Generali PPF Holding Annual Report 2012

Transcription

GROWTH )
Generali PPF Holding Annual Report 2012
Progress
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HONESTY
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GENERALI PPF HOLDING
ANNUAL REPORT 2012
INTERVIEW WITH THE CHAIRMAN AND CEO
Generali PPF Holding is a leading insurance group providing know-how
and a professional base for its insurance companies in Central and Eastern Europe.
At 2012 year-end Generali PPF Holding operated in 14 countries – Belarus, Bulgaria,
Croatia, the Czech Republic, Hungary, Kazakhstan, Montenegro, Poland, Romania,
Russia, Serbia, Slovakia, Slovenia and Ukraine. Companies in these countries
took care of more than 13 million clients and total assets of 16.2 billion.
In 2012 total gross written premium income amounted to 3.5 billion.
Ukraine
Generali Life Insurance
Belarus
Russia
Generali
Generali PPF Life Insurance
Generali PPF General Insurance
Poland
Generali & Generali Życie
Proama
Czech Republic
Česká pojišťovna
Generali Pojišťovna
Slovakia
Generali Slovensko
Hungaria
Generali Providencia
Kazakhstan
Slovenia
Generali Life
Generali Zavarovalnica
Romania
Croatia
Generali osiguranje
Montenegro
Delta Generali Osiguranje
Podgorica
Generali Romania
Serbia
Delta Generali
Osiguranje
Bulgaria
Generali Bulgaria Holding
GP Reinsurance
2
SUCCESS TO ME IS...
/
DESPIT E T HE CONTINUING MACROE CON OMIC
DIFFICULT IE S WITHIN THE CEE RE GION, W HICH
ST IL L N E GATIVELY AF F ECT THE IN SURANCE
MARKE T, GE NERAL I PPF HOL DING MAN AGE D
TO DE L IVER ROBUST PERF ORMAN CE IN 2 012 .
BEHIN D OUR SUCCESS IS A SHARED BON D
THAT BIN DS US TO ACHIEVE OUR SET GOALS
AN D T O PROVE T O OUR CLIENT S T HAT W E ARE
T HE IR T RUSTWORTHY PARTNER.
N O MAT TE R WHAT.
To
ME
SUCCESS
is...
...ability to effectively implement a growth strategy
while maintaining profitability.
Ladislav Bartoníček, CEO of Generali PPF Holding
...to build strategy and client oriented team and culture.
Dmitriy Nadirov, CEO of Generali Life Kazakhstan
...willingness to make changes leading to significant
efficiency improvement, reduction of expenses while
maintening the sustainable profitgenerating capability.
Mihály Erdös, CEO of Generali-Providencia Biztosító, Hungary
...promising rate of expansion in key market segments.
Artur Olech, CEO of Generali Poland
33
ANNUAL REPORT 2012
TABLE OF CONTENTS
Table of Contents
5 Letter from the Chairman and CEO
8 Economic and Insurance Market Development
15
Generali PPF Holding Profile
19
The Holding’s Management
25
The Holding’s Major Subsidiaries
34
Financial Section
4
ANNUAL REPORT 2012
INTERVIEW
LETTER
FROM
WITH
THE
THE
CHAIRMAN
CHAIRMAN
AND
AND
CEO
CEO
Letter from the Chairman and CEO
Dear stakeholder,
Since the creation of GPH in 2007, we have become one of the leading players in Central-Eastern Europe. Over the last four years,
gross premiums have grown to reach €3.5 billion in 2012, with the number of customers increasing substantially to 14 million.
CEE is a region with excellent prospects that will continue to be a key growth driver for Generali going forward. These are rapidly
evolving insurance markets and we expect market growth in terms of premium income to be double that of Western Europe and for
profitability to rise at similar levels over the period 2011–2017.
To reinforce our position in this promising market, in January 2013 the Generali Group reached an agreement to buy out the PPF
Group’s minority stake in GPH, providing clarity over Generali’s overarching strategy in the region. We will maintain our relationship with
PPF until the deal’s completion in 2014, as we fully integrate the business into Generali.
As the first step in this process, Luciano Cirinà has been appointed as the new CEO of GPH, and assumed this role as of
28 March 2013. Luciano has extensive experience within the Generali Group, most recently as CEO of Generali Holding Vienna.
This transaction presents an exciting opportunity to grow our business, and I believe that through the hard work and expertise of
our employees, we will create a more efficient platform both to serve our existing client base and to increase our market share in this
attractive region.
Yours faithfully,
Sergio Balbinot
Chairman, Generali PPF Holding
5
ANNUAL REPORT 2012
INTERVIEW
LETTER
FROM
WITH
THE
THE
CHAIRMAN
CHAIRMAN
AND
AND
CEO
CEO
Dear clients and partners,
It has now been more than five years since the joint venture between Generali and PPF was established. It has been a unique challenge
and an opportunity for rapid development in prospective markets. During its existence, Generali PPF Holding has proven that it is built
on solid foundations and has become one of the largest insurance groups operating in Central and Eastern Europe. At the same time,
the group is by far the most profitable one. This is an excellent accolade of the work of all our companies and their employees.
A number of countries in Central and Eastern Europe have been struggling for several years with economic problems that have also
affected the insurance market. The consequences have been most striking in motor insurance, which in the Czech Republic, Hungary
and Romania, is becoming unprofitable due to strong competition and negative trends in the development of claimed amounts.
Despite the difficulties in this important segment of our business, 2012 was one of the most successful years in GPH history. In non-life
insurance, we have grown by nearly 10 percent, and in regular paid life insurance by 2.5 percent. Total premiums written thus exceeded
the results of 2011 by more than 6 percent and reached €3,545 million.
Notwithstanding the decrease in net profit compared to previous year – which was influenced by impairment on goodwill and other
intangible assets on Russian entities in light of their sale to PPF Group – we even managed to improve the results in our core insurance
business, as it is witnessed by the growth in operating result and the improvement in the net combined ratio below 89 percent. The best
results last year were achieved by our insurance companies in Serbia, Poland, Russia and Kazakhstan. In the Czech Republic, which still
represents the most important part of the income and profit of GPH, our companies continue to hold the position of market leader, while
in Hungary and Serbia we are number two and in Slovakia number three in the market.
In summer 2012, we expanded our business. In Poland we entered into an agreement with the French Groupama group to purchase
its Polish Proama branch. Since last year, our clients in Poland and Slovakia have also had the opportunity to regularly invest in Generali
PPF Invest funds.
In Romania, on the other hand, we have limited our activities in the motor insurance business due to a high loss rate in this segment,
which has been positively reflected in the financial results of our local insurance company.
A fundamental change came at the end of March 2013, when following a change in shareholders’ interests and in accordance with the
shareholders’ agreement, the insurance companies in Belarus, Kazakhstan, Russia and Ukraine were sold, thus excluded from the GPH
perimeter.
2012 was an extremely successful year, and I would like to thank the employees, business partners and, above all, the millions of GPH
customers in Central and Eastern Europe for the excellent results not only for the year 2012.
Ladislav Bartoníček
Chief Executive Officer
6
TEAM TO ME IS...
GEN E RALI PPF HOL DING IS ONE TE AM T HAT W ORKS
T OGE T HE R ON CREATING VAL UES AND ACHIEVIN G
OUR SE T GOALS.
OUR E MPL OYE ES ARE OUR MOST VAL UE D ASSE T.
T HE IR HARD WORK, L OYALTY AND DE TE RMINAT ION
ALLOW US T O EF FE CTIVE LLY OPERAT E THE HOLDING
IN AL L COUNTRIES.
TO
ME
Team
}
is...
...professionals who together contribute to the quality,
speed, and flexibility of our services.
Vladimír Bezděk, CEO of Generali Slovensko poisťovňa
...certainty that I can rely on my colleagues as much
as they can rely on me.
Gragor Pilgram, CEO of Generali Zavarovalnica
7
ANNUAL REPORT 2012
ECONOMIC AND INSURANCE MARKET DEVELOPMENT
Economic and Insurance Market Development
General economic situation in 2012
The global economy has experienced quite contradictory development in a number of economic areas. Consumer and investment
confidence is slowly returning to the US while, on the other hand, the Eurozone is still struggling with debt problems and lower political
stability. The US economy reported GDP growth of +2.2%, while the Eurozone decreased by –0.5% due to the Eurozone economies
being dragged down by the problematic situation within the peripheral countries.
The CEE region economy was fairly slowed down by the recession in the Czech Republic and Hungary (a –1.2% and 1.7% GDP
decrease respectively). These economies were driven down mainly by the austerity measures undertaken by their governments. The
other problematic region on a macroeconomic level is South Eastern Europe, and especially Slovenia, Croatia and Serbia. Slovenian
GDP decreased by the highest rate within the region (–2.3%). The Croatian economy decreased by –2.0%, while the drop in the Serbian
economy was –1.8%. Serbia also had the highest official unemployment in the region at 23.1% as well as the highest rate of inflation at
12.2%. Meanwhile, the CIS countries reported relatively solid growth; for instance, Kazakhstan with +5.0% (the highest growth in CEE)
or Russia with +3.4%. On average GDP in CEE grew by +2.3% in 2012.
Czech GDP in constant prices decreased by –1.2% during 2012. This decline
was caused mainly by the efforts of the Czech government to decrease the
fiscal deficit and to stabilise the public budget. VAT rates were increased by
1 percentage point, and also a number of budget cuts were applied which
caused an overall decrease in consumption and investment confidence. The
Czech National Bank considered monetary intervention to weaken the Czech
Koruna several times, but later postponed this option to 2013 (due to the lack
of deflationary pressures caused by the VAT increase).
2.3%
average GDP
growth in 2012
The Hungarian economy remains in recession too. Real GDP decreased by –1.7% while unemployment reached 11.0%. Hungary is
highly reliant on other Western European export markets, but moreover is burdened by higher external debt and a large share of FX
denominated debts. The Hungarian government also applied a range of controversial fiscal measures, including special sector taxes and
financial transfer taxes. With an expected dovish monetary policy, this fiscal policy is one of the main sources of risk in the Hungarian
economy and may trigger a wide sell-off of Hungarian assets in the future.
The Polish economy has shown evidence of a mild slowdown, yet its economic situation still remains positive. GDP growth decelerated
from 4.3% in 2011 to 2.0% in 2012. Poland has benefited from stabilising external demand and successfully decreasing the current
account balance deficit. On the other hand, Poland is facing weakening domestic demand and deflationary pressures. The labor market
has also deteriorated and the unemployment rate has increased from 9.6% in 2011 to 10.3%. This leads the National Bank of Poland to
monetary easing and to key rates cuts, but declining domestic consumption still remains the main challenge for Poland.
Russia shows slight signs of an economic slowdown, but still remains at a very solid growth level of +3.4%. Russia is now partially driven
by relatively strong domestic demand, but still remains highly dependent on commodity exports which could be negatively influenced by
the future of the global economic recovery and by the volatility of commodity prices.
To sum up, GDP growth in CEE slightly decelerated (from 4.0% in 2011 to 2.3% in 2012), yet economic growth in the CEE region is still
significantly stronger than in the Eurozone. Moreover, the economic outlook for CEE remains positive, with the region being expected to
grow at a pace of 2.5–3.5% in the coming years.
Inflation risks have remained moderate. On the one hand, the slowdown in demand may open up the output gap in the region, and
thereby ease price pressures noticeably. On the other hand, the depreciation of the CEE currencies has added to price pressures from
international trade. This will be reflected in particular in headline inflation, which is more sensitive to rising energy and commodity prices.
8
ANNUAL REPORT 2012
Real GDP growth in CEE region (%)*
10.0
8.0
6.0
4.0
2.0
0.0
(2.0)
(4.0)
(6.0)
(8.0)
2005
2006
2007
2008
2009
Real GDP growth (%)
CEE overall
2010
2011
2010
2011
2012
2012
2013 f
2014 f
2015 f
2013 f
2014 f
2015 f
3.74.02.32.53.23.4
Czech Republic
2.51.9
(1.2)0.31.62.7
Hungary
1.21.7
(1.7)0.01.21.5
Poland
3.94.32.01.32.22.7
Romania
(1.1)2.20.31.62.02.3
Russia
4.54.33.43.43.83.7
Serbia
1.01.6
(1.8)2.02.02.2
Slovak Republic
4.43.22.01.42.73.2
The economic slowdown has launched disinflationary pressures, while in some of the countries these pressures were offset by tax
increases. Foreign currency markets this year also didn’t significantly affect inflation. Overall, the CEE inflation rate decreased to 5.4%.
Inflation in CEE region (%)*
12
10
8
6
4
2
0
2005
2006
2007
Inflation (%)
CEE overall
2008
2009
2010
2011
2010
2011
2012
2012
2013 f
2014 f
2015 f
2013 f
2014 f
2015 f
6.86.95.45.25.05.1
Czech Republic
2.32.42.42.42.02.0
Hungary
4.74.15.04.03.33.0
Poland
3.14.62.42.02.02.5
Romania
8.03.15.03.73.02.9
Russia
8.86.16.66.46.06.0
Serbia
10.37.0
12.25.54.04.0
Slovak Republic
1.34.63.41.92.12.0
* Note: Definition of the CEE region for the purposes of this report: Belarus, Bulgaria, Croatia, Czech Republic, Hungary, Kazakhstan, Montenegro,
Poland, Romania, Russia, Serbia, Slovak Republic, Slovenia and Ukraine.
Source: IMF
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ANNUAL REPORT 2012
After mild improvement in 2011, the unemployment rate again rose in many countries in 2012. The only country in CEE which reported
any notable improvement was the Russian Federation (from 6.6% to 6.0%). A few countries reported a mild decrease (Romania and
Serbia), while in the rest of the region unemployment rates were either stable or increased slightly. With respect to the overall level of
unemployment, Russia, Kazakhstan, Ukraine, Czech Republic and Romania are countries with a low unemployment rate (8% or less),
while Serbian unemployment reaches 23%, Croatia is facing unemployment of 15% and Slovakia 14%. The remaining CEE countries
have an unemployment rate close to 10%.
Fiscal conditions of the CEE countries slightly worsened. The average public debt in CEE still ranges between 30% and 60% of GDP, with
two countries exceeding this level. Hungarian public debt now totals 79% of GDP (an improvement on the previous year’s result which was
equal to 81%); Serbian public debt grew from 50% to 64% of GDP. On the other hand, Russia (11%) and Kazakhstan (12%) are countries
with the lowest debt ratio in the region. A positive factor of 2012 is the gradual calming of the problems surrounding the Greek debt which
will probably no longer negatively influence the neighboring Balkan economies to the same extent as in previous years.
The FX markets were almost exceptionally stable in 2012. Only the Serbian Dinar suffered weaker depreciation, falling by –7.0%. The most
appreciating currencies were the Polish Zloty (+9.0%) and the Hungarian Forint (+7.0%), both of which rebounded from their 2011 losses.
The stock markets mostly recovered from the high 2011 losses, except for the Ukrainian (–38%) and Slovakian (–11%) stock markets.
Stock index
WIG20
BET
CCTX
SOFIX
BUX
RTSSTD
CRO index
SKSM index
PFTS
% change
eop 2012/2011
Warsaw+20
Bucharest+19
Prague+16
Sofia+7
Budapest+7
Moscow+5
Zagreb
+0
Bratislava
–11
10.8%
total premiums
increase
Kiev–38
Source: Bloomberg, eop = end of period
CEE Insurance market development
In terms of premium growth, 2012 was the strongest year since 2008. Insurance premiums showed double digit growth for the first
time since the financial crisis began. Total premiums increased by 10.8% which is an outstanding result given the conditions across the
whole European region. Most of the growth is concentrated in only a few markets, such as Russia (+22%), Kazakhstan (+19%), Ukraine
(+14%) and Poland (+10%). From another perspective, only the Hungarian market decreased notably (–6.5%). In general, all the sluggish
markets (Croatia, Bulgaria, Czech Republic, Slovakia) dropped by –1.1% at worst. (Note: the exceptionally high growth in Belarus was
caused by the heavy devaluation of the Belarussian Ruble in the second half of 2011, and by the fact that a lot of insurance policies are
indexed in euros. In EUR terms, the Belarussian insurance market grew moderately).
We can also perceive positively the change in trend in Romania, which has reversed four years of decline to a growth of +7.0%. The
Serbian insurance market has also shown a considerably high growth rate of +7.2% despite the very poor macroeconomic situation of
the country.
The whole CEE insurance market totalled €55 billion in 2012 (considering the countries with a Generali PPF Holding presence) of which
the non-life segment represented 68% and the life segment represented 32%.
10
ANNUAL REPORT 2012
CEE Insurance market growth*
25%
20%
17.8%
16.5%
15%
10.8%
10%
8.1%
5.1%
5%
0
(5%)
(7.2%)
(10%)
(15%)
2007
2008
2010
2009
2011
2012
Insurance market growth (2012)*
HU
HR
CZ
SL
SK
BG
MN
RO
SB
PL
CEE
UA
KZ
RU
BY
40%
35%
30%
25%
20%
15%
10%
5%
0%
(5%)
(10%)
(6.5%) (1.1%) (0.7%) (0.5%) 0.3% 1.3% 4.4% 7.0% 7.2% 9.6% 10.8% 13.8% 19.5% 21.7% 83.1%
The West European typical penetration level (GWP to GDP ratio) varies around 9%, while the CEE penetration is usually between
1% and 4% which indicates future potential for market growth and higher market saturation.
Insurance market premiums to GDP (2012)*
KZ
BY
UA
RU
RO
SB
MN
BG
HU
HR
SK
CZ
PL
SL
6,0 %
Life
Non-Life
5,0 %
4,0 %
* Note: Definition of the CEE region for
the purposes of this report: Belarus,
Bulgaria, Croatia, Czech Republic, Hungary,
Kazakhstan, Montenegro, Poland,
Romania, Russia, Serbia, Slovak Republic,
Slovenia and Ukraine.
3,0 %
2,0 %
1,0 %
0,0 %
0.2%
0.6%
0.0%
0.8%
0.1%
0.8%
0.1% 0.3%
1.2% 1.1%
0.4% 0.3%
1.5% 1.7%
0.3%
1.8%
1.4%
1.3%
0.7%
2.0%
1.6%
1.3%
1.9%
1.8%
2.3%
1.7%
1.4%
4.1%
Source: National Insurance Markets
Associations / Regulators, Generali PPF
Holding Research
11
ANNUAL REPORT 2012
CEE Insurance market development by segment
The CEE non-life and life markets differ in their geographical structure. While non-life is more spread out across the CEE region with
large countries accounting for a significant share, life insurance is dominated by Central European countries (Poland, Czech Republic,
Slovakia, Hungary and Slovenia), which together account for 84% of CEE life insurance premiums. This might similarly indicate further
growth potential in less penetrated countries and potential for higher geographical diversification of GPH’s operations.
CEE Non-Life market structure (2012)
CEE Life market structure (2012)
RU 50%
PL 51%
MN 0%
MN 0%
BY 1%
BG 1%
SB 1%
UA 1%
BG 2%
HR 2%
KZ 2%
KZ 2%
HR 2%
PL 17%
SK 3%
CZ 16%
RO 2%
UA 3%
HU 3%
CZ 7%
SL 3%
RU 8%
RO 4%
SL 4%
SK 7%
HU 8%
Source: National Insurance Markets Associations / Regulators, Generali PPF Holding Research
The non-life segment grew by +11.0% in 2012 (compared to +10.3% in 2011). The most important non-life segment in CEE is still
motor insurance, consisting of motor third party liability insurance (MTPL) and motor own damage insurance (MOD). This segment was
under high pressure because of tight competition and price wars among MTPL insurers in several countries (Czech Republic, Romania,
Hungary, Slovakia) and also because of stagnating new car sales which negatively influenced the MOD market (Hungary, Croatia,
Slovakia). This negative development was partially compensated by the non-motor market which grew in all major GPH countries (Czech
Republic, Slovakia, Hungary and Poland) thanks to insurance such as small and medium enterprises insurance and accident insurance.
The life market in CEE increased by +10.4% (compared to +3.8% in 2011). This result was affected by the volatile nature of the single
life products market in Poland which grew by +22.3% (excluding the Polish single life effect, the CEE life market premium growth
would have been 6.4%). The most sluggish life market was the Hungarian one which fell by –9.3% because of austerity measures, bad
economic conditions and the low savings capacity of households.
Outlook for 2013
The outlook for the CEE market differs between countries. On the one hand, there are more saturated countries which are slowly but
steadily coming out of recession and the insurance market shows the first evidence of stable growth and profits such as the Czech
Republic and Poland. In the case of these countries, we can expect continuing gradual recovery.
Some of the countries still carry significant amounts of political and macroeconomic risk such as Hungary, Serbia, Croatia, Slovenia and
Slovakia, which have been applying large austerity measures or have been heavily changing their tax systems, which could negatively
influence their economy and even the insurance market in the near future.
The third group of countries is CIS, and mainly Russia and Kazakhstan. These countries currently have very suitable macroeconomic
12
ANNUAL REPORT 2012
conditions and strong domestic demand, which also drives the insurance market up. However, these economies are very dependent on
commodities exports which can be strongly affected by any weakening of demand in the case of an ongoing global economic slowdown
or by a possible decline in commodities prices.
The improved situation surrounding the Greek debt could also have a positive effect on the insurance market, as it could probably
restore part of the consumer and investment confidence in South Eastern Europe.
Another factor delivering growth potential to the CEE region is the ongoing process of the reformation of some of the public pension
and health insurance systems. The Czech Republic is currently establishing a second pillar to its pension system, which is unfortunately
accompanied by political uncertainty about the future of pension reform. However, it generally leads to a higher reflection of risks connected
with pension security everywhere in Czech society. Similarly, Slovenia also expects to reform its pension and health system in the coming
years, and Hungary is going to fully liberalize MTPL prices from 2013 and allow insurers to change prices during the whole year.
To sum up, CEE still has noticeable growth potential, low insurance penetration and outstanding profitability which makes it a promising
market with a range of opportunities.
13
UNITY TO ME IS...
T O RE ALISE OUR VISION , W E E MPHASIZ E PART NE RSHIP AND
T RUST. WE ALWAYS MANAGE TO FIND UNIT Y IN DIVE RSIT Y
AN D T O USE IT TO OUR ADVAN TAGE.
BUT ON E GOAL IS THE SAME FOR EVERYONE F ROM T HE
GPH FAMILY; IN EACH COUNTRY, E ACH BRANCH
OF F ICE – SATISFIED CUSTOME RS.
to
me
UNITY)
is...
...shared focus on a profitable
growth and exceptional customer service.
Sergey Perelygin, CEO of Generali PPF Russia
...working together, sharing the same targets that are
answers to our customers’ needs.
Andrea Simoncelli, CEO of Delta Generali Osiguranje Serbia and Montenegro
13
14
ANNUAL REPORT 2012
GENERALI PPF HOLDING PROFILE
Generali PPF Holding Profile
Generali PPF Holding is a leading insurance group providing know-how and a professional base for its insurance companies in Central
and Eastern Europe. At the 2012 year-end, Generali PPF Holding operated in 14 countries – Belarus, Bulgaria, Croatia, Czech Republic,
Hungary, Kazakhstan, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia and Ukraine. Companies in these countries
took care of more than 13 million clients and total assets of €16.2 billion. In 2012, the total gross written premium income amounted
to €3.5 billion. At the beginning of 2013, the shareholders agreed on a change in the ownership structure. As part of the agreement,
Generali PPF Holding sold its insurance companies in Belarus, Kazakhstan, Russia and Ukraine to the PPF Group in March 2013.
The Generali Group, one of the largest insurance companies worldwide, and the PPF Group, a leading closely-held financial and
investment group, decided to cooperate in the areas of insurance and pension business. The final agreement was signed in 2007,
and it led to the establishment of Generali PPF Holding in January 2008.
Generali PPF Holding operates in a historically closely interconnected region where more than 105 million inhabitants of various
nationalities, languages, religions and cultures live. The diversification in this multinational environment is a fantastic asset that
Generali PPF Holding is exploiting. Its vision of the future is one of growth, innovation and satisfied clients.
Employees of Generali PPF Holding
In 2012, Generali PPF Holding and its companies employed over 13.5 thousand people and cooperated with 27 thousand sales
representatives and tied agents. The widest base of sales representatives can be found in Česká pojišťovna in the Czech Republic with
almost 5 thousand people.
We realise that success relies upon attracting and retaining motivated and highly skilled employees. Generali PPF Holding offers attractive,
individual opportunities to develop people’s talents and achieve their career goals. A strong corporate culture, a friendly and professional
working environment and a comprehensive range of further education and training programs are the values of the whole company.
As part of the Generali Group, Generali PPF Holding has adopted the European Social Charter and Ethical Code. The European Social
Charter reasserts the guiding principles on safeguarding employees and, in general terms, the Group image, which apply to every EU
Member State where the Generali Group operates. The Ethical Code systematically describes in a single document the fundamental
ethical principles inspiring the business conduct of the people operating within the Company and its Group. The document includes a
series of values that are already enshrined in those working inside the Group, and highlights common concepts that are shared by the
countries where the different Group companies operate.
Generali PPF Holding Competence Centres
The system of the Competence Centres is an integral part of Generali PPF Holding. Each Competence Centre provides knowledge in a
specific area, helps in planning and designing country projects and operates as hands-on support in running projects together with the
local teams.
The main goal of the Competence Centres is to work together with countries on defined projects and to help them achieve fulfilment of
their business plans. A Competence Centre typically operates as a team located in one country that collects global best practice and
deploys its specific expertise both in the local market and across the CEE region.
15
ANNUAL REPORT 2012
In Generali PPF Holding, the following Competence Centres have been established:
•
•
•
•
•
•
•
•
Tied Agents Competence Centre
CRM Competence Centre
Claims Competence Centre
Pricing Competence Centre
Motor Competence Centre
External Financial Advisory Competence Centre
Life Insurance Competence Centre
Marketing Competence Centre.
THE GENERALI GROUP
For over 180 years, the Generali Group has been a leading global insurance and financial services provider, characterised since its
inception by a strong international outlook.
Assicurazioni Generali was established in 1831 in Trieste, while the first branch in Prague was opened on Wenceslas Square in 1832.
At the end of the 19th century, through internal growth and acquisitions, Generali had insurance companies operating in Austria,
Hungary, Poland, Czech Republic, Slovakia, Romania, Croatia, Slovenia, Serbia, Albania, Bulgaria and Russia, as well as in Western
Europe, the Mediterranean area and the most important harbours worldwide. The end of the war in 1945 brought the loss of all
company assets in Central and Eastern Europe, where governments nationalized insurance activities. Then, in 1989, Generali was
one of the first Western insurers to re-commence operations in Central and Eastern Europe, establishing a joint venture in Hungary.
In recent years, the Group has re-affirmed a strong presence in the markets of Central and Eastern Europe and started expanding
into the principal markets of Asia, China and India in particular. Generali’s goal is to reinforce its position as one of the most profitable
providers of Life and Property & Casualty insurance by focusing on continental Europe and international markets with strong growth
potential.
Today, with a presence in more than 60 countries and over 65 million clients worldwide, Generali is a leading player in the global
insurance and financial markets. With a 2012 total gross written premium income of €70 billion, the Group is one of Europe’s largest
insurance providers and the biggest European life insurer. Generali is also one of the world’s top asset managers with €490 billion of
assets under management.
THE PPF GROUP
The PPF Group is one of the largest investment groups in Central & Eastern Europe. PPF’s reach spans from Central & Eastern Europe
to Russia and across Asia.
Established in 1991 in then Czechoslovakia, the PPF Group has become an important international investor, managing assets exceeding
€21 billion (as of 31 December 2012). PPF’s business investments now range from banking and financial services, insurance, real estate
to energy, metal mining, agriculture, retail and biotechnology.
In 1996, the PPF Group acquired a major stake in Česká pojišťovna (the “Czech insurance company”) and launched its restructuring,
successfully turning around the formerly state-owned insurer. In 2008, the PPF Group combined its insurance activities with
Assicurazioni Generali and established Generali PPF Holding. In January 2013, the PPF Group agreed to sell its 49% shareholding in
Generali PPF Holding to its partner in the venture, Assicurazioni Generali.
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ANNUAL REPORT 2012
The PPF Group also actively seeks investment opportunities and undertakes strategic investments in the developing markets of CEE,
CIS and Asia. The PPF Group operates through its subsidiaries in the Czech Republic, Slovakia, Russia, Kazakhstan, Belarus, Ukraine,
Vietnam, China and India.
The PPF Group’s corporate ownership and decision-making structure is based in the Netherlands. The key holding company that makes
strategic decisions regarding the entire Group’s activities is the Netherlands-based “PPF Group N.V.”.
The more than 20-year-long history of the PPF Group is a tale of discipline, courage, and professionalism in a team led by the Czech
founder and majority shareholder of the PPF Group N.V., Petr Kellner.
MAJOR CHANGES WITHIN GENERALI PPF HOLDING IN 2012
Last year was the year of two important acquisitions. At the beginning of July 2012, Generali PPF Holding signed an agreement to
acquire 100% shares in the Russian based insurance company Open Joint-Stock Insurance Company “Region”. Before the agreement,
Region was a small non-life and life insurance company based in Saint Petersburg. It was established as one of the first private
insurance companies in Russia back in 1993. From 2008, it has been operating as a subsidiary of the Swedish company IF P&C
Insurance Holding. After this agreement, the Region insurance company was incorporated into the Generali PPF Insurance structure.
The whole acquisition was finalized at the end of 2012 after the necessary regulatory processes. According to the agreement between
the shareholders, Region was sold along with other CIS companies to the PPF Group in March 2013.
Generali PPF Holding (GPH) and Groupama signed an agreement for GPH to acquire Groupama’s Polish insurance branch, Proama
at the end of July 2012. The transaction enabled GPH to expand its activities on one of the most growing CEE insurance markets,
benefiting from Proama’s strong entry into the Polish market. After completion of the transaction in December 2012, Generali PPF
Holding operates separately in Poland under 2 brands – Generali and Proama. Proama, Groupama’s branch in Poland, launched its first
insurance campaign at the end of January 2012. Proama is today acting as a branch of Česká pojišťovna in Poland and is active mainly
in the retail segment through three channels: phone, internet and multi-agents.
During 2012, new Chief executive officers were appointed in three countries. In January, Mr. Georg Engl replaced Michele Cirieco
in Croatia, in March Boris Čuchran left Generali Bulgaria Holding and Ivaylo Yosifov has taken his role, and finally in Russia in June,
Vít Sedláček came back into the position of general manager replacing Elena Belousenko.
At the beginning of 2013, the two shareholders concluded the agreement for the sale of 49% of the Company from the PPF Group to
the Generali Group in two tranches: 25% of the shares were transferred by the PPF Group to the Generali Group on 28 March 2013,
while the closing for the second tranche is expected for the end of 2014. In accordance with the agreement of the shareholders, the
new CEO of Generali PPF Holding was appointed as at 28 March 2013. Ladislav Bartoníček was replaced by Luciano Cirinà, the former
CEO of Generali Vienna. In addition, insurance operations in Belarus, Kazakhstan, Russia and Ukraine were sold to the PPF Group.
