non-transparent price, a fair value is less objective and

requires a different level of assessment depending on solvency,

concentration, uncertainty of market factors, price assumptions

and other risks affecting a particular instrument.

/iii/ Uncertainty of estimates related to establishing provisions

The most signifi cant estimates related to the fi nancial statements

of the Company refer to establishing provisions. The Company

has a conservative approach to forming provisions and it applies

regulations of the Croatian Financial Services Supervisory Agency.

The Company employs certifi ed actuaries. The Company’s policy

is to establish provisions for unexpired risks arising from the non-

life insurance business where it is expected that claims, deferred

sales costs and administrative costs, which are likely to arise after

the end of the fi nancial year for contracts concluded before that

date, will exceed the unearned premium and the premium origi-

nating from these contracts. The Management Board regards the

present level of technical provisions as suffi cient.

/iv/ Uncertainty of estimates related to legal proceedings

A considerable source of the uncertainty of estimates arises out

of judicial proceedings. The Management Board believes that the

existing level of provisions is suffi cient.

/v/ Profit tax

The Company establishes tax liability in accordance with tax

regulations of the Republic of Croatia. Tax reports are subject to

control on the part of the tax authorities who have the right to

subsequently inspect the taxpayer’s books of accounts.

/vi/ Regulatory requirements

The Croatian Financial Services Supervisory Agency is authorized

to perform regulatory inspections of business operations of the

Company and to require changes in the book value of assets and

liabilities in accordance with relevant regulations.

/vii/ Mutual liabilities

The Company has liability towards the Croatian Insurance Bureau

as regards the motor TPL losses caused by unknown or uninsured

vehicles. Besides, like the other participants on the Croatian mo-

tor TPL insurance market the Company is liable for a part of

unsettled motor TPL claims in case of bankruptcy of any of the

insurance companies under the Insurance Law.

2.26. Key accounting estimates in the application of the Company’s accounting policies

/i/ Classification of financial assets and liabilities

The accounting policies of the Company make possible a classifi -

cation of assets and liabilities at the beginning, under certain cir-

rumstances, in different accounting categories. When classifying

fi nancial assets and liabilities as those “intended for trade”, the

Company establishes that they meet the defi nition of assets and

liabilities as set out in Note 3.7.

/ii/ Classification of products

For the accounting policy on the classifi cation of contracts as

insurance contracts or investment contracts see Note 3.21.

/iii/ Classification of real estate

The Company classifi es all real estate pieces not used for own

business operations but kept for renting as investments in real

estate.

/iv/ Estimated duration of tangible and intangible assets' useful life

The depreciation rates are initially set on the basis of the opti-

mum evaluation of the duration of useful life of these assets.

The Company’s Management Board believes that the applied

depreciation rates refl ect the duration of useful life of tangible

and intangible assets.


The basic goal of the Company while managing fi nancial and insurance

risks is to keep the capital level adequate to the scope and insurance

classes it transacts and also with reference to the risks to which it is

exposed. The Management Board recognizes the signifi cance of exist-

ence of an effi cacious and effective system of risk management. The

Company is currently at the stage of introducing centralized system of

risk management. Legal bodies control the solvency of the Company

in order to ensure the cover for the liabilities deriving from possible

economic changes or natural disasters. The Company actively manages

the assets using the approach that creates a balance among the quality,

diversifi cation, coordination of assets and liabilities, solvency and return

on investments. The managers examine and approve target portfolios

on a periodical basis, determine investment directives and limits and

supervise the process of managing assets and liabilities. Due atten-

tion is also paid to the compliance with the regulations defi ned by the

Insurance Law. In the transactions of fi nancial instruments the Company

undertakes fi nancial risks. These risks include market risk, loan risk and

solvency risk. Each of these risks is described further in the text, together

with the summary of the ways the Company manages that risk.

3.1. Market risk

Description: Risk of fl uctuation of fair value of the future cash fl ows

under fi nancial instruments due to changes in market prices.

The market risk includes three types or risk: currency risk, interest risk

and other price risks.

a) Currency risk – fluctuation risk of fair value or cash flows under

financial instruments due to changes in the exchange rates of

foreign currencies.

The Company is exposed to the risk of change in the exchange

rate through the transactions in foreign currencies. This is the

risk that the value of a fi nancial instrument might change due

to the changes in the exchange rates of foreign currencies. The

Company is exposed to the currency risk through loan, deposit

and investment activities, as well as through the premium income,

calculation of related technical provisions and claims payment

under the insurance policies with foreign currency clause. The

company manages the currency risk in a way that it endeav-

ors to diminish the difference between assets and liabilities de-

nominated in foreign currency or with foreign currency clause.

Investments for covering mathematical provision are for the most

part denominated in euros, since most mathematical provision is

also denominated in euros.

b) Interest risk: fluctuation risk of fair value or cash flows under finan-

cial instruments due to changes in the market interest rates

The exposure of the Company to the market risk of changes in

interest rates is concentrated in the investment portfolio. The

Company's business is subject to the risk of a change in interest

rates in the sense that the interest-bearing assets and liabilities

mature or the interest is changed in various periods or in various

amounts. The Company is also exposed to the risk of changes in

the future cash fl ows deriving from the changes in the market

interest rates. However, this risk is limited since most interest-

bearing assets of the Company at the balance sheet date bear

fi xed interest rates. Changes in interest rates do not affect the level

of provision from the non-life insurance business, except for the

annuity payments for the liability claims which are not signifi cant

at the balance sheet date. The rate used in the calculation of the

mathematical provision refl ects to a certain extent the expected

trends in the interest returns over a longer period of time. The

Company monitors this exposure through occasional inspections

of the position of its assets and liabilities. A general goal is to

limit net changes in the value of assets and liabilities arising from

changes in interest rates. The Company endeavors to adjust fu-

ture receipts from these assets to the liabilities from insurance

through the purchases of state bonds. However, considering a

relatively short period of life of such bonds and a longer period

of life of liabilities under life insurance and the incapability of the

Company to buy the interest “swap” in Croatia, the Company is

exposed to the interest rate risk. According to the contracts, the

Company is obliged to calculate interest at rates of 3.5-5% per

III. Financial Risk Management


year on paid life insurance policy premiums for the payment of

the amount to the insureds upon expiry of such insurance policies

and it cannot currently protect itself against future interest risk

to which it will be exposed in the investment of means for the

cover of future liabilities.

c) Other price risks: fluctuation risk of fair value or cash flows under

financial instruments due to changes in market prices (not arising

from the interest or currency risk) whether it is a matter of the

changes caused by factors typical of a particular financial instru-

ment or its issuer or other factors affecting all similar financial

instruments being traded on the market. The portfolio of mar-

ketable equity securities that is presented at its fair value in the

balance sheet makes the Company subject to the price risk. The

price risk is the risk that the value of a financial instrument might

change as a result of changes in market prices, no matter whether

the changes emerged as a result of factors specific for a certan

paper or its issuer or factors affecting all instruments being traded

on the market. The goal of the Company is to earn competitive

returns in a way that it invests in a diversified portfolio of securi-

ties. The characteristics of the portfolio are regularly analyzed. The

portfolio of the Company contains securities of various issuers,

and the concentration of any single firm or company is limited

through the parameters defined by senior management as well

as through legal requirements.

3.2. Loan risk

Description: Risk that one agreement party of the financial instrument

might cause losses for the other party due to the nonfulfillment of

obligations. The portfolio of the company that includes securities with

fixed returns, mortgage loans, and to a lesser extent short-term and

other investments is subject to the loan risk. This risk is defined as a

potential decline in market value as a result of unfavorable changes in

the capability of a debtor to pay off a debt. The managers determined

the loan policy and they continually monitor the exposure to the loan

risk. Evaluations of loan capacity are made for all insureds and the col-

lateral is gathered before payments are made under granted loans or

their prolongation. The collateral is in conformity with the valid Insurance

Law. The Group adopted a careful investment policy. Accordingly, at

the balance sheet date the Company had a significant concentration

of receivables from the Republic of Croatia in bonds and treasury bills.

3.3. Solvency risk

Description: Risk that a sudden and unexpected increase in withdrawal

of liabilities might require from the Company disposing of the assets in

a short term at low price. The solvency risk arises as a result of finan-

cial activities of the Company and management of positions. This risk

includes the risk of incapability to finance assets within the appropriate

time and interest as well as the risk of incapability to dispose of assets at

reasonable price and within the appropriate time period. The Company

has a portfolio of solvent assets as a part of solvency risk management

strategy, by which it ensures continued business operations and meets

legal requirements. The position of the Company’s solvency is good

and all legal requirements for the payment of claims in the course of

the year were met.


IV. Notes to the Profi t and Loss Account

4.1. TOTAL INCOME

2008 2009

Life Non-life Total Life Non-life Total

in HRK in HRK in HRK in HRK in HRK in HRK

Earned premiums (income) 363.607.233 2.409.221.424 2.772.828.657 355.994.212 2.294.843.040 2.650.837.252

Investment income 105.552.938 199.779.630 305.332.568 114.295.531 373.219.153 487.514.684

Income from commissions and fees 49.720 27.802.873 27.852.593 25.482 29.708.596 29.734.078

Other insurance-technical income, net of reinsurance

27.089.900 71.628.529 98.718.429 906.756 28.417.327 29.324.083

Other income 168.104 39.960.092 40.128.196 161.856 36.375.136 36.536.992

Total 496.467.895 2.748.392.548 3.244.860.443 471.383.837 2.762.563.252 3.233.947.089

4.1.1. EARNED PREMIUMS (INCOME)

2008 2009

Lifein HRK

Non-lifein HRK

Totalin HRK

Lifein HRK

Non-lifein HRK

Totalin HRK

Gross written premiums

Gross insurance premium 363.696.544 2.880.264.817 3.243.961.631 356.410.217 2.673.075.937 3.029.486.154

Coinsurance premium - 5.098.399 5.098.399 - 4.979.236 4.979.236

Value adjustment and collected premium value adjustment - 21.972.768 21.972.768 - (63.599.351) (63.599.351)

Total 363.696.544 2.907.335.984 3.271.032.528 356.410.217 2.614.455.822 2.970.866.039

Premiums ceded to reinsurance

Inland reinsurance premiums (7.863) (425.916.340) (425.924.203) (9.476) (410.598.741) (410.608.217)

Reinsurance premiums abroad - (4.871.711) (4.871.711) - (8.045.785) (8.045.785)

Total (7.863) (430.788.051) (430.795.914) (9.476) (418.644.526) (418.654.002)

Change in provisions for unearned premiums

Change in gross provisions for unearned premiums (81.448) (83.462.022) (83.543.470) (406.529) 117.713.753 117.307.224

Reinsurance stake - 16.135.513 16.135.513 - (18.682.009) (18.682.009)

Total (81.448) (67.326.509) (67.407.957) (406.529) 99.031.744 98.625.215

Total 363.607.233 2.409.221.424 2.772.828.657 355.994.212 2.294.843.040 2.650.837.252


4.1.2. INVESTMENT INCOME 2008 2009



Income from branch-offi ces, associate companies and participating in joint investments

26.028.850 27.734.471 53.763.321 9.565.750 56.406.420 65.972.170

Income from investments in land and buildings - 11.512.681 11.512.681 - 148.211.420 148.211.420

Interest income 76.256.769 116.371.586 192.628.355 99.456.427 147.582.015 247.038.442

Unrealized investment profi t at fair value through profi t and loss account

1.025.461 1.719.925 2.745.386 1.900.349 565.158 2.465.507

Profi t from fi nancial investment sale (realization) 2.164.076 4.676.394 6.840.470 3.318.624 3.441.144 6.759.768

Net positive exchange rate differences 31.082 - 31.082 - - -

Other investment income 46.700 37.764.573 37.811.273 54.381 17.012.996 17.067.377

Total 105.552.938 199.779.630 305.332.568 114.295.531 373.219.153 487.514.684

/i/ Income from branch-offi ce, associate companies and participating in joint investments refers to received dividends, i.e. profi t shares.

/ii/ Income from investments in land and buildings

2008 2009



Income from value increase - - - - 137.492.185 137.492.185

Income from rental fees - 8.959.695 8.959.695 - 9.866.188 9.866.188

Income from sale - 2.552.986. 2.552.986 - 853.047 853.047

Total - 11.512.681 11.512.681 - 148.211.420 148.211.420

/iii/ Interest income

2008 2009



Interest on investments kept till maturity 55.486.841 35.018.912 90.505.753 61.412.386 33.207.140 94.619.526

Interest on granted deposits 17.827.338 55.207.052 73.034.390 34.326.604 53.910.439 88.237.043

Interest on granted loans 2.942.590 26.145.622 29.088.212 3.717.437 60.464.436 64.181.873

Total 76.256.769 116.371.586 192.628.355 99.456.427 147.582.015 247.038.442

/iv/ Profi t from fi nancial investment sale (realization)

2008 2009



Investments at fair value through profi t and loss account

2.164.076 4.676.394 6.840.470 2.337.111 2.431.819 4.768.930

Investments available for sale - - - 981.513 1.009.325 1.990.838

Total 2.164.076 4.676.394 6.840.470 3.318.624 3.441.144 6.759.768


/v/ Other investment income

2008 2009



Income from collected loans, decreased in value in previous years

- 16.252.236 16.252.236 - 13.268.845 13.268.845

Call deposit interest 46.700 241.878 288.578 29.506 100.751 130.257

Other income - 21.270.459 21.270.459 24.875 3.643.400 3.668.275

Total 46.700 37.764.573 37.811.273 54.381 17.012.996 17.067.377

4.1.3. INCOME FROM COMMISSIONS AND FEES

Income from commissions and fees amounting to HRK29,734,078 (amounting to HRK27,852,593 in 2008) refers to commissions from reinsurance

companies under the reinsurance contracts.

4.1.4. OTHER INSURANCE-TECHNICAL INCOME, NET OF REINSURANCE 2008 2009



Income from Guarantee fund - 14.426.774 14.426.774 - 26.039.644 26.039.644

Income from foreign claims - 3.672.596 3.672.596 - 2.957.088 2.957.088

Income from interest on premium 115.219 5.990.321 6.105.540 56.853 3.078.433 3.135.286

Income from border insurance fees - 657.234 657.234 - 574.600 574.600

Income from recourse receivables - 27.491.837 27.491.837 - (12.933.130) (12.933.130)

Other income 26.974.681 19.389.767 46.364.448 849.903 8.700.692 9.550.595

Total 27.089.900 71.628.529 98.718.429 906.756 28.417.327 29.324.083

4.1.5. OTHER INCOME

2008 2009



Income from service assessments 1.800 12.215.927 12.217.727 2.800 11.265.851 11.268.651

Income from MOT test stations - 5.899.063 5.899.063 - 8.693.719 8.693.719

Income from collected insurance claims - 3.735.482 3.735.482 - 2.846.952 2.846.952

Income from provision cancellation - 1.466.089 1.466.089 - 2.621.309 2.621.309

Income from subventions and refunds - 4.160.376 4.160.376 - 2.471.726 2.471.726

Income from tangible assets sale - 1.292.807 1.292.807 - 1.599.679 1.599.679

Other income 166.304 11.190.348 11.356.652 159.056 6.875.900 7.034.956

Total 168.104 39.960.092 40.128.196 161.856 36.375.136 36.536.992


4.2 TOTAL EXPENDITURES

2008 2009



Outlays for insured events, net, of reinsurance

(180.837.117) (1.597.110.403) (1.777.947.520) (179.367.288) (1.483.965.678) (1.663.332.966)

Change in other technical provisions, net of reinsurance

(118.323.395) (200.000) (118.523.395) (138.786.966) (200.000) (138.986.966)

Change in life insurance technical provisions when policyholder bears risk

(7.759.063) - (7.759.063) (6.412.230) - (6.412.230)

Business expenditures (outlays for business operations), net

(118.352.665) (895.227.327) (1.013.579.992) (121.383.508) (945.758.908) (1.067.142.416)

Investment expenses (68.355.048) (128.883.566) (197.238.614) (17.368.533) (138.553.744) (155.922.277)

Other technical expenses, net of reinsurance

(1.895.295) (58.766.582) (60.661.877) (2.801.772) (101.603.319) (104.405.091)

Other expenses, including value adjustments

- (676.632) (676.632) - (740.527) (740.527)

Total (495.522.583) (2.680.864.510) (3.176.387.093) (466.120.297) (2.670.822.176) (3.136.942.473)

4.2.1. OUTLAYS FOR INSURED EVENTS, NET

2008 2009



Paid claims

Gross amount (182.870.093) (1.807.677.197) (1.990.547.290) (176.715.830) (1.824.235.795) (2.000.951.625)

Coinsurer’s stake - (249.718) (249.718) - (405.427) (405.427)

Reinsurer’s stake - 250.596.260 250.596.260 - 269.635.051 269.635.051

Total (182.870.093) (1.557.330.655) (1.740.200.748) (176.715.830) (1.555.006.171) (1.731.722.001)

Change in claims provisions

Gross amount 2.032.976 (88.826.784) (86.793.808) (2.651.458) 79.182.121 76.530.663

Reinsurer’s stake - 49.047.036 49.047.036 - (8.141.628) (8.141.628)

Total 2.032.976 (39.779.748) (37.746.772) (2.651.458) 71.040.493 68.389.035

Total (180.837.117) (1.597.110.403) (1.777.947.520) (179.367.288) (1.483.965.678) (1.663.332.966)


4.2.2. CHANGE IN OTHER TECHNICAL PROVISIONS, NET OF REINSURANCE 2008 2009



Change in mathematical insurance provisions

Gross amount (118.326.687) - (118.326.687) (138.784.048) - (138.784.048)

Reinsurer’s stake 3.292 - 3.292 (2.918) - (2.918)

Total (118.323.395) - (118.323.395) (138.786.966) - (138.786.966)

Change in other technical provisions, net of reinsurance

Gross amount - (200.000) (200.000) - (200.000) (200.000)

Total - (200.000) (200.000) - (200.000) (200.000)

Total (118.323.395) (200.000) (118.523.395) (138.786.966) (200.000) (138.986.966)

4.2.3. CHANGE IN LIFE INSURANCE TECHNICAL PROVISIONS WHEN POLICYHOLDER BEARS RISK

2008 2009



Gross amount (7.759.063) - (7.759.063) (6.412.230) - (6.412.230)

Total (7.759.063) - (7.759.063) (6.412.230) - (6.412.230)

4.2.4. BUSINESS EXPENDITURES (OUTLAYS FOR INSURANCE OPERATIONS), NET 2008 2009



Sales expenses

Commission (37.122.421) (144.355.920) (181.478.341) (30.794.419) (143.959.950) (174.754.369)

Other sales expenses (14.643.115) (133.740.366) (148.383.481) (16.685.816) (137.649.340) (154.335.156)

Total (51.765.536) (278.096.286) (329.861.822) (47.480.235) (281.609.290) (329.089.525)

Management expenses (administrative expenses)

Amortization of tangible assets (2.213.249) (43.188.401) (45.401.650) (2.296.569) (44.972.091) (47.268.660)

Salaries, taxes and contributions from and on salaries

(41.015.033) (346.186.627) (387.201.660) (44.605.032) (369.361.213) (413.966.245)

Other management expenses (23.358.847) (227.756.013) (251.114.860) (27.001.672) (249.816.314) (276.817.986)

Total (66.587.129) (617.131.041) (683.718.170) (73.903.273) (664.149.618) (738.052.891)

Total (118.352.665) (895.227.327) (1.013.579.992) (121.383.508) (945.758.908) (1.067.142.416)


/i/ Commission

2008 2009



Commission expenses under credit cards and pos devices

(862.731) (11.282.274) (12.145.005) (828.404) (11.346.737) (12.175.141)

Commission expenses for commissioners (4.515.115) (13.632.981) (18.148.096) (3.618.102) (10.836.826) (14.454.928)

Commission expenses for employees (8.666.234) (29.841.661) (38.507.895) (7.841.801) (33.353.046) (41.194.847)

Commission expenses for banks, agencies and dispatchers

(23.040.194) (73.038.217) (96.078.411) (18.395.674) (71.739.822) (90.135.496)

Commission expenses for MOT test stations

- (9.045.609) (9.045.609) - (7.604.399) (7.604.399)

Other commission expenses (38.147) (7.515.178) (7.553.325) (110.438) (9.079.120) (9.189.558)

Total (37.122.421) (144.355.920) (181.478.341) (30.794.419) (143.959.950) (174.754.369)

/ii/ Other sales expenses

2008 2009



Promotion expenses (13.877.549) (130.901.639) (144.779.188) (16.134.532) (134.308.786) (150.443.318)

Expenses for policy issuance (251.210) (2.570.051) (2.821.261) (136.597) (2.483.127) (2.619.724)

Other direct sales expenses (514.356) (268.676) (783.032) (414.687) (857.427) (1.272.114)

Total (14.643.115) (133.740.366) (148.383.481) (16.685.816) (137.649.340) (154.335.156)

/iii/ Amortization 2008 2009



Amortization of intangible assets - (4.873.049) (4.873.049) - (3.783.160) (3.783.160)

Amortization of tangible assets (2.213.249) (38.315.352) (40.528.601) (2.296.569) (41.188.931) (43.485.500)

Total (2.213.249) (43.188.401) (45.401.650) (2.296.569) (44.972.091) (47.268.660)

/iv/ Salaries, taxes and contributions from and on salaries

2008 2009



Net salaries and compensations (22.997.773) (194.090.436) (217.088.209) (24.935.374) (205.507.883) (230.443.257)

Taxes and contributions from salaries (12.005.213) (101.319.878) (113.325.091) (13.226.273) (110.036.039) (123.262.312)

Contributions on salaries (6.012.047) (50.776.313) (56.788.360) (6.443.385) (53.817.291) (60.260.676)

Total (41.015.033) (346.186.627) (387.201.660) (44.605.032) (369.361.213) (413.966.245)


/v/ Other management expenses

2008 2009



Expended supplies (1.621.652) (13.691.606) (15.313.258) (1.355.377) (11.805.136) (13.160.513)

Energy (1.063.462) (10.206.573) (11.270.035) (1.167.769) (9.913.612) (11.081.381)

Transport, mail and telecommunication services

(2.471.204) (21.976.788) (24.447.992) (2.834.445) (25.141.660) (27.976.105)

Maintenance services (2.096.277) (19.409.639) (21.505.916) (1.740.214) (17.169.487) (18.909.701)

Rental services (1.325.979) (17.066.123) (18.392.102) (1.682.059) (20.016.475) (21.698.534)

Municipal services (247.047) (1.886.684) (2.133.731) (354.127) (2.290.163) (2.644.290)

Intellectual services (1.810.403) (20.669.961) (22.480.364) (3.196.225) (23.736.181) (26.932.406)

Other services (1.154.032) (10.218.862) (11.372.894) (1.197.519) (9.562.631) (10.760.150)

Provisions for severance pays and anniversary rewards

- (4.035.458) (4.035.458) (43.720) (830.691) (874.411)

Provisions for legal proceedings - (2.836.264) (2.836.264) - (1.587.899) (1.587.899)

Business travel allowances and expenses (291.424) (3.030.017) (3.321.441) (303.545) (2.053.485) (2.357.030)

Expenses compensations for employees, presents and subventions

(1.706.534) (12.746.210) (14.452.744) (1.812.889) (14.298.853) (16.111.742)

Expense account (1.182.933) (8.155.517) (9.338.450) (1.185.193) (5.588.016) (6.773.209)

Insurance premiums (1.136.597) (11.422.121) (12.558.718) (1.263.477) (12.611.935) (13.875.412)

Banking services and fees (157.220) (1.391.562) (1.548.782) (156.180) (1.491.950) (1.648.130)

Contributions, membership dues and the like

(758.025) (9.854.475) (10.612.500) (1.134.062) (13.115.391) (14.249.453)

Taxes independent of salary and charges (7.142) (215.133) (222.275) (10.233) (426.537) (436.770)

Unamortized value of tangible property written off

(4.205) (5.615.048) (5.619.253) (9.129) (162.672) (171.801)

Value decrease of tangible property used for insurance operations

- - - - (3.219.100) (3.219.100)

Write off of supplies and small inventory (150.928) (1.757.441) (1.908.369) (69.603) (1.051.679) (1.121.282)

Other material rights of employees (refunds, severance pays and anniversary rewards)

(3.982.840) (37.569.447) (41.552.287) (6.763.752) (58.562.658) (65.326.410)

Expenses for professional education and literature

(513.359) (5.348.208) (5.861.567) (290.020) (4.449.553) (4.739.573)

Expenses for service claim settlements - (4.776.651) (4.776.651) - (4.976.956) (4.976.956)

Other operating expenses (1.677.584) (3.876.225) (5.553.809) (432.134) (5.753.594) (6.185.728)

Total (23.358.847) (227.756.013) (251.114.860) (27.001.672) (249.816.314) (276.817.986)


4.2.5. INVESTMENT EXPENSES

2008 2009



Amortization (buildings not used by the Company for insurance operations)

- (6.154.345) (6.154.345) - (24.575) (24.575)

Interest (120) (22.086) (22.206) (6) (227.122) (227.128)

Investment value adjustment(decrease) (1.019.703) (1.307.648) (2.327.351) (1.221.836) (82.772.371) (83.994.207)

Losses realized on investment sale (realization) (66.028.339) (101.874.635) (167.902.974) (12.209.610) (6.950.062) (19.159.672)

Net negative exchange rate differences - (6.760.627) (6.760.627) (3.326.062) (392.209) (3.718.271)

Other investment expenses (1.306.886) (12.764.225) (14.071.111) (611.019) (48.187.405) (48.798.424)

Total (68.355.048) (128.883.566) (197.238.614) (17.368.533) (138.553.744) (155.922.277)

/i/ Value adjustment (investment decrease) 2008 2009



Value decrease of investments in branch-offi ces - - - - (71.593.666) (71.593.666)

Loss from change in fair value of real estate - - - - (9.005.277) (9.005.277)

Unrealized losses from loans (1.019.703) (525.199) (1.544.902) (1.221.836) (50.360) (1.272.196)

Unrealized losses from deposits - (651.649) (651.649) - (236.990) (236.990)

Unrealized losses from investment funds - (130.800) (130.800) - - -

Other - - - - (1.886.078) (1.886.078)

Total (1.019.703) (1.307.648) (2.327.351) (1.221.836) (82.772.371) (83.994.207)

/ii/ Loss on investment sale (realization) 2008 2009



Investments available for sale (967.751) (4.364.075) (5.331.826) (12.190.066) (6.949.890) (19.139.956)


(64.577.584) (96.776.626) (161.354.210) - (172) (172)

Investments kept till maturity (483.004) - (483.004) (19.544) - (19.544)

Other investments - (733.934) (733.934) - - -

Total (66.028.339) (101.874.635) (167.902.974) (12.209.610) (6.950.062) (19.159.672)


/iii/ Net negative exchange rate differences 2008 2009



Investments kept till maturity - (516.636) (516.636) (3.429.498) (1.184.916) (4.614.414)

Investments available for sale - 285.543 285.543 (8.761) - (8.761)


- - - - 18.899 18.899

Deposits - (6.318.905) (6.318.905) 5.245 (295.617) (290.372)

Loans - - - 41.254 1.721.940 1.763.194

Foreign currency accounts - (1.765.186) (1.765.186) (76.807) (1.746.683) (1.823.490)

Other - 1.554.557 1.554.557 142.505 1.094.168 1.236.673

Total - (6.760.627) (6.760.627) (3.326.062) (392.209) (3.718.271)

/iv/ Other investment expenses 2008 2009



Value decrease of granted loans - (698.377) (698.377) - (36.869.977) (36.869.977)

Value decrease of receivables for interest on granted loans

- (252.009) (252.009) - (4.047.851) (4.047.851)

Compensations for payment transactions fees (457.896) (2.797.992) (3.255.888) (490.933) (2.904.766) (3.395.699)

Negative exchange rate differences under receivables and payables

- (776.491) (776.491) - (966.865) (966.865)

Current value of sold and written off property - (2.105.115) (2.105.115) - (108.599) (108.599)

Expenses for founding of new branch -offi ces - (1.146.282) (1.146.282) - (88.620) (88.620)

Other value decreases - (285.764) (285.764) - (2.438.361) (2.438.361)

Other investment expenses (848.990) (4.702.195) (5.551.185) (120.086) (762.366) (882.452)

Total (1.306.886) (12.764.225) (14.071.111) (611.019) (48.187.405) (48.798.424)


4.2.6. OTHER TECHNICAL EXPENSES, NET OF REINSURANCE

/i/ Other technical insurance expenses

2008 2009



Contributions for health insurance out of motor TPL premium

- - - - (57.175.907) (57.175.907)

Contribution for Guarantee fund - (13.766.000) (13.766.000) - (26.130.658) (26.130.658)

Contribution for fi re department - (8.589.553) (8.589.553) - (7.002.380) (7.002.380)

Contribution for Croatian Insurance Bureau - (2.352.925) (2.352.925) - (3.050.982) (3.050.982)

Contribution for Croatian Financial Services Supervisory Agency

(164.854) (1.175.688) (1.340.542) (213.846) (1.607.431) (1.821.277)

Other insurance – technical expenses (1.660.317) (2.815.764) (4.476.081) (144.512) (5.975.740) (6.120.252)

Expenses for cover of negative life result - (26.800.000) (26.800.000) - - -

Other expenses (70.124) (3.266.652) (3.336.776) (2.443.414) (660.221) (3.103.635)

Total (1.895.295) (58.766.582) (60.661.877) (2.801.772) (101.603.319) (104.405.091)

4.3 PROFIT TAX

The profi t tax is calculated at the rate of 20% on the determined tax basis, and it is calculated and presented in accordance with the legal regulations.