17
CLIENT TO ME IS...
OUR ST RAT EGY IS BUILT AROUND OUR CLIE NTS.
WE T RE ASURE THEIR BUSINESS MORE THAN ANY T HING.
W E E VAL UATE T HEIR NEE DS AND RESPOND W IT H OFFE RIN G
THE BE ST PRODUCTS AND SERVICES TO FAMIL IE S,
INDIVIDUAL S, CORPORATE BUSINE SSES AND SMALL
AN D MEDIUM ENTERPRISES, WHILE PROVIDING
SE CURITY AND STABIL IT Y.
T
L
i
en
C is...
TO ME
/
...a partner with whom we create a long-term
relationship based on transparency and trust.
Dmytriy Dubina, CEO of Generali Life Insurance (Ukraine) and CEO of FICJSC Generali (Belarus)
...the purpose of your existence: making their
dreams come true is the way we want to do business
and earn customers’ loyalty.
Ivaylo Yosifov, CEO of Generali Bulgaria Holding
...a unique person with unique expectations. Securing
our clients’ future is at the heart of our activities.
Georg Engl, CEO of Generali Osiguranje
15
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ANNUAL REPORT 2012
THE HOLDING’S MANAGEMENT
The Holding’s Management
In accordance with the agreement of the shareholders from the beginning of January 2013, the Board of Directors was significantly
changed and the new CEO of Generali PPF Holding was appointed as at 28 March 2013. Ladislav Bartoníček was replaced by
Luciano Cirinà.
Board of Directors
Sergio Balbinot
Chairman of the Board of Directors
Mario Greco (since August 2012)
Giovanni Perissinotto (until August 2012)
Jaroslav Mlynář
Valter Trevisani
Petr Kellner (until March 2013)
Aleš Minx (until March 2013)
Jiří Šmejc (until March 2013)
Luciano Cirinà (since March 2013)
Lubomír Král (since March 2013)
Nikhil Srinivasan (since March 2013)
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ANNUAL REPORT 2012
Executive Committee
Chief Executive Officer (until March 2013)
Responsible for: Czech Republic (Česká pojišťovna)
Luciano Cirinà
Chief Executive Officer (since March 2013)
Gianluca Colocci
Mergers & Acquisitions
Marie Kovářová
GPH Competence Centres
Responsible for: Bulgaria and Romania
Lorenzo Kravina
Reinsurance, Large risks insurance
Responsible for: Serbia, Croatia and Slovenia
Jaroslav Mlynář
Chief Financial Officer, IT, Risk Management and Actuarial
Responsible for: Czech Republic (Generali)
Mátyás Pálvölgyi
Responsible for: Hungary
Vít Sedláček
New Health, Pensions and Business Development
Responsible for: Belarus, Kazakhstan, Russia and Ukraine
Klára Starková
Organizational Development and HR, legal, communication and internal audit
Responsible for: Poland and Slovakia
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ANNUAL REPORT 2012
Sergio Balbinot
Born in 1958, he joined Assicurazioni Generali in Munich in 1983 after graduating with a degree in
economics. In 1986, he joined the Generali Group Insurance Operations at the Corporate Centre
in Trieste, and in 1989 he became Head of the Swiss Branch of Assicurazioni Generali in Zurich. In
1992, he was appointed Head of International Activities of Europe Assistance S.A. (Paris), returning
to Trieste in 1995 to become Area Manager for France and the German-speaking countries. In 1996,
he was appointed Assistant General Manager of Assicurazioni Generali and Head of Group Insurance
Operations. In 1998, he was appointed Deputy General Manager. In 2000, he was nominated for
General Manager. He was appointed Managing Director of the Generali Group in 2002 and Chairman
of Generali PPF Holding in 2008.
Chief Executive Officer (until March 2013)
Born in 1964, he graduated from the Czech Technical University (Faculty of Electrical Engineering)
and earned his MBA degree at Rochester Institute of Technology. He was CEO of the PPF Group
until 1996 and held the position of CEO in Česká pojišťovna, the biggest Czech insurer, between
1996 and 2006. Since 2000, he has been Chairman of the Board of Česká pojišťovna. Since March
2004, he has been President of the Czech Insurance Association, and in 2008, he was appointed
CEO and Member of the Board of Directors of Generali PPF Holding.
Luciano Cirinà
Chief Executive Officer (since March 2013)
Born in 1966, he graduated in Business Administration and has been working for the Generali Group
since 1989, holding several international roles within the Group’s companies. From 1996 to 2004
he served as Head of the Corporate Risks Division for Austria and the CEE countries in Vienna, and
from 2005 to 2006, as Area Manager at the Head Office. In 2007, he was appointed CEO of Generali
Versicherung AG in Austria, and later moved to head Generali Holding Vienna. In March 2013,
Luciano Cirinà was appointed as the new CEO of Generali PPF Holding.
Gianluca Colocci
Born in 1967, he graduated with a degree in business and economics in 1991. He started his career
at Andersen Consulting and then joined Assicurazioni Generali in Trieste in 1995, where he started
as an analyst in the Treasury Department. He was appointed Deputy Head of Corporate Finance
and Head of Investor Relations in 1998, and in 2003, he became Head of Corporate Finance and
Mergers & Acquisitions until June 2008. Since July 2008, he has been a Member of the Executive
Committee at Generali PPF Holding, where he is responsible for Mergers & Acquisitions.
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ANNUAL REPORT 2012
Marie Kovářová
Born in 1972, she graduated in 1995 from Charles University with a degree in mathematics and
completed her Ph.D. studies in Prague in 1998. Before joining Česká pojišťovna in 2004 as
COO, she had worked 6 years for McKinsey and Company, where she specialized in operations,
manufacturing, energetics and heavy industry. She spent 4 years in Germany working in the steel
and basic materials industry. She spent 4 years at Česká pojištovna, and was responsible for client
service, call center, claims, HR and facility management. Then she moved as country CEO to
Romania, responsible among others for merging the two companies the GPH owned there.
In September 2011, she became Member of the Executive Committee at Generali PPF Holding,
where she is responsible for the Competence Centers, strategic projects, Bulgaria and Romania.
Lorenzo Kravina
Born in 1964, he joined Assicurazioni Generali in 1991 after graduating with a degree in economics
at the University of Venice. In 1998, he joined the Generali Group Insurance Operations Department
at the Corporate Centre in Trieste, and in 2002, he became Area Manager, responsible for strategic
management, development and controls of the Generali companies in Germany, Switzerland,
and Central and Eastern Europe. In 2006, he moved to Germany, where he was then appointed
a Member of the Management Board of the company. Back in Trieste, he has been Area Manager
for the CEE countries since 2008. In the same year, he was also appointed a Member of the
Executive Committee of Generali PPF Holding.
Jaroslav Mlynář
Born in 1954, he joined Generali in Vienna in 1992 after graduating from the Technical University
of Brno (Faculty of Mechanical Engineering) in 1978, and after working for 14 years in research
and development, primarily in aerodynamics. He participated significantly in the launch of the new
Generali Czech operation in 1993. In 1998, he became a Board Member of Generali Pojišťovna and
in 2001, Chairman of the Board and CEO of Generali’s Czech operation. In the period from 1999
to 2001, he also acted as a Board Member of Generali Slovakia. After the establishment of Generali
PPF Holding, he was appointed a Board Member, a Member of the Executive Board and Chief
Financial Officer.
Mátyás Pálvölgyi
Born in 1954, he graduated from Budapest University of Technology (Faculty of Civil Engineering)
and then received his Ph.D. in mathematics and engineering. After graduating, he started work as
an engineer and switched to the insurance business when he joined the Generali Group in 1990 as
an expert in construction insurance. In 1991, he started work in the Sales Management Department
of Generali-Providencia, and the following year he was appointed Head of the Sales and Marketing
Department. Since 1994, he has been a Member of the Board of the company. In 1995, he was
appointed Chief Executive Officer of Providencia Insurance Ltd. After the merger of Providencia and
Generali Budapest in 1999, he was CEO of the Generali-Providencia Ltd until June 2011 when he
was simultaneously appointed as Chairman of the Generali-Providencia Supervisory Board.
Mátyás Pálvölgyi has been a Member of the Executive Committee of Generali PPF Holding since
2008, and he is responsible for the strategic management of Hungarian operations.
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ANNUAL REPORT 2012
Vít Sedláček
Born in 1973, he joined Arthur Andersen Business Consulting after receiving his MBA at Rochester
Institute of Technology. In 1998, he joined the Management Board of Plzeňský Prazdroj, a.s., the
largest Czech brewing company, which soon thereafter became part of the South African Breweries
group. He spent seven years with that company, mostly responsible for strategy and supply chain
planning. In 2005, he joined the insurance division of the PPF Group with responsibilities mainly in
business development and Mergers & Acquisitions. He is a Member of the Executive Committee
at Generali PPF Holding and until March 2013 he was responsible for Belarus, Kazakhstan, Russia
and Ukraine.
Klára Starková
Born in 1972, she graduated in 1995 from Vienna University with a degree in economics and
business administration (majoring in capital markets and statistics) and completed her MBA studies
at the US Business School in Prague in 1996. Before joining Generali PPF Holding, she worked
11 years for McKinsey & Company, where she started her professional career as an analyst and
later became a partner, specialising in financial institutions at the EU and emerging markets level.
She is a Member of the Executive Committee at Generali PPF Holding, where she is responsible
for organizational development, human resources, Poland and Slovakia. Klára Starková is also a
Member of the Supervisory Board at Generali in Slovakia, Poland and the Czech Republic.
23
CHANGE TO ME IS...
CHAN GE S MUST START W ITH DE FINING T HE POTE NTIAL
WHICH COUL D ALL OW T HE COMPANY T O MOVE FORWARD.
ON LY SIMPL E CHANGES BASED ON COMMON SENSE
AN D SY N CHRONISED PROCESSES ARE A SMART SOLUTION
F OR A L ARGE CORPORATION SUCH AS GENE RALI PPF HOL DING.
)
is...
)
TO
HANG
e
C ME
...about finding an ability to move faster. Emphasizing activities
that will lead to real changes on the front line.
Pavel Řehák, CEO of Česká pojišťovna (Czech Republic)
...more effective management of risks leading to a higher
profitability and maintaining long-term relationship with the client.
Štefan Tillinger, CEO of Generali Pojišťovna (Czech Republic)
...reflecting the situation on the insurance market in order
to continuously strengthen our business. Change makes
the difference between the companies of today and
the companies of tomorrow ...
Adrian Marin, CEO of Generali Romania
16
24
ANNUAL REPORT 2012
THE HOLDING’S MAJOR SUBSIDIARIES
The Holding’s Major Subsidiaries
BELARUS
FICJSC Generali
The Foreign Insurance Closed Joint Stock Company (FICJSC) Generali is one of the bancassurance leaders in the Belarussian market,
concentrated on non-life insurance. At the moment, it works with 4 banks that are insurance agents of the company. The staff of
FICJSC Generali comprises 8 employees delivering very good results.
FICJSC Generali was founded in 2008. It is the first company on the Belarussian insurance market with 100% of foreign capital.
The company started its business with accident insurance connected to consumer loans in cooperation with Home Credit Bank as
a bank-agent. Over the course of time, new types of insurance were launched using the new distribution channels. FICJSC Generali
serves more than 450,000 clients today.
FICJSC Generali is an innovative insurance company that introduces and implements new types of insurance and offers new
opportunities to the clients’ to insure their risks. Currently, the company insures consumer loans, property, risks of credit card loss,
theft, fraud and job loss. FICJSC Generali offers its services through a large number of Home Credit Bank sale points across the whole
country.
BULGARIA
Generali Bulgaria is one of the major international insurers in Bulgaria. Its operations include Generali Insurance (non-life insurance),
Generali Life Insurance (life insurance) and Generali Zakrila Health Insurance (one of the market leaders in voluntary health insurance).
Generali Group expanded to Bulgaria in 2006 when, through Generali Holding Vienna, an agreement was signed for the acquisition of
a 51% shareholding in Orel-G Holding, at that time one of Bulgaria’s leading insurers with the largest market share in life and health
insurance. With the entry in Bulgaria, that followed the acquisitions in Serbia, Croatia and Ukraine, the Generali Group took a further step
in strengthening and expanding its strategic presence in Central and Eastern Europe.
In 2012, the companies targeted international corporate customers in business risk insurance, corporate life insurance and GEB
schemes. In the retail segment, the Group focuses mainly on motor, household and product for SMEs. During this year, the companies
upgraded and fine-tuned their best-selling products. Generali Bulgaria companies aimed at finding the best interrelation between the
different sales channels in order to provide the best fitting products for the targeted audience.
In terms of customer relations practices, Generali Bulgaria companies launched a series of innovative projects including the launch of new
online products and a number of customer satisfaction related researches as well as further improved the processes within the companies.
During the reported year, the Group further developed its customer self-support web portal with new functionalities and services.
The excellent collaboration with leading international and local banks that was started in previous years continued and was upgraded,
and contributed to the even more positive results in 2012.
The strategy of the Group remains to be one of the leading financial groups in Bulgaria, perceived by the clients and the public as
stable, effective, and delivering quality services by offering a wide range of insurance products. The company also positioned itself as an
innovative and modern partner with flexible and tailor-made solutions for all its customers.
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ANNUAL REPORT 2012
GP Reinsurance
GP Reinsurance is the captive reinsurer based in Sofia, fully owned by Generali PPF Holding. It provides non-life reinsurance solutions
within the Group.
In June 2008, Generali PPF Holding obtained a reinsurance license from the Bulgarian Financial Supervision Commission, allowing it to
operate in the non-life reinsurance business through a fully-owned subsidiary based in Sofia. GP Reinsurance (GP Re) was established
as a green-field investment in 2008, and started operations in 2009.
CROATIA
Generali osiguranje
Since its establishment in Croatia, Generali osiguranje has continuously been among the insurance companies with the highest
growth rates on the market. For the fourth year in a row, Generali recorded growth in the premium and market share, which wasn’t
accomplished by any other leading insurance companies in Croatia. Generali osiguranje is also one of the leaders in bancassurance.
It employs over 400 employees and insurance agents covering five regional headquarters with over 40 offices throughout the country.
Moreover, and thanks to the cooperation of over 70 insurance representative agencies, Generali has enhanced its product distribution.
From the very beginning of Generali’s history, Croatia held special status thanks to its remarkable traditional and economic ties, which
led to the opening of the first office in Croatia in 1832. Generali again started its business activities in Croatia as a green-field investment
at the end of 2002 when Generali životno osiguranje (life) was founded. In mid-2006, Generali acquired Libertas osiguranje.
Generali osiguranje is a universal insurance company offering a wide range of products and services both in life and non-life. Special
attention is given to motor products – the dominant segment on the market – and to small and medium entrepreneurs who are offered
complete insurance solutions for their activities.
Generali continuously sponsors key activities, which are aimed at improving market performance. Generali contributes to a number of
cultural, social and sports events as well as organisations, among which are the National football team, the Easter Regatta – the largest
international multi-day regatta in Croatia, Medvescak Hockey Club and Split Basketball Club. On the social front, Generali has started
to conduct a practical training program entitled “Young Lions” for high school vocational education students, enabling them to gain
experience working in the typical business environment of a financial services organization.
CZECH REPUBLIC
Česká pojišťovna is a universal insurance company with a wide range of both life and non-life insurance products. The Company maintains
almost 8 million policies and, as a responsible market leader, helps clients in key moments of their lives to ensure a better future.
Česká pojišťovna is the oldest insurance institution in the Czech Republic and its tradition begins in 1827, when its predecessor První
česká vzájemná pojišťovna (First Czech Mutual Insurance Company) was established in Prague.
The company provides insurance for individuals, as well as for small, medium, and large customers in industry and commerce. As part
of its non-life insurance, ČP provides a complete range of products, i.e. motor third party liability and motor insurance, property and
liability insurance, travel insurance, pet insurance and more. Česká pojišťovna is also a strong and reliable partner for entrepreneurs, with
guaranteed individual access and care.
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ANNUAL REPORT 2012
Česká pojišťovna is a socially responsible company focusing on a wide scope of interests. ČP owns a unique collection of paintings
which consists of more than 4 thousand exhibits, the best-known works include Mikoláš Aleš, Václav Brožík or Emil Filla. Taking care
of this collection significantly helps in the preservation of Czech cultural heritage. The Company actively participates in the promotion
of road safety. Česká pojišťovna is also well-known as the official partner of the Czech Olympic team, the main partner of the
ice-hockey and floorball leagues. ČP significantly participates in the realisation of the most prestigious horse race – Velká pardubická
steeplechase. Through its own foundation, it supports many charity projects aimed mainly at prevention and helping children in need
and disabled people.
In the Fincentrum Bank of the Year competition, Česká pojišťovna won a prestigious award – The Insurance Company of 2012. In the
competiton Golden Euro, the car insurance of Česká pojišťovna won in its category. The Company remains the most trusted insurance
company in the Czech Republic, as shown by the results from an independent public survey. In the public voting TTG Travel Awards,
the Travel Insurance of Česká pojišťovna ended up in second place in the category.
Companies within ČP Group
Česká pojišťovna ZDRAVÍ is a specialised provider of private health insurance in the Czech Republic. It was established in 1992 by
Česká pojišťovna as its subsidiary, together with Vereinte Krankenversicherung AG, Munich. Česká pojišťovna ZDRAVÍ a.s. is the largest
insurer in private health and sickness insurance in the Czech Republic.
Penzijní fond České pojišťovny (Pension Fund of Česká pojišťovna) was founded by Česká pojišťovna in 1994 and today it is the largest
provider of pension insurance in the Czech Republic. PFČP has nearly 1.3 million customers, and a quarter of a million of their employers
also participate in the savings. In December 2012, Penzijní fond České pojišťovny was transformed to Penzijní společnost České
pojišťovny (Pension Society of Česká pojišťovna).
ČP INVEST, another major subsidiary of Česká pojišťovna, has been operating in the collective investment market since 1991.
The company keeps top position among the largest investment companies in the Czech Republic. In 2012 the company managed
37 funds of various types – capital protected funds, conservative, bond, balanced and equity funds as well as the funds of funds and
funds for qualified investors. ČP INVEST operates not only on the Czech market of collective investment schemes, but is has also
expanded to Slovakia and Poland with the offer of investments into Generali PPF Invest funds denominated in local currencies.
Generali Pojišťovna is the fourth largest insurance company on the Czech market and the third strongest insurance company in the
corporate insurance segment. Generali Pojišťovna has almost 700 employees and over 1,500 sales representatives in the whole of the
Czech Republic.
The first branch of Assicurazioni Generali in Prague was founded in 1832. Generali returned to the Czech Republic as one of the
strongest and most reliable insurance companies in 1993. An important milestone in the modern history of the company was its merger
with the insurance company Zurich in January 2003, which primarily meant strengthening its position in motor insurance and other
segments of non-life insurance.
Generali Pojišťovna places emphasis on high-quality insurance products and perfect and fast service at its all levels of activity. Broad
customer-oriented insurance programs, including personal insurance, property, liability, motor vehicles and industrial and business risks
are provided through the company’s own sales force and a number of reputable brokerage firms. Generali Pojišťovna differs from the
others in the higher quality of its services and with its personal approach to every client.
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ANNUAL REPORT 2012
In the field of CSR activities, through its foundation and in cooperation with the regional authorities of three regions, Generali has
implemented the Odour Fences project that has significantly contributed to the increase in traffic safety in these regions. The increase in
traffic safety is one of the important points of the CSR strategy of Generali Pojišťovna which is fulfilled through the Generali Foundation.
Another big CSR project was the Potholes project. A unique national based all-year-round monitoring of road potholes. The third biggest
CSR project of the year 2012 was the Generali Survival – 24-hour non-stop outdoor competition. One third of athletes were wheel-chair
athletes with their buddies. Generali Survival is a unique race with tight integration of disabled and non-disabled people. The motto of
this race is that there is only one time and space for everybody.
Generali Pojišťovna was awarded twice for its successful communication in the field of social media and received the Czech Award for
Public Relations and Internet Effectiveness Award for its Facebook project.
Generali penzijní fond is one of the operating pension funds in the Czech Republic, where it has been active since 1995. As at
31 December 2012, the Generali pension fund had 76 thousand clients with assets amounting to over €143 million. Because of the
Czech pension reform Generali pension fund was transferred under the structures of the Česká pojišťovna group in December 2012.
HUNGARY
Generali-Providencia Biztosító
Generali-Providencia Biztosító is the second largest insurance company on the Hungarian market. With its international background and
long tradition on the Hungarian market, Generali-Providencia continues to preserve its stability, acting as a reputable partner in vehicle,
property and life insurance services. Due to its innovative business attitude and responsible financial management, the company boasts
the trust of 1.2 million clients. Generali operates with 1,800 employees and around 2,500 sales agents.
The Generali Group has the longest tradition in the Hungarian insurance market. On 29 May 1832, Generali founded its first insurance
institute in Pest, Hungary. After the change in the political regime, which made it possible to return to the Hungarian insurance market,
Generali was the first foreign insurer in the former socialist countries to appear on the market after the year 1989.
Through the subsidiaries of the Generali Group – Generali Asset Management, European Travel Insurer, Genertel, FundamentaLakáskassza Building Society, Europ Assistance, Generali Voluntary Pension Fund, Generali Health Fund – as well as through its
banking partners, Generali can serve the Hungarian public with a complete range of financial solutions.
Generali-Providencia’s strategy and main values are based on client-focused business development and profitable operations. As a
composite multi-channel insurer, the company offers a full range of insurance solutions for its retail, SME and large corporate clients,
with both life and non-life policies. In 2012, the company introduced several innovative products and reshaped its existing policies to be
even better tailored to individual customer needs. To help respond to segmented client needs, GPR developed its CRM systems. The
company placed extra focus on the special service of its corporate clients, a main focus in its business strategy.
In 2012, the company had to respond to numerous challenges such as difficult market conditions, a growing tax burden, and several
background tasks required by gender regulations and new types of insurance premium tax. Nevertheless, the Group managed to
maintain its market position and profitability in 2012.
In 2012, as part of its social responsibility program, Generali continued to support disadvantaged children living in state care.
In co-operation with child care specialists, the Generali Smile Hunter Program was aimed at the support of ability and talent
development projects in 6 foster homes. These activities helped disadvantaged children to gain experiences that enhance their
social skills and build self-esteem. Due to the project, Generali won a Good CSR diploma.
Generali-Providencia has repeatedly been the winner of the Service Quality Competition awarded by the Association of Independent
Insurance Brokers (FBAMSZ) in Hungary. In 2012, Generali won first prize in the vehicle insurance sector. The company was also
awarded a diploma as a Client-friendly Insurance Company as a result of a detailed customer service survey.
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ANNUAL REPORT 2012
KAZAKHSTAN
JSC Generali Life
The Joint Stock Company (JSC) Generali Life is the only international insurer in Kazakhstan with a full range of life insurance products.
25 employees and around 3 thousand agents are doing their best to satisfy client needs.
JSC Generali Life started its business activities in Kazakhstan as a green-field investment in 2006 under the name Czech Insurance
Company Kazakhstan – Life Insurance JSC, a subsidiary of Česká Pojišťovna. In mid-2009, after the establishment of Generali PPF
Holding the Company in Kazakhstan was rebranded to Life Insurance Company Generali Life JSC.
Generali has a comprehensive life insurance offer for individual as well as corporate clients. The product offers include endowment,
group and individual life insurance. Generali’s products are personalised, which enables customers to select the most appropriate
combination of insurance products to meet their specific needs.
Last year, Generali Life held first place in the Life Insurance lines of business in Kazakhstan and it is also the leader in Accident Insurance
since 2008.
MONTENEGRO
Delta Generali Osiguranje Podgorica
Delta Generali Osiguranje Podgorica is one of the five insurance companies operating in Montenegro with a full range of non-life
insurance products. A total of 65 employees and 72 agents at more than 76 points-of-sale are making the company’s insurance service
available throughout all of Montenegro.
In 2009, Delta Generali Osiguranje Beograd acquired a share in DC Holding, the founder of Delta Osiguranje (non-life) becoming the
majority owner of these companies, which started operating under the names Delta Generali Holding Podgorica and Delta Generali
Osiguranje.
The mission of the company is to offer professional and top quality insurance services to its clients and to become their major financial
consultant always following market requests, but also taking care of the company’s efficiency and profitability.
Delta Generali Osiguranje Podgorica is registered for providing all types of non-life insurance. Among the clients are individuals, small
and medium enterprises and large companies. Currently, the company sells a wide range of products including motor insurance,
property, accident, travel and health.
POLAND
Generali Poland is an insurance group focusing on a complex offer of products in life (Generali Życie Towarzystwo Ubezpieczeń) and
non-life (Generali Towarzystwo Ubezpieczeń) insurance, with additional activity in the Pension Fund. Generali Poland is one of the
fastest growing financial groups and ranks among the 10 biggest insurance companies in Poland, being a partner to more than 2 million
customers. The Company owns two sales networks consisting of 77 offices and branches, 7 agencies and 1,500 active agents.
The history of Generali in Poland starts at the beginning of the 19th century – the first branches were established in 1837. Generali
returned to the polish market in 1998 and established two insurance companies: Generali Towarzystwo Ubezpieczeń and Generali Życie
Towarzystwo Ubezpieczeń. In mid 2002, Generali acquired Zurich Insurance Company in Poland, Zurich Life Insurance Company and
Zurich Pension Fund and, by May 2003, those three companies started operating under the brand of Generali.
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ANNUAL REPORT 2012
The Group is a long-term sponsor of Wilanow Palace which is one of the most important monuments of Polish culture. The company is
also involved in the sponsorship of diverse sport disciplines and projects. The main sponsorship activity of Generali Group in Poland is
the contract with Adam Malysz – one of the most successful ski jumpers in history.
Proama
On 31 December 2012, Generali PPF Holding acquired Proama, the Polish start-up of Groupama. Currently Proama operates as a
branch of Česká pojišťovna.
Proama is a multi-channel, non-life company, which offers its products through agents, the internet and by phone. It currently offers
motor insurance: MTPL and casco, supplemented by a range of additional products such as assistance, personal accident insurance,
legal or unemployment protection. Proama stands out on the market by being the only insurance company in Poland that offers a
dedicated Personal Adviser and a bonus-malus discount of 70% for safe and claim free drivers.
Proama started its activities at the end of January 2012. After nearly a year, at the end of 2012, Proama had over 260 thousand
customers. This has been the best result among all start-ups in Poland for the last 10 years. The media called Proama “the start-up of
the decade”.
Despite its short period of activity, Proama has already received many awards. Proama is the winner of the “Consumer Laurel” emblem
– the Discovery of 2012, awarded for “functioning on the market for a relatively short time, but already winning over the hearts of
customers”. Its Autocasco product was considered to be the best product in the contest of the Polish Insurance Awards 2012. The
website www.proama.pl has been awarded the Usable Site certificate. According to the organizers of the study – among all the sites
tested so far by auditors in Poland, it received the highest ever result – of 95%. Proama also received first prize and the title of Oscar
2012 Insurance Leader in the competition of Gazeta Bankowa.
Proama is the organizer of the social campaign “Wrzucam na luz” focused on polite driving. The main aim of the action is to draw
attention to the fact that many car accidents are often caused by overly aggressive and risky driving and the impolite behaviour of
drivers. Through the campaign, Proama intends to introduce new standards in the behaviour of drivers.
ROMANIA
Generali Romania Asigurare Reasigurare
For Generali Romania, the year 2012 was one of reorganization. The company went through a major restructuring process in order to
strengthen its business and become profitable.
One of the most important decisions in 2012 was to only keep the Generali brand and renounce the ARDAF brand.
Another big decision was the reorganization of the sales network structure throughout the country. The sales network has undergone
a restructuring process, which involved moving or merging local offices, closing, and at the same time creating new sales points in
the areas with proven business potential. As part of the cost-cutting process, in 2012, the company also went through a personnel
restructuring process.
Therefore, the priorities of the company in 2012 were to increase business efficiency by speeding up those processes that lead to
profitability: product optimisation, reconsidering the pricing policy according to risk exposure, cross-selling and up-selling based on the
existing portfolio.
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ANNUAL REPORT 2012
In terms of strategy, Generali focused on those business segments meant to ensure its healthy development: life insurance, corporate
insurance, especially property and technical insurance, and travel insurance. All the actions taken during 2012 were aimed at maintaining
a healthy business, to enable the company to honour the promises to its customers.
In 2012, the company was appreciated by the National Union of Insurance Intermediaries (UNSICAR) which awarded the company two
major prizes: “Fair Play in Relationship with Brokers Award” and “Life Insurer of the Year”.
RUSSIA
Generali PPF Insurance Group
In 2012, Generali PPF Insurance Group was represented in Russia by 3 companies:
Generali PPF Life Insurance, one of the leaders on the Russian insurance market, specialised in life insurance and in accident and
health insurance. In life insurance, the Company ranks in the top 10. The Company is also the official representative of Generali
Employee Benefits (GEB) – a world-leading provider of employee benefit solutions for multinational companies. In June 2012, the largest
national rating agency Expert RA assigned the rating of Generali PPF Life Insurance at the level of A++ “exceptionally high level of
reliability”. The rating outlook was “stable”.
Generali PPF General Insurance specialised in non-life insurance products. The Company is a market leader in the financial risk
insurance segment. Being a dynamic company, it was the first insurer on the Russian market to have launched job loss insurance in
July 2009. In January 2012, Expert RA assigned the rating of Generali PPF Life Insurance at the level of A+ “very high level of reliability”.
The rating outlook was “stable”.
Generali PPF Pension Fund, a non-state organisation providing obligatory pension insurance and voluntary pension insurance services.
In December 2012, the pension fund was sold to the Invest Group “Russian Funds”.
Generali first came to Russia at the end of the 19th century, when its first branch was opened in St. Petersburg. The modern history
of the company began in 2002, when Generali PPF Life Insurance (until April 2009, a Czech Insurance Company) entered the Russian
Insurance market. From 2009, the company began to work in Russia under the Generali PPF brand.
Currently, the main activities of the company are focused on bancassurance, life insurance, and insurance of financial risks. Special
attention is paid to the development of voluntary medical insurance, property and liability insurance. Generali PPF Russia has been
successfully developing cooperation with brokers and partners throughout Russia.
In July 2012, Generali PPF Holding acquired small non-life and life insurance company Region. At the end of 2012, after the necessary
regulatory processes, the Region insurance company was incorporated into the Generali PPF Insurance Group structure.
SERBIA
Delta Generali is the second largest insurance company on the Serbian market and, at the same time, the largest privately owned
company in terms of premium income and assets. Headquartered in Belgrade, the company network consists of 52 branches in
7 regional centres across Serbia and 1,100 points of sale, employing 2,086 people. Delta Generali Osiguranje is the shareholder
of Delta Generali Reosiguranje, Delta Generali Voluntary Pension Fund Management Company, Health Center Jedro and Delta Generali
Osiguranje Podgorica.
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ANNUAL REPORT 2012
Operating on the market for more than thirteen years, Delta Generali Osiguranje succeeded in developing an extensive product portfolio,
branch office network and human resources base, which resulted in it being positioned among the top insurance providers in Serbia.
In 2006, the Generali Group, through Generali Holding Vienna, signed an agreement for the acquisition of a 50% +1 share in Delta
Osiguranje. With the acquisitions in Serbia and Montenegro, the Generali Group took a further step in strengthening and expanding its
strategic presence in Eastern Europe.
Delta Generali is registered for providing all types of non-life and life insurance. Among the clients of Delta Generali are individuals, small
and medium enterprises, banks and large companies. In 2012, Delta Generali improved its insurance offer and created several new
products for life, health and agriculture insurance.
After obtaining approval from the National Bank of Serbia, in 2012 Delta Generali Osiguranje acquired 100% ownership in Blutek Auto,
a company for providing customers with a complete range of services for technical checks of vehicles and for supplying state-of-the-art
diagnostic equipment.
During 2012, Delta Generali Osiguranje also continued its long-term project “Apples and Lemons” dedicated to school children and
drivers, aiming to contribute to increasing traffic safety in Serbia. More than 9,500 school children from 58 towns were included in the
project. Well accepted in local communities and with great support from the national and local media, the project has become one of the
most important and well known in Serbia in this area.
SLOVAKIA
Generali Slovensko
In 2012, Generali Slovensko, the third biggest insurance company in Slovakia, continued strengthening its position as a service oriented
company. In accordance with its clear vision and mission – to be the first choice in the insurance market – it provides prompt and
professional services through its 643 employees and 839 internal sales representatives available to clients. There are more than 90 sales
points all over Slovakia.
In Generali Slovensko, clients may select from a wide variety of competitive and flexible life and non-life insurance products. Practical
assistance services and client care add real value to these products. In addition to its own network sales, Generali Slovensko products
are freely available at VÚB bank branches and from major brokerage partners.
In 2012, Generali Slovensko successfully participated in the “Golden Coin” competition. Generali Slovensko achieved top places in
several categories, with second place in Business risk insurance category and third place in Capital life insurance, Property insurance
and Casco insurance.
SLOVENIA
Generali Zavarovalnica is the sixth largest insurance company in Slovenia, with a broad range of non-life and life insurance products.
The company has 381 employees and its sales network extends throughout the entire country. The products are also available through
significant Slovenian banks and numerous partners. Generali Zavarovalnica serves more than 166 thousand clients.
In Slovenia, the first office of Generali was opened in 1997 in Ljubljana – as a Generali and SKB Bank joint venture. In 2001, the
company was renamed Generali Zavarovalnica.
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ANNUAL REPORT 2012
Generali Zavarovalnica has a comprehensive insurance offer for individual clients as well as corporate, small, medium-sized enterprises,
and individual entrepreneurs. Products offered include life, property, motor insurance, participation in the Open Pension Fund, as well as
Individual Pension Accounts, travel and accident insurance, among others. However, Generali Zavarovalnica is not only innovative when
it comes to its product offer. Its unique position in the Slovenian market is also maintained with the Generali Club – the first Slovenian
insurance club with a special loyalty program and club card enabling various discounts for the products and services offered by the
company’s partners.
Generali Zavarovalnica is a sponsor and donor for numerous charity and socially-responsible projects. Contributions are aimed especially
at supporting family quality time or children in need and promoting road safety in Slovenia. Generali Zavarovalnica is also intensifying its
presence in sports and is actively supporting perspective sportsmen and their teams.
According to independent research (Insurance monitor data service – IMDS study (Zavarovalniški monitor, GfK), which was conducted
in June 2012, Generali Zavarovalnica is also one of the most popular insurance companies, and it is perceived as one of the most
innovative companies. It also offers a favourable price-quality ratio; it employs competent, expert and friendly sales agents; and it is an
economically stable and secure company.
UKRAINE
Generali Life Insurance Ukraine offers corporate and retail life insurance on the Ukrainian market. At the moment, there are
21 employees working for Generali Life Insurance Ukraine in the Kiev office. The company has no representative offices or branches
throughout the Ukraine, but is using distribution partners for country-wide coverage.
The company started operations on the Ukrainian market as a green-field investment in 2006 providing credit-life insurance with Home
Credit Bank and has served more than 100 thousand clients during this time. Nowadays, the company is a universal life insurer with a
wide range of products in its portfolio.
Generali Life Insurance Ukraine has a clear focus on corporate employee benefits programs with Generali Employee Benefit Network
(GEB) support. The company is a market-leader in corporate life insurance and is constantly working on the implementation of innovative
solutions.
According to the agreement made between the shareholders in January 2013, the companies in Belarus, Kazakhstan, Russia and
Ukraine are no longer part of Generali PPF Holding since March 2013.
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ANNUAL REPORT 2012
FINANCIAL SECTION
Financial Section
CONTENT
I. BOARD OF DIRECTORS REPORT36
A. Profile
36
B. Financial performance
36
C. Risk management
37
D. Overview of operations, by country and subsidiary
38
E. Corporate Social Responsibility (CSR)
43
F. Outlook for operations
43
II. CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 NOTES TO THE FINANCIAL STATEMENTS
A. General Information
A.1 Description of the Group
A.2 Statutory body
B. Basis of preparation
B.1 Statement of compliance
B.2 Basis of preparation
C. General criteria for drawing up the financial statements and the consolidation method C.1 Group entities
C.2 Consolidation methods and accounting for associates and joint ventures D. Significant accounting policies and assumptions
D.1 Significant accounting policies
D.2 Non-uniform accounting policies of subsidiaries
D.3 Principal assumptions D.4 Terms and conditions of insurance and investment contracts with DPF that have a material impact
on the amount, timing, and uncertainty of future cash flows D.5 Critical accounting estimates and judgements D.6 Changes in accounting policies
E. Risk report
E.1 Risk management system
E.2 Roles and responsibility
E.3 Risk measurement and control
E.4 Market risk
E.5 Credit risk
E.6 Liquidity risk
E.7 Insurance risks
E.8 Operating risk and other risks
E.9 Financial strength monitoring by third parties
E.10 Capital management
F. Notes to the consolidated statement of financial position and income statement
F.1 Intangible assets
F.2 Tangible assets
F.3 Investments
F.4 Reinsurance assets
F.5 Receivables
F.6 Other assets
F.7 Cash and cash equivalents
F.8 Non-current assets held-for-sale
F.9 Shareholders’ equity
45
53
53
53
54
55
55
55
56
56
63
66
66
81
81
84
86
86
90
90
91
91
91
96
99
102
108
109
109
111
111
114
115
121
122
122
123
123
124
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ANNUAL REPORT 2012
FINANCIAL SECTION
F.10 Other provisions
F.11 Insurance provisions
F.12 Financial liabilities
F.13Payables
F.14 Other liabilities
F.15 Net earned premiums
F.16 Fee and commission income and income from financial services activities
F.17 Net gains/(losses) from financial assets and liabilities at fair value through profit or loss
F.18 Income and expenses from non-consolidated subsidiaries and joint ventures
F.19 Income from other financial instruments and investment properties
F.20 Other income
F.21 Net insurance benefits and claims
F.22 Fee and commission expenses and expenses from financial service activities
F.23 Expenses from other financial instruments and investment properties
F.24 Acquisition and administration costs
F.25 Other expenses
F.26 Income taxes
F.27 Information on employees
F.28 Hedge accounting
F.29 Off balance sheet items
F.30 Related parties
G. Subsequent events
G.1 Sale of companies from CIS region
G.2 Interim dividends for the 2012 financial year
G.3 Change in the position of Chief Executive Officer
125
126
130
131
132
132
132
133
133
134
134
135
135
135
136
136
137
139
140
143
144
147
147
147
147
III. COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 148
NOTES TO THE COMPANY FINANCIAL STATEMENTS149
A. General information 149
A.1 Description of the Company
149
A.2 Statutory body
149
B. Basis of preparation 150
C. Accounting policies
150
C.1 Functional and presentation currency
150
C.2 Investments in group companies
150
C.3 Investments; recognition of losses
151
C.4 Investments; unrealised gains and losses
151
C.5
Current assets
151
C.6. Change in accounting principles
152
D. Notes to the company statement of financial position
153
D.1 Financial fixed assets
153
D.2
Current assets
153
D.3
Shareholders’ equity
155
D.4
Provisions
156
D.5. Current liabilities
157
E. Notes to the Profit and Loss Account
157
E.1 Other income and expenses
157
E.2 Commitments and contingent liabilities
158
E.3 Employees
158
E.4 Company directors
158
E.5 Transactions with related parties
158
E.6 Audit fees
158
IV. OTHER INFORMATION
A. Profit appropriation
B. Subsequent events
C. Auditor’s independent report
159
159
159
160
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ANNUAL REPORT 2012
FINANCIAL SECTION
I. Board of Directors Report
A.PROFILE
Generali PPF Holding B.V. is the holding company of the insurance group focusing on life and non-life insurance, with additional activity
in pension fund and asset management businesses. Generali PPF Holding comprises businesses in 14 countries – Belarus, Bulgaria,
Croatia, Czech Republic, Hungary, Kazakhstan, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia and Ukraine – and is
among the most important insurers in Central and Eastern Europe, with total assets of €16.2 billion, premium income of €3.5 billion and
more than 13 million clients.
One of the companies included in Generali PPF Holding is Česká pojišťovna, established in 1827 when the First Czech Mutual Insurance
Company (První česká vzájemná pojišťovna) was founded in Prague as a single-line insurer focusing on fire insurance for real estate.
Even in today’s highly competitive environment, Česká pojišťovna continues to hold its privileged position.
The final contract giving rise to the Generali PPF Holding group was concluded between Assicurazioni Generali and PPF Group N.V.
on 10 July 2007, when Generali and the PPF Group transferred their insurance assets in Central and Eastern Europe to the new group,
establishing it as one of the major players in the region.
The creation of the new group was a major step in the two groups’ expansion strategies in one of the most promising regions for the
insurance business and created a solid platform for further growth opportunities in neighbouring areas.
The agreement valued the Central and Eastern Europe insurance assets transferred by the PPF Group at €3.6 billion and those
transferred by Generali at €1.5 billion. Additionally, the Generali Group paid the PPF Group €1.1 billion to acquire a 51% ownership
interest in the new group. The PPF Group held the remaining 49% as at 31 December 2012.
On 8 January 2013, the two shareholders concluded the agreement for the sale of 49% of the Company from PPF Group to Generali
Group in two tranches: the first 25% tranche was acquired by Generali on 28 March 2013, whereas the remaining 24% stake is
expected to be acquired by Generali Group around the end of 2014.
Part of the shareholders’ agreement was also the decision to sell the subsidiaries in the CIS region (Russia, Kazachstan, Belarus
and Ukraine) to the PPF Group; therefore from 2013 the Group will focus only on the remaining 10 countries in the Central Eastern
Europe region.
B.FINANCIAL PERFORMANCE
At the end of 2012, the consolidated shareholders’ equity of Generali PPF Holding amounted to €4.8 billion and total assets amounted
to €16.2 billion. The bulk of assets is comprised of financial investments (69%).
The consolidated profit of the Group attributable to the equity holders of the parent amounted to €197.7 million, showing a decrease
of 37% compared to 2011. This decrease is, however, entirely due to impairment on goodwill and other intangible assets on Russian
entities, which reflects the reduction of the carrying amount in consolidated financial statements to the agreed price of the sale of CIS
companies to the PPF Group which took place in March 2013.
Without this extraordinary effect, the profit presents an increase compared to the 2011 level which reflects the good results of the Group
in its core business and markets.
The total number of employees decreased to 13,099 as at 31 December 2012. There were 13,236 employees at the same time the
previous year.
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ANNUAL REPORT 2012
FINANCIAL SECTION
C.RISK MANAGEMENT
The Group has implemented a risk management system that aims at identifying, evaluating and monitoring the most important risks to
which the Group is exposed, i.e. risks whose consequences could affect the solvency of the Group or of any single business unit, or
hamper the achievement of any Group goals.
The main objectives of the Group’s risk management processes are to maintain identified risks below an acceptable level, optimise
capital allocation, and improve the risk-adjusted performance for the Group as well as for each individual company.
The risk management processes apply to the whole Group, to all the countries where it operates, and to each business unit. However,
the degree of integration and depth varies with the complexity of the underlying risks. The integration of processes within the Group is
fundamental to ensuring an efficient system of risk management and capital allocation for every business unit.
The risk management system is based on three main pillars:
a) Risk measurement process: Assessing the solvency of the Group and all individual units
b) Risk governance process: Defining and controlling managerial decisions in relation to relevant risks
c) Risk management culture: Increasing value creation.
The Group is exposed to various risks as a result of its activities: insurance risk, liquidity risk, market risks (interest rate risk, equity price
risk, and currency risk), credit risk, and operational risk. For detailed information on risk management, see Section E of the consolidated
financial statements.
From the point of view of liquidity and solvency, the Group is well-positioned with its plentiful capital surplus. Attesting to the Group’s
standing is the high rating of its biggest subsidiary (Česká pojišťovna a.s.). See Section E of the consolidated financial statements for
more details on solvency.
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ANNUAL REPORT 2012
FINANCIAL SECTION
D.OVERVIEW OF OPERATIONS, BY COUNTRY AND SUBSIDIARY
BELARUS
FICJSC Generali
Foreign Insurance Closed Joint Stock Company (FICJSC) Generali is one of the bancassurance leaders on the Belarussian market,
working under a non-life insurance license. At the moment, the company is cooperating with 4 banks.
The position of the company on the market remained stable. During 2012, FICJSC Generali continued to strengthen its leading
and innovative position in the bancassurance sector. Among all insurance companies on the non-life market, FICJSC Generali
is in 13th place.
In 2012, the gross written premium of FICJSC Generali amounted to €2.9 million, representing an increase of 62% on an equivalent
exchange rate basis.
BULGARIA
Generali Bulgaria is one of the major international insurers in Bulgaria. Its operations include Generali Insurance (non-life insurance),
Generali Life Insurance (life insurance) and Generali Zakrila Health Insurance (one of the market leaders in voluntary health insurance).
Despite the challenging market conditions, Generali Bulgaria’s companies succeeded in increasing their portfolio in the preferred
business segments. Notwithstanding this situation, the official statistics show that the non-life company holds the 12th market position
with a 3.2% market share. The life insurance company ranks 8th in the market place with a 4.2% market share. Generali Zakrila Health
Insurance – occupies 2nd place on the voluntary health insurance market and has increased its market share to 13.1%.
During 2012, Generali Bulgaria Holding recorded a gross written premium of €34.1 million.
GP Reinsurance
GP Reinsurance is the captive reinsurer based in Sofia, wholly owned by Generali PPF Holding. It provides non-life reinsurance solutions
within the group.
In June 2008, Generali PPF Holding obtained a reinsurance license for Bulgaria from the Bulgarian Financial Supervision Commission,
allowing it to operate in the non-life reinsurance business through a fully-owned subsidiary based in Sofia. GP Reinsurance (GP Re) was
established as a green-field investment in 2008 and started operations in 2009.
In 2012, it posted a premium income accepted from other Group companies amounting to €747.7 million.
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ANNUAL REPORT 2012
FINANCIAL SECTION
CROATIA
Generali osiguranje
Since its establishment in Croatia, Generali osiguranje has continuously been among the insurance companies with the highest growth
rates on the non-life market. For the fourth year in a row, Generali recorded growth in the premiums and market share, a remarkable
achievement in the Croatian insurance market. Generali osiguranje is also one of the leaders in bancassurance. It employs over
400 employees and insurance agents covering five regional headquarters with over 40 offices throughout the country. Moreover,
and thanks to the cooperation with 80 insurance representative agencies, Generali has enhanced its product distribution.
Despite the continuing stagnation of the insurance market in the past year, Generali osiguranje has achieved an increase in premium
written and was able to stay 9th in the market with 3.8% of the market share. The company is firmly dedicated to further improvement
of results in the coming period, which will be equally challenging for the entire market.
Even in the challenging year 2012, Generali grew by 3.6%, while at the same time the market slightly decreased by 1.2%. Total gross
written premiums in 2012 totalled €45.3 million.
The main event of the year 2013 will be the entry of the Republic of Croatia to the European Union, which is going to have a definite
influence on the overall socio-economic situation, and thus the insurance market.
CZECH REPUBLIC
Česká pojišťovna is a universal insurance company with a wide range of both life and non-life insurance products, and is the largest
insurer in the Czech insurance market. The company’s portfolio consists of almost 8 million policies.
In 2012, the total market share of Česká pojišťovna (based on methodology of the Czech insurance association) measured by premiums
written totalled 25.9%; in life insurance it was 23.1% and in non-life insurance 27.9%.
The position of Česká pojištovna as the local insurance market leader was confirmed by the company’s financial results for 2012, when
gross written premiums exceeded €1.27 billion, out of which gross written premiums in non-life insurance amounted to €777.6 million
and premiums in life insurance totalled €495.8 million.
Penzijní fond České pojišťovny (Pension fund of Česká pojišťovna), the largest pension fund in the Czech Republic, has currently
nearly 1.3 million clients and its total assets amounted to almost €2.7 billion, increasing by 14% compared to the previous year.
Generali Pojišťovna is the fourth largest insurance company on the Czech market with a market share of 6.8% and the third strongest
insurance company in the segment of corporate insurance. Generali Pojišťovna has almost 700 employees and over 1,500 sales
representatives in the whole of the Czech Republic.
In 2012, Generali Pojišťovna registred a reduction in gross written premiums by 6.3% to €322.5 million; this reduction is almost entirely
concentrated in the motor business and is a consequence of the very high pressure on prices which affected the whole motor market.
Notwithstanding this reduction in volume, the company kept its position among the largest insurance companies in the Czech Republic.
As at 31 December 2012, Generali pension fund had 76 thousand clients with assets amounting to over €143 million. Because of the
Czech pension reform, the Generali pension fund was transferred under the structures of Česká pojišťovna group in December 2012.
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ANNUAL REPORT 2012
FINANCIAL SECTION
HUNGARY
Generali-Providencia Biztosító
Generali-Providencia Biztosító is the second largest insurance company on the Hungarian market, with a total of almost 1 million clients.
With its international background and long tradition on the Hungarian market, Generali-Providencia continues to preserve its stability,
acting as a reputable partner in vehicle, property and life insurance services.
The Hungarian insurance market was still having difficulties in 2012 as a result of the austerity measures and taxes undertaken by the
government in its attempt to balance the country’s deficit. In 2012, Generali-Providencia accounted for a market share of 16.5%, as
calculated based on methodology of the Hungarian insurance association, while the Group’s market share (also including Europai
Utazasi and Genertel) was 17.3%.
Generali-Providencia reported a total of €379.8 million premium income, while the same figure for the group was €402.1 million.
In 2012, the Generali Group in Hungary exceeded the previous year’s profit after tax and achieved the planned value despite the difficult
economic environment.
KAZAKHSTAN
JSC Generali Life
The Joint Stock Company (JSC) Generali Life is the only international insurer in Kazakhstan, with a full range of life insurance products.
The overall market share in premiums written in the Kazakhstan life insurance market as at 31 December 2012 was over 15.5%.
During 2012, JSC Generali Life strengthened its leading and innovative position in the Kazakhstan life market and continued to expand
aggressively in the retail and corporate segments despite the negative market environment.
Despite adverse economic conditions, JSC Generali Life posted very good results. In 2012, the gross written premiums amounted to
€60.5 million, representing a remarkable increase compared to €27.2 million recorded in 2011.
MONTENEGRO
Delta Generali Osiguranje Podgorica
Delta Generali Osiguranje Podgorica is one of the five insurance companies operating in Montenegro with a full range of non-life
insurance products. In 2012, Delta Generali Osiguranje Podgorica strengthened its position as number 3 on the market with a market
share of 15.5% and continued further expansion.
Delta Generali’s market share in non-life insurance in 2012 was 17.5% compared to 12.7% in 2011. The market is still influenced by the
financial crisis and a large part of the premium is compulsory MTPL.
The year 2012 was a period of growth, not only in terms of premium, but in profitability. The gross premiums written totalled €9.6 million
in 2012.
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ANNUAL REPORT 2012
FINANCIAL SECTION
POLAND
Generali Poland is the insurance group focusing on life (Generali Życie Towarzystwo Ubezpieczeń) and non-life insurance (Generali
Towarzystwo Ubezpieczeń), with additional activity in the Pension Fund. The Generali Group has been present in the Polish market since
1999 offering its products for individuals as well as corporate and small and medium sized enterprises.
Last year, Generali Poland confirmed its growing trend in volumes both in non-life and life business, especially in the most important
segment of its products with regular premiums, which have been growing significantly faster than the market. Generali Poland also
managed at the same time to further improve the non-life profitability of its business.
In 2012, Generali Poland achieved the best financial and sales results in the history of the company. The overall gross written premiums
reached €390.1 million, showing a remarkable growth of 11.7% compared to 2011.
ROMANIA
Generali Romania Asigurare Reasigurare
For Generali Romania (formed as a result of the merger between Generali Asigurari and ARDAF in 2011), the year 2012 was one of
reorganization. The company went through a major restructuring process in order to strengthen its business and become profitable.
Despite the negative economic environment and internal measures aimed at improving the company’s profitability, Generali Romania
reached the end of 2012 with the gross written premium amounting to €100.6 million, which secured a market share of 5.9%.
RUSSIA
Generali PPF Insurance Group
In 2012, Generali PPF Insurance Group was represented in Russia by 3 companies: Generali PPF Life Insurance, Generali PPF General
Insurance and Generali PPF Pension Fund.
During 2012, Generali PPF Russia strengthened its positions on the Russian Insurance market. According to the official ranking of the
Federal Financial Markets Service in 3Q 2012, non-life business of the Russian companies achieved considerable growth and improved
its position from 16th place in 2011 to 13th place in 2012 with a 2.0% market share. In life business, Generali PPF Life insurance
achieved 11th position among the insurance Groups with an overall market share of 3.2%.
In 2012, Generali PPF Russia demonstrated high growth rates of 96.6% in terms of gross written premium, and the growth touched
all lines of business: total gross written premiums amounted to €526.6 million. While delivering substantial growth rates, Generali PPF
Russia has managed to maintain high business profitability.
41
ANNUAL REPORT 2012
FINANCIAL SECTION
SERBIA
Delta Generali is the second largest insurance company on the Serbian market and at the same time the largest private-owned company
in terms of premium income and assets.
Gross written premiums in Delta Generali grew by 12.9% in 2012 to €108.7 million, being the market leader in life insurance with a
27.1% market share, in health insurance with a 55.7% market share, in travel insurance with a 29.7% market share, and in second
position in the MTPL segment with 21.7%.
SLOVAKIA
Generali Slovensko
With the exception of motor insurance, during 2012 Generali Slovensko poisťovňa continued to grow in the retail and corporate
segments despite the competitive market environment. The market share in total reached 8.6%, in non-life 10.7% and in life business
6.8%. The goal for the next year is to grow in the market share together with increasing profitability.
Despite unstable economic conditions and unfavorable market development, Generali Slovensko poisťovňa posted very good financial
results. In 2012, the gross written premiums amounted to €181.1 million.
SLOVENIA
Generali Zavarovalnica is one of the major insurers in Slovenia with a broad range of non-life and life insurance products. The company
has 381 employees and its sales network extends throughout the entire country. Since 2006, Generali has been the biggest international
insurance company in Slovenia.
Generali’s key segment is non-life (especially motor and property insurance), where the company maintained substantially the same
volumes as in 2011. With a market share that reached 4.6% at the end of 2012, the company ranked sixth on the Slovenian
insurance market.
In 2012, Generali Zavarovalnica continued to grow, especially in life segments and, despite adverse economic conditions, it posted very
good results. In 2012, its gross written premium income totalled €83.8 million.
UKRAINE
Generali Life Insurance Ukraine offers corporate and retail life insurance on the Ukrainian market. The company is cooperating mainly
with external distribution partners throughout Ukraine.
Despite the slow recovery of the economic situation in Ukraine, the company strengthened its position in the corporate life segment and
in the employee benefits market.
During 2012, Generali Life showed stable growth with the gross written premium amounting to €0.9 million.
42
ANNUAL REPORT 2012
FINANCIAL SECTION
E.CORPORATE SOCIAL RESPONSIBILITY (CSR)
Generali PPF Holding and its companies stress the importance of Corporate Social Responsibility in their daily business. The importance
of implementing the essentials of Corporate Social Responsibility in our core business is clear. The integration of policies concerning
CSR issues contributes to positive long-term financial and economic growth. These policies raise employee awareness of the necessity
of conserving energy, reducing paper consumption (for example, by making double-sided printing the standard), promoting recycling,
and sorting waste for recycling or disposal. Environmental-related policies are continuously updated in line with new developments
which offer possibilities for improving these policies. Protecting the environment as a primary asset is one of the Generali Group’s
guiding values, and therefore also Generali PPF Holding and its companies follow the Group’s Environmental Policy.
Addressing social issues by developing new products (e.g. sick leave, disability, and unemployment) is another way in which we try to
take responsibility for the well-being of our society. Companies of Generali PPF Holding are also active towards the local societies; they
support a wide scope of various preventive projects for children’s education, help for children and other people in need, they participate
in sport and cultural events or struggle for better environmental development. There are also many road safety projects run by our
insurance companies. More details on the particular CSR projects can be found in the companies’ profiles in the first part of this
annual report.
As an institutional investor, we maintain our own principles of responsible investment. As part of the Generali Group, the Group adheres
to the ethical guidelines adopted by Norway’s Government Pension Fund for all investments listed in its own account. The Generali
Group also follows a guideline by which it accomplishes a universal life investment policy for its other partners. All companies of Generali
PPF Holding are also involved in the Generali Group Sustainability reporting which is comprised of a wide range of environmental, social,
or employment topics.
F. OUTLOOK FOR OPERATIONS
The expectations of the world economy are still difficult, but gradually increasing. In 2013, the Eurozone area economy will probably
continue to contract (a 0.2% decrease in GDP is expected by the International Monetary Fund), but a new growth trend should be visible
from 2014 (up to 1.0%), which will depend to a large extent on the upturn in the banking sector and greater cash availability, which
should increase investment.
The economic outlook for the CEE region is significantly more positive compared with the Eurozone, with an expected increase in GDP
in the range of 3–4% in the coming years. However, this outlook is quite heterogeneous for different countries, with countries like Poland
and the Czech Republic, where economic growth will still be more robust, and countries with higher political and macroeconomic risk
– like Hungary, Serbia, Croatia and Slovenia – which have applied large austerity measures or have heavily changed their tax systems,
which could negatively influence their economic growth.
The outlook for the CEE insurance markets in 2013 remains slightly positive: insurance markets are expected to grow moderately, in
continuation with the trend already shown in the last few years; also in this case, however, the development will be quite differentiated
across the region.
Overall, with respect to long-term expansion, the CEE region still offers very interesting growth potential, considering that the insurance
markets are still underpenetrated (especially in the life segment) and the still low levels of insurance density; the full potential of such
markets has therefore yet to be realized.
The financial results of the Group in 2013 will be affected by the sale subsidiaries in the CIS region (Russia, Kazachstan, Belarus and
Ukraine) to the PPF Group in March 2013, as part of the agreement between the shareholders that changed the shareholders’ structure
of the Group.
43
ANNUAL REPORT 2012
FINANCIAL SECTION
On the basis of the macroeconomic scenario described above, and on a comparable perimeter basis (i.e. neutralising the impact of the
exit of the CIS region), the Group expects non-life premiums in 2013 to slightly increase compared to 2012, mainly due to moderate
growth in non-motor lines, whereas premium income in the motor business will be substantially stable, interrupting the reducing trend
experienced in the last couple of years. Life premiums are also expected to grow moderately.
As far as the final year-end result is concerned, assuming catastrophic events at physiological levels, the profit in 2013 should exceed
the levels of 2012, which were negatively affected by the impairment of goodwill on the Russian companies.
The number of employees is anticipated to remain stable in comparison to 2012 levels. Furthermore, we do not expect any significant
financing activities to take place during 2013.
Prague, 25 April 2013
The Board of Directors
44
ANNUAL REPORT 2012
FINANCIAL SELECTION
II. Consolidated Financial Statements
for the Year Ended 31 December 2012
ACRONYMS
Acronym
Chapter
FVPL
Financial assets at fair value through profit or loss
Statement of Cash Flows
AFS
Financial assets available for sale
Statement of Changes in Equity
PVFP
Present value of future profits
D.1.1.2
DPF
Discretionary Participation Feature
D.1.12.2
CDS
Credit default swap
D.1.4
IRS
Interest rate swap
D.1.4
CCS
Cross currency swap
D.1.4
MTPL
Motor third party liability
D.3.2
45
ANNUAL REPORT 2012
FINANCIAL SECTION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December 2012
The statement of financial position was prepared prior to profit appropriation.
(€ million)
Note
Total assets
F
2012
2011 (restated)*
16,167.3
14,815.5
1 Intangible assets
F.1
2,721.3
2,851.1
1.1 Goodwill
F.1.1
1,488.2
1,551.6
1.2 Other intangible assets
F.1.2
1,233.1
1,299.5
2 Tangible assets
F.2
124.4
124.9
2.1 Land and buildings (own use)
F.2.1
86.9
85.1
2.2 Other tangible assets
F.2.2
37.5
39.8
3 Investments
F.3
11,182.2
10,188.4
3.1 Investment properties
F.3.1
105.7
83.5
3.2 Investments in associated companies and joint ventures
F.3.2
19.5
18.3
3.3 Held to maturity investments
F.3.3
209.9
199.5
3.4 Loans and receivables
F.3.4
481.2
640.0
3.5 Available for sale financial assets
F.3.5
8,608.9
7,744.5
3.6 Financial assets at fair value through profit or loss
F.3.6
1,757.0
1,502.6
F.3.6
1,576.8
1,273.6
4 Reinsurance assets
of which financial assets relating to unit-linked policies
F.4
252.2
243.0
5 Receivables
F.5
457.8
460.7
275.9
259.6
35.1
42.1
136.4
114.6
10.4
44.4
5.1 Receivables arising out of direct insurance operations
5.2 Receivables arising out of reinsurance operations
5.3 Trade and other receivables
5.4 Current income tax receivables
6 Other assets
F.6
661.3
481.8
6.1 Deferred acquisition costs
F.6.1
561.9
335.8
6.2 Deferred tax assets
F.26.1
10.9
55.4
6.3 Other assets
88.5
90.6
7 Cash and cash equivalents
F.7
760.2
465.6
8 Assets held for sale
F.8
7.9
0.0
46
ANNUAL REPORT 2012
FINANCIAL SECTION
(€ million)
Note
Total shareholders’ equity and liabilities
1 Shareholders’ equity
F.9
1.1 Shareholders’ equity attributable to the Group
1.1.1 Share capital
1.1.2 Other reserves
1.2 Shareholders’ equity attributable to non-controlling interests
2012
2011 (restated)*
16,167.3
14,815.5
4,788.1
4,467.7
4,759.1
4,406.2
0.1
0.1
4,759.0
4,406.1
29.0
61.5
2 Other provisions
F.10
77.6
83.6
3 Insurance provisions
F.11
7,383.2
6,594.3
4 Financial liabilities
F.12
3,041.7
2,849.5
305.6
296.7
2,736.1
2,552.8
441.0
358.3
254.8
202.3
5.2 Payables arising out of reinsurance operations
42.9
56.8
5.3 Current income tax payables
42.8
7.6
4.1 Financial liabilities through profit or loss
4.2 Other financial liabilities
5 Payables
F.13
5.1 Payables arising out of direct insurance operations
5.4 Other payables
100.5
91.6
6 Other liabilities
F.14
435.7
462.1
6.1 Deferred tax liabilities
F.26.1
245.3
289.3
6.2 Other liabilities
F.14
190.4
172.8
* For details on the effect of the changes in accounting policies, please refer to note D.6.1.