The profi t tax report for the year 2009 in the part referring to reported positions of income and expenditures as well as to the increase and decrease

of profi t is set out as follows:

2008 2009

in HRK in HRK

Accounting profi t (profi t before taxation) 68.473.350 97.004.616

Tax non-deductible expenses 35.510.756 119.705.298

Tax reliefs (86.173.331) (80.139.165)

Tax basis 17.810.775 136.570.749

Profi t tax liability 3.562.155 27.314.150

Valid profi t tax rate for the years 2009 and 2008 was 20%.

4.4. EARNINGS PER SHARE

2008 2009

in HRK in HRK

Net profi t for the period 64.911.195 69.690.466

Less: dividends on preferred shares (980.000) (980.000)

Net profi t for the period per common share 63.931.195 68.710.466

Weighted average of common shares except own shares 307.598 307.598

Earnings per share 207,84 223,38


4.5. INSURANCE BUSINESS RESULTS PER CLASSES

Position Mark

Position DescriptionAccident

InsuranceMotor Hull

InsuranceProperty

InsuranceLiability

Insurance

Loan and Guarantee

Insurance

Other Insurance

Classes

Non-life Total

Life Total

Total

I Earned premiums (income) 198.610.496 446.850.280 572.353.291 937.575.681 66.495.083 72.958.209 2.294.843.040 355.994.21 2 2.650.837.252

II Investment income 19.071.499 37.396.558 35.194.566 261.925.202 13.883.753 5.747.575 373.219.153 114.295.531 487.514.684

III Income from commissions and fees - 3.389.077 16.550.032 7.512.610 1.502.750 754.127 29.708.596 25.482 29.734.078

IVOther insurance-technical income, net of reinsurance

481.996 749.734 2.547.688 27.106.560 (2.408.969) (59.682) 28.417.327 906.756 29.324.083

V Other income 1.621.435 5.114.926 4.635.730 24.234.667 342.990 425.388 36.375.136 161.856 36.536.992

VI Outlays for insured events, net (82.465.195) (365.047.317) (448.038.026) (496.454.582) (59.993.862) (31.966.696) (1.483.965.678) (179.367.288) (1.663.332.966)

VIIChange in other technical provisions, net of reinsurance (+/-)

- - (200.000) - - - (200.000) (138.786.966) (138.986.966)

VIII

Change in life insurance technical provisions when policyholder bears investment risk, net of reinsurance (+/-)

- - - - - - - (6.412.230) (6.412.230)

IXBusiness expenditures (outlays for insurance activities), net

(75.986.523) (205.550.405) (262.910.225) (347.810.703) (25.336.477) (28.164.575) (945.758.908) (121.383.508) (1.067.142.416)

X Investment expenses (7.080.097) (13.883.085) (13.065.619) (97.237.019) (5.154.199) (2.133.725) (138.553.744) (17.368.533) (155.922.277)

XIOther technical expenses, net of reinsurance

(452.352) (4.612.939) (7.396.374) (88.968.303) (72.866) (100.485) (101.603.319) (2.801.772) (104.405.091)

XIIOther expenses, including value adjustments

- - - (740.527) - - (740.527) - (740.527)

XIIIProfi t or loss for the accounting period before taxation (+/-)

53.801.259 (95.593.171) (100.328.937) 227.143.586 (10.741.797) 17.460.136 91.741.076 5.263.540 97.004.616

XIV Tax on profi t or loss (4.119.966) (188.388) (1.927.565) (18.891.290) (537.862) (1.649.079) (27.314.150) - (27.314.150)

XVProfi t or loss for the accounting period after taxation (+/-)

49.681.293 (95.781.559) (102.256.502) 208.252.296 (11.279.659) 15.811.057 64.426.926 5.263.540 69.690.466

Presentation of income and investment expenses according to the source of funds

Type of income / investment expenses

Income from capital investment - - - - - - - 8.469.008 8.469.008

Income from mathematical provision investment - - - - - - - 105.772.143 105.772.143

Income from other technical provisions investment

19.071.499 37.396.559 35.194.566 261.925.202 13.883.752 5.747.575 373.219.153 54.380 373.273.533

Total investment income 19.071.499 37.396.559 35.194.566 261.925.202 13.883.752 5.747.575 373.219.153 114.295.531 487.514.684

Capital investment expenses - - - - - - - (19.544) (19.544)

Mathematical provision investment expenses - - - - - - - (16.803.664) (16.803.664)

Other technical provisions investment expenses (7.080.096) (13.883.085) (13.065.618) (97.237.018) (5.154.199) (2.133.728) (138.553.744) (545.325) (139.099.069)

Total investment expenses (7.080.096) (13.883.085) (13.065.618) (97.237.018) (5.154.199) (2.133.728) (138.553.744) (17.368.533) (155.922.277)


V. NOTES TO THE BALANCE SHEET

5.1. INTANGIBLE ASSETS

Investments on Other intangible assets

non-own assets in function in preparation Total

in HRK in HRK in HRK in HRK

Purchasing value

Balance at 31 December 2008 12.978.802 54.982.345 684.833 68.645.980

Increase 1.322.160 1.967.733 235.725 3.525.618

Write-off (4.506) (434.014) - (438.520)

Balance at 31 December 2009 14.296.456 56.516.064 920.558 71.733.078

Value adjustment

Balance at 31 December 2008 9.504.365 51.759.975 - 61.264.340

Amortization during 2009 1.171.152 2.612.007 - 3.783.159

Write-off (4.506) (434.014) - (438.520)

Balance at 31 December 2009 10.671.011 53.937.968 - 64.608.979

Current value

31 December 2009 3.625.445 2.578.096 920.558 7.124.099

31 December 2008 3.474.437 3.222.370 684.833 7.381.640

5.2. TANGIBLE ASSETS

31/12/2008 31/12/2009

Purchasing Value Current Purchasing Value Current

Value Adjustment Value Value Adjustment Value


Land and buildings used for

insurance operations928.110.410 (167.345.905) 760.764.505 1.447.770.526 (212.688.111) 1.235.082.415

Equipment 190.540.275 (144.967.607) 45.572.668 192.919.623 (147.973.567) 44.946.056

Other tangible assets and supplies 9.856.680 (7.198.390) 2.658.290 11.159.525 (6.830.994) 4.328.531

Total 1.128.507.365 (319.511.902) 808.995.463 1.651.849.674 (367.492.672) 1.284.357.002


/i/ Land and buildings used by the Company for insurance operations

Land BuildingsProperty in

preparationGranted advances Total

in HRK in HRK in HRK in HRK in HRK

Purchasing value

Balance at 31 December 2008 31.463.919 875.769.924 19.325.523 1.551.044 928.110.410

Revaluation provision 151.858.841 265.917.186 - - 417.776.027

Revaluation (value decrease through PLA) (815.760) (2.403.340) - - (3.219.100)

New purchased property - 2.812.336 15.322.504 10.093.338 28.228.178

Transfer from preparation 105.196 9.904.487 (10.009.683) - -

Transfer from / to 47.551.021 (47.522.933) (28.088) - -

Transfer from technical provisions 1.231.682 95.866.152 - - 97.097.834

Transfer to technical provisions (1.596) (4.556.158) (7.811.656) (7.671.763) (20.041.173)

Write-off - (181.650) - - (181.650)

Balance at 31 December 2009 231.393.303 1.195.606.004 16.798.600 3.972.619 1.447.770.526

Value adjustment

Balance at 31 December 2008 - 167.345.905 - - 167.345.905

Amortization from revaluation - 6.391.045 - - 6.391.045

Amortization during 2009 - 24.158.894 - - 24.158.894

Transfer from technical provisions - 15.866.415 - - 15.866.415

Transfer to technical provisions - (1.001.098) - - (1.001.098)

Write-off - (73.050) - - (73.050)

Balance at 31 December 2009 - 212.688.111 - - 212.688.111

Current value

Balance at 31 December 2009 231.393.303 982.917.893 16.798.600 3.972.619 1.235.082.415


During 2009 the Company performed an independent estimate of the market value of the land and buildings used by the Company for insurance

operations, on account of which an increase in the value of real estate and revaluation provision amounting to HRK417,776,027 was recorded.

As at 31 December 2009 the Company has no regulated ownership of a certain number of real estate pieces registered in the books of accounts.

Property rights issues are being handled and claims for the entering of ownership rights were fi led for rather many real estate pieces.


/ii/ Equipment

Equipment and furniture

Means of transport

InstrumentsMeans in

preparationTotal


Purchasing value


Increase 471.153 608.759 7.640.278 10.043.831 18.764.021

Transfer from / to 10.931.502 54.962 93.648 (11.080.112) -

Write-off (10.424.317) (5.960.354) - - (16.384.671)


Value adjustment

Balance at 31 December 2008 118.632.185 17.229.173 9.106.247 - 144.967.605

Adjustment of initial balance 7.098 - - - 7.098

Amortization during 2009 14.652.986 3.107.650 1.484.191 - 19.244.827

Write-off (10.362.771) (5.883.192) - - (16.245.963)

Balance at 31 December 2009 122.929.498 14.453.631 10.590.438 - 147.973.567

Current value

31 December 2009 23.604.870 7.174.284 12.512.239 1.654.663 44.946.056

31 December 2008 26.923.845 9.695.375 6.262.504 2.690.944 45.572.668

/iii/ Other tangible assets and supplies

Other tangible assets

Assets in preparation

Granted advances

Supplies Total


Purchasing value

Balance at 31 December 2008 1.141.144 77.226 - 8.638.309 9.856.679

Increase 1.744.985 - 4.270 7.914.280 9.663.535

Transfer from / to 77.226 (77.226) (4.270) (8.259.580) (8.263.850)

Write-off (96.839) - - - (96.839)

Balance at 31 December 2009 2.866.516 - - 8.293.009 11.159.525

Value adjustment

Balance at 31 December 2008 157.161 - - 7.041.228 7.198.389

Adjustment of initial position 81.779 - - - 81.779

Amortization during 2009 - - - 1.117.501 1.117.501

Write-off (63.747) - - (1.502.928) (1.566.675)

Balance at 31 December 2009 175.193 - - 6.655.801 6.830.994

Current value

31 December 2009 2.691.323 - - 1.637.208 4.328.531

31 December 2008 983.983 77.226 - 1.597.081 2.658.290


5.3. INVESTMENTS

31/12/2008 31/12/2009



Investments in land and buildings not used for insurance operations

- 556.661.965 556.661.965 - 653.700.604 653.700.604

Investments in branch-offi ces, associate companies and participating in joint investments

- 499.007.604 499.007.604 - 451.134.832 451.134.832

Other fi nancial investments 1.590.481.407 2.157.416.427 3.747.897.834 1.805.338.359 2.064.644.465 3.869.982.824

Total 1.590.481.407 3.213.085.996 4.803.567.403 1.805.338.359 3.169.479.901 4.974.818.260

5.3.1. Investments in land and buildings not used for insurance operations

in HRK

Balance at 31 December 2008 556.661.965

Transfer to land and buildings used for insurance operations (81.231.419)

Transfer from land and buildings used for insurance operations 19.040.075

Fair value increase credited to the profi t and loss account 137.492.185

Fair value decrease charged to the profi t and loss account (9.005.277)

New purchased during the year 30.997.785

Sold during the year (254.710)

Balance at 31 December 2009 653.700.604

During 2009 the Company performed an independent estimate of the market value of the land and buildings not used by the Company for insur-

ance operations, on account of which an increase in the value of real estate through the profi t and loss account amounting to HRK 128,486,908 was

recorded.

As at 31 December 2009 the Company has no regulated ownership of a certain number of real estate pieces registered in the books of accounts.

Property rights issues are being handled and claims for the entering of ownership rights were fi led for rather many real estate pieces.

5.3.2. Investments in branch-offi ces, associate companies and participating in joint investmentsa

31/12/2008 31/12/2009



Shares and stakes in branch-offi ces - 490.298.304 490.298.304 - 442.425.532 442.425.532

Shares and stakes in associate companies - 8.709.300 8.709.300 - 8.709.300 8.709.300

Total - 499.007.604 499.007.604 - 451.134.832 451.134.832


/i/ Shares and stakes in branch-offi ces

31/12/2008 31/12/2009

Activity CountryOwnership percentage

Investmentgross amount

Value decrease

Investment net amount

Ownership percentage

Investmentgross amount

Value decrease

Investment net amount

% in HRK in HRK in HRK % in HRK in HRK in HRK

Croatia Lloyd d.d., Zagreb Reinsurance Croatia 94,64 109.839.200 - 109.839.200 94,64 109.839.200 - 109.839.200

Croatia Leasing d.o.o., Zagreb Leasing Croatia 100,00 90.000.000 - 90.000.000 100,00 90.000.000 (52.390.694) 37.609.306

Croatia - Tehni�ki pregledi d.o.o., Zagreb

MOT tests Croatia 100,00 71.767.400 - 71.767.400 100,00 71.767.400 - 71.767.400

Herz d.d., Požega MOT tests Croatia 100,00 30.000.165 - 30.000.165 100,00 30.000.165 - 30.000.165

Croatia osiguranje, mirovinsko društvo d.o.o., Zageb

Pension Fund Manag.

Croatia 100,00 30.000.000 - 30.000.000 100,00 30.000.000 (19.202.972) 10.797.028

Croatia zdravstveno osiguranje d.d., Zagreb

Insurance Croatia 100,00 29.363.000 - 29.363.000 100,00 29.363.000 - 29.363.000

PBZ Croatia osiguranje d.d., ZagrebPension Fund Manag.

Croatia 50,00 28.000.000 - 28.000.000 50,00 28.000.000 - 28.000.000

Milenijum osiguranje a.d., Beograd, Srbija

Insurance Srbija 99,78 41.753.534 - 41.753.534 99,78 41.579.948 - 41.579.948

Croatia Sigurimi sh.a., Priština, Kosovo

Insurance Kosovo 100,00 21.973.275 - 21.973.275 100,00 21.918.597 - 21.918.597

Croatia osiguranje d.d., Ljubuški, Bosna i Hercegovina

InsuranceBosnia andHerzegovina

52,05 15.498.858 - 15.498.858 52,05 15.590.918 - 15.590.918

Croatia osiguranje - život a.d,

društvo za osiguranje života, Skopje, Makedonija

Insurance Macedonia 92,50 21.824.920 - 21.824.920 92,50 21.770.611 - 21.770.611

Croatia osiguranje - neživot a.d.,

društvo za osiguranje života, Skopje, Makedonija

Insurance Macedonia - - - - 100,00 23.745.147 - 23.745.147

Zagos d.o.o. u likvidaciji, Zabok Insurance agency Croatia 100,00 262.752 - 262.752 100,00 429.012 - 429.012

Slavonijatrans - Tehn. pregledi d.o.o., Slavonski Brod

MOT tests Croatia 76,00 15.200 - 15.200 76,00 15.200 - 15.200

Total - 490.298.304 - 490.298.304 514.019.198 (71.593.666) 442.425.532

The company adjusted the value of investments in subsidiary companies Croatia Leasing d.o.o., Zagreb and Croatia osiguranje mirovinsko društvo

d.o.o., Zagreb debiting the profi t and loss account for 2009 due to reported losses in business operations of these companies.

During 2009 the company established Croatia osiguranje - neživot a.d., a company for non-life insurance, Skopje, Makedonija.

/ii/ Shares and stakes in associate companies

31/12/2008 31/12/2009

Activity CountryOwnership percentage

Investment value

Ownership percentage

Investment value

% in HRK % in HRK

Autoprijevoz d.d., Oto�ac Transport Croatia 32,78% 4.449.600 32,78% 4.449.600

Brioni d.d., Pula Trade Croatia 25,57% 4.259.700 25,57% 4.259.700

Total - 8.709.300 - 8.709.300


5.3.3. OTHER FINANCIAL INVESTMENTS

31/12/2008 31/12/2009



Investments kept till maturity 1.026.132.097 555.296.203 1.581.428.300 1.028.043.103 562.100.041 1.590.143.144

Investments available for sale 115.680.291 242.564.296 358.244.587 136.306.623 273.153.730 409.460.353


14.503.729 3.536.332 18.040.061 124.377.947 155.321.781 279.699.728

Deposits, loans and receivables 434.165.290 1.356.019.596 1.790.184.886 516.610.686 1.074.068.913 1.590.679.599

Total 1.590.481.407 2.157.416.427 3.747.897.834 1.805.338.359 2.064.644.465 3.869.982.824

5.3.3.1. Investments kept till maturity

31/12/2008 31/12/2009



Debt securities and other securities with fi xed income

State bonds 835.182.319 459.747.581 1.294.929.900 836.618.821 408.871.530 1.245.490.351

Corporate bonds 51.762.867 91.548.622 143.311.489 45.740.742 102.260.122 148.000.864

Local government bonds 5.218.181 - 5.218.181 5.241.157 - 5.241.157

Total 892.163.367 551.296.203 1.443.459.570 887.600.720 511.131.652 1.398.732.372

Treasury bills 105.568.730 - 105.568.730 96.231.978 - 96.231.978

Commercial bills 28.400.000 4.000.000 32.400.000 44.210.405 50.968.389 95.178.794

Total 1.026.132.097 555.296.203 1.581.428.300 1.028.043.103 562.100.041 1.590.143.144


/i/ Structure of investments in bonds is set out as follows

31/12/2008 31/12/2009

Issuer Mark Interest

rateMaturity Life Non-life Total

Total in foreign currency

Life Non-life TotalTotal in foreign currency

% in HRK in HRK in HRK (eur) in HRK in HRK in HRK (eur)

Bonds denominated in HRK

Atlantic grupa d.d., Zagreb ATGR-0-11CA 5,75% 6.12.2011. - 9.887.721 9.887.721 - - 9.936.209 9.936.209 -

HEP d.d., Zagreb HEP-0-13BA 5,00% 29.11.2013. - 39.193.915 39.193.915 - - 39.225.232 39.225.232 -

Ingra d.d., Zagreb INGR-0-11CA 6,13% 6.12.2011. - 14.859.664 14.859.664 - - 14.924.393 14.924.393 -

Metronet telekomunik. d.d. 12,10% 17.7.2013. - - - - - 10.529.015 10.529.015 -

Jadranka d.d., Mali Lošinj JDRA-0-129A 6,48% 13.9.2012. - 7.608.824 7.608.824 - - 7.625.791 7.625.791 -

Ministry of Finance of RC RHMF-0-103A 6,75% 8.03.2010. 9.817.225 - 9.817.225 - 10.147.344 - 10.147.344 -

Ministry of Finance of RC RHMF-0-137A 4,50% 11.7.2013. - 1.822.014 1.822.014 - - 1.864.641 1.864.641 -

Ministry of Finance of RC RHMF-0-15CA 5,25% 15.12.2015. 44.101.015 - 44.101.015 - 44.099.958 - 44.099.958 -

Ministry of Finance of RC RHMF-0-172A 4,75% 8.2.2017. 42.483.692 - 42.483.692 - 42.872.867 - 42.872.867 -

Nexe grupa, Našice NEXE-0-116A 5,50% 14.6.2011. - 19.998.497 19.998.497 - - 20.019.482 20.019.482 -

Odašilja�i i veze d.o.o., Zagreb OIV-0-14B 7,25% 20.11.2014. 10.393.174 - 10.393.174 - 10.347.511 - 10.347.511 -

Podravka d.d., Koprivnica PODR-0-115A 5,13% 17.5.2011. 24.800.241 - 24.800.241 - 25.197.714 - 25.197.714 -

Plodine d.d., Rijeka PLOR-0-133A 9,00% 4.3.2003. 10.668.355 - 10.668.355 - 10.195.516 - 10.195.516 -

Bonds of RC,

Shipyard Split 7,00% 31.08.2011. - 437.420 437.420 - - 305.346 305.346 -

Total 142.263.702 93.808.055 236.071.757 - 142.860.910 104.430.109 247.291.019 -

Bonds denominated in foreign currency

Agrokor d.d., Zagreb XS0275181096 7,00% 23.11.2011. 5.901.096 - 5.901.096 805.674 - - - -

City of Rijeka GRRI-0-167A 4,13% 18.7.2016. 5.218.181 - 5.218.181 712.436 5.241.157 - 5.241.157 725.000

HBOR d.d., Zagreb XSO305384124 5,00% 14.6.2017. - - - - 52.124.841 - 52.124.841 9.000.000

Ministry of Finance of RC RHMF-0-08CA 6,88% 14.12.2008. - - - - - - - -

Ministry of Finance of RC XS0142739993 6,25% 11.2.2009. 63.019.119 48.553.831 111.572.950 15.232.998 - - - -

Ministry of Finance of RC XS0126121507 6,75% 14.3.2011. 16.052.938 116.917.496 132.970.434 18.154.385 16.005.903 116.552.829 132.558.732 17.206.000

Ministry of Finance of RC RHMF-0-125A 6,88% 23.5.2012. 257.430.678 126.056.767 383.487.445 52.357.345 256.226.195 124.948.404 381.174.599 51.309.000



Ministry of Finance of RC RHMF-0-19BA 5,38% 29.11.2019. 135.481.899 - 135.481.899 18.497.274 135.236.375 - 135.236.375 18.600.000

Ministry of Finance of RC RHMF-0-085A 7,00% 15.11.2008. - - - - - - - -

Total 749.899.665 457.488.148 1.207.387.813 164.844.042 744.739.810 406.701.543 1.151.441.353 175.525.000

Total 892.163.367 551.296.203 1.443.459.570 164.844.042 887.600.720 511.131.652 1.398.732.372 175.525.000

/ii/ Structure of investments in treasury bills is set out as follows:

31/12/2009

Issuer Maturity Interest rate Acquisition costs Life Non-life Total


Ministry of Finance of RC 17.06.2010. 6,00% 72.821.250 72.996.019 - 72.996.019

Ministry of Finance of RC 23.11.2010. 8,50% 21.376.000 23.235.959 - 23.235.959

Total 94.197.250 96.231.978 - 96.231.978


/iii/ Structure of investments in commercial bills is set out as follows:

31/12/2009

Issuer Maturity Interest rate Acquisition costs Life Non-life Total


Dalekovod d.d. 03.09.2010. 9,65% 6.841.575 7.043.734 - 7.043.734

Dalekovod d.d. 18.06.2010. 9,65% 5.515.845 5.567.464 - 5.567.464

Ingra d.d. 21.05.2010. 9,40% 4.368.971 4.583.760 - 4.583.760

Ingra d.d. 17.03.2010. 10,00% 2.299.261 2.432.751 - 2.432.751

M san grupa d.d. 26.05.2010. 9,85% 4.552.800 4.811.725 - 4.811.725

Magma d.d. 25.03.2010. 10,60% 2.291.214 2.425.642 - 2.425.642

Nexe grupa d.d. 27.04.2010. 9,70% 2.300.102 2.409.822 - 2.409.822

Petrokemija d.d. 17.09.2010. 9,90% 6.831.150 7.007.728 - 7.007.728

Žito d.o.o. 14.07.2010. 10,50% 7.428.778 7.927.779 - 7.927.779

H1 telekom d.d. 09.03.2010. 12,00% 6.144.588 - 6.591.124 6.591.124

H1 telekom d.d. 28.05.2010. 9,50% 16.325.230 - 17.143.916 17.143.916

Konstruktor-inženjering d.d. 08.03.2010. 11,00% 6.663.104 - 7.163.718 7.163.718

Magma d.d. 28.01.2010. 10,90% 6.764.700 - 7.440.014 7.440.014

Medika d.d. 28.09.2010. 9,40% 2.624.720 - 2.638.947 2.638.947

Medika d.d. 30.06.2010. 10,40% 1.855.160 - 1.902.426 1.902.426

Zagreb montaža d.d. 26.02.2010. 11,60% 4.481.550 - 4.912.567 4.912.567

Zagreb montaža d.d. 09.12.2010. 10,90% 3.156.860 - 3.175.677 3.175.677

Total 44.210.405 50.968.389 95.178.794

/iv/ Maturity dates of debt securities and other securities with fi xed income are set out as follows:

31/12/2008 31/12/2009



Bonds

Up to 1 year 63.019.119 48.553.831 111.572.950 10.147.344 - 10.147.344

From 1 to 5 years 539.267.540 492.295.213 1.031.562.753 641.978.136 511.131.652 1.195.982.655

Over 5 years 289.876.708 10.447.159 300.323.867 235.475.240 - 192.602.373

Total 892.163.367 551.296.203 1.443.459.570 887.600.720 511.131.652 1.398.732.372

Treasury bills

Up to 1 year 80.568.730 - 80.568.730 96.231.978 - 96.231.978

From 1 to 5 years 25.000.000 - 25.000.000 - - -

Total 105.568.730 - 105.568.730 96.231.978 - 96.231.978

Commercial bills

Up to 1 year 28.400.000 4.000.000 32.400.000 44.210.405 50.968.389 95.178.794

Total 1.026.132.097 555.296.203 1.581.428.300 1.028.043.103 562.100.041 1.590.143.144


5.3.3.2. Investments available for sale

31/12/2008 31/12/2009



Shares, stakes and other securities with variable income

- listed on stock exchange 47.319.833 122.432.298 169.752.131 70.529.831 144.832.425 215.362.256

- not listed on stock exchange - 4.100.520 4.100.520 - 4.100.520 4.100.520

Total 47.319.833 126.532.818 173.852.651 70.529.831 148.932.945 219.462.776

Stakes in investment funds 68.360.458 116.031.478 184.391.936 65.776.792 124.220.785 189.997.577

Total 115.680.291 242.564.296 358.244.587 136.306.623 273.153.730 409.460.353

/i/ Structure of investments in shares, stakes and other securities with variable income is set out as follows:

Gross amount Value Net Ownership Gross amount Value Net Ownership

Life Non-life decrease amount percentage Life Non-life decrease amount percentage

in HRK in HRK in HRK in HRK % in HRK in HRK in HRK in HRK %

Shares listed on stock exchange

Atlantska plovidba d.d., Dubrovnik 47.319.833 47.320.522 - 94.640.355 10,08 70.529.831 70.530.782 - 141.060.613 10,08

Luka Rijeka d.d., Rijeka - 25.065.342 - 25.065.342 5,69 - 28.401.929 - 28.401.929 5,69

Jadranska banka d.d., Šibenik - 17.747.500 - 17.747.500 6,48 - 18.910.000 - 18.910.000 6,48

Varaždinska banka d.d., Varaždin - 10.851.050 - 10.851.050 3,29 - 3.077.661 - 3.077.661 3,29

Linijska nacionalna plovidba d.d., Split - 4.819.500 - 4.819.500 9,61 - 3.579.894 - 3.579.894 9,61

Liburnia Riviera Hoteli d.d., Rijeka - 1.849.785 - 1.849.785 0,53 - 2.481.383 - 2.481.383 0,53

HT-Hrvatske telekomunikacije - 3.984.400 - 3.984.400 0,02 - 5.493.600 - 5.493.600 0,02

Podravka d.d., Koprivnica - 3.484.350 - 3.484.350 0,22 - 3.951.066 - 3.951.066 0,22

Atlantic grupa d.d., Zagreb - 2.958.237 - 2.958.237 0,26 - 4.402.062 - 4.402.062 0,26

SPIN VALIS d.d., Požega - 1.562.000 - 1.562.000 4,29 - 1.029.549 - 1.029.549 0,07

Istraturist d.d., Umag - 1.221.301 - 1.221.301 0,07 - 338.000 - 338.000 0,60

Karlova�ka banka d.d., Karlovac - 444.000 - 444.000 0,60 - 242.500 - 242.500 0,81

Drvoplast d.d., Buzet - 169.564 - 169.564 5,41 - 118.435 - 118.435 0,08

Zve�evo d.d., Požega - 260.175 - 260.175 0,81 - 1.562.000 - 1.562.000 4,29

Sarajevo osiguranje d.d., Sarajevo - 150.572 - 150.572 0,08 - 169.564 - 169.564 5,41

Split tours d.d., Split - 544.000 - 544.000 11,24 - 544.000 - 544.000 11,24

Total 47.319.833 122.432.298 - 169.752.131 - 70.529.831 144.832.425 - 215.362.256 -

Baoti� d.d., Zagreb - 2.400.000 - 2.400.000 13,71 - 2.400.000 - 2.400.000 13,71

Agroservis d.o.o., Virovitica - 1.983.600 (595.080) 1.388.520 18,00 - 1.983.600 (595.080) 1.388.520 18,00

Panonija d.d., Osijek - 1.211.700 (1.211.700) - 2,52 - 1.211.700 (1.211.700) - 2,52

IMOTA d.d., Imotski - 1.202.400 (1.202.400) - 0,07 - 1.202.400 (1.202.400) - 0,07

Tržište novca d.d., Zagreb - 312.000 - 312.000 4,50 - 312.000 - 312.000 4,50

Trimot d.d., Imotski - 115.200 (115.200) - 0,66 - 115.200 (115.200) - 0,66

Adria Diesel d.d., Karlovac - 50.800 (50.800) - 0,01 - 50.800 (50.800) - 0,01

Maslina d.d., Punat - 37.798 (37.798) - 7,18 - 37.798 (37.798) - 7,18

�uro �akovi� Aparati d.d.,Slavonski Brod

- 15.600 (15.600) - 0,28 - 15.600 (15.600) - 0,28

Total - 7.329.098 (3.228.578) 4.100.520 - - 7.329.098 (3.228.578) 4.100.520 -

Total 47.319.833 129.761.396 (3.228.578) 173.852.651 - 70.529.831 152.161.523 (3.228.578) 219.462.776 -


Recapitalization of Jadranska banka d.d., Šibenik in which the Company participated with HRK8,400,000 on the basis of which it obtained the ad-

ditional 4,200 shares of HRK2,000 par value was not confi rmed by the Commercial Court in Šibenik due to the appeal of other shareholders for the

purpose of establishing invalidity and refuting the Decision of the General Assembly on the increase of capital stock.