The notes on pages 53 to 147 are an integral part of these financial statements.
47
ANNUAL REPORT 2012
FINANCIAL SECTION
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2012
(€ million)
Note
1 Total income
2012
2011
3,819.7
3,594.5
1.1 Net earned premiums revenue
F.15
3,059.5
3,031.5
1.1.1 Insurance premium revenue
F.15.1
3,270.6
3,232.8
1.1.2 Insurance premium ceded to reinsurers
(211.1)
(201.3)
1.2 Fee and commission income and income from financial service activities
F.16
42.1
42.6
1.3 Net gains/(losses) from financial instruments at fair value through profit or loss
F.17
165.7
(238.6)
85.6
(65.7)
1.2
0.8
of which net gains/(losses) from financial investments relating to unit-linked policies
1.4 Share of results of joint ventures accounted for using the equity method
1.5 Net gains/(losses) related to associates and disposal of subsidiaries
F.18
(1.6)
(5.0)
1.6 Income from other financial instruments and investment properties
F.19
500.6
588.5
1.6.1 Interest income
339.5
336.8
1.6.2 Other income
16.9
21.6
1.6.3 Realized gains
103.3
183.9
1.6.4 Unrealized gains
23.8
31.1
1.6.5 Reversal of impairment losses
17.1
15.1
1.7 Other income
F.20
2 Total expenses
2.1 Net insurance benefits and claims
F.21
2.1.1 Claims paid and change in insurance provisions
2.1.2 Reinsurers’ share
52.2
174.7
(3,545.9)
(3,218.6)
(1,850.7)
(1,775.0)
(1,912.5)
(1,845.3)
61.8
70.3
2.2 Fee and commission expenses and expenses from financial service activities
F.22
(50.9)
(28.9)
2.3 Expenses from other financial instruments and investment properties
F.23
(141.7)
(180.5)
(53.6)
(37.8)
2.3.1 Interest expense
2.3.2 Other expense
(3.5)
(3.6)
2.3.3 Realized losses
(46.6)
(114.0)
2.3.4 Unrealized losses
(3.8)
(0.3)
2.3.5 Impairment losses
(34.2)
(24.8)
(1,078.0)
(989.7)
(822.4)
(729.8)
(16.8)
(18.3)
2.4 Acquisition and administration costs
F.24
2.4.1 Commissions and other acquisition costs
2.4.2 Investment management expenses
2.4.3 Other administration costs
2.5 Other expenses
F.25
Change in net assets attributable to unit holders of investment funds
EARNINGS BEFORE TAXES
Income taxes
NET PROFIT OF THE YEAR
Result of the period attributable to the equity holders of the parent
Result of the period attributable to non-controlling interests
F.26
(238.8)
(241.6)
(424.6)
(244.5)
(7.1)
2.5
266.7
378.4
(64.0)
(70.6)
202.7
307.8
197.7
314.4
5.0
(6.6)
48
ANNUAL REPORT 2012
FINANCIAL SECTION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(€ million)
Note
2012
2011
Net profit of the year
F.9
202.7
307.8
Available-for-sale financial assets revaluation in equity
F.9
508.8
(164.9)
Available-for-sale financial asset revaluation recognised in income statement
F.9
(57.5)
(72.7)
Available-for-sale impairment losses recognised in income statement
F.9
14.5
10.1
Available-for-sale change in Deferred policyholder liabilities (assets)
F.9
(183.5)
22.0
Other comprehensive income
Interest in joint ventures accounted for using equity method
Currency translation differences
Cash-flow hedge reserve
Other changes
Total other comprehensive income/(loss) before tax
Tax on items taken in other comprehensive income
Tax on items taken directly to or transferred into equity – AFS
Tax on items taken directly to or transferred into equity – Cash-flow hedge reserve
F.9
0.1
0.0
75.3
(88.6)
0.6
(2.1)
(4.4)
3.7
353.9
(292.5)
(45.9)
37.1
(45.7)
36.9
(0.2)
0.2
Other comprehensive income/(loss), net of tax
308.0
(255.4)
Total comprehensive income
510.7
52.4
505.6
60.6
5.1
(8.2)
Attributable to:
– Owners of the Parent
– Non-controlling interests
49
ANNUAL REPORT 2012
FINANCIAL SECTION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(€ million)
Note
Balance as at
1 January 2011
Share
capital
0.1
Additional Revaluation
paid – financial
in capital assets AFS
3,601.8
145.0
Other
capital Translation
reserves
reserve
286.6
145.4
Cash-flow
Attributable Attributable
hedge
to equity
to nonreserve / Retained
holders controlling
(deficit) earnings of the Parent
interests
0.7
Net profit for the year
Total
267.3
4,446.9
24.8
4,471.7
314.4
314.4
(6.6)
307.8
(1.4)
(164.9)
Available-for-sale
financial assets
revaluation in equity
F.9
(163.5)
(163.5)
Available-for-sale
financial asset
realised revaluation
in income statement
F.9
(72.7)
(72.7)
Available-for-sale
impairment losses
F.9
9.8
9.8
Available-for-sale
change in Deferred
policyholder liabilities
(assets)
F.9
22.0
22.0
22.0
–
–
Interest in joint
ventures accounted
for using equity
method
Currency translation
differences
Changes in cash-flow
hedge reserve
(88.1)
F.9
(88.1)
(2.1)
Other changes
Tax on items of
other comprehensive
income
3.7
F.9
36.9
Total comprehensive
income
(167.5)
Acquisition of
subsidiary from a
party under common
control
Dividends
0.2
(88.1)
(1.9)
(38.5)
F.9.1
Balance as at
31 December 2011
0.1
3,601.8
(22.5)
248.1
57.3
(1.2)
Adjustment from
change in accounting
policy
D.6.1
Balance as at
31 December 2011
restated
318.1
0.1
3,601.8
(22.5)
248.1
57.3
(1.2)
(72.7)
0.3
(0.5)
10.1
(88.6)
(2.1)
(2.1)
3.7
3.7
37.1
37.1
60.6
(8.2)
52.4
(38.5)
43.9
5.4
(70.0)
(70.0)
(70.0)
515.4
4,399.0
60.5
4,459.5
7.2
7.2
1.0
8.2
522.6
4,406.2
61.5
4,467.7
50
(€ million)
ANNUAL REPORT 2012
Note
Balance as at
1 January 2012
(restated)
Share
capital
0.1
FINANCIAL SECTION
Additional Revaluation
paid in – financial
capital assets AFS
3,601.8
(22.5)
Other
capital Translation
reserves
reserve
248.1
57.3
Cash-flow
Attributable Attributable
hedge
to equity
to nonreserve / Retained
holders controlling
(deficit) earnings of the Parent
interests
(1.2)
Net profit for the year
Total
522.6
4,406.2
61.5
4,467.7
197.7
197.7
5.0
202.7
Available-for-sale
financial assets
revaluation in equity
F.9
508.8
508.8
508.8
Available-for-sale
financial asset
realised revaluation
in income statement
F.9
(57.5)
(57.5)
(57.5)
Available-for-sale
impairment losses
F.9
14.2
14.2
Available-for-sale
change in Deferred
policyholder liabilities
(assets)
F.9
(183.5)
(183.5)
(183.5)
0.1
0.1
Interest in joint
ventures accounted
for using equity
method
0.1
Currency translation
differences
Changes in cash-flow
hedge reserve
76.3
F.9
76.3
0.6
Other changes
Tax on items of
other comprehensive
income
F.9
(45.7)
236.3
Changes in
ownership interests
in subsidiaries that
do not result in a
loss of control
C.1.1
Dividends
F.9.1
Balance as at
31 December 2012
(0.2)
76.3
0.4
3,601.8
213.8
218.4
133.6
(0.8)
75.3
0.8
(4.4)
0.6
(45.9)
192.6
(45.9)
505.6
5.1
510.7
(29.7)
(35.6)
(65.3)
(123.0)
(123.0)
(2.0)
(125.0)
592.2
4,759.1
29.0
4,788.1
(29.7)
0.1
(5.2)
14.5
(1.0)
0.6
(5.2)
Total comprehensive
income
0.3
51
ANNUAL REPORT 2012
FINANCIAL SECTION
CONSOLIDATED STATEMENT OF CASH FLOWS (indirect method)
For the period from 1 January to 31 December 2012
(€ million)
Earnings before taxes
Adjustments for:
Depreciation and amortisation
Amortisation of PVFP and impairment losses on goodwill and PVFP
Impairment and reversal of impairment of current and non-current assets
Profit/Loss on disposal of PPE, intangible assets and investment property
Profit/Loss on disposal and revaluation of Financial Assets
Gains/(Losses) on disposal of subsidiaries, associates and joint ventures
Interest expense
Interest income
Dividend income
Interest income from financial instruments at FVPL
Income/expenses not involving movements of cash
Purchase of financial assets at FVPL
Proceeds from financial assets at FVPL
Change in loans and advances to banks
Change in loans and advances to customers
Change in receivables
Change in reinsurance assets
Change in other assets, prepayments and accrued income
Change in payables
Change in financial liabilities for investment contract with DPF
Change in financial liabilities at FVPL
Change in liabilities to banks
Change in insurance liabilities
Change in other liabilities, accruals and deferred income
Change in other provisions
Cash flows arising from taxes on income
Net cash flow from operating activities
Cash flow from investing activities
Interest received
Dividends received
Purchase of tangible assets and intangible assets
Purchase of financial assets available for sale
Purchase of financial assets held to maturity
Purchase of investment property
Net cash flow from acquisition of subsidiaries, associates and joint ventures, net of cash
acquired
Provided loans
Proceeds from disposals of tangible and intangible assets
Proceeds from financial assets available for sale
Proceeds from financial assets held to maturity
Proceeds from sale of investment property
Net cash flow from investing activities
Cash flow from financing activities
Drawing of loans
Repayment of loans
Interest paid
Dividends paid to shareholders
Payment of other liabilities from bonds issued
Proceeds from other liabilities from bonds issued
Net cash flow from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
Note
2012
266.7
2011
378.4
F.23, F.25
F.23, F.25
50.2
183.1
56.2
49.5
88.1
9.8
(0.2)
(221.1)
0.5
53.6
(339.5)
(16.9)
(19.2)
2.4
(10,619.4)
10,520.9
160.3
0.0
(61.4)
(2.0)
(263.1)
47.4
162.9
(21.6)
9.0
591.9
18.6
(7.1)
(108.3)
443.9
0.0
165.2
5.0
37.8
(336.8)
(21.6)
(24.5)
(75.7)
(8,877.0)
8,717.6
175.3
0.3
2.2
21.3
(81.3)
12.8
171.9
26.8
4.3
(180.8)
(29.2)
(28.2)
(88.7)
122.5
337.1
17.0
(63.4)
(5,467.3)
(11.3)
(0.2)
(88.0)
347.8
21.6
(69.3)
(7,046.7)
(35.6)
(0.4)
10.8
0.0
15.8
5,225.5
15.8
0.4
(18.6)
(92.7)
24.3
6,590.3
88.1
0.0
(161.8)
0.0
0.0
(2.0)
(125.3)
(19.9)
16.5
(130.7)
294.6
465.6
760.2
40.2
(53.6)
(3.4)
(220.0)
0.0
0.0
(236.8)
(276.1)
741.7
465.6
F.17, F.19, F.23
F.23
F.17, F.19
F.19
F.17
F.7
F.7
52
ANNUAL REPORT 2012
FINANCIAL SECTION
Notes to the Financial Statements
A.GENERAL INFORMATION
A.1 DESCRIPTION OF THE GROUP
Generali PPF Holding B.V. (“Generali PPF Holding” or the “Company”) is an insurance holding company operating via its subsidiaries.
It offers a wide range of life and non-life insurance products as well as pension fund schemes in Central and Eastern Europe.
Generali PPF Holding was established under the laws of the Netherlands and as at 31 December 2012 was owned by Assicurazioni
Generali S.p.A. (51% share) and PPF Group N.V. (49% share). Assicurazioni Generali S.p.A. (“Generali”) is the Company’s ultimate
parent company. Generali’s financial statements are publicly available on its internet pages www.generali.com.
On 8 January 2013, the two shareholders concluded the agreement for the sale of 49% of the Company from PPF Group N.V. to
Assicurazioni Generali S.p.A. in two tranches:
• On 28 March 2013, Generali acquired 25% of shares of the Company from the PPF Group, obtaining as at the same day full
management control of the Company with the right to appoint executives of the Company.
On the same date, the Group sold the subsidiaries in the CIS region (Russia, Kazachstan, Belarus and Ukraine) to the PPF Group.
• For the remaining tranche of the acquisition, representing 24% of shares of the Company, closing is scheduled for the end of 2014.
Although a Dutch company, incorporated on 10 July 2007 under the laws of the Netherlands, with its registered office at Strawinskylaan
933, 1077 XX, Amsterdam, the Netherlands, its main operations are based in the Czech Republic, where its branch is registered at
Evropská 2690/17, P.O. Box 177, 160 41 Prague 6, Czech Republic. The Company identification number issued by the commercial
register in the Netherlands is 342 75 688, the branch in the Czech Republic is registered under the identification number of 282 39 652.
The consolidated financial statements of Generali PPF Holding for the year ended 31 December 2012 comprise the Company and its
subsidiaries (together collectively referred to as the “Group”).
See Section C of these financial statements for a listing of significant Group entities and changes to the Group structure.
The Board of Directors authorised these financial statements to be issued on 25 April 2013.
53
A.2
ANNUAL REPORT 2012
FINANCIAL SECTION
STATUTORY BODY
The Board of Directors as at the end of the reporting period consists of:
Chairman:
Sergio Balbinot
Members:
Petr Kellner
Aleš Minx
Jaroslav Mlynář
Mario Greco
Jiří Šmejc
Valter Trevisani
Following the shareholders’ agreement described in note A.1, since 28 March 2013 the Board of Directors has been composed of:
Chairman:
Sergio Balbinot
Members:
Luciano Cirinà
Mario Greco
Lubomír Král
Jaroslav Mlynář
Nikhil Srinivasan
Valter Trevisani
54
ANNUAL REPORT 2012
FINANCIAL SECTION
B. BASIS OF PREPARATION
B.1 STATEMENT OF COMPLIANCE
These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the
European Union (EU) in accordance with the IAS Regulation (EC 1606/2002). The Company financial statements have been drawn up in
accordance with Section 402, Book 2, of the Dutch Civil Code.
Management has reviewed those standards and interpretations adopted by the EU as at the date of issuance of these financial
statements, but which were not effective as at that date. An assessment of the expected impact of these standards and interpretations
on the Group is shown in D.6.3.
B.2 BASIS OF PREPARATION
The Group prepares these consolidated financial statements in accordance with IFRS (as adopted by the EU – see Note B.1).
These financial statements are presented in euros (“EUR (€)”) which is the functional currency of its shareholders.
These financial statements have been prepared on a historical cost basis except for the following assets and liabilities which are stated
at their fair value: derivative financial instruments, financial instruments at fair value through profit or loss and financial instruments
classified as available-for-sale.
The preparation of these financial statements in accordance with IFRS requires that management make judgements, estimates and
assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that
cannot readily be determined from other sources. The actual values may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision only affects that period or in both the period of the revision and future periods if the
revision affects both the current and future periods.
55
ANNUAL REPORT 2012
FINANCIAL SECTION
C.GENERAL CRITERIA FOR DRAWING UP THE FINANCIAL STATEMENTS
AND THE CONSOLIDATION METHOD
Assicurazioni Generali S.p.A. (“Generali”) and PPF Group N.V. (“PPF”) Holding based in the Czech Republic decided to cooperate in
providing insurance. The transaction was arranged through the establishment of a new entity – Generali PPF Holding B.V. – based in the
Netherlands, into which Generali contributed its CEE insurance business and PPF contributed its subsidiary CZI Holdings N.V. (“CZIH”)
that included a number of insurance or insurance-related entities plus investment funds.
The transaction was approved by the EU regulator on 17 January 2008, which is considered to be the effective transaction date. After
this approval, PPF contributed shares of CZIH to Generali PPF Holding and Assicurazioni Generali S.p.A. contributed shares of its CEE
insurance entities plus an amount of cash to Generali PPF Holding.
Generali PPF Holding has its own employees and is managed through a branch based in Prague.
C.1 GROUP ENTITIES
The consolidated financial statements are made up of those of the Parent Company and of its directly or indirectly controlled
subsidiaries. All entities satisfying the requisites of effective control are included in the consolidation. Based on the IAS 27 definition, the
control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The Group consolidates all material subsidiaries and recognises, using the equity method, all material associated companies and joint
ventures. Immaterial subsidiaries, associated companies and joint ventures are summarised in table F.3.2. A list of material Group
entities is presented below.
56
ANNUAL REPORT 2012
FINANCIAL SECTION
Company
Country
Functional
currency
Proportion
of ownership
interest
Proportion
of voting
rights
Generali Foreign Insurance Company Inc.
Belarus
Generali Bulgaria Holding AD
Bulgaria
BYR
100.00
100.00
BGN
100.00
100.00
Generali Insurance AD
Generali Life Insurance AD
Bulgaria
BGN
99.87
99.87
Bulgaria
BGN
99.56
99.56
Generali Zakrila Health-Insurance AD
Bulgaria
BGN
94.47
94.47
Generali Zakrila Medical and Dental Center EOOD
Bulgaria
BGN
94.47
100.00
GP Reinsurance EAD
Bulgaria
CZK
100.00
100.00
Generali Osiguranje d.d.
Croatia
HRK
100.00
100.00
City Empiria, a.s.
Czech Republic
CZK
100.00
100.00
CPI - 1. Zajištěný fond kvalifikovaných investorů
Czech Republic
CZK
100.00
100.00
CPI - 1. Fond kvalifikovaných investorů GPH
Czech Republic
CZK
100.00
100.00
Czech Republic
CZK
91.02
91.02
Czech Republic
CZK
79.49
79.49
Czech Republic
CZK
95.13
95.13
CPI - Dynamický fond fondů otevřený podílový fond
Czech Republic
CZK
96.00
96.00
CPI - Fond globálních značek
Czech Republic
CZK
68.40
68.40
CPI - Fond nemovitostních akcí
Czech Republic
CZK
67.36
67.36
CPI - II. Zajištěný fond
Czech Republic
CZK
87.59
87.59
CPI - III. Zajištěný fond
Czech Republic
CZK
92.94
92.94
CPI - IV. Zajištěný fond
Czech Republic
CZK
84.78
84.78
CPI - Komoditní fond
Czech Republic
CZK
84.19
84.19
CPI - V. Zajištěný fond
Czech Republic
CZK
89.53
89.53
CPI - VI. Zajištěný fond
Czech Republic
CZK
92.40
92.40
CPI - VII. Zajištěný fond
Czech Republic
CZK
78.59
78.59
CPI - Vyvážený fond fondů otevřený podílový fond
Czech Republic
CZK
94.62
96.62
Česká pojišťovna ZDRAVÍ a.s.
Czech Republic
CZK
100.00
100.00
Česká pojišťovna, a.s.
Czech Republic
CZK
100.00
100.00
ČP DIRECT, a.s.
Czech Republic
CZK
100.00
100.00
ČP INVEST invest. spol., a.s.
Czech Republic
CZK
100.00
100.00
ČP INVEST Realitní Uzavřený Investiční Fond, a.s.
Czech Republic
CZK
100.00
100.00
Generali Development s.r.o.
Czech Republic
CZK
100.00
100.00
Generali Penzijní Fond a.s.
Czech Republic
CZK
100.00
100.00
Generali Pojišťovna a.s.
Czech Republic
CZK
100.00
100.00
Generali PPF Asset Management, a.s.
Czech Republic
CZK
100.00
100.00
Generali PPF Services, a.s.
Czech Republic
CZK
100.00
100.00
Pankrác Services, s.r.o.
Czech Republic
CZK
100.00
100.00
Penzijní fond ČP, a.s.
Czech Republic
CZK
100.00
100.00
Solitaire Real Estate a.s.*
Czech Republic
CZK
100.00
100.00
Universální správa majetku, a.s.
Czech Republic
CZK
100.00
100.00
Europai Utazasi Biztosító R.t.
Hungary
HUF
61.00
61.00
Generali Alapkezelõ Rt.
Hungary
HUF
100.00
100.00
Generali Ingatlan Vagyonkezelo és Szolgáltató Kft
Hungary
HUF
100.00
100.00
Generali-Providencia Biztosító Rt.
Hungary
HUF
100.00
100.00
Genertel Biztosító Zrt
Hungary
HUF
100.00
100.00
Generali PPF Cash & Bond Fund
Ireland
EUR
94.43
94.43
Generali PPF Commodity Fund
Ireland
EUR
92.34
92.34
57
ANNUAL REPORT 2012
FINANCIAL SECTION
Company
Country
Functional
currency
Proportion
of ownership
interest
Proportion
of voting
rights
Generali PPF Corporate Bonds Fund
Ireland
Generali PPF Emerging Europe Fund
Ireland
EUR
49.95
49.95
EUR
85.91
85.91
Generali PPF Global Brands Fund
Ireland
EUR
99.24
99.24
Generali PPF New Economies Fund
Ireland
EUR
99.24
99.24
Generali PPF Oil & Energy Industry Fund
Ireland
EUR
92.99
92.99
JSC “Generali Life”
Kazakhstan
KZT
100.00
100.00
Delta Generali Holding d.o.o.
Montenegro
EUR
25.51
51.00
Montenegro
EUR
25.51
100.00
Generali Finance Sp. z o.o.
Poland
PLN
100.00
100.00
Generali PTE S.A.
Poland
PLN
100.00
100.00
Generali T.U. S.A.
Poland
PLN
100.00
100.00
Generali Życie S.A.
Poland
PLN
100.00
100.00
Generali SAF de Pensii Private S.A.
Romania
RON
100.00
100.00
SC Generali Romania Asigurare Reasigurare
Romania
RON
99.91
99.91
Generali PPF General Insurance LLC
Russia
RUB
100.00
100.00
Generali PPF Life Insurance LLC
Russia
RUB
100.00
100.00
Delta Generali Osiguranje a.d.
Serbia
RSD
50.02
50.02
Delta Generali Reosiguranje
Serbia
RSD
50.01
99.99
DGO Policlinic Dom Zdravlja Jedro
Serbia
RSD
50.02
100.00
Voluntary Pension Fund Management Company
Serbia
RSD
50.02
100.00
Generali Slovensko poisťovňa, a. s.
Slovakia
EUR
100.00
100.00
VUB Generali d.s.s., a.s.**
Slovakia
EUR
50.00
50.00
Generali Zavarovalnica d.d.
Slovenia
EUR
99.85
99.85
CP Strategic Investments B.V.
The Netherlands
EUR
100.00
100.00
CZI Holdings N.V.
The Netherlands
CZK
100.00
100.00
Generali PPF Holding B.V.
The Netherlands
CZK
100.00
100.00
Iberian Structured Investments I B.V.
The Netherlands
CZK
100.00
100.00
Generali Life Insurance Ukraine
Ukraine
UAH
100.00
100.00
Company
Country
Functional
currency
Proportion
of direct
ownership
interest
Proportion
of direct
voting
rights
Belarus
BYR
100.00
100.00
Generali Bulgaria Holding AD
Bulgaria
BGN
100.00
100.00
Bulgaria
BGN
99.87
99.87
Bulgaria
BGN
99.56
99.56
Bulgaria
BGN
94.47
94.47
Generali Zakrila Medical and Dental Center EOOD
Bulgaria
BGN
94.47
100.00
GP Reinsurance EAD
Bulgaria
CZK
100.00
100.00
Croatia
HRK
100.00
100.00
City Empiria, a.s.
Czech Republic
CZK
100.00
100.00
Czech Republic
CZK
100.00
100.00
CPI - 1. Fond kvalifikovaných investorů GPH**
Czech Republic
CZK
100.00
100.00
* Subsidiaries consolidated since 2012
** Joint venture
58
ANNUAL REPORT 2012
FINANCIAL SECTION
Company
Country
Functional
currency
Proportion
of direct
ownership
interest
Proportion
of direct
voting
rights
Czech Republic
CZK
91.02
91.02
CPI - 10. Zajištěný fond kvalifikovaných investorů**
Czech Republic
CZK
79.49
79.49
CPI - 11. Zajištěný fond kvalifikovaných investorů**
Czech Republic
CZK
88.65
88.65
CPI - Dynamický fond fondů otevřený podílový fond
Czech Republic
CZK
93.29
93.29
CPI - Fond globálních značek
Czech Republic
CZK
74.78
74.78
CPI - Fond nemovitostních akcí
Czech Republic
CZK
63.87
63.87
CPI - I. Zajištěný fond
Czech Republic
CZK
78.69
78.69
CPI - II. Zajištěný fond
Czech Republic
CZK
86.20
86.20
CPI - III. Zajištěný fond
Czech Republic
CZK
92.41
92.41
CPI - IV. Zajištěný fond
Czech Republic
CZK
84.15
84.15
CPI - Komoditní fond
Czech Republic
CZK
84.02
84.02
CPI - V. Zajištěný fond
Czech Republic
CZK
89.51
89.51
CPI - VI. Zajištěný fond
Czech Republic
CZK
92.28
92.28
CPI - VII. Zajištěný fond**
Czech Republic
CZK
78.28
78.28
CPI - Vyvážený fond fondů otevřený podílový fond
Czech Republic
CZK
93.05
93.05
Czech Republic
CZK
100.00
100.00
Czech Republic
CZK
100.00
100.00
ČP DIRECT, a.s.
Czech Republic
CZK
100.00
100.00
ČP INVEST invest. spol., a.s.
Czech Republic
CZK
100.00
100.00
ČP INVEST Realitní Uzavřený Investiční Fond, a.s.
Czech Republic
CZK
100.00
100.00
Generali Development s.r.o.
Czech Republic
CZK
100.00
100.00
Generali Penzijní Fond a.s.
Czech Republic
CZK
100.00
100.00
Czech Republic
CZK
100.00
100.00
Generali PPF Asset Management, a.s.
Czech Republic
CZK
100.00
100.00
Generali PPF Services, a.s.
Czech Republic
CZK
100.00
100.00
Pankrác Services, s.r.o.
Czech Republic
CZK
100.00
100.00
Czech Republic
CZK
100.00
100.00
Universální správa majetku, a.s.
Czech Republic
CZK
100.00
100.00
Hungary
HUF
61.00
61.00
Generali Alapkezelõ Rt.
Hungary
HUF
100.00
100.00
Generali Biztosítási Ügynök és Marketing Kft
Hungary
HUF
100.00
100.00
Generali Epitö-és Tervezö
Hungary
HUF
100.00
100.00
Generali Ingatlan Vagyonkezelo és Szolgáltató Kft
Hungary
HUF
100.00
100.00
Hungary
HUF
100.00
100.00
Hungary
HUF
100.00
100.00
Generali PPF Cash & Bond Fund
Ireland
EUR
94.4
94.4
Generali PPF Commodity Fund
Ireland
EUR
93.7
93.7
Generali PPF Corporate Bonds Fund
Ireland
EUR
82.5
82.5
Generali PPF Emerging Europe Fund*
Ireland
EUR
99.8
99.8
Generali PPF Global Brands Fund
Ireland
EUR
99.0
99.0
Generali PPF New Economies Fund
Ireland
EUR
98.9
98.9
Generali PPF Oil & Energy Industry Fund
Ireland
EUR
95.4
95.4
Kazakhstan
KZT
100.00
100.00
Delta Generali Holding d.o.o.
Montenegro
EUR
25.51
51.00
Montenegro
EUR
25.51
100.00
Delta Generali Životna osiguranja
Montenegro
EUR
25.51
100.00
Generali AutoProgram
Poland
PLN
100.00
100.00
59
ANNUAL REPORT 2012
FINANCIAL SECTION
Company
Country
Functional
currency
Proportion
of direct
ownership
interest
Proportion
of direct
voting
rights
Generali Finance Sp. z o.o.
Poland
PLN
100.00
100.00
Generali PTE S.A.
Poland
PLN
100.00
100.00
Generali T.U. S.A.
Poland
PLN
100.00
100.00
Poland
PLN
100.00
100.00
Generali SAF de Pensii Private S.A.
Romania
RON
100.00
100.00
(former SC Asigurare Reasigurare ARDAF)
Romania
RON
33.64
33.64
Generali PPF General Insurance LLC
Russia
RUB
100.00
100.00
Russia
RUB
100.00
100.00
Serbia
RSD
50.02
50.02
Delta Generali Reosiguranje
Serbia
RSD
50.01
99.99
DGO Policlinic Dom Zdravlja Jedro*
Serbia
RSD
50.02
100.00
Voluntary Pension Fund Management Company
Serbia
RSD
50.02
100.00
Slovakia
EUR
100.00
100.00
VUB Generali d.s.s., a.s.***
Slovakia
EUR
50.00
50.00
Slovenia
EUR
99.85
99.85
CP Strategic Investments B.V.
The Netherlands
EUR
100.00
100.00
CZI Holdings N.V.
The Netherlands
CZK
100.00
100.00
Generali PPF Holding B.V.
The Netherlands
CZK
100.00
100.00
Iberian Structured Investments I B.V.
The Netherlands
CZK
100.00
100.00
CZI Ukraine, Pension fund administrator
Ukraine
UAH
100.00
100.00
Generali Life Insurance Ukraine
Ukraine
UAH
100.00
100.00
SC Generali Romania Asigurare Reasigurare
* Subsidiaries consolidated since 2011
** Investments funds opened/controlled in 2011
*** Joint venture
The table below presents the list of unit-linked investment funds (mutual funds) which are considered associates and are reported in the
financial investments at fair value through profit or loss.