Revaluation provision development during 2008

Acquisition costs Gross value Value decreaseBalance at

31 December 2008Balance at

31 December 2007Increase/decrease 31 December 2008

/i/ Shares listed on stock exchange

Atlantska plovidba d.d., Dubrovnik 41.208.300 94.640.355 - 94.640.355 443.674.656 (390.242.601) 53.432.055

Luka Rijeka d.d., Rijeka 16.708.000 25.065.342 - 25.065.342 121.846.432 (113.489.090) 8.357.342

Jadranska banka d.d., Šibenik 15.500.000 17.747.500 - 17.747.500 41.180.000 (38.932.500) 2.247.500

HT-Hrvatske telekomunikacije d.d., Zagreb 5.300.000 3.984.400 - 3.984.400 1.755.000 (3.070.600) (1.315.600)

Linijska nacionalna plovidba d.d. 4.284.000 4.819.500 - 4.819.500 - 535.500 535.500

Atlantic grupa d.d., Zagreb 5.999.895 2.958.237 - 2.958.237 (372.122) (2.669.536) (3.041.658)

VABA d.d., Varaždin 10.658.506 10.851.050 - 10.851.050 12.210.000 (12.017.456) 192.544

Liburnia Riviera Hoteli d.d., Rijeka 5.308.800 1.849.785 - 1.849.785 2.986.200 (6.445.215) (3.459.015)

Podravka d.d., Koprivnica 4.005.000 3.484.350 - 3.484.350 2.803.500 (3.324.150) (520.650)

SPIN VALIS d.d., Požega 1.249.600 1.562.000 - 1.562.000 671.660 (359.260) 312.400

Drvoplast d.d., Buzet 920.360 169.564 - 169.564 (750.796) - (750.796)

Istraturist d.d., Umag 345.000 1.221.301 - 1.221.301 1.207.155 (330.855) 876.300

Zve�evo prehrambena ind. d.d., Požega 500.000 260.175 - 260.175 700.000 (939.825) (239.825)

Karlova�ka banka d.d., Karlovac 400.000 444.000 - 444.000 951.520 (907.520) 44.000

Sarajevo osiguranje d.d., Sarajevo 845.347 150.572 - 150.572 (205.957) (488.819) (694.776)

Split tours d.d., za turizam, Split 476.000 544.000 - 544.000 - 68.000 68.000

Total 113.708.808 169.752.131 - 169.752.131 628.657.248 (572.613.927) 56.043.321

Other 7.329.098 7.329.098 (3.228.578) 4.100.520 (1.714.574) (1.377.023) (3.091.597)

Total 121.037.906 177.081.229 (3.228.578) 173.852.651 626.942.674 (573.990.950) 52.951.724

Revaluation provision development during 2009

Acquisition costs Gross value Value decreaseBalance at

31 December 2009Balance at

31 December 2008Increase/decrease 31 December 2009

/ii/ Shares listed on stock exchange

Atlantska plovidba d.d., Dubrovnik 53.470.908 141.060.613 - 141.060.613 53.432.055 34.157.650 87.589.705

Luka Rijeka d.d., Rijeka 16.708.000 28.401.929 - 28.401.929 8.357.342 3.336.587 11.693.929

Jadranska banka d.d., Šibenik 15.500.000 18.910.000 - 18.910.000 2.247.500 1.162.500 3.410.000

HT-Hrvatske telekomunikacije d.d., Zagreb 5.300.000 5.493.600 - 5.493.600 (1.315.600) 1.509.200 193.600

Linijska nacionalna plovidba d.d. 4.284.000 3.579.894 - 3.579.894 535.500 (1.239.606) (704.106)

Atlantic grupa d.d., Zagreb 5.999.895 4.402.062 - 4.402.062 (3.041.658) 1.443.825 (1.597.833)

VABA d.d., Varaždin 10.658.506 3.077.661 - 3.077.661 192.544 (7.773.389) (7.580.845)

Liburnia Riviera Hoteli d.d., Rijeka 5.308.800 2.481.383 - 2.481.383 (3.459.015) 631.598 (2.827.417)

Podravka d.d., Koprivnica 4.005.000 3.951.066 - 3.951.066 (520.650) 466.716 (53.934)

Istraturist d.d., Umag 345.000 1.029.549 - 1.029.549 876.300 (191.751) 684.549

Zve�evo prehrambena ind. d.d., Požega 500.000 242.500 - 242.500 (239.825) (17.675) (257.500)

Karlova�ka banka d.d., Karlovac 400.000 338.000 - 338.000 44.000 (106.000) (62.000)

Sarajevo osiguranje d.d., Sarajevo 845.347 118.435 - 118.435 (694.776) (32.136) (726.912)

SPIN VALIS d.d., Požega 1.249.600 1.562.000 - 1.562.000 312.400 - 312.400

Drvoplast d.d., Buzet 920.360 169.564 - 169.564 (750.796) - (750.796)

Split tours d.d., Split 476.000 544.000 - 544.000 68.000 - 68.000

Total 125.971.416 215.362.256 - 215.362.256 56.043.321 33.347.519 89.390.840

Shares not listed on stock exchange 6.117.398 7.329.098 (3.228.578) 4.100.520 (3.091.597) 3.091.597 -

Total 132.088.814 222.691.354 (3.228.578) 219.462.776 52.951.724 36.439.116 89.390.840


/ii/ Structure of investments in investment funds classifi ed as investments being kept for sale is set out as follows:

31 December 2008 31 December 2009 Revaluation provision development during 2009

Acquisition costs

Life Non-life TotalAcquisition

costs Life Non-life Total 31/12/2008

Realized loss/profi t

Unrealized profi t/loss

31/12/2009

in HRK in HRK in HRK in HRK in HRK in HRK in HRK in HRK in HRK in HRK in HRK

Aureus Equity 13.300.971 - 4.712.047 4.712.047 13.300.971 - 4.852.244 4.852.244 (8.588.923) - 140.197 (8.448.726)

Aureus Balanced 10.000.000 - 5.514.424 5.514.424 10.000.000 - 5.188.210 5.188.210 (4.485.576) - (326.214) (4.811.790)

Erste Total East 17.915.000 - 6.960.795 6.960.795 17.915.000 - 5.646.028 5.646.028 (10.954.205) - (1.314.767) (12.268.972)

Erste balanced 9.000.000 7.057.280 - 7.057.280 9.000.000 7.023.900 - 7.023.900 (2.067.671) - (33.380) (2.101.051)

Erste Adriatic Equity 25.000.000 15.141.932 - 15.141.932 25.000.000 15.473.971 - 15.473.971 (9.858.068) - 332.039 (9.526.029)

Fima Equity 18.400.000 2.084.145 6.097.133 8.181.278 7.873.645 - 3.026.006 3.026.006 (10.218.722) 6.605.630 (1.234.547) (4.847.639)

Ilirika Jugoisto�na Europa

20.300.000 - 9.901.676 9.901.676 20.300.000 - 10.771.683 10.771.683 (10.398.324) - 870.007 (9.528.317)

Ilirika Jugoisto�na Europa Balanced

2.010.000 - 1.304.660 1.304.660 2.010.000 - 1.434.544 1.434.544 (705.340) - 129.884 (575.456)

PBZ I-STOCK 33.484.000 1.126.899 11.601.177 12.728.076 33.484.000 1.727.575 17.785.003 19.512.578 (20.755.924) - 6.784.502 (13.971.422)

PBZ - Equity 35.000.000 17.042.674 - 17.042.674 35.000.000 17.783.004 - 17.783.004 (17.957.326) - 740.330 (17.216.996)

Prospectus Jugoisto�na Europa

16.796.804 4.389.013 1.196.459 5.585.472 - - - - (11.211.332) 10.341.112 870.220 -

Raiffeisen balanced 42.000.000 7.361.233 18.324.811 25.686.044 42.000.000 8.067.975 20.084.150 28.152.125 (16.789.313) - 2.466.081 (14.323.232)

Raiffeisen central Europe

60.000.000 9.128.282 14.684.628 23.812.910 60.000.000 9.974.367 16.045.721 26.020.088 (36.187.090) - 2.207.178 (33.979.912)

ZB PRIVATE EAST 10.000.000 5.029.000 - 5.029.000 10.000.000 5.726.000 - 5.726.000 (4.971.000) - 697.000 (4.274.000)

Questus Private Equity Kapital

30.640.261 - 35.733.668 35.733.668 28.584.282 - 39.387.196 39.387.196 5.093.407 (1.009.326) 6.718.833 10.802.914

Total 343.847.036 68.360.458 116.031.478 184.391.936 314.467.898 65.776.792 124.220.785 189.997.577 (160.055.407) 15.937.416 19.047.363 (125.070.628)

5.3.3.3. Investments at fair value through the profi t and loss account

31/12/2008 31/12/2009



ST Cash - 3.536.332 3.536.332 4.288.744 - 4.288.744

Aureus Equity 10.002.669 - 10.002.669 - - -

Raiffeisen cash 4.501.060 - 4.501.060 31.332.043 40.034.434 71.366.477

OTP Money fund - - - 3.047.728 - 3.047.728

HI cash - - - 10.128.345 10.106.381 20.234.726

HI cash - KP - - - 10.000.140 - 10.000.140

VB Cash - - - 5.000.476 - 5.000.476

Erste Money - - - 10.000.747 35.040.433 45.041.180

ZB Plus - - - 25.439.813 40.063.954 65.503.767

HPB Money fund - - - 10.131.236 15.012.942 25.144.178

HPB Money - KP - - - 10.001.565 - 10.001.565

Raiffeisen BONDS - - - 5.007.110 5.025.137 10.032.247

ZB Global - - - - 10.038.500 10.038.500

Total 14.503.729 3.536.332 18.040.061 124.377.947 155.321.781 279.699.728


5.3.3.4. Deposits, loans and receivables

31/12/2008 31/12/2009



Deposits at loan institutions 394.700.000 862.841.633 1.257.541.633 465.661.000 666.921.098 1.132.582.098

Loans 39.465.290 493.177.963 532.643.253 50.949.686 407.147.815 458.097.501

Total 434.165.290 1.356.019.596 1.790.184.886 516.610.686 1.074.068.913 1.590.679.599

/i/ Structure of investments in deposits at loan institutions is set out as follows:

31/12/2008 31/12/2009

Life Non-life Total Interest rate Life Non-life Total

in HRK in HRK in HRK % in HRK in HRK in HRK

BKS Bank d.d., Rijeka - - - 7,50 5.000.000 5.000.000 10.000.000

Centar banka d.d., Zagreb 10.000.000 30.000.000 40.000.000 7,00 10.000.000 70.000.000 80.000.000

Credo banka d.d., Split 5.000.000 5.000.000 10.000.000 7,00 20.000.000 10.000.000 30.000.000

Croatia banka d.d., Zagreb - 50.000.000 50.000.000 6,50 - 40.000.000 40.000.000

Erste&Steiermärkische Bank d.d., Rijeka

40.000.000 140.000.000 180.000.000 8,00 65.000.000 90.000.000 155.000.000

Hrvatska poštanska banka d.d., Zagreb*

50.000.000 75.000.000 125.000.000 7,75 75.000.000* 70.000.000 145.000.000

Hypo Alpe-Adria-Bank d.d., Zagreb 25.000.000 50.000.000 75.000.000 7,50 90.661.000 74.711.000 165.372.000

Imex banka d.d., Split 10.000.000 50.000.000 60.000.000 6,85 10.000.000 30.000.000 40.000.000

Jadranska banka d.d., Šibenik - 7.500.000 7.500.000 7,00 - 7.500.000 7.500.000

Karlova�ka banka d.d., Karlovac - 31.000.000 31.000.000 6,50 30.000.000 20.000.000 50.000.000

Nava banka d.d., Zagreb - - - 7,50 - 5.000.000 5.000.000

Kreditna banka Zagreb d.d., Zagreb - - - - - - -

Kvarner banka d.d., Rijeka - - - - - - -

OTP banka Hrvatska d.d., Zadar - - - - - - -

Partner banka d.d., Zagreb 15.000.000 23.000.000 38.000.000 6,85 15.000.000 23.000.000 38.000.000

Podravska banka d.d., Koprivnica - 35.000.000 35.000.000 7,00 35.000.000 - 35.000.000

Privredna banka Zagreb d.d., Zagreb 169.700.000 256.341.633 426.041.633 1,5-7,5 80.000.000 181.710.098 261.710.098

Raiffeisenbank Austria d.d., Zagreb 50.000.000 25.000.000 75.000.000 7,00 - - -

Slatinska banka d.d., Slatina - 20.000.000 20.000.000 6,50 10.000.000 10.000.000 20.000.000

Slavonska banka d.d., Osijek - 25.000.000 25.000.000 7,50 - - -

SG-Splitska banka d.d., Split 20.000.000 - 20.000.000 6,50 - - -

Štedbanka d.d., Zagreb - - - 7,00 20.000.000 - 20.000.000

VABA d.d., Varaždin - 40.000.000 40.000.000 7,00 - 30.000.000 30.000.000

Total 394.700.000 862.841.633 1.257.541.633 465.661.000 666.921.098 1.132.582.098


The balance sheet as at 31 December 2009 includes under the position denoting deposits also the deposits with the maturity period up to 3 months

amounting to HRK82,101,498.

* Under the position denoting deposits the balance sheet as at 31 December 2009 sets out a hybrid deposit amounting to HRK50,000,000 that

is made at Hrvatska poštanska banka d.d., Zagreb pursuant to the Agreement on investment in the supplementary capital of the Bank.

/ii/ Loans

31/12/2008 31/12/2009



Gross amount 39.465.290 552.095.960 591.561.250 50.949.686 494.308.295 545.257.981

Value decrease - (58.917.997) (58.917.997) - (87.160.480) (87.160.480)

Total 39.465.290 493.177.963 532.643.253 50.949.686 407.147.815 458.097.501

In the Balance sheet as at 31 December 2009 loans were granted to the affi liated companies to the amount of HRK29,043,401 (in 2008 to the amount of

HRK27,681,324).

Maturity dates of the granted loans are set out as follows:

31/12/2008 31/12/2009



Up to 1 year 15.423.558 360.151.554 375.575.112 24.006.936 258.868.722 282.875.658

From 1 to 5 years 24.041.732 101.218.490 125.260.222 26.942.750 122.778.993 149.721.743

Over 5 years - 31.807.919 31.807.919 - 25.500.100 25.500.100

Total 39.465.290 493.177.963 532.643.253 50.949.686 407.147.815 458.097.501

Structure of loans according to the collateral is set out as follows:

31/12/2008 31/12/2009



Guarantees of business banks - 25.584.502 25.584.502 - 33.673.397 33.673.397

Life insurance policies with restricted transferability

39.465.290 - 39.465.290 50.949.686 - 50.949.686

Mortgages and real estate fi duciaries - 465.769.313 465.769.313 - 373.474.418 373.474.418

With consent of supervisory body and others

- 1.824.148 1.824.148 - - -

Total 39.465.290 493.177.963 532.643.253 50.949.686 407.147.815 458.097.501


5.4. INVESTMENTS FOR THE ACCOUNT AND RISK OF LIFE INSURANCE POLICYHOLDERS

Investments for the account and risk of life insurance policyholders amounting to HRK22,327,665 (amounting to HRK13,686,926 at 31 December

2008) refer to the products that combine insurance and investment components for policyholders through the investments of premium in investment

funds on behalf of and for the account of policyholders.

5.5. DEFERRED AND CURRENT TAX ASSETS

Current tax assets amounting to HRK 593,629 (amounting to HRK23,076,880 at 31 December 2008) refer to the extra paid profi t tax.

5.6. RECEIVABLES

31/12/2008 31/12/2009



Receivables from direct insurance operations

40.299.344 683.345.004 723.644.348 44.283.400 674.209.401 718.492.801

Receivables from reinsurance operations

- 43.028.014 43.028.014 - 13.833.681 13.833.681

Other receivables 37.863.048 249.884.210 287.747.258 6.339.424 230.775.736 237.115.160

Total 78.162.392 976.257.228 1.054.419.620 50.622.824 918.818.818 969.441.642

5.6.1. Receivables from direct insurance operations

31/12/2008 31/12/2009



Receivables under inland premium 40.299.344 841.601.009 881.900.353 44.283.400 884.614.154 928.897.554

Receivables under premium abroad - 16.135.699 16.135.699 - 15.709.925 15.709.925

Premium value adjustment - (174.391.704) (174.391.704) - (226.114.678) (226.114.678)

Total 40.299.344 683.345.004 723.644.348 44.283.400 674.209.401 718.492.801


The elaboration of time-limited receivables structure for inland insurance premium as well as the cover for over 180 days past due but uncollected

receivables are determined as follows:

31/12/2008 31/12/2009

in HRK in HRK

Written uninvoiced inland premium 312.026.180 282.359.110

Invoiced uncollected inland premium 569.874.173 646.538.444

Invoiced uncollected premium abroad 14.981.301 15.709.925

Total receivables 896.881.654 944.607.479

Undue and past due up to 180 days 712.919.119 704.575.066

Past due by over 180 days 183.962.535 240.032.413

Total upon maturity date 896.881.654 944.607.479

Past due by over 180 days 183.962.535 240.032.413

At value adjustment 174.391.704 226.114.678

Unadjusted value of receivables 9.570.831 13.917.735

Cover for receivables past due by over 180 days

Claims provision for debatable receivables 9.570.831 13.917.735

Total cover 9.570.831 13.917.735

Value decrease development during 2009 is set out as follows:

31/12/2009

in HRK

Balance at 31 December 2008 (174.391.704)

Increase of value adjustment (237.544.494)

Collection of previously decreased amounts 168.948.629

Loss from value decrease (68.595.865)

Write-offs 16.872.891

Balance at 31 December 2009 (226.114.678)

5.6.2. Receivables from coinsurance and reinsurance operations

Receivables from reinsurance operations amounting to HRK13,833,681 (at 31 December 2008 amounting to HRK43,028,014) refer to the receivables

from the reinsurer on the basis of the stake in the claims indemnifi cation and receivables for the reinsurance commission.


5.6.3. Other receivables

31/12/2008 31/12/2009



Receivables from other insurance operations

- 50.266.964 50.266.964 - 36.187.495 36.187.495

Receivables for investment returns 1.388.058 7.040.152 8.428.210 2.085.445 11.487.942 13.573.387

Other receivables 36.474.990 192.577.094 229.052.084 4.253.979 183.100.299 187.354.278

Total 37.863.048 249.884.210 287.747.258 6.339.424 230.775.736 237.115.160

/i/ Receivables from other insurance operations

31/12/2008 31/12/2009



Recourse receivables - 44.583.182 44.583.182 - 38.885.182 38.885.182

Recourse receivables value decrease - (7.172.717) (7.172.717) - (16.665.963) (16.665.963)

Total - 37.410.465 37.410.465 - 22.219.219 22.219.219

Receivables under foreign claims - 14.920.080 14.920.080 - 15.974.372 15.974.372

Value decrease - (2.063.581) (2.063.581) - (2.006.096) (2.006.096)

Total 12.856.499 12.856.499 13.968.276 13.968.276

Total - 50.266.964 50.266.964 - 36.187.495 36.187.495

/ii/ Receivables for investment returns

31/12/2008 31/12/2009



Receivables for regular interest on granted loans

603.018 9.236.455 9.839.473 591.266 11.053.181 11.644.447

Receivables for regular interest on granted deposits

777.046 2.607.185 3.384.231 1.488.295 2.841.135 4.329.430

Receivables for default interest 4.203 11.305.703 11.309.906 4.503 14.534.942 14.539.445

Other receivables for interest 3.791 22.279 26.070 1.381 (6.231) (4.850)

Value decrease - (16.131.470) (16.131.470) - (16.935.085) (16.935.085)

Total 1.388.058 7.040.152 8.428.210 2.085.445 11.487.942 13.573.387


/iii/ Other receivables

31/12/2008 31/12/2009



Receivables for sold fl ats - 23.447.402 23.447.402 20.152.180 20.152.180

Receivables for paid advances - 44.623.059 44.623.059 - 15.530.905 15.530.905

Receivables obtained through cessions

130.805 7.101.087 7.231.892 - 4.998.269 4.998.269

Receivables for property obtained through fi duciaries

- 15.158.374 15.158.374 - 24.667.801 24.667.801

Receivables from card issuers 3.359.537 87.506.513 90.866.050 4.137.944 89.111.516 93.249.460

Receivables from state and state institutions

- 4.266.413 4.266.413 - 9.768.691 9.768.691

Receivables from purchasers - 6.670.799 6.670.799 - 4.731.167 4.731.167

Receivables from employees - 717.120 717.120 - 667.332 667.332

Receivables under judicial rulings - 2.230.238 2.230.238 - 4.298.569 4.298.569

Other receivables 32.984.648 856.089 33.840.737 116.035 9.173.869 9.289.904

Total 36.474.990 192.577.094 229.052.084 4.253.979 183.100.299 187.354.278

5.7. OTHER ASSETS

31/12/2008 31/12/2009



Money at bank and till money 5.576.768 26.848.079 32.424.847 92.222 15.795.588 15.887.810

Other 179.611 39.056.894 39.236.505 118.800 25.545.447 25.664.247

Total 5.756.379 65.904.973 71.661.352 211.022 41.341.035 41.552.057

5.7.1.Money at bank and till money

31/12/2008 31/12/2009



Money on HRK accounts - 16.939.254 16.939.254 90.864 6.319.582 6.410.446

Money on foreign currency accounts - 9.700.036 9.700.036 - 9.257.581 9.257.581

Till money 157.101 208.789 365.890 1.358 218.425 219.783

Money for mathematical provision cover

5.419.667 - 5.419.667 - - -

Total 5.576.768 26.848.079 32.424.847 92.222 15.795.588 15.887.810


5.7.2. Other

31/12/2008 31/12/2009



Received cheques 179.611 18.849.631 19.029.242 118.800 13.196.877 13.315.677

Received bills of exchange - 20.207.263 20.207.263 - 12.348.570 12.348.570

Total 179.611 39.056.894 39.236.505 118.800 25.545.447 25.664.247

5.8. PREPAID EXPENSES OF THE FUTURE PERIOD AND UNDUE COLLECTION

31/12/2008 31/12/2009



Deferred interest and rental fees - 1.883.556 1.883.556 - 226.131 226.131

Other prepaid expenses of the future period

34.022 18.888.895 18.922.917 51.194 20.766.308 20.817.502

Total 34.022 20.772.451 20.806.473 51.194 20.992.439 21.043.633


5.9. CAPITAL AND PROVISIONS

5.9.1. Capital stock

The capital stock was determined at nominal value to the amount of HRK442,887,200 (at 31 December 2008 to the same amount) and consists of

316,348 shares at par value of HRK 1,400.00, which were entirely paid in cash and entered in the registry of the Commercial Court in Zagreb

All shares are of the I issue and are marked as follows: 307,598 common shares marked as CROS-R-A 8,750 preferred shares marked as CROS-P-A

Each share, either the common or the preferred one, entitles to 1 (one) vote at the General Assembly of the Company. All shares are paid in total,

issued in non-materialized form, freely transferable and recorded in the register of the Central Depository Agency.