Company
Country
CPI - Fond farmacie a biotechnologií
Czech Republic
CPI - Fond korporátních dluhopisů
Czech Republic
CPI - Fond nových ekonomik
Czech Republic
CPI - Fond peněžního trhu
Czech Republic
CPI - Fond ropy a energetiky
Czech Republic
CPI - Fond smíšený
Czech Republic
CPI - Fond zlatý
Czech Republic
CPI - Fond živé planety
Czech Republic
60
ANNUAL REPORT 2012
FINANCIAL SECTION
Company
Country
CPI - Fond farmacie a biotechnologií
Czech Republic
CPI - Fond korporátních dluhopisů
Czech Republic
CPI - Fond nových ekonomik
Czech Republic
CPI - Fond peněžního trhu
Czech Republic
CPI - Fond ropy a energetiky
Czech Republic
CPI - Fond smíšený
Czech Republic
CPI - Fond zlatý
Czech Republic
CPI - Fond živé planety
Czech Republic
General information about joint ventures:
Registered seat: Shareholders: Group’s stake in registered capital: Core business: Recognised:
VÚB Generali, Dôchodková správcovská spoločnosť, a.s.
Mlynské nivy 1, 829 90 Bratislava
Generali Slovensko poisťovňa, a. s. and VÚB, a.s.
50%
Administration of pension funds for retirement savings scheme
Using equity method
C.1.1 Changes to the Group
Detailed information about significant transactions with subsidiaries of the Group is provided below.
1) Transfer of shares of Generali Romania
On 13 January 2012, the Group was granted the necessary approvals by the Romanian Insurance Supervisory Commission for the
transfer of a 66.25% interest in S.C. Generali Romania Asigurare Reasigurare S.A. (Generali Romania) from Generali Holding
Vienna A.G. (GHV).
Consequently, Generali Romania was delisted from the Bucharest Stock Exchange on 14 March 2012.
The transaction was completed on 2 April 2012 when the transfer of the entire participation held by GHV to the Group was performed
and registered in the shareholder’s registry of the company.
The purchase price for the transferred shares amounted to €62.2 million. The transfer is accounted for in the consolidated financial
statements as a transaction with non-controlling interest and the difference between the consideration paid and the book value of
non-controlling interest is presented in equity under the item “Other capital reserves”.
2) Establishment of ČP Asistence, s.r.o.
ČP Asistence, s.r.o. (ČP Asistence), an assistance company set up jointly by the Group’s subsidiary Česká pojišťovna and Europe
Assistance, started operations on 1 March 2012. The Group’s participation in ČP Asistence is 51%. The company provides complex
assistance services to clients of Česká pojišťovna, utilizing a wide network of partners and innovative telecommunication solutions.
3) Sale of Ukrainian entities
In April 2012, the Group completed the sale of some of its subsidiaries within the territory of the Ukraine, including the following entities:
• Private Joint-Stock Company “CZI Ukraine, Pension fund administrator”
• Private Joint Stock Company “Generali PPF Asset Management Ukraine”
The total purchase price amounted to €1.7 million and the Group realised a loss of €1.0 million from the sale.
4) Acquisition of Region (Generali PPF Insurance)
On 4 July 2012, the Group signed an agreement with the Finnish group Sampo to acquire 100% shares in the Russian Open
Joint-Stock Insurance Company “Region” (Region), a small composite insurance company based in Saint Petersburg, for total
consideration of €8.0 million. The transaction was subject to regulatory approvals, which were granted in November 2012.
61
ANNUAL REPORT 2012
FINANCIAL SECTION
Region has been consolidated, commencing 29 November 2012. The acquisition had no significant effect on the consolidated financial
statements of the Group, net assets increased by €8.0 million. The purchase price has been allocated to net tangible assets acquired.
Post-acquisition gross written premiums and net profit after taxes were less than €0.1 million.
Region was established as one of the first private insurance companies in Russia back in 1993. Since 2008, it has been operating as
a subsidiary of the Swedish company If Skadeforsakring Holding AB and is well known for its high quality of customer services. This
acquisition will enable the Group to enter new insurance segments in Russia, especially the motor sector.
Following the acquisition, Region changed its name to Public Stock Company “Generali PPF Insurance”.
5) Acquisition of Proama business
On 23 July 2012, the Group and French insurer Groupama signed an agreement to acquire Groupama’s Polish insurance portfolio,
operating under its branch Proama, into the Group’s structures.
The transaction was finalised on 31 December 2012, when the approvals by all the regulatory authorities were granted.
In line with the definitions set out in IFRS 3, the transaction is regarded and was accounted for as a business acquisition. The assets and
liabilities arising from the acquisition are as follows:
(€ million)
Amounts acquired
Assets
8.5
Receivables out of insurance operations
4.9
Other assets
2.7
Cash and cash equivalents
0.9
Liabilities
Insurance provisions
37.2
33.5
Financial liabilities
1.4
Payables out of insurance operations
1.5
Other liabilities
0.8
Net liabilities acquired
(28.7)
Consideration transferred
(11.2)
Goodwill
17.5
The Group took over the insurance portfolio and other assets and liabilitites of Proama with a total net liabilities of €28.7 million. As
compensation for the negative net asset value, the Group received consideration in cash amounting to €11.2 million. The residual
amount was allocated to goodwill, which reflects Proama’s capabilities and the growth potential of the Polish insurance market.
The transaction will enable the Group to expand its activities, benefiting from Proama’s strong entry into the Polish market in 2012.
Proama is active mainly in the retail segment, starting with car insurance distributed through three channels: phone, internet and
multi-agents. The Group is operating the acquired business as a branch of Česká pojišťovna.
6) Acquisition of Solitaire Real Estate, a.s.
Effective as of 10 December 2012, the Group acquired 100% shares of Solitaire Real Estate a.s. (Solitaire), a real estate SPV owning
properties in a prime location in Prague’s city centre, for total consideration of €7.2 million. The acquisition was aimed at increasing the
proportion of real estate in the Group’s investment portfolio.
The transaction is regarded as an acquisition of a group of assets, as the transferred set of activities and assets does not meet the
definition of IFRS 3 for a business.
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ANNUAL REPORT 2012
FINANCIAL SECTION
The acquisition of Solitaire had the following effect on the Group’s assets and liabilities:
(€ million)
Amounts acquired
Assets
25.1
Investments
23.3
Other assets
0.3
Liabilities
1.5
17.9
17.3
Other liabilities
0.6
Net assets acquired
7.2
7) Disposal of the Non-State Pension Fund Generali PPF
The Group indirectly sold its participation in the Non-State Pension Fund Generali PPF (RU) through sale of its interest in Generali PPF
Fund Management (RU).
On 14 December 2012, the Group signed an agreement with UNILIKS LLC to sell its participation in Generali PPF Fund Management
(RU). The agreed purchase price amounts to RUB 373 million (€9.1 million).
Consequently, net assets attributable to this company were reclassified to Held for Sale. Since the fair value of net assets less cost to
sell is higher than the book value (€7.9 million), no loss was recognised on the reclassification.
The transaction was completed in February 2013 after the approval by regulatory bodies was obtained.
Generali PPF Fund Management is founder of the Non-State Pension Fund Generali PPF (RU).
8) Mergers and disposals
The following mergers occurred within the Group in 2012:
Generali Biztosítási Ügynök és Marketing Kft (HU) merged with Generali-Providencia Biztosító (HU) as at 1 January.
Generali Építo-és Tervezö Kft (HU) merged with Generali Ingatlan Vagyonkezelö és Szolgáltató Kft as at 1 January.
Delta Generali Životna osiguranja (ME) merged with Delta Generali Osiguranje (ME) as at 28 September.
The company Generali AutoProgram (PL) was liquidated as at 30 September.
C.2
CONSOLIDATION METHODS AND ACCOUNTING FOR ASSOCIATES AND JOINT VENTURES
Investments in subsidiaries are consolidated line by line, whereas investments in associated companies and joint ventures are accounted
for using the equity method.
Reorganisations and mergers involving companies under common control are accounted for using predecessor amounts, and
consequently no adjustment is made to the carrying amounts in the Group’s consolidated accounts and no goodwill arises on such
transactions.
Translation from functional to presentation currency
The statements of the financial position in functional currencies different from the presentation currency of the Group were translated into
EUR based on the exchange rates as at the end of the year.
The income statements were translated based on the average exchange rates of the year. They reasonably approximate the exchange
rates as at the dates of the transactions.
The exchange rate differences arising from the translation were accounted for in other comprehensive income in a translation reserve
and recognised in the income statement only at the time of the disposal of the investments.
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Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as the foreign entity’s assets and liabilities
and are translated at the closing rate.
The exchange rates used for the translation of the main foreign currencies for the Group into EUR (“€”) are the ones published by the
European Central Bank.
C.2.1
Consolidation procedures
The entities controlled by the Group are consolidated. Control is presumed to exist when the Group owns, directly or indirectly through
other entities, more than half of the voting power of an entity or, in any event, when it has the power to govern the financial and
operating policies of an investee. In the assessment of the control, potential voting rights are also considered.
The consolidation of a subsidiary ceases commencing from the date when the Group loses control.
If the Group loses control over a subsidiary, it:
• derecognises the assets (including goodwill) and liabilities of the subsidiary,
• derecognises the carrying amount of any non-controlling interest,
• derecognises the cumulative translation differences recorded in equity,
• recognises the fair value of the consideration received,
• recognises the fair value of any investment retained,
• recognises any surplus or deficit in profit or loss,
• reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss or retained
earnings, as appropriate.
In preparing the consolidated financial statements:
• The financial statements of the Company and its subsidiaries are consolidated. The financial year-end date of each subsidiary is
identical to the one of the Company, 31 December of each financial year.
• The carrying amount of the Company’s investment in each subsidiary and the Company’s portion of equity of each subsidiary are
eliminated as at the date of acquisition.
• Non-controlling interests are shown as separate items in equity.
• Intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.
The Group uses the acquisition method to account for business combinations. The consideration transferred for the acquisition of a
subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs
are recognised as expenses in the period in which they are incurred. Identifiable assets acquired and liabilities assumed in a business
combination are measured initially at their fair values as at the acquisition date. On an acquisition-by-acquisition basis, the Group
recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the
acquiree’s net assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value
of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If this is
less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly
in the income statement.
Changes to contingent consideration classified as a liability at the acquisition date are recognised through the income statement.
Accounting for business combinations under IFRS 3 only applies if it is considered that a business has been acquired. Under IFRS 3,
‘Business combinations’, a business is defined as an integrated set of activities and assets conducted and managed for the purpose
of providing a return to investors or lower costs or other economic benefits directly and proportionately to policyholders or participants.
A business generally consists of inputs, processes applied to those inputs, and resulting outputs that are, or will be, used to generate
revenues. In the absence of such criteria, a group of assets is deemed to have been acquired. If goodwill is present in a transferred
set of activities and assets, the transferred set is presumed to be a business. For acquisitions meeting the definition of a business, the
purchase method of accounting is used.
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For acquisitions not meeting the definition of a business, the Group allocates the cost between the individual identifiable assets and
liabilities of the acquired entity based on their relative fair values as at the date of acquisition. Such transactions or events do not give
rise to goodwill.
Business combinations under common control
Acquisitions of subsidiaries controlled by Assicurazioni Generali S.p.A. group are considered transactions under common control.
For these transactions, acquisition accounting as described in IFRS 3 is not applied. Instead, assets and liabilities of such acquired
entities are recorded using the predecessor amounts method, prospectively from the date of gaining control over the acquired entity.
Any difference between the consideration paid and the predecessor values of the net assets acquired is recorded within equity and
presented in “Other capital reserves”.
Transactions with non-controlling interests
The Group is treating transactions with non-controlling interests as equity transactions not affecting profit and loss. For purchases from
non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net
assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
Non-controlling interests are shown in the consolidated statement of financial position as a separate component of equity, which is
distinct from the Group’s shareholders’ equity. The net income attributable to non-controlling interests is separately disclosed on the
face of the consolidated income statement and statement of comprehensive income.
C.2.2
Using the equity method
Associated companies
IAS 28 defines an associate as an entity over which the investor has significant influence. Significant influence is the power to participate
in the financial and operating policy decisions of the investee but is not control or joint control over those policies. If an investor
holds, directly or indirectly through subsidiaries, 20% or more of the voting power of the investee, it is presumed that the investor has
significant influence.
Under the equity method, the investment in an associate is initially recognised at cost (including goodwill) and the carrying amount is
increased or reduced to recognise the change in the investor’s share of the equity of the investee after the date of acquisition. The
Group’s share of the profit or loss of the investee, net of dividends, is recognised in its income statement.
Unrealised gains on transaction between the Group and its associated companies are eliminated to the extent of the Group’s interest in
the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The accounting policies of associates have been changed where necessary in order to ensure consistency with the policies adopted by
the Group.
Joint ventures
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.
Joint control is the contractually agreed sharing of control over an economic activity. Investments in joint ventures are accounted for by
the equity method of accounting and are initially recognised at cost. The Group’s investment in joint ventures includes goodwill identified
on acquisition.
The Group’s share of its joint ventures’ post-acquisition profit or loss is recognised in the income statement, and its share of
post-acquisition movements in reserves is recognised in reserves. When the Group’s share of losses in the joint-venture equals or
exceeds its interest in the joint venture, including other unsecured receivables, the Group does not recognise further losses unless
it has incurred obligations or made payments on behalf of the joint venture.
Unrealised gains on transaction between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint
ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Joint
venture accounting policies have been changed where necessary in order to ensure consistency with the policies adopted by the Group.
C.2.3
Consolidation of unit-linked investment funds
The Group manages open-ended investment funds through the management companies ČP INVEST and Generali PPF Invest. The
Group invests in these investment funds the assets related to unit linked products as well as its own direct investments.
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For the calculation of the Group’s participation in individual investment funds, the entire Group’s investments are taken into account,
including assets related to unit-linked products.
For consolidation purposes, control is presumed to exist when the Group’s participation is above 50%. Controlled open-ended
investment funds are fully consolidated. The Funds where the Group’s control is not presumed, because the participation is below 50%,
are considered associates and are reported within the financial investments at fair value through profit or loss.
Net assets attributable to unit holders outside the Group are recognised as financial liability.
D. SIGNIFICANT ACCOUNTING POLICIES AND ASSUMPTIONS
D.1
SIGNIFICANT ACCOUNTING POLICIES
The accounting standards adopted in preparing the consolidated financial statements, and the contents of the items in the consolidated
financial statements are presented in this section.
D.1.1
Intangible assets
In accordance with IAS 38, an intangible asset is recognised if, and only if, it is identifiable and controllable, it is probable that the
expected future economic benefits attributable to the asset will flow to the Group and the cost of the asset can be measured reliably.
This category includes goodwill and other intangible assets, such as software, brands and present value of future profits.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and
the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.
D.1.1.1Goodwill
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value
of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill.
In respect of associates and joint ventures, the carrying amount of any goodwill is included in the carrying amount of the investment in
the entity.
After initial recognition, goodwill is measured at the initially recognised amount less any impairment losses and it is not amortised.
Realised gains and losses on disposals of investments in subsidiaries include the related goodwill. Goodwill is tested at least annually in
order to identify any impairment losses.
The purpose of the impairment test on goodwill is to identify the existence of any impairment losses. In this context, cash-generating
units to which the goodwill is allocated are identified and tested for impairment. Cash-generating units usually represent life or non-life
businesses in each country. The impairment loss is equal to the difference, if negative, between the recoverable amount and the carrying
amount of the cash-generating unit. The recoverable amount is the higher of the fair value less cost to sell of the cash-generating unit
and its value in use, i.e. the present value of the future cash flows expected to be derived from the cash-generating unit. The fair value
of the cash generating unit is determined on the basis of current market quotation or valuation techniques commonly adopted. The
valuation is based on the present value of future cash inflows and outflows, considering projections on budgets/forecasts approved by
management and covering a maximum period of five years. Cash-flow projections for a period longer than five years are extrapolated
using estimated growth rates. The discount rates used in the discounted cash-flow models reflect the risk-free rate, adjusted to take
specific risks into account. Should any previous impairment losses no longer exist, they cannot be reversed.
Impairment of goodwill is recognised in the income statement under the item “Other expenses”. For further details, see Note F.1.1.
D.1.1.2 Present value of future profits
On the acquisition of a portfolio of long-term insurance contracts or investment contracts, either directly, or through the acquisition
of an enterprise, the net present value of the shareholders’ interest in the expected cash flows of the portfolio acquired is capitalised
as an asset. This asset, which is referred to as the Present Value of Future Profits (“PVFP”), is calculated on the basis of an actuarial
computation taking into account assumptions for future premium income, contributions, mortality, morbidity, lapses and returns on
investments. PVFP is recognised separately for insurance segments and for respective companies.
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The PVFP is amortised over the average effective life of the contracts acquired, by using an amortisation pattern reflecting the expected
future profit recognition. Assumptions used in the development of the PVFP amortisation pattern are consistent with the ones applied in
its initial measurement. The amortisation period varies from 5 to 30 years for individual portfolios.
As for the life and non life portfolio, the recoverable amount of the value of the “in-force business acquired” is carried out through the
Liability Adequacy Test (LAT) of the insurance provisions – mentioned in paragraph D.3.3 – taking into account, if any, the deferred
acquisition costs recognised in the statement of financial position. If any, the impairment losses are recognised in the income statement.
The amortisation and the potential impairment of present value of future profits are recognised in the income statement under the item
“Other expenses”. For further details, see Note F.1.2.
Where there is any indication that an impairment loss recognised for PVFP in prior years no longer exists, the carrying amount of PVFP
is increased to its estimated recoverable amount. The increased carrying amount of PVFP due to the reversal of impairment loss cannot
exceed the carrying amount that would be determined if no impairment loss had been recognised for PVFP in prior years, net of any
amortisation accounted for in the meantime.
D.1.1.3 Other intangible assets
Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.
Intangible assets with finite useful lives are amortised on a straight-line basis over an average period of 3–5 years. The amortisation
methods, useful lives and residual values, if not insignificant, are reassessed annually. If a material addition is made to an asset during
the year, its useful life and residual value are reassessed at the time of the addition.
The brand can only be recognised when acquired from a third party and it is measured at the acquisition cost less impairment losses.
Acquisition cost for this purpose is the asset’s fair value for assets acquired in business combinations – e.g. the relief-from-royalty
method which is based on revenues attributable to the brand and appropriate royalty rate.
The amortisation and the potential impairment of other intangible assets are recognised in the income statement under the item “Other
expenses”. For further details, see Note F.1.2.
Where there is any indication that an impairment loss recognised for an asset in prior years no longer exists, the carrying amount of the
asset is increased to its estimated recoverable amount. The increased carrying amount of the asset due to the reversal of impairment
loss cannot exceed the carrying amount that would be determined if no impairment loss had been recognised for the asset in prior
years, net of any depreciation or amortisation accounted for in the meantime.
D.1.2
Investment property
Investment properties are properties that are held either to earn rental income or for capital appreciation or for both. A property owned
by the Group is treated as an investment property if it is not occupied by the Group or if only an insignificant portion of the property is
occupied by the Group.
Property that is being constructed or developed for future use as an investment property is classified as investment property.
To measure the value of investment properties, the Group applies the cost model set out by IAS 40, and adopts the depreciation criteria
defined by IAS 16. Please refer to the paragraph on property and equipment (D.1.3) for information about the criteria used by the Group
and finance leases of land and buildings. Rental income from investment property is accounted for on a straight-line basis over the term
of the lease.
Investment properties are derecognised either when they have been disposed of or when they are permanently withdrawn from use and
no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount
of the asset is recognised in the income statement in the period of derecognition.
D.1.3
Property and equipment
Property and equipment are measured at the purchase price or production cost, less accumulated depreciation and any accumulated
impairment losses. Historical cost includes expenditures that are directly attributable to the acquisition of the items.
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Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
All repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation is provided on a straight-line basis using the following rates:
Item
Annual depreciation rate (%)
Buildings
1.98–10.00
Other tangible assets and equipment
5.88–33.33
Component parts of an asset that have different useful lives or provide benefits in a different pattern are recognised as separate assets
with different depreciation rates.
The depreciation methods, useful lives and residual values, if not insignificant, are reassessed annually. If a material addition is made to
an asset during the year, its useful life and residual value are reassessed at the time of the addition. Land is not depreciated.
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases.
Property and equipment acquired by way of finance leasing are stated at an amount equal to the lower of the fair value and the present
value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Financial
leases of property and equipment are not material for the Group.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future
economic benefits are expected from its use or disposal.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount. These are included in the income
statement under the item “Other income” or “Other expenses”.
D.1.4
Financial assets
Financial assets include financial assets at fair value through profit or loss (including derivatives), financial assets available-for-sale,
financial assets held-to-maturity, loans and receivables, cash and cash equivalents.
Financial assets are recognised in the statement of financial position when the Group becomes a party to the contractual provisions of
the instrument. For standard purchases and sales of financial assets, the Group’s policy is to recognise them using settlement-date
accounting. Any change in the fair value of an asset to be received or disposed during the period between the trade date and the
settlement date is accounted for in the same way as if the Group used trade-date accounting. Financial instruments are measured
initially at fair value plus, with the exception of financial instruments at fair value through profit or loss, transaction costs directly
attributable to the acquisition or issue of the financial instrument.
Subsequent measurement is described in Notes D.1.4.1 to D.1.4.4.
Financial assets are derecognised when the rights to receive cash flows from them have expired or where they have been transferred
and the Group has also transferred substantially all risks and rewards of ownership.
Fair value measurement
The fair value of financial instruments is based on their quoted market price on active markets as at the end of the reporting period
without any deduction for transaction costs. If a quoted market price is not available or if the market for an investment is not active, the
fair value of the instrument is estimated using pricing models or discounted cash-flow techniques.
To identify a non-active market, the Group determines whether the quoted price really reflects the fair value, i.e. in cases when the price
has not changed for a long period or the Group has information about an important event but the price did not change accordingly, the
market is not considered active. Discounted cash-flow techniques use estimated future cash flows, which are based on management’s
estimates, and the discount rate, which is constructed from risk-free rates adjusted by risk margin (credit spread). This is usually derived
from an instrument with similar terms and conditions (ideally from the same issuer, similar maturity and seniority) which best reflects the
market price.
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In general, in the case that pricing models are used, inputs are based on market-related measures as at the end of the reporting period
which limits the subjectivity of the valuation performed by the Group, and the result of such a valuation best approximates the fair value
of an instrument.
The fair value of derivatives that are not exchange-traded is estimated at the amount that the Group would receive or pay to terminate
the contract as at the end of the reporting period, taking into account current market conditions and the current creditworthiness of the
counterparties. In the case of options, Black-Scholes models are applied. Also, for any other over-the-counter instruments (CDS, IRS, CCS,
etc.), widely accepted valuation models are applied and, again, the parameters of the valuation intend to reflect the market conditions.
The Company discloses fair value measurements by level of the following fair value measurement hierarchy as defined by IFRS 7:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
• Inputs other than quoted prices included within level 1 that are observable market data for the asset or liability, either directly (that is,
as prices) or indirectly (that is, derived from prices) (level 2).
• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The fair value of financial instruments traded in active markets is based on quoted market prices as at the end of the reporting period.
These instruments are included in level 1.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives or unquoted
bonds) is determined by using valuation techniques. If all the significant inputs required to fair value an instrument are observable market
data, the instrument is included in level 2. Specific valuation techniques used to value financial instruments include mainly quoted market
prices or over the counter offers for similar instruments, cash-flow estimation and risk-free curves.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
Level 3 contains investments where market prices are unavailable and entity specific estimates are necessary.
Fair value hedge
The Group designates certain derivatives as hedges of the fair value of recognised assets and liabilities. The hedge accounting has been
applied to derivatives hedging a currency risk on designated non-derivative financial assets and insurance liabilities denominated in or
exposed to foreign currencies (with respect to the functional currency of each subsidiary). The hedge accounting has also been applied
to derivatives hedging an interest rate exposure of interest-bearing financial assets. The Group applies a fair value hedge.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement,
together with any changes in the fair value of the hedged assets or liabilities that are attributable to the hedged riskwithin lines “Other
income” or “Other expenses” and Net gains/(losses) from financial instruments at fair value through profit or loss.
At the inception of the transaction, the Group documents the relationship between hedging instruments and hedged items, as well as
its risk management objective and strategy for undertaking hedging transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are expected to be and have
been highly effective in offsetting changes in the fair values of hedged items.
Cash-flow hedge
The Group also designates certain derivatives as hedges of the cash flow of future interest payments.
At the inception of the transaction, the Group documents the relationship between hedging instruments and hedged items, as well as its
risk management objective and strategy for undertaking hedging transactions.
The hedging instrument is remeasured at fair value attributable to the hedged interest rate risk as at the balance sheet date. The
appropriate part of this revaluation attributable to the effective hedging is recognized through other comprehensive income in the
revaluation reserve within the Group’s equity.
The Group also documents its assessment of the hedging effectiveness, both at hedge inception and on an on-going basis, of whether
the derivatives that are used in hedging transactions are expected to be and have been highly effective in offsetting changes in the fair
values of hedged items.
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If the change in fair value of the hedging instrument is larger than the change in fair value of the hedged item, then the equity accounts
reflect only the change in fair value of the derivative in the amount of change in fair value of the hedged item. Identified hedge
ineffectiveness is recognized in the income statement within line Net gains/(losses) from financial instruments at fair value through profit
or loss.
Embedded derivatives
Certain derivatives embedded in other financial instruments are treated as separate derivatives when their economic characteristics and
risks are not closely related to those of the host contract and the host contract is not carried at fair value through profit or loss.
The Group designates the hybrid contracts at fair value through profit or loss.
The Group does not separately measure embedded derivatives included in insurance contracts. No derivatives that are not closely
related are embedded in insurance contracts.
D.1.4.1 Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market,
other than classified at fair value through profit or loss or classified as available-for-sale.
After initial recognition at fair value, loans and receivables are measured at amortised cost using the effective interest method less
provision for impairment.
D.1.4.2 Financial assets held-to-maturity
Held-to-maturity assets are non-derivative financial assets with fixed or determinable payments and fixed maturities other than those that
meet the definition of loans and receivables that the Group has the positive intent and ability to hold to maturity, other than those:
• that the Group upon initial recognition designates as at fair value through profit or loss,
• that the Group designates as available-for-sale,
• that meet the definition of loans and receivables.
Financial assets held-to-maturity are measured at amortised cost using an effective interest rate method less any impairment losses.
The amortisation of premiums and discounts is recorded as interest income.
The fair value of an individual security within the held-to-maturity portfolio can temporarily fall below its carrying value, but, provided there
is no risk resulting from significant financial difficulties of the issuer, the security is not considered to be impaired.
D.1.4.3 Financial assets available-for-sale
Available-for-sale financial assets are those non-derivative financial assets that are not classified as loans and receivables,
held-to-maturity investments, or financial assets at fair value through profit or loss.
After initial recognition, the Group measures financial assets available-for-sale at their fair values, without any deduction for transaction
costs that it may incur upon sale or other disposal, with the exception of instruments that do not have a quoted market price on an active
market and whose fair value cannot be reliably measured which are stated at cost, including transaction costs, less impairment losses.
Any revaluation gain or loss on a financial asset available-for-sale is recognised in other comprehensive income with the exception of
impairment losses (see note D.1.29.2) and, in the case of monetary items such as debt securities, foreign exchange gains and losses.
When available-for-sale assets are derecognised, the cumulative gain or loss previously recognised in other comprehensive income is
recognised in the income statement. Where these instruments are interest-bearing, interest calculated using the effective interest rate
method is recognised in the income statement. Dividend income is recognised in the income statement under the “Other investment
income” – see D.1.22.
D.1.4.4 Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held-for-trading and non-trading financial assets which are
designated upon initial recognition at fair value through profit or loss.
Financial assets held-for-trading are acquired or incurred principally for the purpose of generating a profit from short-term fluctuations in
the price or dealer’s margin. Financial assets are classified as held-for-trading if, regardless of the reason they were acquired, they are
part of a portfolio for which there is evidence of a recent actual pattern of short-term profit taking.
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Financial assets held-for-trading include investments and derivative contracts that are not designated as effective hedging instruments.
All trading derivatives in a net receivable position (positive fair value), as well as options purchased, are reported as trading assets. All
trading derivatives in a net payable position (negative fair value), as well as options written, are reported as financial liabilities at fair value
through profit or loss.
If a financial asset is no longer held for the purpose of selling or repurchasing it in the near term (notwithstanding that the financial asset
may have been acquired or incurred principally for the purpose of selling or repurchasing it in the near term), the financial assets can be
reclassified out of the fair value through profit or loss category in rare circumstances.
The Group designates non-trading financial assets according to its investment strategy as financial assets at fair value through profit or
loss, whether there is an active market and the fair value can be reliably measured.
The fair value option is only applied in one of the following situations:
• It results in more relevant information, because it significantly reduces a measurement or recognition inconsistency (“accounting
mismatch”);
• When a contract contains one or more substantive embedded derivatives, unless the embedded derivative does not significantly
modify the cash flows that otherwise would be required by the contract or it is clear that separation of an embedded derivative is
prohibited.
Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value. Gains and losses
arising from changes in the fair values of financial assets at fair value through profit or loss are recognised in the income statement.
Swaps
Swaps are over-the-counter agreements between the Group and other parties to exchange future cash flows based upon agreed
notional amounts. Swaps most commonly used by the Group are interest rate and cross-currency interest rate swaps. Under interest
rate swaps, the Group agrees with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate
interest amounts calculated by reference to an agreed notional amount. Cross-currency interest rate swaps require an exchange
of interest payment flows and capital amounts in different currencies. The Group is subject to credit risk arising from default of the
respective counter parties. Market risk arises from potentially unfavourable movements in interest rates relative to the contractual rates
of the contract, or from movements in foreign exchange rates. Credit default swaps are also used by the Group. Under the credit default
swap agreement, a credit risk is transferred from a protection buyer to a protection seller.
Futures and forwards
Forward contracts are commitments to either purchase or sell a designated financial instrument, currency, commodity or an index at
a specified future date for a specified price and may be settled in cash or another financial asset. Forward contracts result in credit
exposure to the counter party and exposure to market risk based on changes in market prices relative to the contracted amounts.
A futures contract is a standardised contract, traded on a futures exchange, to buy or sell a standardised quantity of a specified
commodity of standardised quality at a certain date in the future, at a price determined by the instantaneous equilibrium between the
forces of supply and demand among competing buy and sell orders on the exchange at the time of the purchase or sale of the contract.
Futures contracts bear considerably lower credit risk than forwards and, as forwards, result in exposure to market risk based on
changes in market prices relative to the contracted amounts.
Options
Options are derivative financial instruments that give the buyer, in exchange for a premium payment, the right, but not the obligation,
to either purchase from (call option) or sell to (put option) the writer a specified underlying instrument at a specified price on or before a
specified date. The Group enters into interest rate options, foreign exchange options, equity and index options and credit failure options
(swaps). Interest rate options, including caps and floors, may be used as hedges against a rise or fall in interest rates.
They provide protection against changes in the interest rates of floating rate instruments above or below a specified level. Foreign
currency options may also be used (commensurate with the type of option) to hedge against rising or falling currency rates. The Group as
a buyer of over-the-counter options is subject to market risk and credit risk since the counter party is obliged to make payments under the
terms of the contract if the Group exercises the option. As the writer of over-the-counter options, the Group is subject to the market risk,
as it is obliged to make payments if the option is exercised by the counterparty or credit risk from a premium due from a counterparty.