The ownership structure as at 31 December 2008 and 31 December 2009 is set out as follows:

31/12/2008 31/12/2009

ShareholderNumber

of sharesAmount

in HRK% of stake

in capitalNumber

of sharesAmount

in HRK% of stake

in capital

Croatian Privatization Fund 253.941 355.517.400 80,27 253.961 355.545.400 80,28

Raiffeisenbank Austria d.d. - custodial account 21.312 29.836.800 6,74 20.341 28.477.400 6,43

HPB d.d. / Kapitalni fond d.d. - custodial account 3.594 5.031.600 1,14 - - 0,00

Hrvatska poštanska banka d.d. 2.957 4.139.800 0,93 6.919 9.686.600 2,19

Societe Generale - Splitska banka d.d. - custodial account 2.566 3.592.400 0,81 4.502 6.302.800 1,42

Julius k.d.d., Maribor 2.122 2.970.800 0,67 2.122 2.970.800 0,67

Privredna banka Zagreb d.d., Zagreb - custodial account 1.758 2.461.200 0,56 2.422 3.390.800 0,77

Hypo Alpe-Adria-Bank d.d., Zagreb - custodial account 1.566 2.192.400 0,50 1.109 1.552.600 0,35

Kraš d.d., Zagreb 1.400 1.960.000 0,44 1.400 1.960.000 0,44

Zagreba�ka banka d.d. - custodial account 1.157 1.619.800 0,37 736 1.030.400 0,23

Auto Hrvatska d.d., Zagreb 1.004 1.405.600 0,31 1.004 1.405.600 0,32

Dioki d.d., Zagreb 734 1.027.600 0,22 - - 0,00

Komercijalna banka Zagreb d.d., Zagreb - in bankruptcy 700 980.000 0,22 700 980.000 0,22

Erste&Steiermarkische Bank d.d., Rijeka - custodial account 635 889.000 0,20 873 1.222.200 0,28

Bahovec Sre�ko 530 742.000 0,17 540 756.000 0,17

Adriacommerce d.o.o., Split 500 700.000 0,16 500 700.000 0,16

Radi� Antun 417 583.800 0,13 414 579.600 0,13

Tankerska plovidba d.d., Zadar 400 560.000 0,13 400 560.000 0,13

TEB inženjering d.o.o., Zagreb 399 558.600 0,13 - - 0,00

Škaro Miroslav 380 532.000 0,12 380 532.000 0,12

Other small shareholders 18.276 25.586.400 5,78 18.025 25.235.000 5,69

Total 316.348 442.887.200 100,00 316.348 442.887.200 100,00


5.9.2. Revaluation provisions

Revaluation provisions amounting to HRK462,272,014 (amounting to HRK102,406,509 at 31 December 2008) are set out as follows:

Revaluation provisions for land and buildings:

in HRK

31 December 2008 209.510.191

Increase 417.776.027

Decrease (1.171.067)

Amortization on the revaluation effect (6.391.045)

Transfer to deferred tax liability (125.740.431)

Transfer from deferred tax liability 1.278.209

Other changes in revaluation provisions 2.689.919

31 December 2009 497.951.803

Revaluation provisions for investments available for sale:

Investments in fundsInvestments in

shares and stakesTotal

in HRK in HRK in HRK

31 December 2008 (160.055.407) 52.951.724 (107.103.683)

Changes in fair value of fi nancial assets available for sale 19.047.363 33.341.338 52.388.701

Realized loss and profi t from fi nancial assets available for sale 15.937.416 3.097.778 19.035.194

31 December 2009 (125.070.628) 89.390.840 (35.679.788)

5.9.3. Provisions

Provisions to the amount of HRK423,894,652 (at 31 December 2008 to the amount of HRK405,232,684) were determined by the Decisions of the

General Assembly of the Company out of the profi t in previous years as follows:

31/12/2008 31/12/2009

in HRK in HRK

Legal reserves 10.731.893 13.977.453

Statutory provisions 52.289.963 67.706.372

Other provisions 342.210.828 342.210.827

Total 405.232.684 423.894.652


/i/ Legal reserves

in HRK

31 December 2008 10.731.893

Transfer of profi t in 2008 (see Note 5.9.5.) 3.245.560

31 December 2009 13.977.453

/ii/ Statutory provisions

in HRK

31 December 2008 52.289.963

Transfer of profi t in 2008 (see Note 5.9.5.) 15.416.409.

31 December 2009 67.706.372

/iii/ Other provisions

Other provisions amounting to HRK342,210,828 (at 31 December 2008 to the same amount) were determined by the Decision of the General Assembly of

the Company out of a part of profi t in previous years.

5.9.4. Retained profi t

in HRK

31 December 2008 147.556.010

Transfer of profi t in 2008 (see Note 5.9.5.) 45.269.226

Change in accounting policy (56.122.580)

31 December 2009 136.702.656

During 2009 the Company set out the provisions for regular severance pays and anniversary rewards for all employees working for indefi nite period

of time with the position as at 31 December 2008 by debiting the retained profi t.


5.9.5. Current year profi t

Business operations of the Company during 2009 resulted in the realized profit amounting to HRK69,690,466 (in 2008 amounting to

HRK64,911,195).

Pursuant to the decision of the Assembly of the Company the profi t realized through the business operations of the Company during 2008 amounting

to HRK64,911,195 was allocated as follows:

in HRK

Legal reserves (see Note 5.9.3./i/) 3.245.560

Statutory provisions (see Note 5.9.3./ii/) 15.416.409

Retained profi t (see Note 5.9.4.) 45.269.226

Liability for dividend payment - preferred shares 980.000

Total 64.911.195

5.10. TECHNICAL PROVISIONS

31/12/2008 31/12/2009



Unearned premiums, gross 3.294.428 1.166.569.292 1.169.863.720 3.700.957 1.048.855.538 1.052.556.495

Math. insurance provision, gross 1.497.408.097 - 1.497.408.097 1.636.192.145 - 1.636.192.145

Claims provision, gross 40.383.334 2.927.094.981 2.967.478.315 43.034.792 2.847.912.861 2.890.947.653

Other insurance-technical provisions, gross

- 14.200.000 14.200.000 - 14.400.000 14.400.000

Total 1.541.085.859 4.107.864.273 5.648.950.132 1.682.927.894 3.911.168.399 5.594.096.293

/i/ Other insurance-technical provisions, gross amount

Other insurance-technical provisions, gross amount totalling HRK14,400,000 (totalling HRK14,200,000 at 31 December 2008) refer to the provisions

for the earthquake risk.

5.11. LIFE INSURANCE TECHNICAL PROVISIONS WHEN THE POLICYHOLDER BEARS THE RISK

Life insurance technical provisions when the policyholder bears the risk amounting to HRK22,327,665 (amounting to HRK13,686,926 at 31 December

2008) are formed for the life insurance policies when the policyholder bears the insurance risk.


5.12. OTHER PROVISIONS

31/12/2008 31/12/2009



Provisions for pensions and legal proceedings

- 21.940.023 21.940.023 3.398.958 73.155.742 76.554.700

Other provisions - 2.186.550 2.186.550 - 2.317.231 2.317.231

Total - 24.126.573 24.126.573 3.398.958 75.472.973 78.871.931

/i/ Development of provisions for pensions and legal proceedings during 2009 is set out as follows:

Costs of legal proceedingsCosts of anniversary

rewards and severance pays

Other Total


31 December 2008 8.045.404 13.685.284 209.335 21.940.023

Additional provisions 1.587.899 56.996.989 - 58.584.888

Transfer from / to 1.132.561 (1.132.561) - -

Cancellation of provisions (1.615.544) (1.005.765) - (2.621.309)

Use of provisions (62.958) (1.076.609) (209.335) (1.348.902)

31 December 2009 9.087.362 67.467.338 - 76.554.700

5.13. DEFERRED AND CURRENT TAX LIABILITY

31/12/2008 31/12/2009



Deferred tax liability - - - - 124.462.222 124.462.222

Current tax liability - 2.338.424 2.338.424 - 19.668.840 19.668.840

Total - 2.338.424 2.338.424 - 144.131.062 144.131.062

The deferred tax liability is recognized under the adjustment to the fair value of land and buildings used for the insurance operations and a part of

land and buildings not used for insurance operations.


5.14. OTHER LIABILITIES

31/12/2008 31/12/2009



Liabilities derived from direct insurance operations

706.519 96.488.747 97.195.266 359.664 101.114.806 101.474.470

Liabilities derived from coinsurance and reinsurance operations

2.986 2.645.012 2.647.998 2.426 694.632 697.058

Other liabilities 112.581 117.800.007 117.912.588 6.977.237 90.056.639 97.033.876

822.086 216.933.766 217.755.852 7.339.327 191.866.077 199.205.404

/i/ Liabilities derived from direct insurance operations

31/12/2008 31/12/2009



Liabilities for Guarantee fund - 60.232.640 60.232.640 - 70.776.073 70.776.073

Liabilities under paid claims 706.519 31.172.197 31.878.716 337.020 22.907.401 23.244.421

Liabilities for fi re department contribution

- 1.589.929 1.589.929 - 1.514.522 1.514.522

Liabilities towards Croatian Insurance Bureau for insurance premiums

- 237.671 237.671 - 158.274 158.274

Liabilities for CFSSA contribution - 134.229 134.229 - 112.761 112.761

Liabilities for health insurance contribution out of motor TPL ins. premium

- - - - 3.950.260 3.950.260

Other liabilities - 3.122.081 3.122.081 22.644 1.695.515 1.718.159

Total 706.519 96.488.747 97.195.266 359.664 101.114.806 101.474.470


/ii/ Other liabilities

31/12/2008 31/12/2009



Liabilities towards suppliers - 26.282.110 26.282.110 2.278 34.175.380 34.177.658

Liabilities for received advances 104.099 408.967 513.066 201.852 96.465 298.317

Liabilities for dividends - 1.163.947 1.163.947 - 1.194.244 1.194.244

Liabilities for net salaries - 18.664.952 18.664.952 - 17.179.642 17.179.642

Liabilities for contributions from salaries - 6.282.575 6.282.575 - 5.956.035 5.956.035

Liabilities for tax and surtax from salaries - 4.909.475 4.909.475 - 4.684.842 4.684.842

Liabilities for contributions on salaries - 5.587.325 5.587.325 - 5.110.625 5.110.625

Deductions from salaries and salary compensation

- 3.565.862 3.565.862 - 2.777.749 2.777.749

Liabilities under motor TPL and motor-hull insurance tax

- 11.680.042 11.680.042 - 10.640.526 10.640.526

Liabilities towards state for sold fl ats - 8.323.072 8.323.072 - 7.538.636 7.538.636

Other liabilities 8.482 30.931.680 30.940.162 6.773.107 702.495 7.475.602

Total 112.581 117.800.007 117.912.588 6.977.237 90.056.639 97.033.876



CroatiaOsiguranje

Group

POWER.from one generation to another


CROATIA OSIGURANJE D.D. GROUP

On 31/12/2009 Croatia osiguranje Group consisted of the company Croatia osiguranje d.d. Zagreb (parent company) and 23 daughter companies (13

daughter companies and 10 grand-daughter companies).

Organization of the Group Croatia osiguranje d.d.

Croatia LLoyd d.d.Zagreb (94,64%)

Milenijum osiguranje a.d Beograd, Srbija (99,78%)

Croatia osiguranje a.d. za životna osiguranja,

Skopje, Makedonija (92,5%)

Croatia osiguranje a.dza neživotna osiguranja,

Skopje , Makedonija (100%)

Croatia osiguranje d.d. Ljubuški, BIH (52,05%)

Croatia Sigurimi sh.a.Priština (100%)

PBZ Croatia osiguranje d.d.Zagreb (50%)

Croatia osiguranje dobrovoljnomirovinsko društvo d.o.o.

Zagreb (100%)

Croatia leasing d.o.o.Zagreb (100%)

Croatia zdravstveno osiguranje d.d.Zagreb (100%)

Herz d.d.Požega (100%)

Slavonijatrans – tehni�kipregledi d.o.o.

Slavonski Brod (76%)

Croatia tehni�ki pregledi d.o.o.Zagreb (100%)

CROATIA osiguranje d.d.

Croatia mirovni dom d.o.o.Zagreb (100%)

Plan�i� d.o.o.Vrbanj (51%)

Crotehna d.o.o.Ljubuški (100%)

Croatia remont d.d.�apljina (69,79%)

Croauto d.o.o.Mostar (67,0%)

Croatia Vitez d.o.o.Vitez (90,0%)

Hotel Hum d.o.o.Ljubuški (80%)

Poliklinika Ars MedicaPula (74%)

Poliklinika Croatia zdravstveno osiguranje, Zagreb (100 %)

STP PITOMA�APitoma�a (100%)

DAUGHTER COMPANIES


1. CROATIA LLOYD d.d., ZagrebUlica grada Vukovara 62, 10 000 Zagreb

Capital stock: HRK116,060,800

Capital ownership of the Group: 94.64%

Number of shares issued: 145,076

Nominal value of one share: HRK800.00

Number of shares owned by CROATIA osiguranje d.d.: 137,299

Number of employees on 31/12/2009: 52

Management Board of the Company: Supervisory Board:

1. Robert Stude, Chairman 1. Hrvoje Vojkovi�

2. Kitica Mio�, Member 2. Zoran Zaninovi�

3. Ljerka Šeparovi�

4. Vanja Nadali

5. Damir Mihanovi�

6. Zdenka Matkovi�

7. Jakov Su�evi�

More than 40 years, the company Croatia Lloyd d.d. has been operating

as a professional reinsurance company in the Republic of Croatia at the

same time successfully connecting home and international insurance

and reinsurance market. The Company offers reinsurance against all

types of risks among which property and transport risks are the core

business.

Major ownership of the Company: Croatia mirovni dom d.o.o., Zagreb

(100%) and Plan�i� d.o.o., Vrbanj (51%).

In 2009, business operations of the Company were under pressure of

unstable fi nancial market environment and economic crisis that affected

the insurance industry on the home as well as on the international

market. The Company's business operations were undertook in sig-

nifi cant insolvency of the market as a whole. The existing portfolio of

the Company is, however, stable and the share of the active business

from abroad increased.

In 2009, the Company achieved the results as planned and expected.

The total income increased by 5.1% compared to the same period of

the previous year and amounted to HRK 289.2 mil. That increase is by

its major part the result of the investment income that increased by

29.7% compared to the same period of the previous year. The total

expenditures increased by 14.9% compared to 2008 and amounted

to HRK253.1 mil. In accordance with branch requirements and positive

provisions only the claim provision increased by HRK 11.7 mil. All that

resulted with gross profi t amounting to HRK 36.1 mil. that is somewhat

lower than planned.

Given the environment, longterm measures applied with the aim to de-

crease expenses contributed as well as to achieve such good results.

The same effects of these measures are expected in 2010 as well.

In 2009 Croatia Lloyd acquired the stake in the member company of the

Group Croatia zdravstveno osiguranje (33.81%) and in the company

Plan�i� d.o.o. (51%).

The Company applies the Code of Corporate Management of the

Zagreb Stock-Exchange d.d.

DESCRIPTION AND BUSINESS OPERATIONS OF THE DAUGHTER COMPANIES


2. CROATIA zdravstveno osiguranje d.d., ZagrebMiramarska 22, 10 000 Zagreb

The capital stock: HRK44,363,000

- by the recapitalization of the member company of the Group Croatia

Lloyd d.d. amounting to HRK 15,000,000 the capital stock increased

from HRK 29,363,000 up to HRK 44,363,000

The capital stock owned by the Group: 100% (66.19% owned by

Croatia osiguranje d.d. whille 33.81% owned by Croatia Lloyd d.d.)


Nominal value of one share: HRK1,000.00


Number of shares owned by Croatia Lloyd d.d.: 15,000



1. Vesna Dulibi�, Chairwoman 1. Hrvoje Vojkovi�

2. Josip Kereta, Member 2. Ljerka Šeparovi�


4. Zvonko Lovri�

5. Kitica Mio�

The Company was founded in March, 2004 as the company specialized

for private health insurance and separated as the daughter company of

the parent company Croatia osiguranje d.d. In accordance with the Law on

voluntary health insurance 2006 dividing the voluntary health insurance

as supplementary, additional and private health insurance, now the com-

pany CROATIA zdravstveno osiguranje provides voluntary health insurance

– supplementary and additional health insurance. In its major ownership

the company Croatia zdravstveno osiguranje has two clinics: Poliklinika Ars

Medica in Pula and Poliklinika Croatia zdravstveno osiguranje in Zagreb.

In 2009, the company Croatia zdravstveno osiguranje d.d. realized the

gross profi t amounting to HRK 6.4 mil. that is an increase of 39.0%

compared to the same period of the previous year. The business results

of the company Croatia zdravstveno osiguranje, owing to its longterm

strategy, detailed creative insurance programmes and the highest qual-

ity of service confi rm its successful struggle with business challenges.

During 2009, the company CROATIA zdravstveno osiguranje d.d. real-

ized the gross written premium amounting to HRK 97.0 mil. that is

an increase of 9.5% compared to the same period in 2008. The real-

ized increase of profi t and premium is the result of the improved pro-

gramme of additional health insurance, introducing new sales channels

via Internet and applying the newest business operation standards. The

company Croatia zdravstveno osiguranje got the prestigious certifi cate

¨Quality Management System ISO 9001:2008¨ given to companies ex-

tremely satisfying the restrictive international business standards. This

Certifi cate guarantees that the Company's running business is in ac-

cordance with business standards of European Union and the rest of the

world and was given to the company Croatia zdravstveno osiguranje

by the company Lloyd`s Register EMEA.

During 2009, the company CROATIA zdravstveno osiguranje has been

preparing necessary steps in order to open a new clinic in Koprivnica

that will start with its work in the second quarter of 2010.

In 2010 the company plans up to 20% more newly contracted insur-

ance policies and further strengthening and development of the sales

network, introducing and improving new sales channels and launching

the redesigned existing and new sales programmes to the market as

well as improving both service and staff's skills.


3. CROATIA OSIGURANJE d.d., LJUBUŠKI, B&HNikole Kordi�a bb, Ljubuški, B&H

Capital stock: KM8,018,304

Capital owned by the Group: 52.05%


Nominal value of one share: KM266.00




1. Mladen Markoti�, Chairman 1. Hrvoje Vojkovi�

2. Siniša Srzi�, Member 2. Damir Mihanovi�

3. Florijan Boras

4. Zdravko Petrovi�

5. Ivan Luburi�

Croatia osiguranje d.d., Ljubuški takes the third place among insurance

companies in Bosnia&Herzegowina.

In its total or major ownership the Company has several companies

mostly operating MOT testing and TPL insurance of motor vehicles:

Crotehna d.o.o., Ljubuški (100%), Croatia remont d.d., �apljina

(69,79%), Croauto d.o.o., Mostar (67,0%), Croatia Vitez d.o.o., Vitez

(90,0%), Hotel Hum d.o.o., Ljubuški (80%).

In 2009, the Company operated in unstable environment of fi nancial

market and economic crisis and at the same time under the pressure of

illegal competition still present on the insurance market of B&H.

In 2009, the total income realized amounted to HRK139.7 mil. that is a

decrease of 5.9% compared to the same period of the previous year while

expenditures amounted to HRK136.4 mil. that is a decrease of 4.7%.

The realized gross profi t decreased by 38.2% and amounted to HRK 3.3

mil. The written gross premium amounted to HRK 131.6 mil. which is a

decrease of 3.0% while the technical provision increased by 4.2%.

4. MILENIJUM osiguranje a.d., BeogradKneza Miloša 82/I, 11 000 Beograd, Republic of Serbia

Capital stock: RSD483,550,000

- On 09/04/2009 the General Assembly brought a decision on an increase

of the capital stock by issuing 3,137 shares from the retained profi t.

Capital stock owned by the Group: 99.78%

Number of shares issued: 48.355

Nominal value of one share: RSD10,000

Number of shares owned by CROATIA osiguranje d.d.: 48.251



1. Damir Mihanovi�, Chairman 1. Hrvoje Vojkovi�

2. Hrvoje Parlov, Member 2. Pero Beki�

3. Eugen Sunara, Member 3. Stamenka Milovi�

4. Hrvoje Paukovi�, Member

5. Veljko Kneževi�, Member

Milenijum osiguranje a.d. is one of the smaller insurance companies

in the Republic of Serbia.

CROATIA osiguranje d.d. acquired the major ownership part in

Milenijum osiguranje a.d., by purchasing shares at the beginning of

2003.

Soon after purchasing shares recapitalization took place in order to

enable Milenijum osiguranje a.d. to operate other types of insurance

besides TPL motor insurance.

During 2008 the falling down of economic operations has started and

it continued during 2009 as well so affecting the insurance market in

the Republic of Serbia as a decrease both in insurance product sales

and in premium received.

During 2009 the insurance market in the Republic of Serbia has not

become stable. Illegal competence, commission higher than legally pre-

scribed etc. placed restrictions on normal business operations. During

2009, in spite of that, the Company registered an increase in the writ-

ten premium by 7.8% compared to 2008 amounting to HRK77.1 mil.

while technical provision increased by 16.1%.


The total income amounted to HRK 81.4 mil. that is a decrease of 0.8%

compared to 2008 while total expenditures amounted to HRK 80.3

mil. that is an increase of 1.0%. The realized gross profi t decreased by

55.1% and amounted to HRK 1.2 mil.

In 2010, the strategic target of the company Milenijum osiguranje a.d.

is to keep the existing portfolio and to enhance it, at the same time

to allocate it to the major part of the registered property and personal

accident insurance as well as to the growth of the participation in the

portfolio referring to – primarily – companies from the Republic of

Croatia operating on the territory of the Republic of Serbia.

5. CROATIA osiguranje a.d. Društvo za osiguranje života Skopje, Republic of MacedoniaMito Hadživasilev 20/II, 1000 Skopje, Republic og Macedonia

Capital stock: MKD184,131,750 or EUR 3,000,000

Capital stock owned by the Group: 92.50%


Nominal value of one share: EUR100.00



Director: Management Board of the Company:

1. Vladimir Popovski 1. Željko Juki�

2. Vladimir Popovski

3. Mario Puljiz

4. Franjo Mišak

5. Vlado Kambovski

In March, 2005 the Company started with operating life insurance.

In December, 2007 the purchase of 2,520 shares of the company Vardar

Croatia osiguranje d.d. Skopje from the company Croatia osiguranje

d.d. Ljubuški, has been realized, that increased the share of Croatia

osiguranje d.d. Zagreb in the Company from 36.40% to 70%.

In December, 2008 recapitalization of the Company which amounted to

EUR 2,250,000.00 took place and the capital stock of the Company as

well as the share of Croatia osiguranje d.d. in the Company increased

from 70% to 92.50%. At the same time the Company changed its

name from VARDAR CROATIA osiguranje a.d. Skopje to CROATIA osi-

guranje a.d. Društvo za osiguranje života Skopje.

In 2009, the total income of the Company amounted to HRK17.1

mil. that is an increase of 27.1% compared to the same period of the

previous year while expenditures amounted to HRK 16.6 mil. that is an

increase of 26.3%. The realized gross profi t increased by 68.2% and

amounted to HRK 448.6 thousand.

The written gross premium increased by 27.1% and amounted to

HRK13.5 mil. while the mathematical provision increased by 47.9%

and amounted to HRK 19.8 mil.

The realized business results overfulfi lled the plan for 2009.


6. CROATIA osiguranje a.d. Društvo za neživotna osiguranja, Skopje, Republic of MacedoniaMito Hadživasilev 20/II, 1000 Skopje, Republic of Macedonia

Capital stock: MKD199,593,125 or EUR 3,250,000

Capital stock owned by the Group: 100%





Director: Management Board:

1. Dragan Lazareski 1. Vlado Ošust

2. Dragan Lazareski

3. Ivan Pavkovi�

4. �uro Eder

5. Risto Mal�eski

The company CROATIA osiguranje, Društvo za neživotna osiguranja,

is a new member of the Group that started with work in 2009 and

operates all types of non-life insurance.

Foundation of that company and investment of EUR25 mil. shows the

continuance of the process of expanding operations and strengthening

the position of the Group in the region.

As the Company started with its work in June the basic targets in the

second quarter of 2009 were establishing legal and professional pre-

dispositions for the beginning of business operations.

With regard to only six months-work of the Company the realized

results in 2009 were as expected. In the total income that amounted

to HRK 1.6 mil., income from investment amounted to 43.5% while

earned premium participated with 37.4%. In total expenditures that

amounted to HRK 2.9 mil. the biggest part (89.4%) refers to business

expenditures (acquisition expenses and administrative expenses) that

are necessary as it is a new company at the beginning of its operation

and expansion.

In 2010 the strategic target of the Company is enhancing the share

on the Macedonian insurance market i.e. wider market presence with

bigger scope and quality of sales service (further education and profes-

sional training of the personnel as well as stronger marketing strategy)

and fi rst of all the need for development of own sales network by

foundation of new subsidiaries .

Taking into account everything above mentioned, in spite of economic

recession, the Management Board is optimistic and expects the realiza-

tion of total income amounting to HRK 12.4 mil., total expenditures

amounting to HRK 12.2 mil. and the realization of profi t amounting

to HRK 180 thousand in 2010 . They expect increase in gross written

premium by 349% that equals to HRK 18,0 mil.


7. CROATIA Sigurimi sh.a., Priština, KosovoRr. Luan Haradinaj 5/A, 10000 Priština, Kosovo

Capital stock: EUR3,000,000


Number of issued shares: 30,000




Director: Management Board:

1. Ivica Pezo 1. Ivan Jurina

2. Boris Sekelez

3. Ivica Pezo

4. Mahmut Alidemaj

5. Nazmi Bytyqi

In March, 2005 the Company was founded with minimal capital stock

of EUR 2,500,000.00 and operates non-life insurance.

In June, 2005, Banking and payments authority of Kosovo (BPK)

brought a decision on additional conditions needed to get a working

license to operate non-life insurance, in terms of increasing minimal

capital stock from EUR 2,500,000.00 to EUR 3,000,000.00 that was

successfully completed until 31/12/2006 as prescribed.

In 2009, the total income of the Company amounted to HRK 18.6 mil.

that is an increase of 32.5% compared to 2008, while expenditures

amounted to HRK14.7 mil. that is an increase of 33.4%. The gross

profi t amounted to HRK3.9 mil. that is an increase of 29.1% compared

to 2008. The gross written premium increased by 14.4% compared

to 2008 and amounted to HRK 21.0 mil. while the technical provision

increased by 69.1%.

The gross profi t is overfulfi lled by 31.3% compared to plan for 2009.

In 2010 a new policy against illegal competence, better marketing

strategy, investment in new sales channels – branch offi ces, technology

and professional education of personnel are planned.

8. Croatia osiguranje mirovinsko društvo za upravljanje dobrovoljnim mirovinskim fondom d.o.o., ZagrebMiramarska 22, 10 000 Zagreb


- On September 15, 2009 the General Assembly of the Company brought

a decision on the decrease of the capital stock from HRK30.0 mil. to

HRK 15.0 mil. due to losses.

The capital stock owned by the Group: 100%


Management of the Company: Supervisory Board:

1. Veronika Šapina-Pezelj, Director 1. Lidija Kralj

2. Hrvoje Paukovi�

3. Nina Babi�

In 2003 the Company was founded as an open fund offering voluntary

pension insurance on the basis of individual capitalized saving and

expanded its business by including closed pension funds since 2007.

Now the Company manages with one open (CROATIA OSIGURANJE dobro-

voljni mirovinski fond) and four closed pension funds (CROSIG mirovinski

fond, HEP mirovinski fond, HAC mirovinski fond, SPH mirovinski fond).

In 2009 the Voluntary Pension Fund met with extremely hard market

conditions affected not only by economic crisis but additionally by

evaluations of pension reform from the side of actual public policy.

Negative media opinion concerning small pensions arising out of the

second pillar pension insurance resulted with negative reaction with

citizens and savers from the third pillar pension insurance. In spite of

the negative economic circumstances the total number of members

in all funds was 26,047 that is an increase of 4.75% compared to the

same period of the previous year.

The realized total income amounted to HRK 3.7 mil. that is an increase

of 6.2% compared to the same period of the previous year while the to-

tal expenditures amounted to HRK 3.0 mil. that is the decrease of 27.1%

which resulted with positive result amounting to HRK 720 thousand.

The realized income registers the decrease of 30.5% compared to plan

for 2009. Savings and rationalization measures resulted with decrease

in expenses by 42.7% compared to plan for 2009 and the gross profi t

more than expected was realized.


9. PBZ CROATIA osiguranje d.d. za upravljanje obveznim mirovinskim fondom, ZagrebUl. kralja Držislava 5, 10 000 Zagreb




Nominal value of one share: HRK1,000


Number of employees on 31/12/2009.: 16


1. Dubravko Štimac, Chairman 1. Nikola Mijatovi�

2. Mario Radakovi�, Member 2. Vesna Urek

3. Nedjeljko Pavlovi�

In 2001 the Company was founded with the aim to manage obligatory

pension fund which is jointly managed by Croatia osiguranje d.d. and

Privredna banka Zagreb d.d..

PBZ CO is a well-known and respectable company among funds man-

aging pension funds in the Republic of Croatia. In 2009, the number

of the fund members was 270,426 that is a share of 17.7% among all

obligatory pension fund members. The number of fund members in-

creased by 3.1% compared to the same period of the previous year.

In 2009, the total income of the Company amounted to HRK49.2 mil. and

increased by 10.8% compared to 2008 while total expenditures amount-

ed to HRK 19.3 mil. and increased by 21.6%. The gross profi t amounted

to HRK 30.0 mil. and increased by 4.7% compared to 2008.

10. CROATIA LEASING d.o.o., ZagrebMiramarska 22, 10 000 Zagreb

The capital stock: HRK38,000,000

- On 30/06/2009 the General Assembly brought a decision on the

decrease of the capital stock from HRK 90.0 mil. to HRK 38.0 mil.

due to losses.