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Reinsurance assets
Reinsurance assets comprise the actual or estimated amounts, which, under contractual reinsurance arrangements, are recoverable
from reinsurers in respect of technical provisions.
Reinsurance assets relating to technical provisions are established based on the terms of reinsurance contracts and valued on the same
basis as the related reinsured liabilities. The Group records an allowance for estimated irrecoverable reinsurance assets, if any.
D.1.6
Insurance receivables
Receivables on premiums written in the course of collection and receivables from intermediates, co-insurers and reinsurers are included
in this item. They are initially recognised at fair value and then at their presumed recoverable amounts, if lower.
D.1.7
Other receivables
Other receivables include all other receivables other than of an insurance or tax nature. They are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method, less a provision for impairment.
Cash-flow hedge
For some of the expected foreign currency receivables, the cash-flow hedge by foreign currency loan is being applied in the Group to
minimise its exposure to changes in cash flows denominated in foreign currencies.
The effective portion of the gains and losses on the hedging instrument is recognised in other comprehensive income and is recognised
in the income statement only in periods during which the hedged forecast transaction affects profit or loss.
The gain or loss relating to the ineffective portion is recognised immediately in the income statement within lines “Other income” or
“Other expenses”.
At the inception of the transaction, the Group documents the relationship between hedging instruments and hedged items, as well as
its risk management objective and strategy for undertaking hedging transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis of the hedging effectiveness.
D.1.8
Cash consists of cash on hand and demand deposits with banks and other financial institutions and term deposits due within 15 days.
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value.
D.1.9
Lease transactions
Property and equipment holdings used by the Group under operating leases, whereby the risks and benefits relating to ownership of the
assets remain with the lessor, are not recorded on the Group’s statement of financial position. Payments made under operating leases
to the lessor are charged to the income statement on a straight-line basis over the period of the lease. Lease incentives received are
recognised as an integral part of the total lease expense.
D.1.10 Non-current assets held-for-sale
Non-current assets (or disposal groups comprising assets and liabilities) that are expected to be recovered primarily through sales
rather than through continuing use are classified as held-for-sale. Immediately before being classified as held-for-sale, the assets (or
components of a disposal group) are measured in accordance with the applicable IFRS. Thereafter generally the assets (or disposal
group) are measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group is
allocated to assets and liabilities on a pro rata basis, except that no loss is allocated to financial assets and deferred tax assets, which
continue to be measured in accordance with the Group’s accounting policies.
Impairment losses on initial classification as held-for-sale and subsequent gains or losses on re-measurement are recognised in profit or
loss. Gains are not recognised in excess of any cumulative impairment loss.
D.1.11Equity
D.1.11.1 Share capital issued
Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directly attributable to the
issue of equity instruments are shown in equity as a deduction from the proceeds, net of tax.
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D.1.11.2 Other reserves
This item comprises the following reserves:
Retained earnings
This item comprises retained earnings or losses adjusted for the effect due to changes arising from the first time application of IFRS,
equalisation or catastrophe provisions not recognised as insurance provisions according to IFRS 4 and statutory reserve funds.
Equalisation and catastrophe provisions and statutory reserve funds are not available for distribution.
Other capital reserves
Other capital reserves arose when the Group was formed as a result of reorganisation of Generali CEE operations.
Additional paid in capital
Excess contributed by an investor to the Company over the par-value price of a share issue is recognized in additional paid in capital.
Reserves for currency translation differences
The item comprises the exchange differences recognised in other comprehensive income in accordance with IAS 21, which arise from
translating the balances and transactions from functional to presentation currency.
Reserve for unrealised gains and losses on available-for-sale financial assets
The item includes gains or losses arising from changes in the fair value of available-for-sale financial assets, as previously described in
the corresponding item of financial investments. The amounts are presented net of the related deferred taxes and Deferred policyholder
liabilities.
Reserve for cash-flow hedges
This item includes the effective portion of gains or losses arising from changes in exchange rates and interest rates on the instruments
used for cash-flow hedges. The amounts are presented net of the related deferred taxes.
Results of the period
The item refers to the Group consolidated earnings after taxes for the period. Dividend payments are accounted for after the approval of
the shareholders’ general meeting.
D.1.11.3 Shareholders’ equity attributable to non-controlling interest
The item comprises equity instruments of non-controlling interests. It also includes the reserve for unrealised gains and losses on
available-for-sale investments attributable to non-controlling interests.
D.1.11.4Dividends
Dividends are recognised as a liability provided they are declared before the end of the reporting period. Dividends declared after the
end of the reporting period are not recognised as a liability but are disclosed in the notes.
D.1.12 Product classification
D.1.12.1 Insurance contracts
In accordance with IFRS 4, policies are classified as insurance contracts or investment contracts based on the significance of the
underlying insurance risk. As a general guideline, the Group defines as significant insurance risk the possibility of having to pay benefits
on the occurrence of an insured event that are at least 5–10% more than the benefits payable if the insured event did not occur.
Premiums, payments and change in the insurance provision related to products whose insurance risk is considered significant
(e.g. term insurance, whole life and endowment with annual premiums, life contingent annuities and contracts containing an option to
elect at maturity a life contingent annuity at rates granted at inception, long-term health insurance and unit-linked with sum assured in
the case of death significantly higher than the value of the fund) are recognised in the income statement.
D.1.12.2 Investment contracts with Discretionary Participation Feature (DPF)
A Discretionary Participation Feature (DPF) represents a contractual right to receive, as a supplement to guaranteed benefits, additional
benefits that constitute a significant portion of the total contractual benefits, whose amount or timing is at the discretion of the Group
and are based on the performance of pooled assets, profit or loss of the Group or investment returns.
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As the amount of the bonus to be allocated to policyholders has been irrevocably fixed as at the end of the reporting period, the amount
is presented as a guaranteed liability in the financial statements, i.e. within the life insurance provision in the case of insurance contracts
or within the Guaranteed liability for investment contracts with DPF in the case of investment contracts.
Premiums, payments and change in the Guaranteed liability of investment contracts with Discretionary Participation Feature (e.g. policies
linked to segregated funds, contracts with additional benefits that are contractually based on the result of the company) are recognised
in the income statement with the exception of investment contracts with DPF issued by Czech pension funds subsidiaries
(see note D.1.12.3).
D.1.12.3 Investment contracts with DPF issued by Czech pension funds
Investment contracts with DPF issued by the Group relate primarily to pension insurance policies written by its Czech subsidiaries
Penzijní fond České pojišťovny and Generali Penzijní Fond. Under these investment contracts, the policyholders are entitled to receive
85% of Czech GAAP profits reported by these subsidiaries. The DPF for these contracts is represented by the 10% portion of Czech
GAAP profit to be distributed to the policyholders subject to the decision of the Annual Meeting. If the DPF portion is not subsequently
allocated by the Annual meeting to the policyholders, it is transferred to retained earnings.
These pension insurance contracts are classified as investment contracts with DPF but – in contrast to the general rule described in note
D.1.12.2 – no premiums, payments and change in liabilities are recognized in the income statement. Such products are accounted for
under the deposit accounting, which foresee that the financial liabilities are credited in the equal amount of the clients’ cash received.
Such exemption is given since IFRS 4.35 gives the option – but not the obligation – to treat Investment contracts with DPF as insurance
contracts, and also since the Group has taken the advantage of exemption available under IFRS 4.25(c) to continue using non-uniform
accounting policies for insurance contracts (and investment contracts with DPF) of subsidiaries (see note D.2).
D.1.12.4 Shadow accounting
In order to mitigate the valuation mismatch between financial investments carried at fair value according to IAS 39 and insurance
provisions that are carried at amortised cost, shadow accounting is applied to insurance contracts and investments contracts with DPF.
This accounting practice is to attribute to the policyholders part of the temporary difference between IFRS measurement of the basis on
which the profit sharing is determined and valuation which is used to determine the profit sharing actually paid.
The Group’s accounting policies are set in such a way that a recognised but unrealised gain/(loss) on an asset affects measurement
in the same way that a realised gain or loss does. The related adjustment to the insurance liability (including DPF liability/asset) shall be
recognised in other comprehensive income if, and only if, the unrealised gains or losses are recognised in other comprehensive income.
The percentage for policyholder participation is based on statutory or contractual regulation, since local regulation already foresees
the protection of guaranteed obligations through the recognition of additional provisions for interest rate risk if future financial returns
based on a proper time horizon are not sufficient to cover the financial guaranties included in the contract. The Group applies
shadow accounting in respect of unrealised gain/(loss) both on bonds and equities. The accounting item arising from the shadow
accounting application is included in the carrying amount of insurance liabilities for the purposes of the Liability Adequacy Test (LAT) in
accordance with IFRS 4 (refer to note D.3.3). As a result, the accounting treatment should not result in measurements falling short of the
requirements of the Liability Adequacy Test.
D.1.12.5 Investment contracts without DPF
Investment contracts without DPF mainly include some unit-/index-linked policies and pure capitalisation contracts. These products are
accounted for in accordance with IAS 39, as follows:
• the products are recognised as financial liabilities at fair value or at amortised cost. In detail, linked products are fair valued through
profit or loss, while pure capitalisation policies are generally valued at amortised cost;
• fee and commission income and the incremental costs of pure capitalisation contracts without DPF (other than administration costs
and other non-incremental costs) are included in the initial carrying amount of the financial liability and recognised as an adjustment to
the effective interest rate;
• the risk component of linked products is unbundled, if possible, and accounted for as insurance contract.
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D.1.13 Insurance contracts liabilities
D.1.13.1 Provision for unearned premiums
The provision for unearned premiums comprises that part of gross premiums written attributable to the following financial year or to
subsequent financial years, computed separately for each insurance contract using the pro rata temporise method, adjusted to reflect
any variation in the incidence of risk during the period covered by the contract. The provision for unearned premiums is created for both
life insurance and non-life insurance.
D.1.13.2 Mathematical provision
The mathematical provision comprises the actuarially estimated value of the Group’s liabilities under life insurance contracts. The amount
of the life insurance provision is calculated by a prospective net premium valuation, taking account of all future liabilities as determined
by the policy conditions for each existing contract and including all guaranteed benefits, bonuses already declared and proposed,
expenses and after deducting the actuarial value of future premiums.
The mathematical provision is initially measured using the assumptions used for calculating the corresponding premiums and remains
unchanged except where a liability inadequacy occurs. A Liability Adequacy Test (LAT) is performed as at the end of each reporting
period by the Group’s actuaries using current estimates of future cash flows under its insurance contracts. If those estimates show that
the carrying amount of the provision (net of present value of future profit capitalized and related deferred acquisition costs) is insufficient
in the light of estimated future cash flows, the difference is recognised in the income statement with a corresponding increase to the
other life insurance technical provision.
D.1.13.3 Claims provision
The provision for outstanding claims represents the total estimated ultimate cost of settling all claims arising from events that have
occurred up to the end of the financial year, whether reported or not, less amounts already paid in respect of such claims, including the
related internal and external claims settlement expenses as estimated based on historical experience and specific assumptions about
future economic conditions.
The provision includes claims reported by policyholders but not settled (RBNS) and claims incurred but not reported (IBNR).
Where benefits resulting from a claim are paid in the form of an annuity, the provision is calculated by recognised actuarial methods,
mainly by the application of discounting techniques and assumptions (mortality).
With the exception of annuities, the Group does not discount its provisions for outstanding claims.
Where applicable, provisions are disclosed net of the prudent estimates for salvage and subrogation recoveries.
The provision for outstanding claims in respect of life insurance policies is included within the life insurance provision.
Whilst the Board of Directors considers that the gross provision for claims and the related reinsurance recoveries are fairly stated, the
ultimate liability may differ as a result of subsequent information and events and may result in significant adjustments to the amounts
provided. Adjustments to the amounts of the provisions are reflected in the financial statements for the period in which the adjustments
are made. The methods used and the estimates made are reviewed regularly.
D.1.13.4 Other insurance provisions
Other insurance provisions contain any other insurance technical provision that is not mentioned above, such as the provision for
unexpired risks in non-life insurance, the ageing provision in health insurance, provision for contractual non-discretionary bonuses in
non-life business.
The provision for contractual non-discretionary bonuses in non-life business covers future benefits in the form of additional payments to
policyholders or reduction of policyholder payments, which are a result of past performance. This provision is not recognised for those
contracts, where future premium is reduced by bonuses resulting from favourable past policy claim experience and such bonuses being
granted irrespective of whether the past claim experience was with the reporting entity. In such a situation, the reduction of the premium
reflects the expected lower future claims, rather than distribution of past surpluses.
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D.1.14 Other provisions
A provision is recognised in the statement of financial position when the Group has a legal or constructive obligation as a result of past
events, it is probable that an outflow of economic benefits will be required to settle the obligation, and a reasonable estimate can be made
of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
D.1.15 Bonds issued
Bonds issued are recognised initially at fair value, net of transaction costs incurred, and subsequently carried at amortised cost.
Amortisation of a discount or premium and interest are recognised in interest expense using the effective interest method.
D.1.16 Financial liabilities to banks and non-banks
Financial liabilities to banks and non-banks are recognised initially at fair value, net of transaction costs incurred, and subsequently
measured at their amortised cost. The amortised cost of a financial liability is the amount at which the financial liability was measured
upon initial recognition minus principal repayments, plus or minus the cumulative amortisation of any difference between that initial
amount and the maturity amount.
D.1.17 Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss are liabilities classified as held-for-trading, which include derivative liabilities, and
designated as fair value through profit or loss. Related transaction costs are immediately expensed. Financial liabilities at fair value
through profit or loss are measured at fair value and the relevant gains and losses from this revaluation are included in the income
statement. Financial liabilities are removed from the statement of financial position when, and only when, they are extinguished –
i.e. when the obligation specified in the contract is discharged, cancelled or expires.
D.1.18Payables
Accounts payable are when the Group has a contractual obligation to deliver cash or another financial asset. Accounts payable are
measured at amortised cost, which will normally equal their nominal or repayment value.
D.1.19 Net insurance premium revenue
Net insurance premium revenue includes gross earned premiums from direct insurance business and assumed (inwards) reinsurance
business, net of premiums ceded to reinsurers, which are arising on insurance contracts and investment contracts with Discretionary
Participation Feature (DPF) with exception of those issued by Czech pension fund subsidiaries (see below).
The above amounts do not include the amounts of taxes or charges levied with premiums.
Written premiums are recognized by each subsidiary of the Group following the treatment prescribed by their respective local accounting
standards, since under IFRS 4 it is possible to continue using local existing accounting standards for insurance contracts and investment
contracts with DPF.
Premiums are recognised as earned on a pro-rata basis over the term of the related policy coverage via the provision for unearned
premiums.
For investment contracts without DPF and investment contracts with DPF issued by Czech pension funds subsidiaries no premiums are
recorded, and amounts collected from policyholders under these contracts are recorded as deposits.
D.1.20 Net insurance claims and benefits
Insurance technical charges include claims (benefit) expenses, the change in technical provisions and rebates and profit sharing.
Claims (benefits) expenses are represented by benefits and surrenders, net of reinsurance (life) and claims paid net of reinsurance
(non-life). Benefits and claims comprise all payments made in respect of the financial year. These amounts include annuities, surrenders,
entries and withdrawals of loss provisions to and from ceding insurance enterprises and reinsurers, and external and internal claims
management costs. Sums recovered on the basis of subrogation or salvage are deducted. Claims paid are recognised at the moment
that the claim is approved for settlement.
The change in technical provisions represents change in provisions for claims reported by policyholders, change in provision for IBNR,
change in mathematical and unit linked provisions and change in other technical provisions.
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Bonuses comprise all amounts chargeable for the financial year representing an allocation of surplus or profit arising on business as a
whole or from a section of business, after the deduction of amounts provided in previous years which are no longer required. Rebates
comprise such amounts to the extent that they represent a partial refund of premiums resulting from the experience of individual contracts.
D.1.21 Interest and similar income and interest and similar expense
Interest income and interest expense are recognised in the income statement on an accrual basis, taking into account the effective yield
of the asset or liability, or an applicable floating rate. Interest income and interest expense include the amortisation of any discount or
premium or other differences between the initial carrying amount of an interest-bearing instrument and its amount at maturity calculated
using the effective interest method.
Interest on financial assets fair-valued to profit or loss is reported as a part of Net income from financial instruments at fair value through
profit or loss. Interest income and interest expense on other assets or liabilities is reported as Interest and other investment income or as
Interest expense in the income statement.
D.1.22 Other income and expense from financial assets
Other income and expenses from financial assets comprise realised and unrealised gains/(losses), dividends, impairment losses and net
trading income.
A realised gain/(loss) arises on de-recognition of financial assets other than financial assets at fair value through profit or loss. The
amount of the realised gain/(loss) represents the difference between the carrying value of a financial asset and the sales price adjusted
for any cumulative gain/(loss) that had been recognised in other comprehensive income.
Net fair value gains/loss on financial assets and liabilities at fair value through profit or loss not held-for-trading represent the amount of
the subsequent measurement of financial assets and liabilities designated at fair value through profit or loss to their fair value or the
gain/(loss) from disposal thereof.
Dividends from investments are recorded when declared and approved by the shareholder’s meeting of the respective company.
Net trading income represents the subsequent measurement of the “Trading assets” and “Trading liabilities” to fair value or the
gain/(loss) from disposal of the “Trading assets” or “Trading liabilities”.
The amount of the trading income to be recorded represents the difference between the latest carrying value and the fair value as at the
date of the financial statements or the sale price.
D.1.23 Income and expense from investment property
Income and expense from investment property comprise realised gains/(losses) triggered by de-recognition, rental income and other
income and expense related to investment property.
D.1.24 Acquisition costs
Acquisition costs are costs arising from the conclusion of insurance or investment contracts with DPF and include direct costs, such
as acquisition commissions or the cost of drawing up the insurance document or including the insurance contract in the portfolio,
and indirect costs, such as advertising administrative expenses costs connected with the processing proposals and issuing policies.
A portion of acquisition costs is being deferred, such as agents’ commissions and other variable underwriting and policy issue costs.
General selling expenses and line of business costs as well as commissions for servicing a portfolio are not deferred unless they are
related to the acquisition of new business.
In non-life insurance, a proportion of the related acquisition costs are deferred and amortised commensurate with the unearned
premiums provision. The amount of any deferred acquisition costs is established on a similar basis as that used for unearned premiums
for a relevant line of business (product). Deferred acquisition costs are reported as other assets in the statement of financial position.
Acquisition costs in respect of life insurance contracts and investment contracts with DPF (Discretionary Participation Feature) are
deferred or expensed in line with the local practice of each entity.
The recoverability of deferred acquisition costs is assessed as at the end of each reporting period as a part of the Liability Adequacy
Test and using recoverability tests applied by the selected local entities.
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D.1.25 Administrative expenses
Administrative expenses include expenses relating to the administration of the Group. This includes employee benefits, office rental
expenses and other operating expenses. Employee benefits include expenses arising from short-term employee benefits, such as
salaries and wages, management remuneration and bonuses, social insurance. Other operating expenses include costs of premium
collection, portfolio administration and the processing of inwards and outwards reinsurance.
D.1.26 Reinsurance commissions and profit participations
Reinsurance commissions and profit participations include commissions received or the receivable from reinsurers and profit
participations based on reinsurance contracts. Non-life reinsurance commissions are deferred in a manner consistent with the deferral of
acquisition costs in non-life insurance.
In the income statement these are included in line Commissions and other acquisition costs.
D.1.27 Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement
except to the extent that it relates to items recognised directly to other comprehensive income, in which case it is recognised in other
comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted as at the
end of the reporting period, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for: the initial recognition of assets or liabilities that affect neither accounting nor
taxable profit nor differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on
tax rates enacted or substantially enacted as at the end of the reporting period.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset
can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current
income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
D.1.28 Employee benefits
D.1.28.1 Short-term employee benefits
Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within twelve months
after the end of the period in which the employees render the related service. Short-term employee benefits include mainly wages and
salaries, management remuneration and bonuses, remuneration for membership in Group boards and non-monetary benefits. The
Group makes contributions to the government pension schemes at the statutory rates in force during the year, based on gross salary
payments. The benefits are recognised in an undiscounted amount as an expense and as a liability (accrued expense).
D.1.28.2 Other long-term employee benefits
Other long-term employee benefits are employee benefits (other than post-employment benefits and termination benefits) that are not
due to be settled within twelve months after the end of the period in which the employees render the related service.
The benefits are measured at present value of the defined obligation at the balance sheet date using the projected unit credit method.
D.1.28.3 Post-employment benefits
Post-employment benefits are employee benefits (other than termination benefits) that are payable after the completion of employment.
The Group makes contributions to the government health, accident and guarantee insurance and unemployment schemes at the
statutory rates in force during the year, based on gross salary payments. Throughout the year, the Group made contributions defined by
the relevant laws to such schemes. The cost of these Group made contributions is charged to the income statement in the same period
as the related salary cost as this is a defined contribution plan. There are no further obligations of the Group in respect of employees’
post employment benefits.
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D.1.28.4 Termination benefits
Termination benefits are employee benefits payable as a result of the Group’s decision to terminate an employee’s employment before
the normal retirement date, or as a result of an employee’s decision to accept voluntary redundancy in exchange for those benefits. The
Group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees
according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to present value.
D.1.29 Other accounting policies
D.1.29.1 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (the ‘functional currency’). The functional currencies of individual group companies are stated in
Note C.1. The consolidated financial statements are presented in EUR (“€”), which is the Group’s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing as at the transaction dates.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and
liabilities denominated in foreign currencies at year-end exchange rates are recognised in the income statement and presented within
‘Other income’ or ‘Other expenses’.
Changes in the fair value of monetary securities denominated in foreign currencies classified as available-for-sale are analysed between
translation differences resulting from changes in the amortised cost of the security, and other changes in the carrying amount of the
security. Translation differences related to changes in amortised cost are recognised in the income statement, and other changes in the
carrying amount are recognised in other comprehensive income.
Translation differences on non-monetary financial assets, such as equities held at fair value through profit or loss, are reported as part of
the fair value gain or loss in the income statement. Translation differences on non-monetary financial assets, such as equities classified
as available-for-sale financial assets, are included in the revaluation reserve in other comprehensive income.
For the translation of results and the financial position of all the Group entities, refer to Note C.2.
D.1.29.2Impairment
Impairment of tangible and intangible assets
Where there is any indication that an asset under the scope of IAS 36 may be impaired, tangible and intangible assets are subject to
impairment testing.
An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount. The latter is the higher of
its fair value less cost to sell (i.e. the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable,
willing parties, less the costs of disposal) and its value in use (i.e. the present value of the future cash flows expected to be derived from
the continuous use and disposal of the asset at the end of its useful life).
The impairment loss is charged to the income statement.
Where there is any indication that an impairment loss recognised for an asset in prior years no longer exists, the carrying amount of the
asset is increased to its estimated recoverable amount. The increased carrying amount of the asset due to the reversal of impairment
loss cannot exceed the carrying amount that would be determined if no impairment loss had been recognised for the asset in prior
years, net of any depreciation or amortisation accounted for in the meantime.
Intangible assets with an indefinite useful life, primarily brands, are not amortised but are tested for impairment annually, or whenever
there is an indication that the intangible asset may be impaired.
Goodwill impairment testing is disclosed in notes D.1.1.1 and F.1.1.
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Impairment of financial assets
A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of
impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or
events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment includes, for example, significant financial difficulties of the issuer, default or delinquency in interest or principal
payments, the probability that the borrower will enter bankruptcy or other financial reorganisation and the disappearance of an active
market for the financial asset.
In all these cases, any impairment loss is recognised only after an analysis of the type of loss has established that the conditions exist to
proceed with the corresponding recognition. The analysis includes considerations of the recoverable value of the investment, checks on
the volatility of the stock versus the reference market or compared to competitors, and any other possible quality factor. The analytical
level and detail of the analysis varies based on the significance of the latent losses of each investment.
A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost is considered to be objective
evidence of impairment. The Group considers prolonged decline to be 12 months. Significant decline is assessed to be for unrealised
loss higher than 30%. In prior year, the significant decline was defined with reference to industrial segment. The impact of this change in
estimate is immaterial. Estimating future impact of the change is impracticable. The recoverable amount of the Group’s investments in
held-to-maturity securities is calculated as the present value of expected future cash flows, discounted at the original effective interest
rate inherent in the asset. Receivables with a short duration are not discounted.
Loans and advances are reported net of allowances for loan losses to reflect the estimated recoverable amounts. Receivables are stated
at their cost less impairment losses.
The recoverable amount of an available-for-sale asset is the current fair value. When there is objective evidence that it is impaired, the
decline in fair value that had been recognised directly in other comprehensive income is reclassified to the income statement.
An impairment loss in respect of a held-to-maturity security, loan, advance or receivable, available-for-sale debt instrument is reversed
through the income statement (up to the amount of the amortised cost) if the subsequent increase in recoverable amount can be
attributed objectively to an event occurring after the impairment loss was recognised.
An impairment loss in respect of available-for-sale equity instruments is not reversed through the income statement and any subsequent
increase in fair value is recognised in other comprehensive income.
D.1.29.3 Repo transactions
The Group enters into purchases (sales) of investments under agreements to resell (repurchase) substantially identical investments at
a certain date in the future and at a fixed price. Investments purchased subject to commitments to resell them at future dates are not
recognised. The amounts paid are recognised in loans to either banks or non-banks. The receivables are shown as collateralised by the
underlying security. Investments sold under buy-sell transactions continue to be recognised in the statement of financial position and are
measured in accordance with the accounting policy for either assets held-for-trading or available-for-sale, as appropriate. The proceeds
from the sale of the investments are reported as liabilities to either banks or non-banks.
The difference between the sale and repurchase considerations is recognised on an accrual basis over the period of the transaction and
is included in interest income.
D.1.29.4 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position only when there is an
unconditional and legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
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NON-UNIFORM ACCOUNTING POLICIES OF SUBSIDIARIES
The Group has taken advantage of the exemption available under IFRS 4.25(c) to continue using non-uniform accounting policies for
insurance contracts (and investment contracts with DPF) of its subsidiaries.
As a result, the amounts received from policyholders under investment contracts with DPF issued by Czech pension funds subsidiaries
continue to be recognised as deposits, in contrast to the Group’s accounting policy of recognising premium income under such
contracts.
D.3
PRINCIPAL ASSUMPTIONS
D.3.1
Life insurance provisions
Life insurance provisions are set in accordance with local GAAP and other legal requirements of the country where the insurance
contract has been concluded.
Life mathematical provisions are calculated using the net premium method using the same actuarial assumptions as applied in the case
of premium calculations (provided that local legislation does not explicitly require the use of different parameters). The assumptions
underlying the mathematical provision are locked-in at policy inception and remain in force until the expiry of the liability. Most notably,
the technical interest rate (i.e. the level of guarantee on traditional life policies in force) ranges from 0% to 6.0% with an average
guarantee of 3.10% (in 2011: 3.23%).
The above-mentioned figures do not consider guarantees on pension fund products. In this respect, Czech pension funds (Penzijní
fond ČP and Generali Penzijní Fond) guarantee a 0% minimum investment return (losses are covered by a mandatory reserve fund).
The Polish pension fund (Generali PTE) guarantees 50% of the average market investment return from the previous period, while other
smaller pension funds guarantee a 0% minimum investment return.
Life insurance provisions also include insurance provisions recognised as a result of the Liability Adequacy Test.
The provisions (including the additional provisions mentioned above) are tested for adequacy using the actual best-estimate
assumptions. See Note D.3.3 Liability Adequacy Test for more details.
D.3.2
Non-life insurance provisions
Non-life insurance provisions are set according with local GAAP and other legal regulations of the country where the insurance contract
has been concluded.
Claims provisions
At the end of the reporting period, provisions are made for the expected ultimate cost of settling all claims incurred in respect to events
up to that date, whether reported or not, together with related claims handling expenses, less amounts already paid and a prudent
estimation of salvage and subrogation recoveries.
The liability for reported claims (RBNS) is assessed on a separate case-by-case basis with due regard to the claim circumstances,
information available from loss adjusters and historical evidence regarding the size of similar claims. Case reserves are reviewed regularly
and are updated as and when new information arises. The estimation of claims incurred but not reported (IBNR) is generally subject
to a greater degree of uncertainty than reported claims. IBNR provisions are predominantly assessed by the Group’s local actuaries
using statistical techniques such as different link ratio methods (e.g. a chain-ladder) whereby historical data is extrapolated to estimate
ultimate costs of claims. In case there is insufficient claims history, simplified actuarial methods are applied, such as proportioning based
on an appropriately chosen measure. IBNR provisions are initially estimated at a gross level, and a separate calculation is carried out to
estimate the size of reinsurance recoveries.
Other provisions
The provisions for contractual non-discretionary bonuses (covering future benefits in the form of additional payments to policyholders or
reductions of policyholder payments, which are the result of past performance) are predominantly determined contract by contract. For
numerous similar contracts, statistical methods are applied (e.g. distribution fitting on historical claims data).
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The ageing provision in health insurance is determined under the same principles that are used for life insurance provisions.
The provision for premium reversal (cancellations) is set at the amount of premiums likely to be reversed:
• to cater for cessation or reduction of the insured interest (the underwriting risk as opposed to the financial risk if the policyholder is
unable to meet his commitments);
• in respect of accounts receivable;
• in respect of premiums already collected by the Group.
The provision for cancellations only includes the portion of premiums that will probably be reversed and that have not already been
covered by the provision for unearned premiums.
Other non-life insurance provisions may be set up by companies according to local regulations.
Non-life insurance provisions also include insurance provisions recognised as a result of the Liability Adequacy Test – see Note D.3.3
Liability Adequacy Test for more details.
The assumptions that have the greatest impact on the measurement of non-life insurance provisions are as follows:
Tail factors
When applying statistical techniques, the level of IBNR provision for long-tail business is significantly influenced by the estimate of the
development of claims from the latest development year for which historical data is available to ultimate settlement. These tail factors are
estimated prudently using mathematical curves, which project observed development factors.
Annuities
In MTPL insurance and other third-party liability lines, part of the claims payment may be in the form of an annuity. The provision for such
claims is established as the present value of expected future claims payments.
The key assumptions involved in the calculation are mortality tables, adjustment factors used to determine the present value of future
payments (taking into account discounting and inflation effects) and disability pensions which influence the amount of annuities to be
paid. All these assumptions are set by the companies’ actuaries, taking into account recommendations by local insurance regulators or
bureaus if they exist.
Discounting
With the exception of annuities, non-life claims provisions are not discounted. For annuities, discounting is used as described above.
D.3.3
Liability Adequacy Test
The Liability Adequacy Test envisaged by IFRS 4 is applied to verify that the insurance provisions – adjusted by the amount of Deferred
policyholder liabilities and related intangible assets – are adequate to cover future cash flows coming from the aforementioned insurance
contracts, based on the current best estimates. Each inadequacy is charged to the income statement, initially reducing deferred
acquisition costs and the value of business acquired and subsequently accounting for a provision.