1. Miroslav Marketi�, Chairman 1. Hrvoje Vojkovi�

2. Zoran Šangut, Member 2. Ljerka Šeparovi�


The company CROATIA LEASING d.o.o. is registered to operate fi nance

and operative leasing of material assets.

In 2009, the total income of the Company amounted to HRK 163.4

mil. that is an increase of 4.1% compared to 2008 while expenditures

amounted to HRk 162.8 mil. that is a decrease of 11.7%. The gross

profi t amounted to HRK 538.00 thousand.


11. CROATIA – tehni�ki pregledi d.o.o., ZagrebMiramarska 22, 10 000 Zagreb

The capital stock:HRK 71,767,400




1. Joško Divi�, Chairman 1. Hrvoje Vojkovi�

2. Staško Adleši�, Member 2. Damir Mihanovi�

3. David Sopta, Member 3. Hrvoje Parlov

4. Željko Serdar

5. Bernard Mršo

In October, 2003 the company CROATIA-tehni�ki pregledi d.o.o. be-

came the member of the CROATIA osiguranje d.d. Group and the main

business operation of the company is testing and registration of motor

vehicles. The Head Offi ce of the Company is in Zagreb and MOT test

stations are situated at 20 places all over the Repuiblic of Croatia. The

Company owes a 100%-share in STP PITOMA�A, Pitoma�a.

In 2009, Croatia – tehni�ki pregledi d.o.o. opened new MOT test

stations in Vukovar, Split, Osijek, Koprivnica and Glavina Donja (near

Imotski) that will ensure contemporary and quality service of the tech-

nical testing and assessment of claims all in one place making the

procedure faster and easier to the clients.

All MOT test stations owned, co-owned or rented by the Group, real-

ized in total the number of 191,570 technical testings of the motor

vehicles that is an increase of 10.5% compared to 2008. This increase

is the result of the increase in the number of the MOT test stations

mentioned above during 2009 that at the same time improved the

sales of the MTPL insurance policies by 6.4%.

The total income amounted to HRK 47.0 mil. that is an increase of

6.8% compared to 2008, while total expenditures amounted to HRK

40.4 mil. that is an increase of 10.0%. The increase of the total expen-

ditures mostly is the result of the increase of expenses due to opening

of new MOT test stations.

The gross profi t decreased by 9.2% and amounted to HRK 6.6 mil.

The plan for 2009 announced the decrease in income, expenditures

and profi t but the realilzation overfulfi lled the plan.

12. SLAVONIJATRANS – TEHNI�KI PREGLEDI d.o.o., Slavonski Brod, Vinogradska 17, 35 000 Slavonski Brod

The capital stock: HRK20,000




1. Davor Pin�ar, Chairman 1. Nenad Pehnec

2. Stjepan Furlan

3. Mika Mimica

In July, 2004 the company was founded and started to operate testings

of the motor vehicles.

In 2009, the number of 18,284 of testings was achieved that is an

increase of 1.1% or 200 of testings more than in 2008.


compared to 2008, while the total expenditures amounted to HRK 6.2

mil. that is a decrease of 4.5%.

The realized gross profi t increased by 39.9% and amounted to HRK

676.1 thousand.

The realization overfulfi lled the plan for 2009.


13. HERZ d.d. PožegaSv. Roka 2, Požega

The capital stock: HRK 3,408,600



Nominal value of one share: HRK380.00




1. Vladimir Hut, Chairman 1. Mika Mimica

2. Zdenko Ov�ar, Member 2. Marija Bajt

3. Ilija Šimunovi�, Member 3. Željko Vinkovi�

HERZ d.d., Požega is a company that operates driving schools and MOT

testings. The technical equipment level of the driving school and of the MOT

testing station belong to the highest rank in the Republic of Croatia.


compared to 2008, while the total expendituires amounted to HRK 7.0

mil. that is a decrease of 13.4%.

The realized gross profi t increased by 159.0% and amounted to HRK

1.2 mil.

Plan for 2009 announced decrease in profi t by 18.7% due to fi nancial

crisis and falling down of the standard of living. The realized profi t

increased by 218.4% than planned owing to the signifi cant rationaliza-

tion of operating expenses.

In 2010, it is expected that recession would still affect the business and the

announced business results should be on the level of those in 2009.


BUSINESS RESULTS OF THE GROUP

Key Performance Indicators

31/12/2008 31/12/2009 Index (3/2)

1 2 3 4

Profi t & Loss Account:

Total income (HRK 000) 4.009.972 4.042.104 100,8

Total expenditures (HRK 000) 3.921.861 3.843.622 98,0

Written premium (HRK 000) 3.593.956 3.412.909 95,0

- non-life 3.197.382 3.019.185 94,4

- life 396.574 393.723 99,3

Claims paid (HRK 000) 2.213.780 2.185.322 98,7

- non-life 1.960.748 1.998.072 101,9

- life 253.032 187.250 74,0

Investment income(HRK 000) 315.780 512.092 162,2

- non-life 227.489 390.277 171,6

- life 88.291 121.815 138,0

Investment expenses(HRK 000) 234.309 93.198 39,8

- non-life 166.663 75.077 45,0

- life 67.646 18.121 26,8

Business expenditures (HRK 000) 1.165.803 1.219.327 104,6

- non-life 1.037.341 1.085.445 104,6

- life 128.462 133.882 104,2

Gross profi t (HRK 000) 88.111 198.481 225,3

Net profi t (HRK 000) 61.130 152.504 249,5

Balance:

Total assets (HRK 000) 8.396.510 8.973.441 106,9

Capital & Provision (HRK 000) 1.329.704 1.786.104 134,3

Technical provision (HRK 000) 6.215.385 6.180.830 99,4

- unearned premium 1.387.075 1.248.997 90,0

- provision for claims 3.200.392 3.140.702 98,1

- LIMP 1.579.432 1.739.463 110,1

- other insurance-technical provision 48.486 51.669 106,6

Investment (HRK 000) 5.337.016 5.660.086 106,1

Other indicators :

Earning per share (HRK) 195,6 492,6 251,9

Claim ratio (%) 68,5 68,8 100,4

Cost ratio (%) 38,9 44,5 114,5

Ratio combined (%) 107,4 113,3 105,5

Asset profi tability (%) 0,7 1,7 233,4

Capital profi tability (%) 4,6 8,5 185,7


In 2009, economic crisis and recession greatly infl uenced the results

but the Group records the total income amounting to HRK 4,042,1

mil. that is an increase of 0,8% compared to the previous year. The

consolidated profi t after taxation and minority shares amounted to

HRK 152,5 mil.

The written premium as the biggest income in insurance operations

amounted to HRK 3,412,9 mil. and recorded the decrease of 5.0% that

confi rmed the existence of crisis i.e. stagnation in insurance industry

as well as in the economy of the Republic of Croatia as in the region.

The written premium of non-life insurance amounted to HRK 3,019,2

mil. that is a decrease of 5.6% while written premium of life insurance

amounted to HRK 393,7 mil. that is a decrease of 0.7%. The non-life

insurance in the total written premium of the Group participated with

88.5% while life insurance participated with11.5%.

Investment income from life and non-life insurance recorded an in-

crease of 62.2% amounting to HRK 512,0 mil. That increase is mainly

infl uenced by increase in income from interest as well as by value

adjustment of investment in land and buildings.

Business Result of the Group

Income of the Group according to business segments:

HRK 000

2008 2009 Index (3/2)

1 2 3 4

Insurance operation income 3.779.619 3.801.345 100,6

Finance and operative leasing income 147.229 152.024 103,3

Pension fund managing income 25.717 28.326 110,1

MOT test stations income 57.404 60.407 105,2

Total 4.009.969 4.042.102 100,8

The paid claims amounted to HRK 2,185,3 mil. and recorded the de-

crease of 1.3%.

The insurance operation expenses amounted to HRK 1,219,3 mil. that

is 31.1% of total expenses and increased by 4.6% compared to the

same period of the previous year.

The total assets of the Group on 31/12/2009 amounted to HRK 9,0

billion.

On 31/12/2009 the calculated technical provision amounted to HRK 6.2

billion that is a decrease of 0.6% compared to the technical provision

calculated on 31/12/2008.

The Group will endeavour to grow further and record positive results

as the regional leader by signifi cantly reducing operative expenses and

by enhancing sales activities during the next business year.


Share by members of the Group in the Group's business result:

HRK 000

Profi t/LossI-XII 2008

Profi t/LossI-XII 2009

Index09/08

1 2 3=2/1

Croatia osiguranje d.d. 68.473 97.005 141,7

Croatia Lloyd Grupa d.d. 55.023 36.135 65,7

PBZ Croatia osiguranje d.d. 14.267 14.944 104,7

Croatia osiguranje Ljubuški Grupa d.d. 5.300 3.275 61,8

Milenijum osiguranje a.d. 2.574 1.156 44,9

Croatia osiguranje mirovinsko društvo d.o.o. -617 720

Croatia - tehni�ki pregledi Grupa d.o.o. 7.296 6.625 90,8

Croatia zdravstveno osiguranje Grupa d.d. 4.581 6.369 139,0

Slavonijatrans tehni�ki pregledi d.o.o. 483 676 140,0

Croatia leasing d.d. -27.494 538

Croatia Sigurimi sh.a. 3.002 3.874 129,0

Herz d.d. 461 1.194 259,1

Croatia osiguranje d.d., za neživot.osig., Skopje -1.238

Croatia osiguranje d.d., za život.osig., Skopje 267 449 167,8

GROSS PROFIT OF THE GROUP BEFORE ELIMINATION 133.617 171.721 128,5

Consolidation elimination (dividend, value adjustment of the investment in the daughter-companies) -45.506 26.758

Profi t before taxation 88.111 198.481 225,3

Profi t tax 22.114 42.867 193,8

Profi t after taxation 65.997 155.614 235,8

Minority shareholders 4.866 3.110 63,9

Company's shareholders 61.130 152.504 249,5


In 2009, two new member companies i.e. Croatia osiguranje a.d.,

Društvo za neživotna osiguranja, Skopje and Plan�i� d.o.o., Vrbanj joined

the Group. Assets and business results of the new member companies

are included in the consolidated fi nancial reports of the Group.

Changes in the Group

Major business events

During previous business year, in spite of more diffi cult operating con-

ditions caused by economic crisis, the Group continued with more

conservative strategy of expanding its operations in the Republic of

Croatia as well as in the region.

At the beginning of June, a new company operating non-life insurance

started with business in Macedonia.

With the aim to expand its sales network in Macedonia, the company

Croatia osiguranje opened a new subsidiary operating non-life insur-

ance in Ohrid. That is the fi rst subsidiary of that kind of the daughter

company Croatia osiguranje, društvo za neživotno osiguranje.

During the previous business year, fi ve MOT test stations were opened

(in Vukovar, Split, Osijek, Koprivnica and Glavina Donja (near Imotski)

that will ensure more contemporary and quality service of technical

testing of the motor vehicles as well as the assessment of loss all at one

place that will make the procedure faster and easier to the clients.

Furthermore, a new business premises in Koprivnica, intended for new

polyclinic that should start with work soon have been bought. The new

polyclinic will cover not only the Koprivnica-Križevci district but the wider

territory of the North-West region of the Republic of Croatia as well.

At the beginning of the business year new corporate web pages of

Croatia osiguranje d.d. as well as the corporate data warehouse were

introduced.

The member of the Group Croatia zdravstveno osiguranje acquired the

prestigious certifi cate ¨Quality Management System ISO 9001:2008¨

given to the companies that satisfy extremely rigorous international

business standards. Quality Management Certifi cate is a guarantee that

the company operates according to rigorous business standards of the

European Union and the rest of the world and was given to Croatia

zdravstveno osiguranje by the company Lloyd`s Register EMEA.

The sale and distribution of the insurance products in the Croatian post

offi ces started while travel health insurance as well as travel cancellation

insurance can be bought on-line as well as in the tourist agencies.

The co-operation with FINA, which will have FINA Option offi ces in

its 17 offi ces offering all information needed by the clients as well as

conclusion of insurance, offers or requirements for MTPL insurance,

motor hull insurance, household insurance, travel insurance, private

health insurance, personal accident insurance, life insurance, housing-

savings, voluntary pension savings and risk investments, has started.

The above stated co-operation will enable cheaper distribution and

sale of the insurance products and services.

In the scope of saving measures with the aim to decrease unproduc-

tive expenses and according to the Republic of Croatia Government's

reccomendation, the salary of the Board of Management and of the

management of the Group decreased and the Decision on the decrease


of the gross salary in the parent as well as in the daughter companies

(the Group) by 10% has been brought and implemented.

During 2009, the project of organization optimization of Croatia osig-

uranje d.d. has been completed and implemented. It continues to be

realized in the member companies of the Group as well. This project

unifi es the organization and metodology of remuneration at the Group

level.

In the scope of Middle&East Europe Euromoney Conference, the com-

pany Croatia osiguranje has got a great recognition as the best insur-

ance company in the Middle&East Europe.

During next two years the Group Croatia osiguranje will be profi led

as the full service fi nancial institution that will base its operations on

insurance, fi nancial service and asset management.

MAJOR BUSINESS EVENTS AFTER EXPIRY OF THE BUSINESS YEAR

The Group acquired 16.9% stake in the company Adriatica-Net d.o.o.,

Zagreb.

President of the Board of Management of the Company Mr. Hrvoje

Vojkovi� and member of the Management Board Mr. Damir Mihanovi�

have been revealed of duty while Mr. Zdravko Zrinuši� was appointed

President of the Management Board.

EXPECTED DEVELOPMENT OF COMPANIES IN CONSOLIDATION

It is expected that Croatia osiguranje d.d. Group will continue with

growth and successful business results. This particularly refers to the

newly founded companies abroad that started with business success-

fully but on the markets of those countries participate with little per-

centage for now. It is necessary to enable faster growth to these com-

panies to become respectable competence on the insurance markets

there. Investment in education and training of personnel, especially

the young ones, then expanding of the sales network, introducing new

channels of insurance sales, particularly on-line sale as well as through

agencies and brokers, will be enlarged. The business partnership with

banks will be stronger with the aim to sale insurance products and to

enhance the business operations step by step to other segments of

fi nancial industry such as investment funds, obligatory and voluntary

pension funds. Health insurance, either through a new company or as

an insurance product will be offerred as well. During a fi ve-year period

our aim is that no company operating abroad should participate on the

market of that country with less than 5% and efforts should be made to

realize even better business results depending on the particular market

conditions. Special attention will be paid to the insurance technology

transfer and new products on the relation parent company – daughter

companies as well as to the development of new insurance products

in the daughter companies.

With the aim to achieve good participation on the insurance markets

abroad (depending on conditions and possibilities of those markets

and companies) there is a continuous interest in taking over other

insurance companies abroad as well as entry in industries close to

insurance such as building engineering, leasing sales, motor vehicles

repair and the like.


ACTIVITIES OF THE DAUGHTER COMPANIES AS A WHOLE IN THE FIELD OF RESEARCH & DEVELOPMENT(R&D)

The research and development (R&D) as a very important part of the

marketing will be further-on managed by the parent company. The

independence of the daughter companies in realization of this seg-

ment will be encouraged in regard with development of new insur-

ance products and new insurance sales channels targeted at maximum

harmonization of offer and needs on the market. In that way Croatia

osiguranje d.d. and its daughter companies will mostly be in service

of their insureds' needs and wishes. Special attention will be paid to

further development of the Daughter company department in the Head

offi ce aimed at creating a new strategy on development and growth

of all daughter companies especially those in the region.

MAIN CHARACTERISTICS OF THE INTERNAL SUPERVISION OF THE DAUGHTER COMPANIES AND RISK MANAGEMENT SYSTEM

The internal supervision of the daughter companies is well organized.

The Internal Control & Audit Department is established in the Head

Offi ce of Croatia osiguranje d.d., Zagreb, that, besides supervising the

business and business results of the parent company – supervises busi-

ness operations of all daughter companies nevertheless their shares/

stakes are quoted on the stock-exchange or not. However, in all in-

surance companies, the internal supervision and audit is established

consisting of a certifi ed auditor and a certifi ed actuary including other

specifi c ways of supervision and control according to regulations in

the particular country. The scope of activities of the above mentioned

departments are closely regulated by the Insurance Law in every country

separately but basically their scope of activities, liability and way of op-

erating do not make any signifi cant difference. Similarly, in accordance

with Insurance Law of the Republic of Croatia the company Croatia

osiguranje d.d. Zagreb, is obliged to present all relevant business reports

twice a year for the reason of capital calculation, guarantee capital and

capital adequacy of the insurance companies as well as the data about

investment and related business between some linked business subjects

to HANFA. On that occasion all business reports of the daughter com-

panies are additionally analyzed by the Risk Management Department

in the Head offi ce of Croatia osiguranje d.d., Zagreb. As the regulations

of the countries where our daughter companies operate also regulate

their continuous supervision by their supervising agencies, practically all

business reports and business events signifi cant for stability, solvency,

liquidity and possible business risks are repeatedly supervised.

Risk management system is still at its beginning, as in the company

Croatia osiguranje d.d. as in its daughter companies. However, some

business functions where implementation of risk management is signifi -

cant, for example, treasury, investment, real estate purchase/sale and

the like, already exist, while at the same time some other functions of

risk management are still at the very beginning.



Independentaudit

opinion– Group

PARTNERSHIP.from one generation to another


For and on behalf of the Management Board:

CROATIA OSIGURANJE d.d.

Miramarska 22

10000 Zagreb

Republic of Croatia

March 16, 2010

Responsibility for consolidated fi nancial reports

The Company's Management is liable to ensure that the consolidated

fi nancial reports for the year ended 31 December 2009 are composed

pursuant to the Croatian Accounting Law (NN 109/07) and the Inter-

national Financial Reporting Standards (NN 140/06, 30/08, 130/08,

137/08, 29/09) set by the Accounting Standards Board, so that they

provide a true and fair view of fi nancial situation, business results,

changes in capital and cash fl ows of the Group for that period.

On the basis of performed analysis the Board of Management justly

expects that the Company has suitable means to continue the busi-

ness activities in the forseeable future. Accordingly the Board of Man-

agement made fi nancial reports under the assumption of the time

limitlessness of the Group's business activities.

When composing fi nancial reports the Board of Management is liable:

for the selection and thereafter a consistent application of suit-

able accounting policies

for giving reasonable and prudent judgements and estimates for the application of valid financial reporting standards, pub-

lication and giving explanation for all substantially significant

aberrations in financial reports and for composing financial reports under the assumption of business

time limitlessness, unless the assumption is inappropriate.

The Board of Management is liable for keeping proper accounting records

that will refl ect the fi nancial position and business results of the Group

with acceptable accuracy at any moment as well as their adjustment to

the Croatian Accounting Law (NN 109/07) and the International Financial

Reporting Standards (NN 140/06, 30/08, 130/08, 137/08, 29/09) set by the

Accounting Standards Board. The Board of Management is also liable for

the protection of the Group's property, consequently also for taking justi-

fi ed measures in order to prevent and disclose fraud and other illegal acts.

Silvana Ivan�i�


Hrvoje Vojkovi�



Independent audit opinion

To the shareholders of the company CROATIA osiguranje d.d., Zagreb

1. We have audited the attached consolidated financial reports of

CROATIA osiguranje d.d. Zagreb, Miramarska 22 („Group“) for

the year ended December 31, 2009 that include the consoli-

dated Balance sheet of that day, the consolidated Profit and Loss

Account, the consolidated Report on Changes in Capital and

consolidated Report on Money Flow for the year ended on that

day as well as the belonging Notes to the consolidated financial

reports consisting of significant summaries of accounting policies

and other explanations.

Liability of the Management Board of the Company

2. The Management of the Company is responsible for making

and fairly presenting the following financial reports according

to the International Standards for Financial Reporting valid in

the Republic of Croatia. That responsibility includes: identify-

ing, including and managing the internal control significant for

making and fair presentation of financial reports without materi-

ally significant mistakes as a consewuence of errors or fraud, the

choice and the application of adequate accounting policies and

reasonable accounting estimation in given circumstances.

Responsibility of the Auditors

3. Our responsibility is to express our independent opinion about

the enclosed financial reports on the basis of our audit. The au-

diting procedure was performed according to the International

Auditing Standards. The mentioned Standards require the audit

to be planned and made in such a manner to collect all evidence

and all explanations that we consider needed to collect adequate

evidence providing us a reasonable guarantee that consolidated

financial reports do not include materially significant errors.

4. The auditing procedure includes procedures with the aim to col-

lect auditing evidence of the amounts and explanations in the

consolidated financial reports. The chosen procedures including

estimation of risk of the significant errors in consolidated financial

reports caused by mistake or as the result of fraud depend on

the opinion of the auditor. In estimation of the risk the auditor


Audit d.o.o., Zagreb

Zdenko Balen, certifi ed auditor,


Zagreb, March 16, 2010

takes into consideration internal controls that are important for

the Company for making and fairly presenting the consolidated

financial reports so as to identify auditor's procedures adequate

in given circumstances but not at the same time to give opinion

about internal controls' of the Company efficiency. The auditing

procedure also includes the estimation of adequate implemen-

tation of accounting policies and accounting estimation of the

Management Board of the Company as well as the estimation

of the whole presentation of the consolidated financial reports.

5. We believe that the collected audit data are adequate to give our

expert opinion.

Opinion

6. It is our expert opinion is that attached consolidated financial

reports, in all materially significant aspects, provide true and

fair financial position of the Group on December 31, 2009 as

well as the business results, changes in capital and money flows

of the Group in 2009 according to Law on Accountancy and

International Financial Reporting Standards valid in the Republic

of Croatia.

Special remark

7. Without making it conditional on our opinion given in point 6

above we bring your attention to the Notes 5.2./i/ and 5.3.1./

ii/ attached to the consolidated financial reports containing the

effects of value adjustment of book and estimated fair value of

real estate.

ConsolidatedAnnual

FinancialReports

– Group

RELIABILITY.from one generation to another


CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 December 2009

HRK 000

2008 2009

Note Life Non-life Total Life Non-life Total

Earned premium 4.1. 396.399 2.810.539 3.206.938 393.333 2.743.901 3.137.234

Investment income 4.2. 88.291 227.490 315.781 121.815 390.277 512.092

Commission & Contribution Income 4.3. 49 47.351 47.400 25 48.969 48.994

Other insurance-technical income, net of reinsurance 4.4. 27.901 107.155 135.056 1.023 34.945 35.968

Other income 4.5. 442 304.355 304.797 176 307.639 307.815

Insured event expenses,net 4.6. (251.353) (1.861.092) (2.112.445) (190.012) (1.797.757) (1.987.769)

Changes in other technical provision, net of reinsurance 4.7. (77.390) 1.462 (75.928) (158.804) (4.394) (163.198)

Changes in life insurance technical provision policyholder's investment risk, net of reinsurance (7.759) - (7.759) (6.412) - (6.412)

Premium return expenses (bonus & discounts), net of reinsurance - (2.404) (2.404) - (139) (139)

Business expenditures (insurance operation expenses), net 4.8. (128.462) (1.037.341) (1.165.803) (133.882) (1.085.445) (1.219.327)

Investment expenses 4.9. (67.646) (166.663) (234.309) (18.121) (75.077) (93.198)

Other technical outlays, net of reinsurance 4.10. (1.895) (64.020) (65.915) (2.813) (112.916) (115.729)

Other outlays, including value adjustment 4.11. (38) (257.260) (257.298) (152) (257.698) (257.850)

Profi t of the accounted period before taxation (21.461) 109.572 88.111 6.176 192.305 198.481

Profi t tax 4.12. - (22.114) (22.114) (69) (42.798) (42.867)

Profi t of the accounted period after taxation (21.461) 87.458 65.997 6.107 149.507 155.614

Allocation of profi t of the accounted period

Shareholders profi t (21.424) 82.554 61.130 5.856 146.648 152.504

Minority shareholders profi t (37) 4.904 4.867 251 2.859 3.110

Notes I - X attached hereto make the constituent part of these fi nancial reports.


CONSOLIDATED BALANCE SHEET on 31 December 2009

HRK 000

31 December 2008 31 December 2009

Note Life Non-life Total Life Non-life Total

Intangible assets 5.1. 3 61.650 61.653 39 62.060 62.099

Material assets 5.2. 4.772 1.259.527 1.264.299 5.013 1.633.401 1.638.414

Investments 5.3. 1.704.749 3.632.267 5.337.016 1.943.036 3.717.050 5.660.086

Investments for the account and risk of life insurance policyholders 5.4. 13.687 - 13.687 22.328 - 22.328

Reinsurance share in technical provision 5.5. 16 196.498 196.514 13 151.020 151.033

Deferred and current tax assets 5.6. - 23.077 23.077 - 6.156 6.156

Receivables 5.7. 81.270 1.223.413 1.304.683 51.474 1.245.548 1.297.022

Other assets 5.8. 7.015 145.913 152.928 2.212 86.275 88.487

Deferred cost payment and future income 5.9. 219 42.434 42.653 195 47.621 47.816

ASSETS TOTAL 1.811.731 6.584.779 8.396.510 2.024.310 6.949.131 8.973.441

Capital stock 5.10. 44.289 398.598 442.887 44.289 398.598 442.887

Revaluation provision (40.550) 171.410 130.860 (7.555) 500.126 492.571

Provision 75.500 329.733 405.233 75.500 348.395 423.895

Retained profi t 23.599 265.995 289.594 1.237 273.010 274.247

Current period profi t (21.424) 82.554 61.130 5.856 146.648 152.504

81.414 1.248.290 1.329.704 119.327 1.666.777 1.786.104

Exchange rate balance 5 263 268 (1) 87 86

Minority interest 8.801 47.487 56.288 9.123 53.647 62.770

Technical provision 5.11. 1.623.717 4.591.669 6.215.386 1.786.943 4.393.887 6.180.830

Technical provision of life insurance policyholders risk 5.12. 13.687 - 13.687 22.328 - 22.328

Other provision 5.13. 10 30.226 30.236 3.399 79.451 82.850

Deferred & current tax liability 5.14. - 3.634 3.634 - 145.210 145.210

Financial liability 5.15. 148 316.989 317.137 245 232.124 232.369

Other liabilities 5.16. 31.526 270.326 301.852 37.456 316.156 353.612

Deferred payment and future income 5.17. 52.423 75.895 128.318 45.490 61.792 107.282

LIABILITIES TOTAL 1.811.731 6.584.779 8.396.510 2.024.310 6.949.131 8.973.441

Notes I - X attached hereto make the constitiuent part of these fi nancial reports.


CONSOLIDATED CHANGES IN CAPITAL REPORT FOR THE YEAR ENDED 31 December 2009

HRK 000Position

Paid capital

ordinary shares

Paid capital preferred

shares

Revaluation provision-land and buildings

Revaluation provision-

fi nancial investment

Other revaluation

provisionLaw

provisionStatutory provision

Other provision

(own shares

included)

Retained profi t/

loss

Total capital & provision

On January 1, 2009 430.637 12.250 237.007 (113.924) 7.777 10.732 52.290 342.211 350.724 1.329.704

Previous period correction - - 839 (1.102) - - - - 263 -

Changes in accountancy policies - - - - - - - - (56.123) (56.123)

On January 1, 2009 corrected 430.637 12.250 237.846 (115.026) 7.777 10.732 52.290 342.211 294.864 1.273.581

Change in fair value of fi nancial assets for sale - - - 52.777 - - - - - 52.777

Realized profi t and loss from fi nancial assets for sale - - - 19.035 - - - - - 19.035

Other profi t and loss in direct capital and provision - - 287.036 - 3.126 - - - - 290.162

Profi t/loss of the current period - - - - - - - - 152.504 152.504

Dividends (shares in profi t – for payment) - - - - - - - - (1.955) (1.955)

Transfer of profi t to provision - - - - - 3.246 15.416 - (18.662) -

On December 31, 2009 430.637 12.250 524.882 (43.214) 10.903 13.978 67.706 342.211 426.751 1.786.104

On January 1, 2008 430.637 12.250 235.597 633.293 795 5.254 26.269 342.211 335.632 2.021.938

Previous period correction - - - 2.204 6.982 - - - (2.204) 6.982

On January 1, 2008 corrected 430.637 12.250 235.597 635.497 7.777 5.254 26.269 342.211 333.428 2.028.920

Change in fair value of fi nancial asset for sale - - - (734.747) - - - - - (734.747)

Realized profi t and loss from fi nancial assets for sale - - - (14.674) - - - - - (14.674)

Other profi t and loss in direct capital and provision - - 1.410 - - - - - - 1.410

Profi t//loss of the current period - - - - - - - - 61.130 61.130

Dividends (shares in profi t – for payment) - - - - - - - - (12.335) (12.335)

Transfer of profi t to provision - - - - - 5.478 26.021 - (31.499) -

On December 31, 2008 430.637 12.250 237.007 (113.924) 7.777 10.732 52.290 342.211 350.724 1.329.704

Notes I - X attached hereto make the constituent part of these fi nancial reports.