D.3.3.1 Life insurance
Economic assumptions
Economic assumptions are derived from financial market rates while applying Generali methodology. Most important is the term-structure
of risk-free yields for each country, which is calibrated to market yields on local government bonds.
Expense assumptions
Initial unit costs are entity-specific and are set in accordance with the 2011 experience of the Group. Inflation of maintenance expenses
per policy is based on inflation expectations for each country (with an additional consistency check between assumed inflation and the
term-structure of interest rates). The resulting annual expense inflation is in the range of 1.84% – 8.70% (2011: 2.85% – 7.20%).
Demographic assumptions
Mortality and morbidity rates are set according to the recent experience of the Group, if possible. In cases where there is insufficient
experience, the rates from companies with a longer history are adopted (taking into account country-specific effects as well as the level
of the population’s mortality).
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Lapses and paid-up rates are based on the past experience of each company, if possible. In cases where there is insufficient
experience, the rates from companies with a longer history are adopted (taking into account company-specific effects and local market
characteristics). The Group companies annually investigate actual persistency rates separately for books of policies with similar product
type produced by a similar distribution channel. The assumptions are amended appropriately to the outcome of investigation.
Investment contracts with DPF are included within the Liability Adequacy Test (LAT) for life insurance.
D.3.3.2 Non-life insurance
In the case of non-life insurance, unearned premium reserves are subject to a Liability Adequacy Test. The test is carried out on separate
lines of business by estimation of future cash flows for which the unearned premium reserve shall be sufficient to cover. In case the test
shows insufficiency, the difference is accounted as unexpired risk reserve increasing the total amount of premium provisions.
D.3.4
Significant variables
Profit or loss and insurance liabilities are mainly sensitive to changes in mortality, lapse rates, expense rates, discount rates, and
annuitisation that are estimated when calculating the adequate value of insurance liabilities during the LAT.
The Group has estimated the impact on profit for the year and on equity at the end of the year for changes in key variables that have a
material impact on either profit or equity.
D.3.4.1 Life insurance
The description below presents sensitivity analysis information for Česká pojišťovna, which represents the majority of the Group’s life
insurance provisions, except for unit-linked provisions.
According to Liability Adequacy Test life statutory reserves are comfortably adequate in comparison to minimum value of the liabilities
and the changes in variables other than discount rate and expense rate has no impact on profit for the year and equity.
A 100bp decrease in the discount rate would lead to €51.7 million increase in the liability. A 100 bp increase would not impact the
liability at all. A 10% increase in the expense rate would lead to €3.4 million increase in the liability. A 10% decrease would not impact
the liability. Life assurance liabilities as at 31 December 2012 and 2011 according to the Liability Adequacy Test were not sensitive to a
change in any other variable.
D.3.4.2 Non-life insurance
In non-life insurance, variables that would have the greatest impact on insurance liabilities relate to MTPL annuities. In the table below
the effects on the liabilities of a 100 bp decrease in the discount rate and of a 100 bp increase in the pension growth rate, gross and net
of reinsurance are shown:
Sensitivity of MTPL annuities
31.12.2012
(€ million)
Discount rate
Pension growth rate
31.12.2011
Change
in variable
Change
in insurance
liabilities (gross)
Change
in insurance
liabilities (net)
Change
in insurance
liabilities (gross)
Change
in insurance
liabilities (net)
(100) bp
29.9
19.1
31.3
18.3
100 bp
29.0
16.1
26.1
15.3
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TERMS AND CONDITIONS OF INSURANCE AND INVESTMENT CONTRACTS WITH DPF THAT HAVE
A MATERIAL IMPACT ON THE AMOUNT, TIMING, AND UNCERTAINTY OF FUTURE CASH FLOWS
Non-life insurance contracts
The Group offers many forms of general insurance, mainly motor, property, and liability insurance. Contracts may be concluded for a
fixed term of one year or on a continuous basis with either party having the option to cancel. The Group is therefore generally able to
re-price the risk by revising the premium at intervals of not more than one year. It also has the ability to impose deductibles and to reject
fraudulent claims.
Future insurance claims are the main source of uncertainty which influences the amount and timing of future cash flows.
The amount of particular claims payments is limited by the sum insured, which is established in the insurance policy.
The other significant source of uncertainty connected with non-life insurance arises from legislative regulations that entitle the
policyholder to report a claim before the time of expiration, which usually lasts 3–4 years from the date when the policyholder becomes
aware of the claim. This feature is particularly significant in the case of permanent disability arising from accident insurance, because of
the difficulty in estimating the period between the occurrence and confirmation of permanent effects.
The following statements describe characteristics of particular types of insurance contracts if they are significantly different from the
above-mentioned features.
Motor insurance
The Group motor portfolio comprises both motor third-party liability insurance (MTPL) and other motor (mainly casco) insurance. MTPL
insurance covers bodily injury claims and property claims in the country where the contract has been concluded as well as claims
caused abroad by insured motorists under the Green Card system.
Property damage under MTPL and casco claims are generally reported and settled within a short period of time after the accident.
Payments relating to bodily injury claims, however, take longer to finalise and are more difficult to estimate. Such claims may be settled
in the form of a lump-sum settlement or an annuity.
For claims relating to bodily injury and related losses of personal earnings, the amount of the related claim payments is derived from
governmental decree. This requirement may have a retrospective effect on claims incurred before the effective date of this requirement.
Policyholders may be entitled to a no-claims-bonus on renewal of their policy where the relevant conditions are fulfilled.
The amount of claim payment liable for damage to property and compensation for losses of earnings may not exceed a per claim
threshold which is determined by local regulators. This amount includes compensation for injury as well.
Casco insurance represents standard insurance against damage; claims payments are limited by the sum insured and the amount of
coinsurance.
Property insurance
This is broadly split into Industrial and personal lines. For Industrial lines, the Group uses risk management techniques to identify and
evaluate risks and analyse possible losses and hazards and cooperates with reinsurers. Risk management techniques primarily include
inspection visits to industrial areas. Risk assessment visits are performed by a risk management team that consists of professionals
with long-term experience and an in-depth knowledge of safety rules. Personal property insurance covers standard buildings and the
contents thereof.
Claims are normally promptly reported and can be settled without delay.
Liability insurance
This covers all types of liabilities and includes commercial liabilities, directors and officers and professional indemnity as well as personal
liability.
While the majority of general liability coverage is written on a “claims-made” basis, certain general liability coverage is typically insured on
an “occurrence basis”.
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Accident, health and disability insurance
Accident, health and disability insurances are sold either as stand-alone policies or as add-ons to the life products offered by the Group.
D.4.2
Life insurance contracts
Bonuses
Over 90% of the Group’s traditional life insurance contracts include an entitlement to receive a bonus. Bonuses to policyholders are
granted at the discretion of the insurer and are recognised when proposed and approved by the Board of Directors in accordance with
the relevant legal requirements. Once allocated to policyholders, bonuses are guaranteed.
Premiums
Premiums may be payable in regular instalments or as a single premium at the inception of the policy. Most endowment-type insurance
contracts contain a premium indexation option that may be annually exercised at the discretion of the policyholder. Where the option is
not exercised, premiums are not increased with inflation.
Term life insurance products
Traditional term life insurance products comprise risk of death, a waiver of the premium in the case of permanent disability, and an
accident rider. The premium is either paid regularly or as a single premium. Policies offer a fixed or a decreasing sum insured for the
event of death. These policies offer protection ranging from a few years up to the medium long-term. Death benefits are paid only if the
policyholder dies during the term of the insurance. A waiver of the premium arises only in the case of an approved disability pension for
the policyholder.
The period of disability is the main source of uncertainty connected with life insurance products. It is limited by a contractual minimum
duration of the insurance policy and by the end of the insurance period.
Endowment products
These are also traditional term life insurance products providing life-long financial protection. Many long-term policies have tax
advantages and allow the insured to finance their retirement needs. Capital life insurance products, involving regular premiums or a
single premium, offer coverage against the risk of death and dread disease, an endowment, a waiver of the premium in the case of
disability, and an accident rider. Insurance benefits are usually paid as a lump-sum.
Variable capital life insurance products
Variable capital life insurance products cover all types of insurance risk in the same way that traditional capital life insurance products do.
In addition, they also allow the policyholder to pay an extra single premium during the term of the insurance. The policyholder can ask
to interrupt payment for a regular premium, to withdraw part of the extra single premium, to change the term of the insurance, the risks
covered, the sums insured, and the premium.
Child insurance products
These products are based on traditional life risks: involving death, endowment assurance, a waiver of the premium in the case of
disability, and an accident rider. The premiums are paid regularly. The term of the insurance is usually limited to the 18th birthday of the
child. Benefits may be in the form of a lump-sum or an annuity payment.
Unit-linked life insurance
Unit-linked are those products where the policyholders carry the investment risk.
The Group earns management and administration fees and mortality results on these products.
Unit-linked life insurance combines traditional term life insurance with risk coverage of death or dread disease, together with a waiver
of the premium in the case of permanent disability, and allows for investment of the regular premium or extra single premium in some
investment funds. The policyholder defines the funds and the ratio of the premium where payments are invested and can change the
funds and ratio during the contract. He can also change the sums assured, the regular premium, and the insurance risks covered. He
can pay an additional single premium or withdraw part of the extra single premium.
Retirement insurance for regular payments (with interest rates)
Lifelong retirement program products include pensions paid-off in the event of death or dread diseases, on maturity at the agreed age
of the assured, and options for a variable combination of components. The policyholder can pay the premium regularly or in a single
payment. Basic types of pensions are short-term pensions and lifetime pensions.
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Investment contracts with DPF
Adult deposit life or accident insurance with returnable lump-sum principal
These types of life or accident products allow policyholders to pay a single returnable deposit at the beginning of the policy. The
interest earned on the deposit is used to pay the annual premiums. The deposit is returned at the end of assurance or on death. These
contracts also entitle the policyholder to a discretionary bonus, determined as under life insurance contracts.
D.5
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal
the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
D.5.1
Assumptions used to calculate insurance liabilities
The Group uses certain assumptions when calculating its insurance liabilities. The process used to determine the assumptions that have
the greatest effect on the measurement of the items in the Group’s financial statements, and the effects of changes in the assumptions
that would have a material effect on the recognised amounts, are discussed in Note D.3.4.
D.5.2
Fair value of derivatives and other financial instruments
The fair value of financial instruments that are not traded on an active market (for example, over-the-counter derivatives) is determined
using a valuation method. The Group uses its judgement to select a variety of valuation methods and makes assumptions that are
mainly based on the market conditions existing at the end of each reporting period (see also Note D.1.4).
D.5.3
Assumptions used in impairment tests on goodwill and other intangible assets
The Group uses certain assumptions when determining the recoverable amount of goodwill and brands with an indefinite useful life.
The process used to determine the assumptions with the greatest effect on result of the impairment test are described in Note F.1.1
and F.1.2.
D.6
CHANGES IN ACCOUNTING POLICIES
D.6.1
Insurance liabilities for moral damages due to bodily injuries
In 2012, Romanian Insurance Supervisory Commission (CSA) published a new norm regarding the calculation and registration of
minimum technical reserves for insurance activities.
The main impact of the changes is related to the method of calculation of a loss reserve for moral damages due to bodily injury or death
(BI). Previously, the amount claimed by an insured person as a compensation for moral damage was fully reserved, following the rules
set by local legislation. According to the new norm the loss reserves for BI will be calculated based on methods and practice of each
insurance company.
Following the changes in the regulations, the Group performed changes in the calculation of MTPL insurance liabilities in order to align
the amount of reserves with the expected payments at claim settlement and provide more reliable information for external users of the
financial statements regarding future outflow of economic benefits from the Group.
The local GAAP and other regulations for each country are applied to the insurance provisions, thus the changes relate to claims
incurred within Romania only.
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The table below summarises the adjustments made to the statement of the financial position on implementation of the new accounting
policy.
(€ million)
Balances at 31 December 2011, as previously reported
Net insurance
provisions
Deferred tax
liabilities
Group retained
earnings
Non-controlling
interests
6,360.5
288.3
515.4
60.5
Impact of the change in accounting policy
(9.2)
1.0
7.2
1.0
Restated balances at 31 December 2011
6,351.3
289.3
522.6
61.5
The change in accounting policy has led to an increase of profit for the year 2012 of €1.7 million. If the change was not implemented,
the net insurance provisions as at 31 December 2012 would amount to €7,142.4 million.
When a change in accounting policy is applied retrospectively, IAS 8 Accounting policies, Changes in accounting estimates and Errors
prescribes adjusting the opening balance of each affected component of equity and the other comparative amounts disclosed for each
prior period presented as if the new accounting policy had always been applied, except to the extent that it is impracticable to determine
either the period specific effects or the cumulative effect of the change.
The effect of the new accounting policy for the periods prior to 2012 is not disclosed, since for the Group, it was impracticable to
determine the period specific effect of changes prior to 31 December 2011. The calculation of insurance provisions for BI claims involves
subjective managerial judgment and estimates which require the gathering of information that provides evidence of circumstances that
existed on the date as at which the insurance event occurred and as at which the amount of provisions was calculated.
It is impossible to gather this type of information, making assumption about what would have been the estimates of management at that
point of time regarding future claims settlement and estimating the amounts recognised in prior periods and, therefore, it is impracticable
to apply the new accounting policy prior to 31 December 2011.
D.6.2
New standards, amendments and interpretations to existing standards relevant for the Group
The following published amendments and interpretations of existing standards are mandatory and relevant to the Group and have been
applied by the Group since 1 January 2012:
Limited scope amendment to IAS 12, Income Taxes – Deferred Tax: Recovery of Underlying Assets (amendment issued in
December 2010, effective for annual periods beginning on or after 1 January 2012)
IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the
carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether the recovery will be through use
or through sale when the asset is measured using the fair value model in IAS 40 Investment Property. The amendment provides a
practical solution to the problem by introducing a presumption that the recovery of the carrying amount will normally be through sale.
Amendments to IFRS 7, Financial Instruments: Disclosures (issued in October 2010, effective for annual periods beginning on or after
1 July 2011).
The amendments increase the disclosure requirements for transactions involving transfers of financial assets. These amendments
are intended to provide greater transparency around the risk exposures of transactions where a financial asset is transferred but the
transferor retains some level of continuing exposure in the asset.
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New standards, interpretations and amendments to published standards that are not yet effective
and are relevant to the Group’s financial statements
Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after
1 January 2013 or later, and which the Group has not early adopted:
IFRS 9, Financial Instruments (effective for annual periods beginning on or after 1 January 2015, with earlier application
permitted, not yet endorsed by the EU)
IFRS 9 replaces those parts of IAS 39 relating to the classification and measurement of financial assets. Key features are as follows:
• financial assets are required to be classified into two measurement categories: those to be measured subsequently at fair value, and
those to be measured subsequently at amortised cost. The decision is to be made at initial recognition. The classification depends on
the entity’s business model for managing its financial instruments and the contractual cash-flow characteristics of the instrument;
• an instrument is subsequently measured at amortised cost only if it is a debt instrument and both (i) the objective of the entity’s
business model is to hold the asset to collect the contractual cash flows, and (ii) the asset’s contractual cash flows represent only
payments of principal and interest (that is, it has only “basic loan features”). All other debt instruments are to be measured at fair value
through profit or loss;
• all equity instruments are to be measured subsequently at fair value. Equity instruments that are held-for-trading will be measured
at fair value through profit or loss. For all other equity investments, an irrevocable election can be made at initial recognition, to
recognise unrealised and realised fair value gains and losses through other comprehensive income rather than profit or loss. There
is to be no recycling of fair value gains and losses to profit or loss when the asset is derecognised. This election may be made on an
instrument-by-instrument basis. Dividends are to be presented in profit or loss, as long as they represent a return on investment; and
• financial liabilities are recognized similarly to the currently applicable IAS 39.
The Group is considering the implications of the standard, the impact on the Group and the timing of its adoption by the Group.
IFRS 10, Consolidated Financial Statements (firstly published May 2011, effective for annual periods beginning on or after
1 January 20131)
IFRS 10 supersedes the previous version of IAS 27 (2008) Consolidated and Separate Financial Statements including the related
interpretation SIC 12 Consolidation – Special Purpose Entities.
New standard IFRS 10 requires a parent entity to present consolidated financial statements, defines the principle of control and
establishes control as the basis for consolidation, and also sets out the method for applying the principle of control in order to identify
whether or not an investor controls an investee and therefore must consolidate the investee. IFRS 10 also sets out the accounting
requirements for the preparation of consolidated financial statements.
The Group is yet to assess IFRS 10’s full impact and intends to adopt IFRS 10 no later than the accounting period beginning on or after
1 January 2013.
IFRS 11 Joint Arrangements (firstly published May 2011, effective for annual periods beginning on or after 1 January 20131)
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities – Non-monetary Contributions by Venturers.
Joint control under IFRS 11 is defined as the contractually agreed sharing of control of an arrangement, which exists only when the
decisions about the relevant activities require the unanimous consent of the parties sharing control. The reference to “control” in “joint
control” refers to the definition of “control” in IFRS 10.
1 January 2013.
1 Although the effective date is 1 January 2013, each reporting unit within the region of the European Union shall apply IFRS 10, IFRS 11, IFRS 12, the amended
IAS 27, the amended IAS 28, and the consequential amendments, at the latest, as from the commencement date of its first financial year starting on or after
1 January 2014.
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IFRS 12, Disclosure of Interests in Other Entities (firstly published May 2011, effective for annual periods beginning on or after
1 January 20131)
The objective of IFRS 12 is to require the disclosure of information that enables users of financial statements to evaluate the nature
of, and risks associated with, its interests in other entities (and risks associated with it) and the effect of those interests on its financial
position, financial performance and cash flows. IFRS 12 is required to be applied by an entity that has an interest in any of following:
subsidiaries, joint arrangements, associates and unconsolidated structured entities.
1 January 2013.
IFRS 13, Fair Value Measurement (firstly published May 2011, effective for annual periods beginning on or after 1 January 2013)
This standard defines fair value, a framework for measuring fair value and requires disclosures about fair value measurement. IFRS 13
includes guidance on measurement and list of valuation techniques.
IFRS 13 is not expected to have a significant impact on the Group´s financial statements.
Amendments to IAS 1, Presentation of Financial Statements (amendments issued in June 2011, effective for annual periods
beginning on or after 1 July 2012)
The amendments revise the way other comprehensive income is presented, requiring: separate subtotals to be presented for those
elements which may be “recycled” and those elements that will not, profit or loss and OCI to be presented together, i.e. either as a
single statement of comprehensive income, or separate income statement and a statement of comprehensive income.
Amendments to IAS 1, Presentation of Financial Statements, resulting from Annual Improvements 2009–2011 Cycle
(amendments issued in May 2012, effective for annual periods beginning on or after 1 January 2013)
The purpose of these amendments is to clarify the requirements for comparative information. The revised standard is not expected to
have a significant impact on the Group’s financial statements.
Amendments to IAS 16, Property, Plant and Equipment, resulting from Annual Improvements 2009–2011 Cycle (amendments
published in May 2012, effective for annual periods beginning on or after 1 January 2013)
The purpose of these amendments is to classify servicing equipment. The revised standards are not expected to have a significant
impact on the Group’s financial statements.
Amendments to IAS 28, Investments in Associates and Joint Ventures (effective for annual periods beginning on or after
1 January 2013)
IAS 28 was amended to include the application of the equity method to investments in joint ventures. The revised standards are not
expected to have a significant impact on the Group’s financial statements.
Amendments to IAS 32, Financial Instruments: Presentation, resulting from Annual Improvements 2009–2011 Cycle
(amendments published in May 2012, effective for annual periods beginning on or after 1 January 2013)
The amendments clarify that tax effect of a distribution to holders of equity instruments should be accounted for in accordance with IAS
12 Income Taxes. The revised standards are not expected to have a significant impact on the Group’s financial statements.
Amendments to IAS 32 and IFRS 7 Financial Instruments: Presentations, Offsetting financial assets and financial liabilities
(amendments published in December 2011, effective for annual periods beginning on or after 1 January 2014 and
1 January 2013 respectively)
The amendments clarify meanings and enhance disclosures on offsetting. The revised standards are not expected to have a significant
impact on the Group’s financial statements.
1 Although the effective date is 1 January 2013, each reporting unit within the region of the European Union shall apply IFRS 10, IFRS 11, IFRS 12, the amended
IAS 27, the amended IAS 28, and the consequential amendments, at the latest, as from the commencement date of its first financial year starting on or after
1 January 2014.
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IFRS 4 – exposure draft on Insurance contracts
The IASB (“the board”) released an exposure draft on 30 July 2010 proposing a comprehensive standard to address recognition,
measurement and disclosure for insurance contracts. The board expects to issue the final standard in 2013 with proposed effective date
of 1 January 2015. Retrospective application will be required but with some practical expedients for transition.
The proposals retain the IFRS 4 definition of an insurance contract but amend the scope to exclude fixed fee service contracts but some
financial guarantee contracts may now be within the scope of the proposed standard.
The proposals would require an insurer to measure its insurance contracts using a current measurement model. The measurement
approach is based on the following building blocks: a current, unbiased and probability-weighted average of future cash flows expected
to arise as the insurer fulfils the contract; the effect of time value of money; an explicit risk adjustment and a residual margin calibrated so
that no profit is recognised on inception.
E.RISK REPORT
In the risk report the Group presents further information to enable the assessment of the significance of financial instruments and
insurance contracts for the assessment of an entity’s financial position and performance. Furthermore, the Group provides information
about its exposure to risks arising from financial instruments and insurance contracts, and it discloses management’s objectives, policies
and processes for managing those risks, in accordance with IFRS 7.
E.1
RISK MANAGEMENT SYSTEM
The Group is a member of the Generali Group and is part of its risk management structure. The Generali Group has implemented a risk
management system that aims at identifying, evaluating, and monitoring the most important risks to which the Generali Group and the
Group are exposed. The most important risks are those risks whose consequences could affect the solvency of the Generali Group, the
solvency of any single business unit, or negatively hamper any Group goals.
The risk management processes apply to the whole Generali Group, to all the countries where it operates, and to each business unit.
However, the degree of integration and depth varies with the complexity of the underlying risks. The integration of processes within the
Generali Group is fundamental to assure an efficient system of risk management and capital allocation for every business unit.
The main objectives of the risk management processes of the Generali Group are to keep identified risks below an acceptable level, to
optimise capital allocation, and to improve the risk-adjusted performance.
Risk Management guidelines related to investment risk management, the system of limits, credit ratings and guidelines on an approval
process for new instruments are in the place, as well as the investment risk reporting for management on monthly basis.
The risk management system is based on three main pillars:
a)the risk measurement process: aimed at assessing the solvency of the Group as well as all individual units;
b)the risk governance process: aimed at defining and controlling the managerial decisions in relation to relevant risks;
c)the risk management culture: aimed at increasing the value creation.
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E.2
ANNUAL REPORT 2012
FINANCIAL SECTION
ROLES AND RESPONSIBILITY
The system is based on three levels of responsibility:
• Assicurazioni Generali (Generali Group) – for every country, this sets the targets in terms of solvency, results, and risk exposure,
moreover it defines the risk management policy through a list of Guidelines for acceptance of the main risks. The Generali Group has
developed the Enterprise Risk Management Policy to align the risk measurement methodology, the governance and the reporting of
each company within the Group.
• Generali PPF Holding (GPH) – defines strategies and objectives for every firm, taking into account the local features and regulations,
providing support for the implementation and controlling the results. In particular, in order to assure a better solution to the specific
features of local risks and changes in local regulation, the risk management responsibility and decisions are delegated to the Chief
Risk Officer (CRO) of GPH respecting the Generali Group policy framework. Generali and GPH groups are also assigned performance
targets for their respective areas.
• Business Unit – defines strategies and targets for the lines of business, in respect of the policy and the guidelines established by
GPH. Risk management involves the corporate governance of Group entities and the operational and control structure, with defined
responsibility levels and aims to ensure the adequacy of the entire risk management system at every point.
E.3
RISK MEASUREMENT AND CONTROL
Through its insurance activity the Group is naturally exposed to several types of risks, which are related to the movements of the
financial markets, to adverse developments of insurance-related risks, both in life and non-life business, and generally to all the risks that
affect ongoing organised commercial operations.
These risks can be grouped into the following five main categories which will later be detailed: market risk, credit risk, liquidity risk,
insurance risk, and operational risk.
Along with the specific measures for the risk categories considered by the Group, the calculation of Economic Capital represents a
comprehensive measure of risk that can be aggregated at the different organisational levels (Group, country and operative entity) and at
the main business lines (life, non-life and asset management).
The Economic Capital is a risk measure that corresponds to the amount of capital to be held so that the market value of assets is
greater than the market value of liabilities in twelve months’ time, with a confidence level consistent with the target rating.
The internal models of risk measurement are constantly being improved, in particular those relating to the calculation of the Economic
Capital and Asset Liability Management (ALM) approaches have been harmonised at all different organisational levels within the
Generali Group.
Current activities are targeted to strengthen the results and to improve some organisational issues, in particular relating to:
• Standardisation of the information flow within Group companies;
• Improvement in methodologies for the identification, measurement, and evaluation of risks; and related management processes.
E.4
MARKET RISK
Unexpected movements in prices of equities, currencies, and interest rates might impact the value of the Group’s assets and liabilities.
Financial investments are invested to meet the obligation towards both life and non-life policyholders and to earn a return on capital
expected by the shareholders. The same changes might affect both assets and the present value of insurance liabilities.
At year-end 2012, investments whose market risk affects the Group were €8,973.9 million at market value.
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31.12.2012
(€ million)
Equities
Bonds
Derivatives
Total
31.12.2011
Total fair
value
Weight
(%)
Total fair
value
Weight
(%)
636.7
7.1%
640.0
7.9%
8,406.4
93.7%
7,567.0
93.5%
(69.1)
(0.8%)
(114.8)
(1.4%)
8,974.0
100.0%
8,092.2
100.0%
As mentioned above, the economic impact of changes in interest rates, equity prices, currencies and corresponding volatilities, for
the shareholders will depend not only on the sensitivity of the assets to these shifts but also on how the same movements effect the
measurement of its insurance liabilities.
This effect is particularly significant for the life business because of the minimum guaranteed rates of return and profit sharing
arrangements. The impact of the minimum guaranteed rates of return on solvency, both in the short- and long-term, is assessed through
deterministic and stochastic analysis. These analyses are performed at the company and single portfolio level and take into account the
interaction between assets and liabilities. These analyses help develop product strategies and strategic asset allocations with the aim of
optimising the risk and return characteristics of portfolios.
Other financial instruments (receivables, term deposits, derivatives, financial liabilities, etc.) are not subject to significant market risk
because of their nature. This means they are not sensitive to market risk, they are short-term in duration, or the risk is negligible to the
Group.
E.4.1
Asset liability matching
A substantial part of insurance liabilities may imply an interest-rate risk. The management of interest-rate risk implied from the net
position of assets and liabilities is a key task of asset-liability management (ALM).
GPH Group has an Asset and Liability Committee which is an advisory body to the Board of Directors and is in charge of the most
strategic investment and ALM-related decisions. The committee is responsible for setting and monitoring the Group’s strategic asset
allocation in the main asset classes (i.e. government and corporate bonds, equities, real estate, etc.) in addition to the resulting asset
and liability strategic position. The objective is to establish an appropriate return potential together with ensuring that the Group can
always meet its obligations without undue cost and in accordance with the Group’s internal and regulatory capital requirements. To
guarantee the necessary expertise in meeting its mandate, the Committee consists of representatives from top management and
includes asset management, risk management and ALM experts from the business units.
The ALM manages the net asset-liability positions in both, life and non-life insurance, with the main focus on traditional life products with
a long-term nature and often with embedded options and guarantees. The insurance liabilities are analysed, including the embedded
options and guarantees and models of future cash flows are prepared in cooperation with actuaries. The models allow for all guarantees
under the insurance contracts and for expected development of the key parameters, primarily mortality, morbidity, lapses, and
administration expenses.
At first, government bonds are used to manage the net position of assets and liabilities and in particular their sensitivity to parallel and
non-parallel shifts in the yield curve. Next, corporate bonds and derivatives, primarily interest rate swaps, can be used. However, in
line with the credit risk management policy, investments in long-term and thus also high-duration instruments focus on government
bonds. The use of interest-rate swaps is limited due to their accounting treatment – as their revaluation, which is reported in the income
statement, does not match with the reporting of the insurance liabilities.
There is a strategic target asset-liability interest rate position set in line with the risk and capital management policy – to strictly focus on
intended risks and reduce capital needed for risks with lower expected gain potential. The prevailing policy is to reduce this position to
a minimum level and even though it is not possible to perfectly match future cash flows between assets and liabilities, the position has
been substantially reduced within the last years and currently the parallel and non-parallel sensitivities are low. Investments in long-term
government bonds in emerging markets also contribute to this result.
In addition to management of the strategic position, there are certain limits allowed for tactical asset manager’s positions, so that the
asset interest rate sensitivity can deviate from the benchmark in a managed manner.
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ANNUAL REPORT 2012
FINANCIAL SECTION
Interest rate risk
The Group’s operations are subject to the risk of interest rate fluctuations to the extent that interest-earning assets (including
investments) and interest-bearing liabilities mature or re-price at different times or in differing amounts. In the case of floating rate
assets and liabilities, the Group is also exposed to an interest-rate cash-flow risk, which varies depending on the different re-pricing
characteristics of the various floating rate instruments.
Interest rate derivatives are primarily used to bridge the mismatch in the re-pricing of assets and liabilities. In some cases derivatives are
used to convert certain groups of interest-earning assets to floating or fixed rates to reduce the risk of losses in value due to interest rate
changes or to lock-in spreads. In addition, the Group enters into interest rate swaps to fix the interest rates on its floating-rate debts at a
certain level.
The assets whose value is subject to interest rate risk are represented mainly by bonds. The table below summarises the breakdown of
their carrying amount by company.
Interest rate risk exposure
31.12.2012
31.12.2011
Total
carrying amount
Weight
(%)
Total
carrying amount
Weight
(%)
Česká pojišťovna, Czech Republic
2,801.1
33.3%
2,696.8
35.6%
Penzijní fond ČP, Czech Republic
2,498.9
29.8%
2,178.3
28.7%
Generali-Providencia Biztosító Rt, Hungary
440.0
5.2%
423.0
5.6%
Generali Pojišťovna, Czech Republic
431.3
5.1%
398.7
5.3%
Penzijní fond Generali, Czech Republic
150.5
1.8%
121.3
1.6%
GP Reinsurance EAD, Bulgaria
676.1
8.0%
604.8
8.0%
Generali Slovensko poisťovňa, Slovakia
227.3
2.7%
201.1
2.7%
Generali T.U. S.A., Poland
(€ million)
165.5
2.0%
135.6
1.8%
Generali Życie, Poland
31.9
0.4%
24.8
0.3%
Delta Generali, Serbia
146.3
1.7%
107.3
1.4%
Generali Zavarovalnica d.d., Slovenia
107.1
1.3%
81.7
1.1%
Generali Romania Asigurare Reasigurare S.A.,
Romania
139.1
1.7%
137.4
1.8%
90.1
1.1%
83.9
1.1%
Generali PPF Insurance LLC, Russia
124.2
1.5%
79.2
1.0%
Generali PPF Holding B.V., The Netherlands
200.7
2.4%
86.6
1.1%
Generali Osiguranje, Croatia
CZI Holdings N.V., The Netherlands
Other companies
Total
0.0
0.0%
119.8
1.6%
168.1
2.0%
98.8
1.3%
8,398.2
100.0%
7,579.1
100.0%
The table below summarises the modified duration of bond portfolios for the biggest companies in the Group.