CONSOLIDATED MONEY FLOW REPORT For the year ended 31/12/2009

HRK 0002008 2009

I MONEY FLOW FROM BUSINESS OPERATIONS 210.668 151.9081. Money fl ow before business assets and liabilities change (521.751) 160.900

Profi t before taxation 88.111 198.481Adjustment (609.862) (37.581)Real estate and equipment amortisation 119.248 107.909Material asset amortisation 7.176 6.800Depreciation in value and profi t/loss from adjustment to fair value (734.747) (176.805)Interest expenses (925) (5.296)Interest income 1.922 14.560Profi t/loss from material asset sale (land and buildings included) 535 (1)Other adjustments (3.071) 15.252

2. Increase/decrease in business and liabilities 754.533 16.665Increase/decrease in investment for sale 403.170 (105.604)Increase/decrease in fair value investment through profi t&loss account 886.253 (245.428)Increase/decrease in deposits, loans and receivables (613.869) 219.219Increase/decrease in investment for life insurance policyholders' account and risk 3.563 (8.641)Increase in reinsurance share in technical provision 97.886 45.481Decrease in tax assets (23.077) (16.921)Increase/decrease in receivables (60.438) 7.664Increase in other assets 2.603 64.440Decrease in future period paid costs and deferred income (4.866) (5.163)Increase/decrease in technical provision 149.144 (34.556)Increase/decrease in life insurance technical provision (policyholders' investment risk) (3.563) 8.641Increase/decrease in tax obligations (14.493) 141.575Decrease in fi nancial obligations (68.251) (84.767)Increase/decrease in other obligations (1.951) 51.760Increase/decrease in deferred costs payment and future period income 2.422 (21.035)

3. Paid profi t tax (22.114) (25.657)II INVESTMENT MONEY FLOW (160.474) (109.676)

Material asset sale income 27.332 27.675Material asset purchase expenses (112.075) (75.436)Intangible asset sale income 22 -Intangible asset purchase expenses (16.943) (6.010)Land and buildings not used for insurance operations sale income 12.330 144Land and buildings not used for insurance operations purchase expenses (20.978) (40.116)Decrease in subsidiaries, associated companies and participation in joint investment (1.208) (9.045)Investment income held until maturity 12.033 12.993Investment expenses held until maturity (79.058) (22.879)Security and stake sale income 5.087 2.669Security and stake investment expenses (935) (15.298)Dividend and shares in profi t income 8.724 21.363Short-term and long-term loan income 5.966 5.632Short-term and long-term loan expenses (771) (11.368)

III FINANCIAL OPERATION MONEY FLOW (47.591) (107.615)Short-term and long-term loan income 8.123 29.063Short-term and long-term credit payment expenses (44.757) (134.837)Expenses for dividend payment (10.957) (1.841)NET MONEY FLOW 2.603 (63.383)EXCHANGE-RATE INFLUENCE ON MONEY AND MONEY EQUIVALENTS - 942NET INCREASE IN MONEY AND MONEY EQUIVALENTS 2.603 (64.441)Money and money equivalents at the beginning of the period 150.325 152.928Money and money equivalents at the end of the period 152.928 88.487

Notes I – X attached hereto make the constituent part of these fi nancial reports.


NOTES TO THE FINANCIAL REPORTS For the year ended December 31, 2009

I GENERAL

1.1. CROATIA OSIGURANJE d.d., Zagreb Miramarska 22 (''Company''), is the parent company

of the Group CROATIA OSIGURANJE and operates non-life and life insurance.

The Group CROATIA OSIGURANJE (''Group'') consists of the parent company and daughter companies:

Daughter companies Business Country

Croatia Lloyd d.d., Zagreb Reinsurance Croatia

- Croatia mirovni dom d.o.o., Zagreb Building engineering Croatia

- Plan�i� d.o.o., Vrbanj Viticulture Croatia

Croatia Leasing d.o.o., Zagreb Leasing Croatia

Croatia - Tehni�ki pregledi d.o.o., Zagreb MOT test stations Croatia

- STP Pitoma�a, Pitoma�a MOT test stations Croatia

Herz d.d., Požega MOT test stations Croatia

Croatia osiguranje mirovinsko društvo d.o.o., Zagreb Pension fund Croatia

Croatia zdravstveno osiguranje d.d., Zagreb Health insurance Croatia

- Poliklinika Ars Medica, Pula Health services Croatia

- Poliklinika Croatia zdravstveno osiguranje, Zagreb Health services Croatia

PBZ Croatia osiguranje d.d., Zagreb Pension fund management Croatia

Slavonijatrans - Tehni�ki pregledi d.o.o., Sl. Brod MOT test stations Croatia

Zagos d.o.o. in liquidation, Zabok Insurance representation Croatia

Croatia Sigurimi sh.a., Priština Insurance Kosovo

Milenijum osiguranje a.d., Beograd Insurance Serbia

Croatia osiguranje d.d., Ljubuški Insurance Bosna& Herzegovina

- Crotehna d.o.o., Ljubuški MOT test stations Bosna& Herzegovina

- Croatia remont d.d., �apljina MOT test stations Bosna& Herzegovina

- Croauto d.o.o., Mostar MOT test stations Bosna& Herzegovina

- Croatia Vitez d.o.o., Vitez MOT test stations Bosna& Herzegovina

- Hotel Hum d.o.o. , Ljubuški Hotel&Catering services Bosna& Herzegovina

Croatia osiguranje a.d., društvo za osiguranje života, Skopje Insurance Macedonia

Croatia osiguranje a.d. društvo za osiguranje neživota, Skopje Insurance Macedonia


1.2. Supervisory Board and Management Board of the Company

Members of the Supervisory Board:

Ivan Šuker, Chairman

Andrija Hebrang, Ph.D.Sc., Deputy chairman

Miroslav Hraš�anec, Member

Stjepan Koži�, Member

Miljenko Boban, Member

Gzim Redžepi, D.Sc., Member

Management Board of the Company:

Hrvoje Vojkovi�, President Since July 16, 2004

Silvana Ivan�i�, Member Since December 10, 2009

Damir Mihanovi�, Member From January 1, 2006

until March 1, 2010

Ljerka Šeparovi�, Member From July 16, 2004

until July 16, 2009

1.3. Capital stock and shares

The capital stock of the Company amounts to HRK 442,887,200.00 and

is divided in 316,348 shares at par value of HRK 1,400.00. All shares

are shares of the I.issue and are marked as follows:

307,598 shares are ordinary shares marked as CROS-R-A

8,750 shares are preferred shares marked as CROS-P-A.

Each share, either common or preferred one, corresponds to 1 (one)

vote at the General Assembly of the Company. All shares are paid in

total, issued in non-materialized form, can be freely transferred and are

recorded in the register of the Central Depository Agency.

Since 2004 the shares of the Company are listed in the fi rst quota-

tion of the Zagreb Stock-Exchange and so for the fi rst time trading

with the shares of one major state-owned company in the Republic

of Croatia started.

II FINANCIAL REPORTING BASIS

2.1. Basis for making fi nancial reports

The consolidated fi nancial reports of the Group for 2009 have been

composed in accordance with Insurance Law (NN 151/05, 87/08, 82/09),

Accounting Law (NN 109/07) and the International Financial Reporting

Standards (''MSFI'') (NN 140/06, 30/08, 130/08, 137/08, 29/09) set

by the Accounting Standards Board and in accordance with Structure

& Contents of Annual Financial Reports of the Insurance Company

Regulation (NN 31/08).

The consolidated fi nancial reports of the Group have been composed by

applying basic accounting assumptions of the occurrence of a business

event under which the effects of transaction are recognized at the time

of their occurrence and are presented for the period they refer to in the

fi nancial reports as well as by applying basic accounting assumptions of

time limitlessness in business activities.

2.2. Basis of consolidation

The consolidated fi nancial reports consist of the fi nancial reports of

the parent company and of the companies under its control (daughter

companies). The control presents itself naturally by investing in the

companies to benefi t from their business.

The business results of the daughter companies acquired or sold during

the year are included in the profi t and loss account from the date of

acquisition i.e. until the date of the actual sale.

The Company invested in shares and stakes of the daughter companies

and acquired ownership of 50 and more per cent of the power vote. These

investments are positioned in acquisition expenses and are consolidated

in fi nancial reports of the Group. The acquisition expenses method is an

accounting method of investment valuation recognized in the expenses

presenting the market value of the given benefi t and all other expenses

directly linked to these investments at the time of the acquisition.

Investment of the Company in shares and stakes of the associated

companies from 20% up to 50% of the power vote are positioned in

acquisition expenses. The acquisition expenses method is an accounting

method of investment value recognized in the expenses presenting the

market value of the given benefi t and all other expenses directly linked

to these investments at the time of the acquisition.


Investment in joint business are consolidated by applying ratio method

of consolidation adding own share of all assets, liabilities, income and

expenditures in jointly controlled entity by similar positions in own

consolidated fi nancial reports.

During consolidation all signifi cant transactions and amounts between

companies in the Group have been eliminated.

2.3. Reporting Currency

The consolidated fi nancial reports are made in HRK. On December 31,

2009 the effective exchange rate amounted to HRK 7.31 for 1 EUR (on

December 31, 2008 HRK 7.32) and HRK 5.09 for 1 USD (on December

31, 2008 HRK 5.16).

2.4. Foreign Currency Transactions

Foreign currency transactions are made in foreign currency value pre-

sented in HRK according to the exchange rate of Croatian National

Bank (HNB) on the day of the transaction or according to the exchange

rate agreed between parties concerned. Assets and liabilities are pre-

sented in foreign currency converted to HRK on the day of the balance

made according to the mean exchange rate of Croatian National Bank

(HNB) valid on that day. Each income or expenditure incurred by the

change in exchange rate after the transaction date is included in profi t

and loss account as investment income or expenditure.

2.5. Use of Estimates

The making of consolidated financial reports in accordance with

International Financial Reporting Standards (MSFI) requires the use of

presumptions and estimates. These presumptions and estimates infl u-

ence accounting policies used as well as presented assets, liabilities,

income and expenditures. Estimates and presumptions are made by

experience and other reasons considered reasonable in given circum-

stances and data available on the day of making the fi nancial reports.

The result makes the basis for book value of assets and liabilities esti-

mate not easily made out of other sources. Actual results may differ

compared to these estimates. Estimates and presumptions have been

reconsidered several times. Changes in accounting estimates are recog-

nized in the period when the estimate is changed and in future period

if the change has the infl ow to them.

III SUMMARY OF BASIC ACCOUNTING POLICIES

The basic accounting policies adopted for handling and recording mate-

rially signifi cant positions fundamentally identifying result and fi nancial

position of the Group are:

3.1. Gross Written Premium

/i/ Gross written premium makes fundamental business income

consisting of non-life and life insurance premium.

/ii/ Gross written premium of non-life insurance includes all amounts

of premium agreed in the current accounting period nevertheless

these amounts refer fully or partially to a subsequent period or

not.

/iii/ Gross written premium of life insurance includes all amounts of

premium paid until the end of the accounting period.

3.2. Investment Income & Expenses

/i/ Investment income includes income realized from participating

interest (dividends, share in profit, entry income – increase in

value), income from land and buildings investment, income from

interest, unrealized profit from fair value investment through

profit and loss account, income from investment sales, net posi-

tive exchange rate balance and other investment income.

Land and buildings investment income consists of adjustment –

increase in value of land and buildings value income, land and

buildings sales income, rental income and other income linked

to investment in land and buildings. Land and buildings rental

income and other operative leases are recognized in profit and

loss account by a straight-line method during the whole period

of lease.

Interest income is recognized to the profit and loss account when

accrued, taking into account the effective proceeds to the ap-

propriate assets. Interest on monetary assets at fair value through

profit and loss account is calculated at coupon interest rate and

is positioned in interest income. Dividend income is recognized

into the profit and loss account on the day dividends are voted.

Accounting policy linked to the recognition of financial income

is described in the Note 3.6. „Financial assets“.


/ii/ Investment expenses include interest expenses, value adjustments

(decrease) in investments, losses on disposal (sale) of investments,

net foreign exchange losses and other investment expenses.

3.3. Expenses for Insured Events

Expenses for insured events comprehend all paid amounts of claims in

the accounting period regardless the fact in which accounting period

the claims incurred, decreased for the reinsurance portion into claims,

recourse claims collected, sold and saved parts and elements and in-

creased for the claims' provision at the end of a period but decreased

for the claims' provision at the beginning of the period.

Gross paid claims amounts, except for net settled claims, include han-

dling of claims (assessments, attorneys' services and the like), and pur-

chases and expenses upon recourse claims.

3.4. Operating Expenses

Operating expenses include acquisition costs of insurance policies and

management expenses.

Acquisition costs (sales) include all direct costs which occur when mak-

ing insurance contracts as the costs of representatives, commission and

promotion costs.

Management expenses include expenses incurred during collecting the

premium, portfolio management, employees salary and other tangible

and intangible expenses.

3.5. Intangible and tangible assets and real estate investment

Initially long-term intangible and long-term tangible assets are carried

at historical acquisition cost which comprises purchase price, import

duties and non-refundable sales taxes, after deduction of commercial

discounts and rebates as well as all other costs directly attributable to

bringing the asset to its working condition for its intended use.

The long-term intangible and tangible assets are recognized under the

assumption that future benefi t owing to the assets would fl ow into the

Group, the assets purchase expenses would be reliably measured and

if a single purchase value of property exceeds HRK 2,000.00.

After initial recognition, the property is carried at historical acquisition cost

less accumulated depreciation and any accumulated impairment losses.

After initial recognition, land and buildings are positioned according to

revalued amount made of their fair value on the day of revaluation de-

creased by later correction in value and later accumulated losses caused

by depreciation in value. Increase in value of assets due to revaluation is

credited directly to equity as revaluation provision. Revaluation is made

continually so that the accounting amount does not materially differ

from fair value on the balance sheet date.

Maintenance and repairs, replacements and improvements of minor

importance are expenses as incurred. Where it is obvious that expenses

incurred resulted in increase of expected future economic benefi ts to

be derived from the use of an item of property in excess of the origi-

nally assessed standard performance of the asset, they are added to

the carrying amount of the asset. Gains or losses on the retirement

or disposal of an asset are included in the statement of income in the

period in which they occur.

Depreciation commences on putting an asset in use, i.e. when it is at

the location and in condition necessary for utilization. Depreciation

count of property ceases when the property is classifi ed as property

held for sale. Depreciation is charged so as to write-off the cost or

valuation of each asset, other than land and long-term intangible and

tangible property under construction, over their estimated useful lives,

using straight-line method, on the following basis:

Amortisation rate(from – to %)

Concessions, patents, licenses, software and other

25

Other intangible assets 25

Buildings 2,5

Furniture and equipment 10 – 25

IT equipment 33,33

Means of transportation 20

Investment in real estate (land, buildings) not used for insurance opera-

tions owned by the Group or held in fi nancial lease are held how to

enable the Group to realize rental income or/and for the increase of

market value of property, and is stated either at fair value of acquisition

or at fair value through the profi t and loss account.


3.6. Financial assets

/i/ Financial assets at fair value through the profit and loss account

Financial instruments included in this portfolio are financial in-

struments held for trading and are purchased with the aim to

gain profit from the short-term price fluctuations or broker's

commission or the securities included in the portfolio where the

pattern of realization of short-term profits exists.

In accordance with investment policy of the Group, each finan-

cial instrument could be positioned as assets stated at fair value

through the profit and loss account, with the exception of invest-

ment into equity instruments which do not have a quoted price

at an active market and whose fair value could not be reliably

measured.

These instruments are initially positioned at purchase cost and

subsequently are repeatedly measured at fair value based on the

quoted purchase prices on the active market.

Realized and unrealized profits and losses – all connected - are

included in investment income / expenditures. Interest earned

arisen while holding these instruments are stated as interest

income.

All purchases and sales of instruments held for trading are rec-

ognized on the day of trade and that is the date the Group is

bounded for the purchase or sale of property.

Transactions not recognized on the day the trade is realized are

calculated as financial derivatives.

/ii/ Loans and receivables

Loans and receivables are non-derivative financial asset with fixed

or definite payments not quoted on the active market. Loans

and receivables incur at the moment the Group approves money

without the aim to trade with these receivables and includes

loans to insureds and deposits with banks.

Loans and receivables are recognized at the moment of money

transfer.

Loans and receivables are positioned as decreased for provision

caused by deterioration in value. Deterioration in value provision

is defined when the Group obviously could not be able to collect

the total receivables until maturity. Provision for identified losses

is assessed on the basis of credit ability and business results of

the debtor, taking into account value of insurance instruments

or third party's guarantee.

At the moment of comprehension that the possibility of loan col-

lection no more exists and that all legal possibilities for collection

are exhausted and that the amount of total loss is determined, the

loan is directly written-off. If, subsequently, the amount impair-

ment is decreased and the decrease is to be bounded objectively to

event which has arisen after the value decrease, value impairment

orprovision is decreased through the profit and loss account.

For the delay in payment the Group charges to its borrowers

penalty interest calculated at the accrual basis and is startzed as

interest income.

/iii/ Financial asset for sale

Financial asset for sale is non-derivative financial asset defined

as available for sale or financial asset for sale positioned neither

to property at fair value through the profit and loss account nor

into loans, advances and receivables.

Financial instruments included in asset for sale consist of debt

and equity securities. These instruments are initially recognized

at investment expenses and subsequently are positioned at fair

value on the basis of quoted prices or amounts derived from

the cash flow models. In circumstances when quoted market

prices are not available, fair value of debt securities is assessed

by applying actual value of future money flow, while fair value

of non-quoted equity instruments is assessed by application of

adequate ratio price/earning or price/cash flow cleaned in a way

to reflect specific circumstances connected with the issuer.

Profit and loss arising out of change in financial asset fair value

available for sale are directly recognized to equity as revaluation

provision and are positioned in changes in capital report until the

moment of sale or decrease, when cumulative profit or losses

previously recognized in capital are included in profit and loss of

the period.

Interest earned at the time of owning securities available for sale

is accounted daily and positioned as interest income.


Foreign exchange balance concerning equity instruments in for-

eign currency payments defined as available for sale are stated in

equity, together with profit and losses from change in fair value

until the moment of the instrument's sale. Foreign exchange

balance considering debt instruments in foreign currency pay-

ments defined as available for sale are positioned in profit and

loss account.

Dividends according to securities defined as available for sale are

recorded at the moment of publishing.

/iv/ Owner's investment until maturity

Owner's investment until maturity is non-derivative financial asset

with fixed amounts of payment or payments that could be deter-

mined, as well as with fixed due dates which the Group intends

and is able to hold until maturity. Here we include treasury bills

as well as debt securities. Owner's investment until maturity is

positioned according to amortisation expenses applying method

of effective interest rate, decreased by adjustment of value caused

by decrease.

The Group constantly checks up objective evidence showing the

decrease in owner's investment until maturity. The value of financial

assets decreased when its book amount is over assessed recover-

able amount that is equal to actual value of expected future money

flows discounted by applying original effective interest rate for that

instrument. The amount of loss caused by the decrease in particular

asset positioned according to amortisation expenses is counted as

the difference between the book amount of that asset and actual

value of expected future money flows that are discounted by ap-

plying original effective interest rate for that instrument. When

decrease in value of asset is identified, the Group recognizes value

impairment by charging the profit and loss account.

3.7. Receivables

/i/ Insurance business receivables include receivables from insureds

based on non-life and life insurance premium.

Non-life premium receivables consist of written but not billed

premium and receivables for billed but not collected premium.

Life insurance premium receivables and supplementary acci-

dent insurance consist of receivables for billed but not collected

premium.

The recognition of insurance premium is described in Note 3.1.

– Gross written premium.

/ii/ Receivables for billed but not collected premium are positioned

in nominal value while dubious and uncollectible receivables are

positioned with correction in value. Correction in value as de-

crease in premium receivables is positioned for all uncollected

receivables due more than 180 days. Correction in value could

be decreased for receivables with identified liability for payment

of claim to the debtor (provision for claims).

/iii/ Reimbursement receivables are recognized for all reimbursement

claims in peaceful procedure arising out of receivables from other

insurance company and reimbursements with agreed payment.

Correction in value of reimbursements is identified for all receiva-

bles due more than 180 days.

/iv/ Other receivables refer to the credit and deposit interest receiva-

bles, advanced payment receivables and the like.

3.8. Impairment

On each date of the balance sheet, the Group checks up book amounts

of its assets to identify possible losses caused by the decrease in assets

value. If such indications exist, collectible amount is assessed to identify

possible loss incurred by decrease. If collectible amount of some instru-

ment is assessed lower than its book value, the book value of that asset

decreases to the collectible amount.

3.9. Money and money equivalents & short-term deposits

For the purpose of the money and money equivalents fl ow, money in

bank and till money as well as checks and bills of exchange received

are understood. Deposits due shorter than a year are understood as

short-term deposits. Money equivalents and deposits are positioned

through costs, while those in foreign currency are converted according

to the mean exchange rate of the Croatian Natinal Bank (HNB) at the

end of the year.

3.10. Profi t tax

Profi t tax consists of current and deferred tax. Current tax indicates ex-

pected tax obligation counted on profi t for the year adjusted for amounts

not calculated on the tax basis or tax not recognizable expenses, by use of

tax rates that were valid on the day of reporting.

Deferred tax is recognized by balance method, reflecting temporary


difference between book value of assets and liabilities for the needs of

fi nancial reporting and amounts used for the needs of the tax calculation.

The deferred tax is not recognized in investment in daughter companies

unless it would be collected in foreseeable future. The deferred tax is cal-

culated using tax rates expecting to be applied on temporary difference

when they would be collected or settled, on the basis of provisions valid

or basically valid on the day of the balance sheet. The deferred tax asset is

recognized up to the amount which is likely to be adequate for future tax

profi t using temporary difference. The deferred tax liability is checked up

on each reporting date, and is decreased following the fact that there was

not any more probability to realize the connected tax profi t. The deferred

tax assets and liabilities are not discounted but are positioned as long-term

assets and/or long-term liabilities.

3.11. Capital and provision

In business books the Group records capital as: capital stock, revaluation

provision, statutory provision, legal provision, other provision, retained

profi t and current year profi t.

/i/ Capital stock is an integral shareholders' capital of the Company

paid in total.

/ii/ The effect of increase / decrease in investment, classified as invest-

ment available for sale, real estate used for insurance operations,

adjusted at assessed market value, the Group indicates in the

balance sheet as the revaluation provision. During the period,

the revaluation provision increase / decrease caused by value

adjustment at recoverable market value.

/iii/ Expenditures in statutory provision, legal provision, other provi-

sion and retained profit are defined by decisions of the General

Assembly of the Company and daughter companies.

/iv/ Current financial year profit is identified on 31 December and

is transferred to the next business year. The profit is used i.e. al-

located depending on the General Assembly's of the Company

and daughter companies' decision.

3.12. Technical provision

Technical provision positioned in fi nancial reports refers to an unearned

premium, life insurance mathematical provision, provision for claims

and other insurance technical provision and is defi ned according to

the Minimal standards, way of accounting and measures for counting

technical insurance provision regulation. The authorized actuary is of

the positive opinion on the technical provision.

/i/ Unearned premium

The Group counts the unearned premium for those types of in-

surance whose cover continues even after the counted period as

the insurance and the business year do not coincide. The basis

for accounting gross unearned premium of non-life insurance is

counted written premium in the accounting period, while the basis

for counting the gross unearned premium of supplementary acci-

dent insurance as a part of life insurance premium is paid premium

in accounting period.

Unearned premium is counted according to pro rata temporis

method, with the exception of the credit insurance types which

take into consideration the decrease of insurance cover during the

insurance contract's period of cover.

/ii/ Life insurance mathematical provision

Life insurance mathematical provision is counted separately by

each insurance contract in a way described in the authorized

actuary's report on mathematical provision accounting.

/iii/ Provision for claims

Provision for claims contains provision for the reported claims,

provision for incurred but not reported claims, provision for claims

handling expenses and reinsurance share in claims.

Provision for the reported claims is identified by separate assess-

ment. Provision for claims handling expenses and incurred but

not reported claims is identified by applying actuary methods.

Reinsurance share in provision is identified in accordance with

reinsurance contracts.

/iv/ Other insurance technical provision

Other insurance technical provision is identified against an earth-

quake risk.

/v/ Provision for premium returns depending on and independent

of the result (bonus & discounts)

Provision for premium return depending on and independent

of the result (bonus & discounts) is counted in accordance with

guaranteed rights of the insured on the basis of the insurance

contract as well as for future partial discount of premium.

3.13. Technical provision of life insurance – policyholders' investment risk

Following the fact that the Group concludes life insurance policies

with poilcyholders' investment risk, special provision is made by each

insurance contract separately.


3.14. Other liabilities

/i/ Liabilities arising out of direct insurance business refer to the

claim liabilities.

/ii/ Liabilities arising out of reinsurance business refer to the liabili-

ties contracted for reinsurance claims and reinsurance premium

liabilities.

/iii/ Other liabilities refer to inland suppliers liabilities, received ad-

vanced payment liabilities, commission liabilities and the like.

3.15. Employees' salary

Salary, taxes and contributions from and on salary are counted as the

costs of the period in which the employee has worked.

3.16. Provision

Provision is recognized only when the Group has actual liabilitiy as the

result of the past event and under the condition that it was probable

the payment of liability would require the outfl ow with economic ben-

efi t and the amount of liability could be assessed reliably. Provision is

subject to questioning on each date of the balance sheet and adjusted

in accordance with the newest and the best assessments.

Provision is identifi ed for lawsuits, anniversary bonus and severance

pays.

Provision for ordinary anniversary bonus and severance pays to employ-

ees is identifi ed as actual value of future outfl ow of money by using a

discount rate adequate to that of state bonds interest rate.

3.17. Potential liabilities and assets

Potential liabilities are not recognized in fi nancial reports, but are pub-

lished in the notes attached to the fi nancial reports.

Potential assets are not recognized in fi nancial reports, but are recog-

nized at the moment of probable infl ow of economic benefi ts.

3.18. Events after the day of the balance sheet

Events after the day of the balance sheet giving additional information

of the position of the Group (events having the effect of adjustment)

are recognized in consolidated fi nancial reports. Events not having the

effect of adjustment are published in the notes attached to the consoli-

dated fi nancial reports in case of their material signifi cance.

3.19. Earning per share

The earning per share is counted as the profi t of the period decreased

by dividends of the preferred shares divided with ponderable average

of ordinary shares decreased by own shares.

3.20. Classifi cation of the contract

Contracts in which the Group takes over signifi cant insurance risk from

the other party (the policy owner) accepting to compensate loss to the

owner of the policy or to the other insurance benefi ciary upon occur-

rence of the insured event with negative infl uence to the owner of the

policy or to the other insurance benefi ciary are classifi ed as insurance

contracts. Insurance risks differ from fi nancial risks.

Financial risk is a risk of the possible future change in one or more par-

ticular interest rates, security price, share price, goods price, exchange

rate, indices, prices or rates, credit rating or credit indices or other vari-

ables, under the condition that in the case of non-fi nancial variable that

the variable is not specifi c for one contract party. Insurance contracts

can transfer the fi nancial risk up to some point.

Contracts in which the transfer of insurance risk from the policy owner

to the Group is not signifi cant are classifi ed as investment contracts.

3.21. Insurance Risk Concentration

The key risk aspect of insurance to the Group is exposure to the rate

of insurance risk concentration that defi nes the degree up to which

the particular event or series of events could affect liabilities of the

Group. Such concentration could arise out of one particular insurance

contract or out of numerous insurance contracts. The important aspect

of insurance risk concentration is that it could arise out of risk accu-

mulation through various types of insurance. The risk concentration

could arise out of rare events with big consequences such as natural

disasters, then in situations when the Group is exposed to unexpected

changes in trends such as unexpected changes in human mortality or

the insureds' behaviour or when signifi cant court or regulatory risks

could cause big particular losses or have signifi cant infl uence to the big

number of insurance contracts. Risks acquired by the Group are prima-

rily located in the Republic of Croatia. In non-life insurance business the

Management Board is of the opinion that by any insurance type the

Group's risk exposure according to social, professional, generation or

similar criteria is not signifi cant. The greatest probability of signifi cant

losses arises out of natural disasters such as fl oods, storms or losses


caused by an eartquake. Techniques and assumptions used by the

Group to calculate these risks include: Measuring of geographic accumulation; Assessment of the greatest possible loss; Excess of loss reinsurance.

3.22. Insurance risk management

The Group is exposed to actuary risk and to acquisition risk arising out of

wide offer of life and non-life insurance products: participating traditional

life insurance products, insurance policies linked to the stakes and all types

of non-life insurance. The insurance risk refers to uncertainty of insurance

operations. The most important components of the insurance risk are

premium risk and provision risk. They refer to premium tariff adequacy and

provision adequacy with regard to insurance liabilities and capital basis.

Premium risk is present at the moment of policy issuing before the occur-

rence of the insured event. There is a risk that expenses and losses incurred

would be higher than premium received. The provision risk presents the

risk that absolute level of technical provision was either wrongly assessed

or the actual losses would vary about statistical mean value. The acquisi-

tion risk in non-life insurance includes the risk of catastrophe as well,

that arises out of exceptional events not in good measure covered either

by premium risk or the provision risk. The life insurance acquisition risk

includes biometric risk (mortality, longevity, illness risk and disability) as

well as surrender risk. The surrender risk includes bigger or less degree of

surrendering from policies, cancellations, changes in capitalization (pre-

mium payment stops) and surrenderings.

The Group manages insurance risk through acquisition limits, transactions'

approval procedure that include new products or those over set limits,

tariff, design of the product and reinsurance management. The acquisi-

tion strategy aims at variety which would ensure the balanced portfolio

and is based on one big portfolio of similar risks during several years that

decrease the variability of the result. All non-life insurance contracts are

made typically on an annual basis and agents have the right to reject re-

newal of the contract or to change terms of the contract on the occasion

of the renewal. The Group reinsures a part of risk acquired with the aim

to control exposure to losses and to protect the capital stock. The Group

purchases a combination of proportional and non-proportional reinsurance

contracts in order to decrease net exposure to a particular risk depending

on the insurance type.

3.23. Basic presumptions having the biggest infl uence on recognized

assets, liabilities, income and expenditures from insurance

operations

/i/ Non-life insurance

On the day of the balance sheet the provision is made for the as-

sessed total expenditures of the settlement of all incurred losses

arising out from events until that day, regardless the fact they are

reported or not, together with subsequent costs of the handling

of claims, decreased by already paid sums. The liability for reported

but not paid claims is assessed separately for each particular claim

taking into account circumstances, available information given by

the assessment expert as well as evidence about amounts paid to

similar claims. Each particular claim is reviewed regularly and the

appropriate provision is adjusted depending on new information.

The assessment of provision for incurred but not reported claims

(IBNR) is generally subject to higher degree of uncertainty than

provision for the reported claims. IBNR provision is assessed by

actuaries of the Company using statistic and actuary methods.

The key methods used are: Chain-ladder method which uses historical data to assess final

claims expenses Bornhuetter – Ferguson's method, combining the assessed share

of claims and the projection method. This method improves the

hard use of claims share taking into account information got

from the newest form of the claim development Expected claims share Across-the-board method, using historical data, is applied in insur-

ance types where it is needed, in majority of claims, less than two

years either to be reported or/and settled compared to the period

of the risk exposure or/and occurrence of the insured event

Actual method used depends on the year of the accident considered,

type of insurance and historical development of the claims. Measuring

the use of historical development of claims, it is assumed that the his-

torical sample of the claims' development would be repeated in future.

There are reasons why this sample could not be repeated for certain.

Such reasons include: economic, political and social trends (causing various level of

inflation compared to the expected one); changes in types of insurance contracts acquired ; random variations, including great losses' influence.


IBNR provision is initially assessed in gross amount and special calcula-

tion is made to assess the reinsurance part.

Assumptions that have the biggest infl uence on provision amount

measured for non-life insurance are the following:

The remaining factor of the claims development

For „long tail“ claims, the provision level in great measure depends

on the assessment of claims development from the latest year of de-

velopment with existing historical data until fi nal development. The

remaining factors of the claims development are reasonably assessed

using mathematical method for curves, that project factors seen or

based on actuary estimate.

Discounts

Besides provision against liability insurance losses paid as annuity, non-

life insurance provision is not discounted.

In 2009 HANFA stated an opinion which led to the change in unpaid

claims obligation referring to losses caused by unknown and uninsured

vehicles incurred before February 27, 1997. The above losses became a

Guarantee Fund obligation that resulted with including those losses in the

provision of the Croatian Insurance Bureau's (HUO) Guarantee Fund on

December 31, 2009. In accordance with that the MTPL provision of the

Company decreased and claims provision ratio (identifi ed as the provision

of the Guarantee Fund) referring to the Company is positioned as the

claims provision liability of the Guarantee Fund.

/ii/ Life Insurance

Mathematical provision is counted by net prospective method

using reasonable actuary presumptions in accordance with legal

provisions. The guaranteed technical interest rate is 3.5 - 5%.

Insureds or insurance beneficiaries in case of maturity or death

have the right to the profit share of the Company realized by life

insurance funds' managing. The profit share is allocated after the

Management Board's decision.

3.24. Major sources of uncertainty linked to estimates

/i/ Losses due to decrease in loans' and receivables' value

The need for decrease in assets value positioned as amortisation

expenses is assessed as described in note 3.6./ii/. The decrease in

value for particular exposure in total losses due to decrease in value

is based on the best estimate of the managers on actual value of

expected future income. During estimation of these receivables,

the managers estimate financial position of the debtor and net

sale value of the insurance instruments. Each asset that suffered

decrease in value is estimated separately and the function of the

credit risk independently approves the strategy of recovering as well

as the estimate of realizable money flows.

/ii/ Identifying the fair value

Fair value of financial instruments rarely in trade having a non-

transparent price is less objective and requires a different level of

estimate depending on liquidity, concentration, market factors,

uncertainty, price presumptions and other risks influencing the

particular instrument.

/iii/ Uncertainty of estimates linked to provision making

The most significant estimates are linked to the financial reports

of the Group and refer to making the provision. The Group

has conservative approach to making the provision and applies

regulations of regulatory bodies. The Group employs author-

ized actuaries.The Group policy is to form provision for risks

not yet due arising out of non-insurance business where it is

expected that claims, deferred acquisition expenses and adminis-

trative expenses which would incur after the end of the financial

year for contracts concluded before that day would be over

unearned premium and premium arising out of that contracts.

The Management Board considers the existing level of technical

provision appropriate.

/iv/ Uncertainty of estimates linked to lawsuits

The significant source of uncertainty of estimates arises out of

lawsuits. The Management Board is of the opinion that the exist-

ing level of provision is appropriate.

/v/ Profit tax

The Group makes tax liability in accordance with tax regulations

of the state in which the companies of the Group are registered.

Tax applications are subject to control by tax authorities having

the right to subsequent business books review of the tax payer.

/vi/ Regulatory requirements

Regulatory bodies are authorized to make regulatory reviews of

the Group's operations as well as to require changes in book

values of assets and liabilities in accordance with regulations.

/vii/ Mutual liabilities

The Group has the liability towards the Croatian Insurance Bureau

(HUO) in connection with the Group's share in MTPL losses caused

by unknown and uninsured vehicles. Besides that, the Group, as


well as other participants on Croatian market of MTPL insurance

is liable for the part of unpaid MTPL losses in case of liquidation

of any insurance company according to the Insurance Law.

3.25. Key accounting estimates in applying accounting policies

/i/ Financial assets and liabilities classification

Accounting policies of the Group enable assets and liabilities clas-

sification at the beginning, in particular circumstances, in various

accounting categories. During financial assets and liabilities clas-

sification as „intended for trade“, the Group identifies that they

satisfy the definition of assets and liabilities stated in note 3.6.

/ii/ Product classification

Regarding accounting policy about contract classification as the

insurance contract or investment contract see note 3.20.

/iii/ Real estate classification

All real estate not used for insurance operations but held for rent

the Group classifies as investment in real estate.

Amortisation rate of tangible and intangible assets use estimate

Initially, amortisation rates are defi ned on the basis of the best estimate

of these assets operating life. The Management Board of the Company

and those of the daughter companies believe that applied amortisation

rates refl ected the operating life of tangible and intangible assets.

3.26. Daughter companies:

31/12/ 2008 31/12/ 2009

Group Ownership( %)

Share in vote rights ( %)

Ownership( %)

Share in vote rights ( %)

Daughter companies registered in the Republic of Croatia:

Croatia Lloyd d.d., Zagreb 94,64 94,64 94,64 94,64

- Croatia mirovni dom d.o.o., Zagreb 100,00 100,00 100,00 100,00

- Plan�i� d.o.o., Vrbanj - - 51,00 51,00

Croatia Leasing d.o.o., Zagreb 100,00 100,00 100,00 100,00

Croatia - Tehni�ki pregledi d.o.o., Zagreb 100,00 100,00 100,00 100,00

- STP Pitoma�a, Pitoma�a 100,00 100,00 100,00 100,00

Slavonijatrans - Tehni�ki pregledi d.o.o., Sl. Brod 76,00 76,00 76,00 76,00

Herz d.d., Požega 100,00 100,00 100,00 100,00

Croatia osiguranje mirovinsko društvo d.o.o., Zagreb 100,00 100,00 100,00 100,00

Croatia zdravstveno osiguranje d.d., Zagreb 100,00 100,00 100,00 100,00

- Poliklinika Ars Medica, Pula 74,00 74,00 74,00 74,00

- Poliklinika Croatia zdravstveno osiguranje, Zagreb 100,00 100,00 100,00 100,00

PBZ Croatia osiguranje d.d., Zagreb 50,00 50,00 50,00 50,00

Daughter companies registered abroad:

Milenijum osiguranje a.d., Beograd 99,96 99,96 99,78 99,78

Croatia Sigurimi sh.a., Priština 100,00 100,00 100,00 100,00

Croatia osiguranje d.d., Ljubuški 52,05 52,05 52,05 52,05

- Crotehna d.o.o., Ljubuški 100,00 100,00 100,00 100,00

- Croatia remont d.d., �apljina 69,79 69,79 69,79 69,79

- Croauto d.o.o., Mostar 67,00 67,00 67,00 67,00

- Croatia Vitez d.o.o., Vitez 90,00 90,00 90,00 90,00

- Hotel Hum d.o.o., Ljubuški 80,00 80,00 80,00 80,00

Croatia osiguranje d.d., društvo za osiguranje neživota, Skopje - - 100,00 100,00

Croatia osiguranje d.d., društvo za osiguranje života, Skopje 92,5 92,50 92,5 92,50

The daughter company Zagos d.o.o., Zabok is not included in consolidation because of its liquidation in progress.


IV NOTES TO THE PROFIT & LOSS ACCOUNT

TOTAL EXPENDITURES

2008 2009


HRK 000 HRK 000 HRK 000 HRK 000 HRK 000 HRK 000

Earned premium 396.399 2.810.539 3.206.938 393.333 2.743.901 3.137.234

Investment income 88.291 227.490 315.781 121.815 390.277 512.092

Commission&compensation income 49 47.351 47.400 26 48.969 48.995

Other insurance-technical income, net of reinsurance 27.901 107.155 135.056 1.023 34.945 35.968

Other income 442 304.355 304.797 176 307.639 307.815

Total 513.082 3.496.890 4.009.972 516.373 3.525.731 4.042.104

4.1. Earned premium

2008 2009



Written gross premium 396.574 3.197.382 3.593.956 393.723 3.019.185 3.412.908

Co-insurance premium - 450 450 - 555 555

Correction in value & collected correction in value of insurance & co-insurance premium - 15.995 15.995 - (67.644) (67.644)

Premium ceded to reinsurance (8) (302.654) (302.662) (9) (305.655) (305.664)

Change in gross provision of unearned premium (86) (120.991) (121.077) (381) 135.981 135.600

Change in gross provision of unearned premium, reinsurance share (81) 20.357 20.276 - (38.521) (38.521)

Total 396.399 2.810.539 3.206.938 393.333 2.743.901 3.137.234

4.2. INVESTMENT INCOME

2008 2009



Land & buildings investment income - 13.918 13.918 - 148.563 148.563

Interest income 81.547 152.637 234.184 106.929 195.352 302.281

Unrealized fair value investment income 1.025 6.473 7.498 1.900 3.215 5.115

Financial investment sales income 2.164 4.864 7.028 3.319 5.816 9.135

Net positive exchange rate balance 64 6.292 6.356 9 4.261 4.270

Other investment income 3.491 43.306 46.797 9.658 33.070 42.728

Total 88.291 227.490 315.781 121.815 390.277 512.092


/i/ Land & buildings not used for insurance operations investment income

2008 2009



Rent income - 9.929 9.929 - 10.176 10.176

Land&buildings not used for insurance operations increase in value income - 9 9 - 137.531 137.531

Real estate sales income - 3.980 3.980 - 856 856

Total - 13.918 13.918 - 148.563 148.563

/ii/ Interest income

2008 2009



Investment interest until maturity 59.390 40.769 100.159 64.531 42.576 107.107

Deposit interest 19.211 72.148 91.359 34.651 73.357 108.008

Credit&investment interest 2.946 39.720 42.666 7.747 79.419 87.166

Total 81.547 152.637 234.184 106.929 195.352 302.281

/iii/ Other investment income

2008 2009



Received dividend income 3.434 5.290 8.724 9.566 11.798 21.364

Correction in value & written-off collected receivables - 16.457 16.457 - 13.269 13.269

Call deposit interest 57 265 322 38 278 316

Other income - 21.294 21.294 54 7.725 7.779

Total 3.491 43.306 46.797 9.658 33.070 42.728

4.3. COMMISSION & COMPENSATION INCOME

Commission and compensation income amounting to HRK 48,994 thousand (in 2008 amounting to HRK 47,400 thousand) refer to reinsurance

companies commission in accordance with reinsurance contracts.


4.4. OTHER INSURANCE-TECHNICAL INCOME, NET OF REINSURANCE

2008 2009



Reimbursement income - 74.280 74.280 - (4.415) (4.415)

Reinsurance share in reimbursements - (9.668) (9.668) - 2.529 2.529

Value correction collected reimbursements - - - - 286 286

Reimbursement receivables correction in value - (7.017) (7.017) - (11.333) (11.333)

Liability cancellation income - 10.754 10.754 96 490 586

Border line insurance compensation income - 1.083 1.083 - 575 575

Foreign claims income - 4.062 4.062 - 2.957 2.957

Guarantee fund income - 14.427 14.427 - 26.040 26.040

Other income 27.901 19.234 47.135 927 17.816 18.743

Total 27.901 107.155 135.056 1.023 34.945 35.968

4.5. OTHER INCOME

2008 2009



Insurance operation income 442 74.003 74.445 176 66.881 67.057

Non-insurance operation income - 230.352 230.352 - 240.758 240.758

Total 442 304.355 304.797 176 307.639 307.815

/i/ Insurance operations income

2008 2009



Tangible assets sale income - 1.460 1.460 - 63 63

Subsidy& refund income - 4.189 4.189 - 2.472 2.472

Written-off collected receivables - 4.294 4.294 - 1.149 1.149

Service assessment income 2 13.787 13.789 3 12.601 12.604

MOT test stations income - 8.920 8.920 - 12.631 12.631

Insurance losses collected income - 3.940 3.940 - 2.847 2.847

Long-term bookings cancellation income 260 5.339 5.599 - 2.870 2.870

Other income 180 32.074 32.254 173 32.248 32.421

Total 442 74.003 74.445 176 66.881 67.057


/ii/ Non-insurance operations income

2008 2009

HRK 000 HRK 000

Finance & operative leasing income 145.647 152.025

Pension fund managing income 25.718 28.326

MOT test stations income 58.987 60.407

Total 230.352 240.758

TOTAL OUTLAYS

2008 2009



Insured events outlays, net 251.353 1.861.092 2.112.445 190.012 1.797.757 1.987.769

Change in other technical provision, net of reinsurance 77.390 (1.462) 75.928 158.804 4.394 163.198

Change in life insurance technical provision – policyholder's investment risk 7.759 - 7.759 6.412 - 6.412

Premium return outlays (bonus & discounts), net of reinsurance - 2.404 2.404 - 139 139

Business outlays (insurance operations outlays), net 128.462 1.037.341 1.165.803 133.882 1.085.445 1.219.327

Investment expenses 67.646 166.663 234.309 18.121 75.077 93.198

Other technical expenses, net of reinsurance 1.895 64.020 65.915 2.813 112.916 115.729

Other expenses, value adjustments included 38 257.260 257.298 152 257.698 257.850

Total 534.543 3.387.318 3.921.861 510.196 3.333.426 3.843.622

4.6. OUTLAYS FOR INSURED EVENTS, NET

2008 2009



Paid claims

Paid claims-gross 253.032 1.960.748 2.213.780 187.250 1.998.072 2.185.322

Paid claims-coinsurance part - 2 2 - 73 73

Paid claims-reinsurance part - (175.464) (175.464) - (145.065) (145.065)

Total 253.032 1.785.286 2.038.318 187.250 1.853.080 2.040.330

Change in provision for claims

Change in provision for claims-gross (1.679) 85.487 83.808 2.762 (53.460) (50.698)

Change in provision-reinsurance part - (9.681) (9.681) - (1.863) (1.863)

Total (1.679) 75.806 74.127 2.762 (55.323) (52.561)

Total 251.353 1.861.092 2.112.445 190.012 1.797.757 1.987.769


4.7. CHANGE IN OTHER TECHNICAL PROVISION, NET OF REINSURANCE

2008 2009



Change in mathematical insurance provision

Gross 77.393 - 77.393 158.804 - 158.804

Reinsurance share (3) - (3) - - -

Total 77.390 - 77.390 158.804 - 158.804

Change in other technical provision, net of reinsurance

Gross - (1.462) (1.462) - 4.394 4.394

Total - (1.462) (1.462) - 4.394 4.394

Total 77.390 (1.462) 75.928 158.804 4.394 163.198

4.8. BUSINESS OUTLAYS (INSURANCE OPERATION OUTLAYS), NET

2008 2009



Acquisition outlays

Commission 40.458 154.295 194.753 37.453 157.309 194.762

Other acquisition outlays 16.106 170.771 186.877 17.440 189.948 207.388

Change in split acquisition outlays - (2.214) (2.214) - (6.993) (6.993)

Total 56.564 322.852 379.416 54.893 340.264 395.157

Managing outlays (administrative outlays)

Tangible assets amortisation 2.499 52.168 54.667 2.496 51.628 54.124

Salary, taxes & contributions from and on salary 44.035 398.974 443.009 47.144 414.353 461.497

Other managing outlays 25.364 263.347 288.711 29.349 279.200 308.549

Total 71.898 714.489 786.387 78.989 745.181 824.170

Total 128.462 1.037.341 1.165.803 133.882 1.085.445 1.219.327

/i/ Other acquisition costs

2008 2009



Marketing outlays 14.735 137.728 152.463 16.235 139.315 155.550

Costs of policy issuance 252 3.028 3.280 199 3.499 3.698

Other direct acquisition costs 1.119 30.015 31.134 1.006 47.134 48.140

Total 16.106 170.771 186.877 17.440 189.948 207.388


/ii/ Salary, taxes & contributions from and on salary

2008 2009



Salary & compensations – net 25.176 223.204 248.380 26.706 233.896 260.602

Taxes & contributions from salary 12.632 117.168 129.800 13.916 121.150 135.066

Contributions on salary 6.227 58.602 64.829 6.522 59.307 65.829

Total 44.035 398.974 443.009 47.144 414.353 461.497

/iii/ Other managing outlays

2008 2009



Material outlays 2.885 20.157 23.042 2.905 16.058 18.963

Business trips & transportation compensation 1.998 15.961 17.959 2.116 16.352 18.468

Service outlays 9.681 82.511 92.192 11.048 89.732 100.780

Bookings - 6.872 6.872 44 2.930 2.974

Contract compensations 973 9.909 10.882 563 6.040 6.603

Intellectual services - 23.559 23.559 20 18.328 18.348

Representation 1.207 9.947 11.154 1.418 6.972 8.390

Insurance premium 1.167 8.576 9.743 1.344 8.805 10.149

Bank services 176 2.849 3.025 225 3.370 3.595

Contributions to public bodies 770 11.542 12.312 600 16.888 17.488

Claims handling services - 5.359 5.359 - 5.330 5.330

Non-amortised value of written-off material assets 573 5.267 5.840 78 4.433 4.511

Severance pays, vacation compensations, fi nancial aids and the like 4.040 42.008 46.048 6.883 64.617 71.500

Other outlays 1.894 18.830 20.724 2.105 19.345 21.450

Total 25.364 263.347 288.711 29.349 279.200 308.549


4.9. INVESTMENT EXPENSES

2008 2009



Amortisation (buildings not used for insurance operations) - 6.395 6.395 - 1.764 1.764

Interest 30 502 532 - 960 960

Investment value adjustment (decrease) 1.020 6.784 7.804 1.222 14.840 16.062

Realized investment sales losses 66.028 131.111 197.139 12.210 6.962 19.172

Net negative exchange rate balance 8 6.923 6.931 3.327 423 3.750

Other investment expenses 560 14.948 15.508 1.362 50.128 51.490

Total 67.646 166.663 234.309 18.121 75.077 93.198

/i/ Investment value adjustment (decrease)

2008 2009



Land and buildings not used for insurance operations - 1.188 1.188 - 9.005 9.005

Investment available for sale - - - - 1.888 1.888

Credit unrealized losses 1.020 525 1.545 1.222 50 1.272

Deposit unrealized losses - 652 652 - 237 237

Investment fund unrealized losses - 2.354 2.354 - - -

Other decrease in value - 2.065 2.065 - 3.660 3.660

Total 1.020 6.784 7.804 1.222 14.840 16.062

/ii/ Investment sale losses

2008 2009



Investment available for sale –investment funds 968 621 1.589 12.190 5.750 17.940

Investment available for sale – shares - 3.743 3.743 - 1.212 1.212

Fair value investment via profi t&loss account 64.578 126.013 190.591 - - -

Investment held until maturity 482 - 482 20 - 20

Land and buildings not used for insurance operation expenditures - 734 734 - - -

Total 66.028 131.111 197.139 12.210 6.962 19.172


/iii/ Other investment expenses

2008 2009



Loan decrease in value - 698 698 751 36.870 37.621

Interest receivable decrease in value - 251 251 - 4.046 4.046

Compensation costs - 610 610 87 298 385

Assessment and foundation of new subsidiary expenses - 1.146 1.146 - 89 89

Money transfer processing expenses 458 2.798 3.256 491 2.905 3.396

Non-amortised sold material assets value - 2.105 2.105 - 109 109

Other investment expenses 102 7.340 7.442 33 5.811 5.844

Total 560 14.948 15.508 1.362 50.128 51.490

4.10. OTHER TECHNICAL EXPENSES, NET OF REINSURANCE

2008 2009



Prevention activity expenses - 1.039 1.039 - 3.044 3.044

Other insurance technical expenses 1.895 62.981 64.876 2.813 109.872 112.685

Total 1.895 64.020 65.915 2.813 112.916 115.729

/i/ Other insurance technical expenses

2008 2009



Guarantee fund compensation - 15.371 15.371 11 27.406 27.417

Supervisory body compensations (HANFA, HUO) 165 4.349 4.514 214 5.511 5.725

Fire-fi ghting contribution - 8.914 8.914 - 8.925 8.925

Health insurance from MTPL premium contribution - - - - 57.176 57.176

Other insurance-technical costs 1.730 34.347 36.077 2.588 10.854 13.442

Total 1.895 62.981 64.876 2.813 109.872 112.685


4.11. OTHER EXPENSES (VALUE ADJUSTMENTS INCLUDED)

2008 2009



Insurance operation expenses 38 20.719 20.757 152 39.732 39.884

Non-insurance operation expenses - 236.541 236.541 - 217.966 217.966

Total 38 257.260 257.298 152 257.698 257.850

/i/ Non-insurance operation expenses

2008 2009

HRK 000 HRK 000

Raw material, material, energy and the like expenses 2.789 2.917

Service expenses 26.135 21.842

Amortisation 65.362 58.821

Personnel expenses 29.294 25.279

Purchase value of property sold 14.597 600

Actual value of written-off property 12.994 28.428

Value adjustment 20.695 27.976

Interest expenses 28.745 18.230

Negative exchange rate balance 15.524 11.741

Other expenses 20.406 22.132

Total 236.541 217.966

4.12. PROFIT TAX

The profi t tax is calculated at the rate of 20% on identifi ed tax basis and is accounted and positioned in accordance with law provisions.


V NOTES TO THE BALANCE SHEET

5.1. INTANGIBLE ASSETS

31/12/2008 31/12/2009



Goodwill - 38.454 38.454 - 39.985 39.985

Other intangible assets 3 23.196 23.199 39 22.075 22.114

Total 3 61.650 61.653 39 62.060 62.099

/i/ Other intangible assetsFoundation Other intangilbe assets

expenses In function In preparation TOTAL

HRK 000 HRK 000 HRK 000 HRK 000

Purchase value

On 31 December 2008 15.059 75.969 822 91.850

Correction in initial balance 104 (32) (137) (65)

Increase 1.362 4.412 236 6.010

Sale or writing-off (5) (857) - (862)

On 31 December 2009 16.520 79.492 921 96.933

Value correction

On 31 December 2008 9.611 59.040 - 68.651

Correction in initial balance 74 (143) - (69)

Amortisation for 2009 1.255 5.545 - 6.800

Sale or writing-off (5) (558) - (563)

On 31 December 2009 10.935 63.884 - 74.819

Actual value

December 31, 2009 5.585 15.608 921 22.114

December 31, 2008 5.448 16.929 822 23.199

5.2. MATERIAL ASSETS

31/12/2008 31/12/2009



Land and buildings used for insurance operations 4.205 946.520 950.725 4.192 1.382.967 1.387.159

Equipment 315 301.819 302.134 616 215.751 216.367

Other material assets and supplies 252 11.188 11.440 205 34.683 34.888

Total 4.772 1.259.527 1.264.299 5.013 1.633.401 1.638.414


/i/ Land and buildings used for insurance operations


preparationAdvance

payments Total

HRK 000 HRK 000 HRK 000 HRK 000 HRK 000

Purchase value

On 31 December 2008 82.654 1.008.448 53.643 1.551 1.146.296

Correction in an opening balance 11 (4.695) 3.715 - (969)

Revaluation 151.859 265.917 - - 417.776

Value adjustment (816) (2.403) - - (3.219)

Increase 2.042 4.882 20.332 10.093 37.349

Transfer from property in preparation 105 16.170 (16.152) - 123

Transfer from/to 47.551 (47.523) (551) - (523)

Transfer from land and buildings not used for insurance operations 1.232 96.144 - - 97.376

Transfer to land and buildings not used for insurance operations (15.595) (4.556) (35.310) (7.672) (63.133)

Sale or writing-off - (209) - - (209)

Transfer to supplies (353) (143) - - (496)

On 31 December 2009 268.690 1.332.032 25.677 3.972 1.630.371

Value correction

On 31 December 2008 - 195.571 - - 195.571

Correction in an opening balance - (7) - - (7)

Amortisation on revaluation effect - 6.391 - - 6.391

Amortisation in 2009 - 26.618 - - 26.618

Transfer from land and buildings not used for insurance operations - 15.866 - - 15.866

Transfer to land and buildings not used for insurance operations - (1.001) - - (1.001)

Sale or writing-off - (100) - - (100)

Transfer to supplies - (126) - - (126)

On 31 December 2009 - 243.212 - - 243.212

Actual value

On 31December 2009 268.690 1.088.820 25.677 3.972 1.387.159

On 31December 2008 82.654 812.877 53.643 1.551 950.725

During 2009, Croatia osiguranje d.d. (parent company) made an independent assessment of market value of land and buildings used for insurance

operations. Consequently, increase in real estate value and revaluation provision amounting to HRK 417,776 thousand was registered.

On December 31, 2009 the Group has not regulated ownership on identifi ed number of real estate registered in business books. The settlement of

legal and property rights is in progress.


/ii/ Equipment

Equipment & furniture

Means of transportation Instruments

Machinery & equipment Tools & aids

Other equipment

Investment in progress Total

HRK 000 HRK 000 HRK 000 HRK 000 HRK 000 HRK 000 HRK 000 HRK 000

Purchase value

On 31 December 2008 258.540 313.788 30.945 145 330 30.279 11.171 645.198

Correction in an opening balance (740) (1.648) 1.158 2.050 (2) (921) 6 (97)

Increase 921 6.229 8.909 57 6.278 3.075 12.618 38.087

Transfer to real estate (3.736) - (794) - - (3.736) - (8.266)

Transfer from/to 15.785 961 1.207 - - 914 (18.867) -

Sale or writing-off (12.052) (74.276) (156) - - (4.912) (1.447) (92.843)

On December 31, 2009 258.718 245.054 41.269 2.252 6.606 24.699 3.481 582.079

Value correction

On 31 December 2008 167.026 137.627 20.905 111 228 17.167 - 343.064

Correction in an opening balance (1.304) (2.023) 630 1.792 (2) 638 - (269)

Amortisation in 2009 25.672 48.432 2.541 120 2.801 4.151 - 83.717

Sale or writing-off (11.596) (45.056) (124) - - (4.024) - (60.800)

On December 31, 2009 179.798 138.980 23.952 2.023 3.027 17.932 - 365.712

Actual value

On December 31, 2009 78.920 106.074 17.317 229 3.579 6.767 3.481 216.367

On December 31, 2008 91.514 176.161 10.040 34 102 13.112 11.171 302.134

5.3. INVESTMENT

31/12/2008 31/12/2009



Land and buildings not used for insurance operation investment - 650.748 650.748 - 800.366 800.366

Investment in subsidiaries, associate companies and participation in joint investment - 10.176 10.176 - 19.221 19.221

Other fi nancial investment 1.704.749 2.971.343 4.676.092 1.943.036 2.897.463 4.840.499

Total 1.704.749 3.632.267 5.337.016 1.943.036 3.717.050 5.660.086


5.3.1. 5.3.1. Investment in land and buildings not used for insurance operations

/i/ Via purchase value


preparation Total

HRK 000 HRK 000 HRK 000 HRK 000

Purchase value

On 31 December 2008 5.239 100.229 471 105.939

Increase - 891 13.928 14.819

Transfer from property in preparation 4.568 29.288 (33.856) -

Transfer to land and buildings used for insurance operations - (228) - (228)

Transfer from land and buildings used for insurance operations 15.624 - 24.656 40.280

Sale or writing-off - (552) - (552)

On 31 December 2009 25.431 129.628 5.199 160.258

Value correction

On 31 December 2008 - 11.853 - 11.853

Amortisation during 2009 - 1.764 - 1.764

Transfer to land and buildings used for insurance operations - (22) - (22)

Sale or writing-off - (2) - (2)

On 31 December 2009 - 13.593 - 13.593

Actual value

On December 31, 2009 25.431 116.035 5.199 146.665

On December 31, 2008 5.239 88.376 471 94.086

/ii/ Via fair value through profi t & loss account

HRK 000

On 31 December 2008 556.662

Transfer to land and buildings used for insurance operations (81.231)

Transfer from land and buildings used for insurance operations 19.040

Increase in value recognized in the profi t & loss account 137.492

Decrease in fair value in the profi t & loss account (9.005)

Purchases during the year 30.998

Sold during the year (255)

On 31 December 2009 653.701

During 2009, Croatia osiguranje d.d. (parent company) made an independent assessment of the market value of land and buildings not used for insur-

ance operations. Consequently, increase in value of real estate amounting to HRK 128,487 thousand effects the profi t and loss account.

On December 31, 2009 the Group has not regulated ownership on identifi ed number of real estate registered in the business books. The settlement of

legal and property rights is in progress.


5.3.2. Investment in subsidiaries, associate companies and participation in joint investment

31/12/2008 31/12/2009



Shares & stakes in subsidiaries - 624 624 - 954 954

Shares & stakes in associate companies - 9.413 9.413 - 17.965 17.965

Participation in joint investment - 139 139 - 302 302

Total - 10.176 10.176 - 19.221 19.221

Shares and stakes in associate companiesa

31/12/2008 31/12/2009



Autoprijevoz d.d. Oto�ac - 4.450 4.450 - 4.450 4.450

Brioni d.d. Pula - 4.260 4.260 - 4.260 4.260

Strmec projekt d.o.o. - - - - 8.513 8.513

STP Agroservis d.o.o., Virovitica - 556 556 - 556 556

Reumal d.o.o. Fojnica - 147 147 - 186 186

Total - 9.413 9.413 - 17.965 17.965

5.3.3. Other fi nancial investment

31/12/2008 31/12/2009



Investment held until maturity 1.050.590 676.246 1.726.836 1.067.466 691.963 1.759.429

Investment available for sale 115.680 269.181 384.861 136.307 354.159 490.466

Fair value investment via profi t & loss account 14.504 115.544 130.048 124.378 251.098 375.476

Deposits, loans & receivables 523.975 1.910.372 2.434.347 614.885 1.600.243 2.215.128

Total 1.704.749 2.971.343 4.676.092 1.943.036 2.897.463 4.840.499

Investment held until maturity

31/12/2008 31/12/2009



Debtor securities & other securities with fi xed income 1.037.922 675.239 1.713.161 1.064.830 671.986 1.736.816

Other investment held until maturity 12.668 1.007 13.675 2.636 19.977 22.613

Total 1.050.590 676.246 1.726.836 1.067.466 691.963 1.759.429


Investment available for sale

31/12/2008 31/12/2009



Shares, stakes & other securities with changeable income 47.320 145.978 193.298 70.530 229.554 300.084

Stakes in investment funds 68.360 123.203 191.563 65.777 124.605 190.382

Total 115.680 269.181 384.861 136.307 354.159 490.466

Investment available for sale consists of shares acquired in recapitalization of Jadranska banka d.d., Šibenik in which the Group participated with HRK

8,400,000 on the basis of which it acquired additional number of 4,200 shares at par value of HRK 2,000 each but the recapitalization has not been

confi rmed by the Commercial Court in Šibenik because other shareholders put an appeal requiring the Decision of the General Assembly on capital

stock increase to be declared null & void.

Fair value investment via profi t & loss account

31/12/2008 31/12/2009



Shares, stakes & other securities with changeable income - 13.638 13.638 - - -

Debtor securities & other securities with fi xed income - 27.087 27.087 - 8.652 8.652

Shares in investment funds 14.504 74.819 89.323 124.378 241.195 365.573

Other investment - - - - 1.251 1.251

Total 14.504 115.544 130.048 124.378 251.098 375.476

Deposits, loans and receivables

31/12/2008 31/12/2009



Deposits with credit institutions (banks) 467.455 1.186.268 1.653.723 545.096 1.028.238 1.573.334

Loans 56.442 645.575 702.017 68.698 544.591 613.289

Other loans and receivables 78 78.529 78.607 1.091 27.414 28.505

Total 523.975 1.910.372 2.434.347 614.885 1.600.243 2.215.128


5.4. INVESTMENT FOR THE ACCOUNT AND RISK OF LIFE INSURANCE POLICYHOLDERS

Investment for the account and risk of life insurance policyholders amounting to HRK 22,328 thousand (on 31 December 2008 amounting to HRK

13,687 thousand) refers to introducing new products uniting insurance and investment aspects for policyholders' account and risk i.e. premium invest-

ment in investment funds for the account and risk of policy owners.

5.5. REINSURANCE SHARE IN TECHNICAL PROVISION

31/12/2008 31/12/2009



Unearned premium, reinsurance share - 105.849 105.849 - 67.046 67.046

Life insurance mathematical provision, reinsurance share 16 - 16 13 - 13

Claims provision, reinsurance share - 90.035 90.035 - 83.440 83.440

Premium return provision - 614 614 - 534 534

Total 16 196.498 196.514 13 151.020 151.033

5.6. DEFERRED AND CURRENT TAX ASSETS

Current tax assets amounting to HRK 6,156 thousand (on 31 December 2008 amounting to HRK 23,077 thousand) refer to overpaid profi t tax.

5.7. RECEIVABLES

31/12/2008 31/12/2009



Direct insurance receivables 40.326 750.941 791.267 44.662 757.239 801.901

Co-insurance & reinsurance receivables - 70.461 70.461 - 63.913 63.913

Other receivables 40.944 402.011 442.955 6.812 424.396 431.208

Total 81.270 1.223.413 1.304.683 51.474 1.245.548 1.297.022

/i/ Direct insurance receivables

31/12/2008 31/12/2009



From insureds 40.326 750.580 790.906 44.662 755.812 800.474

From agents i.e. insurance intermediaries - 361 361 - 1.427 1.427

Total 40.326 750.941 791.267 44.662 757.239 801.901


Receivables from insureds

31/12/2008 31/12/2009



Written but not billed premium - 364.378 364.378 - 323.619 323.619

Billed but not collected premium 40.326 569.563 609.889 44.662 672.080 716.742

Co-insurance premium - 1.154 1.154 - - -

Other premium receivables - 398 398 - 397 397

Gross premium receivables 40.326 935.493 975.819 44.662 996.096 1.040.758

Value correction - (184.913) (184.913) - (240.284) (240.284)

Total 40.326 750.580 790.906 44.662 755.812 800.474

/ii/ Co-insurance and reinsurance receivables

31/12/2008 31/12/2009



Commission receivables - 7.807 7.807 - 15.082 15.082

Claim receivables - 62.654 62.654 - 48.831 48.831

Total - 70.461 70.461 - 63.913 63.913

/iii/ Other receivables

31/12/2008 31/12/2009



Other insurance business receivables - 101.039 101.039 - 78.379 78.379

Investment proceeds receivables 3.750 16.524 20.274 2.165 24.261 26.426

Other receivables 37.194 284.448 321.642 4.647 321.756 326.403

Total 40.944 402.011 442.955 6.812 424.396 431.208

Other insurance business receivables

31/12/2008 31/12/2009



Reimbursement receivables - 86.738 86.738 - 77.565 77.565

Other receivables - 14.301 14.301 - 814 814

Total - 101.039 101.039 - 78.379 78.379


Other receivables

31/12/2008 31/12/2009



Sold apartment receivables - 23.447 23.447 - 20.152 20.152

Long-term leasing receivables - 58.901 58.901 - 19.140 19.140

Advance payment receivables - 50.837 50.837 - 18.010 18.010

Fiduciary assets receivables - 15.158 15.158 - 85.696 85.696

Purchase receivables - 22.782 22.782 - 17.876 17.876

Credit card receivables 3.360 87.998 91.358 4.138 89.833 93.971

Court decision receivables - 2.230 2.230 - 4.299 4.299

Cession receivables 131 7.292 7.423 - 4.998 4.998

State & state institution receivables - 9.815 9.815 - 11.051 11.051

Other receivables 33.703 5.988 39.691 509 50.701 51.210

Total 37.194 284.448 321.642 4.647 321.756 326.403

5.8. OTHER ASSETS

31/12/2008 31/12/2009



Money in bank and in cash

Money on business account 1.075 104.409 105.484 1.960 59.392 61.352

Money on mathematical provision account 5.602 - 5.602 131 - 131

Cash money 158 460 618 2 381 383

Total 6.835 104.869 111.704 2.093 59.773 61.866

Other money 180 41.044 41.224 119 26.502 26.621

Total 7.015 145.913 152.928 2.212 86.275 88.487

5.9. FUTURE PERIOD PAID EXPENSES AND DEFERRED PAYMENT

31/12/2008 31/12/2009



Interest and rent split - 2.721 2.721 101 1.896 1.997

Acquisition costs split - 15.877 15.877 - 19.070 19.070

Other future period paid expenses 219 23.836 24.055 94 26.655 26.749

Total 219 42.434 42.653 195 47.621 47.816


5.10. CAPITAL STOCK AND PROVISION

5.10.1. Capital Stock

Capital stock amounting to HRK 442,887,200 (on December 31, 2008 in the same amount) paid in total and registered at the Commercial Court in

Zagreb. The capital stock is divided in 316,348 shares at par value of HRK 1,400.

Ownership structure on December 31, 2009 and on December 31, 2008:

31/12/2008 31/12/2009

Shareholder Number of Amount in Number of Amount in

shares HRK % share shares HRK % share

Hrvatski fond za privatizaciju 253.941 355.517.400 80,27 253.961 355.545.400 80,28

Raiffeisenbank Austria d.d. – custodial account 21.312 29.836.800 6,74 20.341 28.477.400 6,43

HPB d.d. / Kapitalni fond d.d.–custodial account 3.594 5.031.600 1,14 - - 0,00

Hrvatska poštanska banka d.d. 2.957 4.139.800 0,93 6.919 9.686.600 2,19

Societe Generale - Splitska banka d.d. – custodial account 2.566 3.592.400 0,81 4.502 6.302.800 1,42

Julius k.d.d., Maribor 2.122 2.970.800 0,67 2.122 2.970.800 0,67

Privredna banka Zagreb d.d., Zagreb – custodial account 1.758 2.461.200 0,56 2.422 3.390.800 0,77

Hypo Alpe Adria Bank d.d., Zagreb – custodial account 1.566 2.192.400 0,50 1.109 1.552.600 0,35

Kraš d.d., Zagreb 1.400 1.960.000 0,44 1.400 1.960.000 0,44

Zagreba�ka banka d.d. – custodial account 1.157 1.619.800 0,37 736 1.030.400 0,23

Auto Hrvatska d.d., Zagreb 1.004 1.405.600 0,31 1.004 1.405.600 0,32

Dioki d.d., Zagreb 734 1.027.600 0,22 - - 0,00

Komercijalna banka Zagreb d.d., Zagreb - in liquidation 700 980.000 0,22 700 980.000 0,22

Erste & Steiermarkische Bank d.d., Rijeka – custodial account 635 889.000 0,20 873 1.222.200 0,28

Bahovec Sre�ko 530 742.000 0,17 540 756.000 0,17

Adriacommerce d.o.o., Split 500 700.000 0,16 500 700.000 0,16

Radi� Antun 417 583.800 0,13 414 579.600 0,13

Tankerska plovidba d.d., Zadar 400 560.000 0,13 400 560.000 0,13

TEB inženjering d.o.o., Zagreb 399 558.600 0,13 - - 0,00

Škaro Miroslav 380 532.000 0,12 380 532.000 0,12

Other small shareholders 18.276 25.586.400 5,78 18.025 25.235.000 5,69

Total 316.348 442.887.200 100,00 316.348 442.887.200 100,00


5.11. TECHNICAL PROVISION

31/12/2008 31/12/2009



Unearned premium, gross 3.535 1.383.540 1.387.075 3.990 1.245.007 1.248.997

Life insurance mathematical provision, gross 1.579.432 - 1.579.432 1.739.463 - 1.739.463

Claims provision, gross 40.750 3.159.642 3.200.392 43.490 3.097.211 3.140.701

Premium return provision – dependent and independent of the result (bonus & discounts), gross - 9.809 9.809 - 9.759 9.759

Claim adjustment provision, gross - 23 23 - - -

Other insurance-technical provision, gross - 38.655 38.655 41.910 41.910

Total 1.623.717 4.591.669 6.215.386 1.786.943 4.393.887 6.180.830

5.12. LIFE INSURANCE TECHNICAL PROVISION POLICYHOLDERS' RISK

Life insurance technical provision policyholders' risk amounting to HRK 22,328 thousand (on 31 December 2008 amounting to HRK 13,687 thousand)

is a special provision made for life insurance policies policyholders' investment risk.

5.13. OTHER PROVISION

31/12/2008 31/12/2009



Pension and lawsuit provision - 21.940 21.940 3.399 73.156 76.555

Other provision 10 8.286 8.296 - 6.295 6.295

Total 10 30.226 30.236 3.399 79.451 82.850


/i/ Pension and lawsuit provision fl ow during 2009:

Lawsuit expensesSeverance pays and

anniversary bonusOther Total


On December 31, 2008 8.045 13.686 209 21.940

Additional provision 1.588 56.997 - 58.585

Transfer from/to 1.133 (1.133) - -

Provision cancellation (1.616) (1.005) - (2.621)

Provision use (63) (1.077) (209) (1.349)

On December 31, 2009 9.087 67.468 - 76.555

/ii/ Other provision

31/12/2008 31/12/2009



Apartment fund - 2.704 2.704 - 2.806 2.806

Other provision 10 5.582 5.592 - 3.489 3.489

Total 10 8.286 8.296 - 6.295 6.295

5.14. DEFERRED AND CURRENT TAX LIABILITY

31/12/2008 31/12/2009



Deferred tax liability - - - - 125.130 125.130

Current tax liability - 3.634 3.634 - 20.080 20.080

Total - 3.634 3.634 - 145.210 145.210

Deferred tax liability is recognized on the basis of land and buildings used for insurance operation revaluation and a part of land and buildings not

used for insurance operations.

5.15. FINANCIAL LIABILITIES

31/12/2008 31/12/2009



Loan liabilities - 315.288 315.288 - 223.943 223.943

Other fi nancial liabilities 148 1.701 1.849 245 8.181 8.426

Total 148 316.989 317.137 245 232.124 232.369


/i/ Loan liabilities

Maturity

Creditor Interest rate 31/12/2009 Up to 1 year 2-5 years over 5 years

HRK 000 HRK 000 HRK 000 HRK 000

Hrvatska poštanska banka d.d., Zagreb 6MEUR+2,5% 4.914 4.914 - -

Privredna banka Zagreb d.d., Zagreb 3MEUR+2,4% 42.011 42.011 - -

Hrvatska poštanska banka d.d., Zagreb 9,95% 40.038 - 40.038 -

Privredna banka Zagreb d.d., Zagreb 3MEUR+2,4% 15.854 - 15.854 -

Privredna banka Zagreb d.d., Zagreb 3MEUR+2,4% 30.442 - 30.443 -

Hypo Alpe-Adria bank d.d., Zagreb 1MEUR+2,2% 14.742 - 14.742 -

Erste & Steiermarkische Bank d.d., Rijeka 7% 35.446 - 35.446 -

Hrvatska poštanska banka d.d., Zagreb 8,50% 30.144 - 30.144 -

Erste & Steiermarkische Bank d.d., Rijeka 6% 9.829 1.336 8.025 468

UniCredit banka d.d., B&H 8,50% 142 54 67 21

Hypo Alpe-Adria Bank, B&H 5,25% 332 125 157 50

UniCredit Leasing d.o.o., B&H - 49 11 37 -

Total 223.943 48.451 174.953 539

5.16. OTHER LIABILITIES

31/12/2008 31/12/2009



Liabilities out of direct insurance operations 764 105.398 106.162 1.171 115.162 116.333

Liabilities out of co-insurance and reinsurance operations 3 43.052 43.055 2 71.224 71.226

Other liabilities 30.759 121.876 152.635 36.283 129.770 166.053

Total 31.526 270.326 301.852 37.456 316.156 353.612

/i/ Liabilities out of direct insurance operations

31/12/2008 31/12/2009



Claim and contracted insurance amount liabilities 717 36.206 36.923 337 36.491 36.828

Fire-fi ghting contribution liability - 1.912 1.912 - 1.515 1.515

Guarantee fund liabilities - 60.233 60.233 - 70.776 70.776

Health insurance from MTPL premium liabilities - - - - 3.950 3.950

Other liabilities 47 7.047 7.094 834 2.430 3.264

Total 764 105.398 106.162 1.171 115.162 116.333


/ii/ Liabilities out of co-onsurance and reinsurance operations

31/12/2008 31/12/2009



Inland reinsurance premium liabilities - 433 433 2 220 222

Reinsurance premium liabilitiies abroad 3 42.619 42.622 - 71.004 71.004

Total 3 43.052 43.055 2 71.224 71.226

/iii/ Other liabilities

31/12/2008 31/12/2009



Supplier liabilities 1.009 35.252 36.261 529 45.330 45.859

Dividend liabilities - 1.806 1.806 - 1.287 1.287

State liabilities for sold apartments - 8.326 8.326 - 7.539 7.539

Contributions, membership dues and the like - 3.931 3.931 70 4.970 5.040

Employee liabilities - 44.621 44.621 61 41.085 41.146

MTPL & motor hull insurance tax liabilities - 11.680 11.680 - 10.641 10.641

Other liabilities 29.750 16.260 46.010 35.623 18.918 54.541

Total 30.759 121.876 152.635 36.283 129.770 166.053

5.17. DEFERRED PAYMENT AND FUTURE PERIOD INCOME

31/12/2008 31/12/2009



Calculated premium 41.956 - 41.956 45.066 - 45.066

Discount amortisation//premium on treasury & commercial bills 10.467 262 10.729 - - -

Other deferred payment and future period income - 75.633 75.633 424 61.792 62.216

Total 52.423 75.895 128.318 45.490 61.792 107.282


VI LAWSUITS AND POTENTIAL LIABILITIES

Besides lawsuits against the members of the Group raised with the

aim to compensate the claims there are lawsuits of other cause.

Consequently the Group is exposed to potential liabilities. The possi-

bility of money outfl ow on the basis of lost lawsuits has been assessed.

The Group positioned a provision amounting to HRK 9,087 thousand

following that assessment.

VII EVENTS AFTER THE BALANCE SHEET DATE

/i/ The Group acquired 16.90% share in the company Adriatica-

Net d.o.o., Zagreb by investment in rights, real estate and cash

payment.

/ii/ Mr Damir Mihanovi�, member of the Management Board, has

been releaved of duty on March 1, 2010.

/ii/ The procedure of releaving of duty Mr Hrvoje Vojkovi�, President

of the Management Board and appointing Mr Zdravko Zrinuši�

as President of the Management Board is in progress.

VIII FINANCIAL RISK MANAGEMENT (FRM)

During fi nancial and insurance risk management the basic target of the

Group is maintenance of the capital level adequate to scope and types

of insurance operations as well as to risk exposure. The Management

Board recognizes the signifi cance of existing effective system of risk

management. At the moment the Group fi nds itself in the process of

introducing the centralized risk management system.

Regulatory bodies control solvency of the Group to secure the cov-

er of liabilities arising out of possible economic changes or natural

disasters.

The Group manages assets actively by use of approach making in bal-

ance quality, diversifi cation, adjustment of assets and liabilities, liquidity

and investment proceeds. The management of the Group approves

periodically targeted portfolio, identifi es investment direction and limits

and supervises the process of managing assets and liabilities. Due at-

tention is paid to the adjustment with Law on Insurance.

In fi nancial instrument transactions the Group takes over fi nancial

risks. These risks include market risk, credit risk and solvency risk. Each

of these risks is described below together with the summary of the

Group's managing the particular risk.

Market risk

Description: Risk of fi nancial instrument future money fl ow fair value

fl uctuation due to market price change.

Market risk includes three types of risks: currency risk, interest risk and

other price risks.

a) Currency risk – Fair value fluctuation or financial instrument

money flow risks due to change in exchange rates.

The Group is exposed to change in exchange rate risk through

transactions in foreign currencies. That is the risk which results

with the change in financial instrument's value due to foreign

currency exchange rate changes.

The Group is exposed to currency risk through credit, deposit and

investment activities, as well as through premium income, linked

technical provision accounting as well as through settlement of

currency clause insurance policies. The Group manages currency

risk by trying to decrease the difference in change of assets and

liabilities either in foreign currency or by currency clause. Major

part of mathematical provision investment is euro denominated

following the fact that major part of mathematical provision is

as well euro denominated.

b) Interest risk: Fair value fluctuation or financial instrument money

flow risks due to change in market interest rate.

The Group is exposed to change in market interest rate risk that

is concentrated in investment portfolio. The business operations

of the Group are subject to interest rate change risk to the extent

that assets and liabilities with interest proceeds either become

due or the interest rate is changed in various periods or in differ-

ent amounts. The Group is as well exposed to future cash money

flow change risk arising out of the market interest rate change.

However, this risk is limited since major part of investment interest

proceeds of the Group on the date of the balance sheet bears

fixed interest rates.

Changes in interest rate do not influence the level of non-life

insurance provision except annuity payments that are not signifi-

cant on the balance sheet date. The interest rate used in counting

the mathematical provision reflects partially the expected flows

in interest proceeds in long-term perspective.

The Group goes along with this exposure by reviewing the posi-

tion of the assets and liabilities from time to time. The general

aim is to limit net changes arising out of interest rate change in


assets' and liabilities' value.

The Group endeavours to adjust future income from this asset

with insurance liabilities by purchasing state bonds. However,

taking into consideration a relatively short period of these bonds'

duration and longer period of life insurance liabilities as well

as the inability of the Group to purchase interest swap in the

Repuiblic of Croatia, the Group is exposed to interest risk.

According to contracts, the Group is obliged to count annual

interest rates from 3.5-5% on life insurance paid premium for

payment amounts upon maturity to the insureds and at the mo-

ment the Group is not able to protect itself from future interest

risk exposure caused by future liability cover investment.

c) Other price risks: Fair value or financial instrument money flow

fluctuation risks caused by market price changes (not arising

either out of interest or currency risk) either it is about changes

caused by particular financial instrument factors or its issuer, or

it is about other risks influencing all similar financial instruments

traded on the market.

The Group is subject to price risks due to the marketable security

portfolio, positioned in the balance sheet by its fair value. The

price risk is the risk including the financial instrument change as

the result of change in market prices nevertheless the changes

incurred either as the result of particular paper specific factors (or

its issuer) or factors influencing all financial insturments traded

on the market.

The target of the Group is to earn competitive proceeds by in-

vesting in securities portfolio diversification. The characteristics

of the portfolio are subject to analysis regularly. The portfolio of

the Group contains securities of various issuers. The concentra-

tion of any individual or a company is limited by criteria brought

either by higher management or by law requirements.

Credit risk

Description: Credit risk is the risk that one party to a fi nancial instru-

ment will cause a loss for the other party by failing to pay for its

obligations.

The portfolio of the Group including securities with fi xed proceeds,

mortgages and less short-term and other investment are subject to

credit risk. This risk is defi ned as the potential decrease of the market

value as a consequence of unfavourable changes in debtor's ability to

pay obligations.

The Management Board brought a decision on credit policy and con-

tinually follows a potential exposure to credit risk. Credit ability of all

insureds is assessed and security instruments are collected before pay-

ment or the postponement. Insurance instruments are in accordance

with Insurance Law.

The Group accepted the conservative investment policy.

In accordance with that, on the balance sheet date, the Group indicated

signuifi cant concentration of receivables (bonds and treasury bills) with

the Republic of Croatia.

Liquidity risk

Description: Liquidity risk presents itself in circumstances when sudden

and unexpected increase in liabilities could require trading with asset

in the market quickly at a low price.

Liquidity risk incurrs as the result of fi nancial operations of the Group

and position management. This risk includes inability of assets fi nancing

at an adequate time and interest as well as inability of selling assets

at a reasonable price and at a reasonable period of time. The Group's

liquid assets portfolio makes a part of strategy management of liquid-

ity risk thus ensuring continuous business operations and at the same

time satisfying law requirements.

The liquidity position of the Group is strong and all law requirements

needed for payment of claims during the year satisfi ed.



Croatia osiguranje d.d. Annual Report 2009 003...Šenoa, supported by other members of the political...

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