Bond portfolio: modified duration
(years)
31.12.2012
31.12.2011
Generali Slovensko poisťovňa, Slovakia
4.9
5.0
Česká pojišťovna, Czech Republic
5.3
4.8
Penzijní společnost ČP, Czech Republic
4.3
4.2
Generali penzijní společnost, Czech Republic
3.5
3.9
Generali PPF Life Insurance, Russia
4.2
3.8
Generali Pojišťovna, Czech Republic
3.2
3.5
Generali Życie, Poland
3.4
3.4
Generali-Providencia Biztosító, Hungary
1.6
2.3
Generali T.U. S.A., Poland
1.6
1.8
1.2
1.1
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ANNUAL REPORT 2012
FINANCIAL SECTION
The Group monitors the sensitivity of the bond portfolio to various standard and non-standard interest rate scenarios.
The income statement and Shareholders’ equity sensitivity to interest rate changes have been calculated by applying the stress test
(100 bp parallel fall or rise in all yield curves worldwide) to all bond portfolios as at 31 December 2012 and 31 December 2011.
Bonds backing Unit-linked provisions are excluded from the sensitivity analysis since investment risk is borne by the policyholders.
The following table shows this sensitivity analysis at year end, before and after the related deferred taxes. The sensitivity analysis
considers the mitigating effect on the insurance liability side (e.g. mainly LAT Reserve and Deferred policyholder liability).
31.12.2012
Income
Statement
Shareholders’
Equity
Income
Statement
Shareholders’
Equity
1.4
0.0
11.5
0.0
Gross impact on fair value
(1.9)
(215.3)
0.4
(192.0)
Income tax charge / (credit)
0.0
36.9
(0.4)
31.9
Total net impact
(0.5)
(178.4)
11.5
(160.1)
Gross impact on interest income
(1.2)
0.0
(11.9)
0.0
2.6
220.8
(2.6)
215.1
(0.5)
(38.4)
0.8
(36.0)
0.9
182.4
(13.7)
179.1
(€ million)
100 bp
parallel
increase
100 bp
parallel
decrease
31.12.2011
Total net impact
The reasonably possible shift of +/– 100bp on the yield curve implies a potential impact on the result of the period, caused on one hand
by the consequent change in the fair value of bonds and on the other by the re-computation on coupon and accrued interest of floating
rate securities.
While the gross impact of changes in the fair value of the bonds is almost fully shown in the Shareholder’s Equity column (being the large
majority of bond portfolios classified as Available-for-sale), the mitigating impact on the insurance contract liabilities can be summarised
as follows:
31.12.2012
Income
Statement
(€ million)
100 bp
parallel
increase
Income
Statement
Shareholders’
Equity
(1.1)
0.0
(8.4)
0.0
(1.8)
103.2
1.5
93.6
0.3
(0.1)
(0.3)
(4.0)
(2.6)
103.1
(7.2)
89.6
1.1
0.0
8.4
0.0
2.5
(112.3)
(3.6)
(102.5)
(0.5)
0.1
0.7
4.4
3.1
(112.2)
5.5
(98.1)
Total net impact
E.4.3
Shareholders’
Equity
Total net impact
100 bp
parallel
decrease
31.12.2011
Equity price risk
Equity price risk is the risk that equity prices will fluctuate affecting the fair value of equity investments and other instruments that derive
their value from a particular equity investment or index of equity prices.
The Group manages its use of equity investments in response to changing market conditions using the following risk management tools:
a)The limits for investments are set and carefully monitored for each business unit in its investment policy.
b)The portfolio is diversified (limits are set per single counterparty exposure).
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ANNUAL REPORT 2012
FINANCIAL SECTION
The table below summarises the breakdown by equity and investment fund unit type.
(€ million)
Unquoted equities at cost
Equities at fair value
Quoted
Unquoted
Investments in fund units
Other financial investments
Total
31.12.2012
31.12.2011
2.7
4.6
281.5
188.4
275.8
183.0
5.7
5.4
337.4
426.6
15.1
20.4
636.7
640.0
The table below summarises the breakdown of the carrying amount of equities and the investment fund unit portfolio by company.
Equity risk exposure
31.12.2012
31.12.2011
Total carrying
amount
Weight
(%)
Total carrying
amount
Weight
(%)
340.6
53.5%
358.4
56.0%
(€ million)
11.1
1.7%
51.6
8.1%
66.2
10.4%
66.0
10.3%
43.5
6.8%
36.7
5.7%
42.0
6.6%
39.6
6.2%
55.0
8.7%
14.2
2.2%
Generali T.U. S.A.
23.7
3.7%
18.2
2.9%
17.1
2.7%
0.0
0.0%
0.2
0.1%
4.0
0.6%
Other companies
Total
37.3
5.8%
51.3
8.0%
636.7
100.0%
640.0
100.0%
The Income statement and Shareholders’ equity sensitivity to equity price changes have been calculated by applying the stress test
(+/– 10% change in equity prices) to all equities and investment fund unit portfolios as at 31 December 2012 and 2011.
Financial assets backing Unit-linked provisions are excluded from the sensitivity analysis since investment risk is borne by the
policyholders.
The following table shows this sensitivity analysis at the year end, before and after the related deferred taxes. The sensitivity analysis
considers the mitigating effect on the insurance liability side (e.g. mainly Deferred policyholder liability).
31.12.2012
(€ million)
31.12.2011
Income
Statement
Shareholders’
Equity
Income
Statement
Shareholders’
Equity
Equity
price
+10%
27.5
61.9
23.2
43.6
(5.2)
(9.9)
(4.4)
(6.6)
Total net impact
22.3
52.0
18.8
37.0
Equity
price
–10%
(27.5)
(62.0)
(23.2)
(43.6)
5.2
9.9
4.4
6.6
(22.3)
(52.1)
(18.8)
(37.0)
Total net impact
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ANNUAL REPORT 2012
FINANCIAL SECTION
The impact on the income statement or shareholder’s equity is determined by the IFRS classification of the particular investments. The
vast majority of investments are classified as available-for-sale, thus the impact on shareholders’ equity is much higher than the impact
on the income statement. On the other hand, the mitigating impact on the insurance contract liabilities can be summarised as follows:
31.12.2012
(€ million)
31.12.2011
Income
Statement
Shareholders’
Equity
Income
Statement
Shareholders’
Equity
Equity
price
+10%
(0.9)
(0.3)
(1.7)
(3.2)
0.0
0.0
0.0
0.0
(0.9)
(0.3)
(1.7)
(3.2)
Equity
price
–10%
0.9
0.3
1.7
3.2
0.0
0.0
0.0
0.0
Total net impact
0.9
0.3
1.7
3.2
E.4.4
Total net impact
Currency risk
The Group is exposed to currency risk as a result of transactions performed by its entities in currencies different from their functional
currency and through their assets and liabilities being denominated in various currencies.
However, the general strategy of the Group is to fully hedge currency risk exposure, and this goal is pursued through the two following
actions:
• Liabilities expressed in a foreign currency are covered by Group entities using financial investments expressed in the same currency.
• The net exposure arising from assets expressed in foreign currencies is kept at an acceptable level by buying and selling foreign
currencies at spot rates when considered appropriate, or using short-term FX operations. Derivative financial instruments are used
to manage the potential earnings impact of foreign currency movements, including currency swaps, spots, and forward contracts. If
suitable, options and other derivatives are also considered and used.
The FX position is regularly monitored, and the hedging instruments are reviewed and adjusted accordingly.
As the result of this approach, the Group has no significant exposure to any currencies.
Moreover, it should be noted that each company is given specific and strict FX investment limits which are part of the System of
Investment Risk Limits prepared by Group Risk Management who also regularly monitor whether these limits are being respected.
E.5
CREDIT RISK
Credit risk refers to the economic impact from downgrades and defaults of fixed income securities or counterparties on the Group’s
financial strength. Furthermore, a general rise in the spread level, due to the econimic crisis, impacts the financial strength of the Group.
The Group has adopted guidelines to limit the credit risk of investments. These favour the purchase of investment-grade securities and
encourage diversification and dispersion of the portfolio.
The Chief Risk Officer of the Group collects monthly reports on the Group’s exposure to the components of credit risk and evaluates this
risk. Credit risk is also evaluated at the Generali Group level.
For the rating assessment of an issue or issuer, ratings from rating agencies are used. Securities without an external rating are given
an internal one based on the Group´s own credit analysis. In most cases internal ratings are based on external rating by the parent
company or its adjusted external rating due to subordination of the instrument. In line with Generali Group principles, the GPH Group
uses the second best external rating for each counterparty in all calculations and in the system of credit limits.
To manage the level of credit risk, the Group deals with counterparties with a good credit standing and enters into master netting
agreements whenever possible. Master netting agreements provide for the net settlement of contracts with the same counterparty in the
event of default.
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ANNUAL REPORT 2012
FINANCIAL SECTION
The Group sets up issuer/counterparty limits according to their credit quality and monitors compliance with these limits on a monthly basis.
The following tables show the Group’s exposure to credit risks for bonds and reinsurance assets (only official ratings are used, securities
without a rating are shown as non-rated even if an internal rating was allocated to them).
The ratings shown below are expressed according to the S&P scale.
Rating of bonds
31.12.2012
(€ million)
31.12.2011
Fair value
Weight (%)
Fair value
Weight (%)
184.8
2.2%
184.0
2.4%
AA
4,255.7
50.6%
3,960.1
52.3%
A
AAA
1,398.9
16.6%
1,306.4
17.3%
BBB
973.2
11.6%
753.9
10.0%
Non-investment grade
966.7
11.5%
785.1
10.4%
Not Rated
626.9
7.5%
577.5
7.6%
8,406.2
100.0%
7,567.0
100.0%
Total
The portfolio of fixed income investments of the Group has been prudently composed: 75.9% of the securities are government issued
(2011: 72.9%). Following the turbolences that have affected the government bonds market during the year 2011, exposures towards
government bonds issued by countries involved in the Eurozone credit tension have been closely monitored. As at 31 December 2012
the Group has no exposure towards PIIGS1 government debts (in 2011, the only exposure to PIIGS government debts was an
investment of €4.7 million into Italian government bonds).
The distribution by rating class shows that the vast majority of fixed income investment is of a high rating standing, with almost 70%
being greater than or equal to the A- rating. The somewhat high percentage of Not Rated bonds is also explained by the fact that
securities without a rating are shown as non-rated, even if an internal rating was allocated to them.
The ratings shown below are expressed according to the S&P scale.
Rating of reinsurance assets
31.12.2012
(€ million)
AAA
AA
A
BBB
Non-investment grade
Not Rated
Total
Amount
31.12.2011
Weight (%)
Amount
Weight (%)
0.4
0.2%
1.8
0.7%
60.3
23.9%
128.4
52.8%
104.4
41.3%
72.7
29.9%
41.2
16.3%
1.7
0.7%
0.2
0.1%
0.0
0.0%
45.7
18.2%
38.5
15.9%
252.2
100.0%
243.1
100.0%
As far as the “not rated” counterparties are concerned, these are often reinsurers that are no longer active in the market and
consequently no longer rated by the rating agencies. However, they are not necessarily weaker from a financial perspective. On the
contrary, they are often part of important and highly rated insurance groups that have decided to discontinue their reinsurance activities.
Credit risk associated with deposits on demand at banks is regularly monitored and kept under control. Approximately 43% of the
Group’s counterparties have a rating of ‘A’ or higher (2011: 56%).
1
Portugal, Ireland, Italy, Greece, Spain.
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ANNUAL REPORT 2012
FINANCIAL SECTION
The remaining exposure is represented mainly by:
• Term deposits with non-rated banks which account for approximately 44% of the total (2011: 33%); exposure in this category is
mainly represented by bank deposits with PPF Banka, the bank owned by the Group’s shareholder, PPF Group N.V. and UniCredit
Bank Czech Republic. GPH management believes that no significant credit risk relates to the term deposits in PPF Banka and
UniCredit Bank.
PPF Banka and its parent company, PPF Group, are considered to be strong financial entities that are closely followed by the
financial markets.
UniCredit Bank Czech Republic is a part of UniCredit Group, one of the leading European financial group with very strong position on
the market.
Throughout its entire history of operations, all term deposits placed with PPF Banka and UniCredit Bank by the Group have been
properly paid out. Up to the date of preparation of these financial statements, there have been no indications of the weakening of PPF
Banka’s or UniCredit Bank´s financial position.
• Term deposits with banks having a ‘BB’ rating; this exposure is almost entirely concentrated in Russia and is represented by bank
deposits with the Home Credit & Finance Bank, which is an other related party for the Group (see note F.30.3 Other related parties).
GPH management believes that no significant credit risk relates to the Home Credit & Finance Bank.
The following table presents the ageing analysis for loans and receivables.
Loans and receivables: ageing analysis Other loans and receivables – carrying
amount
(€ million)
Receivables – carrying
amount
31.12.2012
31.12.2011
31.12.2012
31.12.2011
417.9
578.5
371.5
338.9
417.9
578.5
274.8
257.4
between 91 days and up to 1 year
0.0
0.0
59.8
39.6
between 1 year and 2 years
0.0
0.0
11.8
5.5
more than 2 years
0.0
0.0
25.1
36.4
Assets not past due or past due, but not impaired
not past due or past due up to 90 days
Assets impaired
Total
0.0
2.2
75.9
77.4
417.9
580.7
447.4
416.3
The individual business units of the Group hold collateral for loans and advances to banks in the form of securities as part of a
reverse buy-sell transaction, collateral for loans and advances to non-banks in the form of mortgage interests on property and
guarantees received.
Collateral is held by Česká pojišťovna against debt securities. The following table shows the fair value of collateral held:
(€ million)
Against individually impaired
Property
Other
Against neither past due nor impaired
Debt securities
Total
31.12.2012
31.12.2011
0.8
1.2
0.8
1.2
0.0
0.0
12.6
15.3
12.6
15.3
13.4
16.5
98
E.6
ANNUAL REPORT 2012
FINANCIAL SECTION
LIQUIDITY RISK
Liquidity risk arises during the general funding of the Group’s activities and in the management of its positions. It includes both the risk
of being unable to fund assets using instruments with appropriate maturities and rates, the risk of being unable to liquidate an asset
sufficiently quickly and in the appropriate amount, and the risk of being unable to meet obligations as they become due.
All the business units have access to a diverse funding base. Apart from insurance provisions, which serve as the main source of
financing, funds are also raised using a broad range of instruments including deposits, other liabilities evidenced by paper, reinsurance
policies, subordinated liabilities, and shareholder equity. This enhances funding flexibility, limits dependence on any one source of funds,
and generally lowers the cost of funds.
The business units strive to maintain a balance between the continuity of funding and flexibility through the use of liabilities with a range
of maturities. In addition, all the business units hold a portfolio of liquid assets as part of its liquidity risk management strategy. Special
attention is paid to the liquidity management of non-life insurance business, which requires sufficient funding to meet all potential
obligations in the event of a natural disaster or other extraordinary event.
All the business units as well as the Group as a whole continually assess their liquidity risk by identifying and monitoring changes in the
funding required to meet business goals and the targets set in terms of the overall strategy.
The following table shows an analysis of the Group’s financial assets and liabilities broken down into their relevant maturity bands based
on the residual contract maturities.
Residual contractual maturities of financial assets
31.12.2012
(€ million)
Investments
Loans
Held to maturity
Available for sale
Bonds
Equities
Investment fund units
Less than Between 1
1 year and 5 years
More than Unspecified
5 years
2,039.8
4,409.4
3,204.3
302.9
116.7
87.4
98.4
1,367.1
Total
1,788.3
11,441.8
61.7
0.0
481.3
24.1
0.0
209.9
3,693.2
3,022.1
526.5
8,608.9
1,367.1
3,693.2
3,022.1
0.0
8,082.4
0.0
0.0
0.0
242.0
242.0
0.0
0.0
0.0
284.5
284.5
282.4
501.1
96.4
1,261.8
2,141.7
Bonds
0.4
36.6
5.4
0.0
42.4
Equities
0.0
0.0
0.0
42.2
42.2
0.0
0.0
0.0
67.9
67.9
Unit-linked investments
Derivatives
Receivables
Total financial assets
93.3
261.6
70.3
1,151.7
1,576.9
188.7
202.9
20.7
0.0
412.3
397.7
23.2
26.5
0.0
447.4
760.2
0.0
0.0
0.0
760.2
3,197.7
4,432.6
3,230.8
1,788.3
12,649.4
99
ANNUAL REPORT 2012
FINANCIAL SECTION
Residual contractual maturities of financial assets
31.12.2011
(€ million)
Investments
Loans
Held to maturity
Available for sale
Bonds
Less than Between 1
1 year and 5 years
5 years
Total
2,040.7
3,880.6
3,019.6
1,456.6
10,397.5
530.6
52.1
57.3
0.0
640.0
16.5
138.4
44.6
0.0
199.5
1,296.5
3,194.2
2,756.5
497.2
7,744.4
1,296.5
3,193.5
2,756.5
0.0
7,246.5
Equities
0.0
0.0
0.0
168.1
168.1
0.0
0.7
0.0
329.1
329.8
197.1
495.9
161.2
959.4
1,813.6
Bonds
10.8
50.2
12.8
0.0
73.8
Equities
0.0
0.0
0.0
24.9
24.9
0.0
0.0
0.0
117.2
117.2
136.2
213.0
107.1
817.3
1,273.6
50.1
232.7
41.3
0.0
324.1
361.3
32.7
22.3
0.0
416.3
Derivatives
Receivables
Total financial assets
465.6
0.0
0.0
0.0
465.6
2,867.6
3,913.3
3,041.9
1,456.6
11,279.4
5 years
Total
Residual contractual maturities of financial liabilities
31.12.2012
(€ million)
Financial liabilities at fair value through profit or loss
Derivatives
Other
Other financial liabilities
Bonds
Less than Between 1
1 year and 5 years
12.5
206.9
23.7
0.0
243.1
12.3
206.9
23.7
0.0
242.9
0.2
0.0
0.0
0.0
0.2
128.9
74.0
0.0
0.0
202.9
0.0
16.7
0.0
0.0
16.7
Net assets attributable to unit holders
64.2
0.0
0.0
0.0
64.2
Other
64.7
57.3
0.0
0.0
122.0
141.4
280.9
23.7
0.0
446.0
5 years
Total
Total financial liabilities
31.12.2011
(€ million)
Derivatives
Other
Bonds
Net assets attributable to unit holders
Other
Total financial liabilities
Less than Between 1
1 year and 5 years
97.5
243.8
45.4
0.0
386.7
97.1
243.8
45.4
0.0
386.3
0.4
0.0
0.0
0.0
0.4
157.1
61.4
2.6
0.0
221.1
0.0
20.6
0.0
0.0
20.6
52.4
0.0
0.0
0.0
52.4
104.7
40.8
2.6
0.0
148.1
254.6
305.2
48.0
0.0
607.8
Derivatives mainly consist of currency swaps due within one month and interest rate swaps that are due within three years.
100
ANNUAL REPORT 2012
FINANCIAL SECTION
The following table shows the amount of life segment insurance liabilities and financial liabilities for investment contracts broken down by
estimated timing of the net cash outflows or contractual maturity. Data reported refers to gross direct business. Deferred policyholder
liabilities are excluded from the analysis as they depend on market movements; therefore, it is impossible to split the estimated timing of
the cash flows related to Deferred policyholder liabilities.
Estimated timing of the net cash outflows resulting from recognized insurance liabilities and contractual maturities of financial
liabilities for investment contracts
31.12.2012
(€ million)
Up to 1 year
Life insurance provisions –
Gross direct insurance
Financial liabilities related
to investment contracts
Total
510.9
490.6
1,001.5
Between 1 and 5 years
1,025.3
802.0
1,827.3
1,201.6
521.8
1,723.4
1,032.7
552.6
1,585.3
737.7
393.5
1,131.2
4,508.2
2,760.5
7,268.7
Life insurance provisions –
Financial liabilities related
to investment contracts
Total
More than 20 years
Total
31.12.2011
(€ million)
Up to 1 year
394.7
474.1
868.8
1,043.5
808.9
1,852.4
1,158.6
478.9
1,637.5
1,003.6
492.4
1,496.0
673.0
303.1
976.1
4,273.4
2,557.4
6,830.8
More than 20 years
Total
The Group takes into account the impact of rational/irrational surrenders on its expected profits. In the product design phase, penalties
for surrenders are allowed: they are calculated in order to partially compensate for the eventual decrease in expected future profits.
Investment contracts may be cancelled early, however with significant negative consequences for the policyholders.
In relation to the non-life segment, the table below shows the amount of gross direct provisions for outstanding claims split by the
remaining maturity. The total liability is broken down by the remaining duration in proportion to the cash flows expected to arise during
each duration band.
Estimated timing of the net cash outflows resulting from recognized insurance liabilities – Non-life insurance liabilities
Provison for outstanding claims – gross direct amount
(€ million)
31.12.2012
Restated 31.12.2011
Up to 1 year
829.9
809.2
493.9
473.0
144.8
126.3
188.6
149.0
More than 20 years
Total
0.0
0.0
1,657.2
1,557.5
The accepted reinsurance effect is negligible. Estimated cash flows from other non-life insurance liabilities will predominantly occur within
one year.
101
E.7
ANNUAL REPORT 2012
FINANCIAL SECTION
INSURANCE RISKS
Insurance risk results from the uncertainty surrounding the timing, frequency and size of claims under insurance contracts. The principal
risk is that the frequency or size of claims is greater than expected. In addition, for some contracts, there is uncertainty about the timing
of insured events. These are, by their nature, random, and the actual number and size of events during any one year may vary from
those estimated using established statistical techniques.
The Group is exposed to actuarial and underwriting risk through a wide range of life and non-life products offered to customers:
participating and non-participating traditional life products, unit-linked products, annuities, universal life products, guaranteed investment
products, and all lines of non-life products (property, accident and health, car, third party liability, and disability).
The most significant components of actuarial risk concern the adequacy of insurance premium rate levels and the adequacy of provisions
with respect to insurance liabilities and the capital base. Adequacy is assessed by taking into consideration: supporting assets (fair and
book value, currency and interest sensitivity); changes in interest and exchange rates; developments in mortality and morbidity; non-life
claims frequency and amounts; lapses; expenses; and general market conditions. Specific attention is paid to the adequacy of provisions
for the life business. For a detailed description of the Liability Adequacy Test, see Note D.3.3 Liability Adequacy Test.
The Group manages insurance risk in the individual business units using internal guidelines for product design, reserving, pricing criteria,
reinsurance strategy and underwriting. Monitoring risk profiles, reviewing insurance-related risk control, and asset/liability management
are also carried out by senior management. For the most significant business units and portfolios, stochastic modelling is used to assess
the risk of interest rate guarantees included in insurance contracts. The pricing reflects the cost of the guarantees, and appropriate
reserves are established accordingly.
New methods based on dynamic and stochastic modelling are starting to be implemented throughout the Group and are continuously
being improved. These methods will be used, among others, to measure the Economic Capital of insurance risks.
E.7.1
Concentration of insurance risk
A key aspect of the insurance risk faced by the Group is the extent of the concentration of insurance risk, which determines the extent
to which a particular event or series of events could significantly impact upon the Group’s liabilities. Such concentrations may arise from
a single insurance contract or through a number of related contracts where significant liabilities could arise. An important aspect of the
concentration of insurance risk is that it could arise from the accumulation of risks within a number of different insurance classes.
Concentrations of risk can arise in low-frequency, high-severity events such as natural disasters; in situations where the Group is
exposed to unexpected changes in trends, for example, unexpected changes in human mortality or in policyholder behaviour; or where
significant litigation or legislative risks could cause a large single loss, or have a pervasive effect on many contracts.
102
ANNUAL REPORT 2012
FINANCIAL SECTION
E.7.1.1 Geographic and sector concentrations
The following table provides an overview of the gross direct written premiums according to the countries in which the Group operates
and according to the different lines of business.
Life gross direct premiums written by line of business and by geographical area
2012
(€ million)
Czech Republic
Saving
& Pension
Protection
Unit Linked
Total
310.1
158.5
150.1
618.7
Hungary
35.1
11.2
84.5
130.8
Slovakia
18.1
13.7
47.4
79.2
Poland
1.7
36.2
99.6
137.5
Russia
33.7
9.5
0.0
43.2
Serbia
26.2
1.2
0.0
27.4
Romania
9.6
6.4
2.8
18.8
Slovenia
7.4
2.6
8.1
18.1
Bulgaria
3.3
1.7
0.1
5.1
Croatia
12.9
1.2
1.5
15.6
Other countries
3.7
2.0
0.0
5.7
461.8
244.2
394.1
1,100.1
Saving
& Pension
Protection
Unit Linked
Total
345.8
149.3
165.8
660.9
Hungary
42.3
9.7
92.4
144.4
Total
Life gross direct premiums written by line of business and by geographical area
2011
(€ million)
Czech Republic
Slovakia
21.5
12.0
50.2
83.7
Poland
2.9
32.3
85.7
120.9
Russia
26.8
5.4
0.0
32.2
Serbia
24.2
0.3
0.0
24.5
Romania
5.7
1.2
1.0
7.9
Slovenia
8.1
1.7
7.0
16.8
Bulgaria
3.6
1.6
0.3
5.5
Croatia
14.1
1.6
1.1
16.8
2.7
1.5
0.0
4.2
497.7
216.6
403.5
1,117.8
Other countries
Total
103
ANNUAL REPORT 2012
FINANCIAL SECTION
Non-life gross direct premiums written by line of business and by geographical area
Non-motor
2012
(€ million)
Motor
Personal
Commercial /
Industrial
Accident / Health
Total
Czech Republic
455.4
189.5
263.7
43.4
952.0
Hungary
90.3
84.7
67.7
22.3
265.0
Slovakia
55.3
8.0
31.4
4.6
99.3
Poland
148.8
23.1
59.2
13.9
245.0
Russia
0.0
0.0
127.6
355.8
483.4
Serbia
46.7
4.4
21.3
9.1
81.5
Romania
44.3
17.9
19.0
0.4
81.6
Slovenia
41.9
11.5
9.2
3.0
65.6
Bulgaria
15.5
2.9
6.9
3.6
28.9
Croatia
13.6
2.9
10.0
3.2
29.7
6.4
0.1
2.3
59.3
68.1
918.2
345.0
618.3
518.6
2,400.1
Other countries
Total
Non-life gross direct written premiums by line of business and by geographical area
Non-motor
2011
(€ million)
Motor
Personal
Commercial /
Industrial
Accident / Health
Total
Czech Republic
514.1
189.4
273.8
47.4
1,024.7
Hungary
114.9
87.4
69.6
25.4
297.3
Russia
0.0
0.0
58.4
170.9
229.3
Poland
136.8
20.2
54.5
14.3
225.8
Slovakia
61.6
7.7
30.6
5.3
105.2
Serbia
46.1
4.6
22.8
8.9
82.4
Slovenia
43.8
10.8
9.0
2.7
66.3
Romania
31.7
8.6
6.4
0.2
46.9
Bulgaria
17.1
2.8
6.4
3.3
29.6
Croatia
14.1
2.6
7.6
2.9
27.2
Other countries
Total
5.6
0.1
1.0
27.5
34.2
985.8
334.2
540.1
308.8
2,168.9
The breakdown according to gross written premiums is a reliable approximation of the concentration of the total sum insured from a
geographical perspective.
Reinsurance has no significant impact on the concentration of insurance risk.
E.7.1.2 Low-frequency, high-severity risks
Significant insurance risk is connected with low-frequency and high-severity risks. The Group manages these risks through its
underwriting strategy and adequate reinsurance arrangements.
According to its underwriting strategy, the most significant risk of natural disaster to which the Group is exposed is the risk of flooding. In
the event of a major flood, the Group expects the property portfolio to see high claims for structural damage to properties and contents
and high claims for business interruption while transport links are inoperable and business properties are closed for repair.
Apart from the risk of flooding, other climatic phenomena, such as long lasting snow-fall, claims caused by snow-weight, and strong
winds or hail storms would have a similar effect. The Group is participating in the insurance of nuclear risks through Czech and Slovak
nuclear pools, for more information see Note F.29.2.1.
104
ANNUAL REPORT 2012
FINANCIAL SECTION
The underwriting strategy is an integral part of the annual business plan that specifies the classes of business to be written within the
planned period and the target sectors of clients. Following approval of the underwriting limits, the strategy is cascaded down to the
individual underwriters in the form of underwriting limits (each underwriter can write a business by line size, class of business, territory,
and industry to ensure the appropriate risk selection within the portfolio).
E.7.1.3 Life underwriting risk
In the life portfolio of the Group, there is a prevailing component of savings contracts, but there are also pure risk covers (death benefits
plus riders, such as accident, disability, dread disease, etc.) and some annuity portfolios, with the presence of the longevity risk.
The risks related to policies with a prevailing savings component are considered when pricing the guarantees, in line with the particular
situation in the local financial market, and also taking into account any relevant regulatory constraint. In the recent past a policy of
redefining the structure of minimum guarantees has been pursued to lower their risk impact and their cost.
As far as the demographic risk related to pure risk portfolios is concerned, the mortality tables used in the pricing are prudent. The
standard approach is to use population or experience tables with adequate safety loadings.
For the most important risk portfolios a detailed analysis of mortality experience is carried out every year in comparison with the
expected mortality of the portfolio, determined according to the most up-to-date mortality tables available in each market. This analysis
takes into consideration mortality by gender, age, policy year, sum assured, other underwriting criteria and also mortality trends.
As far as lapse risk (risks related to voluntary withdrawal from the contract) and expense risk (risks related to the inadequacy of charges
and loadings in the premiums to cover future expenses) are concerned, they are also considered in the product development and
pricing processes. The Group continuously works on model development and implementation in individual business units and provides
support when determining assumptions that are either derived from the experience of the business unit or, if it is not sufficiently reliable
or suitable, the experience of the other Group entities, or the general experience of the local market. To mitigate lapse risk, surrender
penalties are generally considered in the pricing and are determined in such a way as to compensate, at least partially, the loss of future
profits.
The table below shows the concentration of insurance provisions of life gross direct business by the level of financial guarantee. Financial
liabilities related to investment contracts are included as well.
Life insurance provisions and financial liabilities for investment contracts: level of financial guarantee
(€ million)
31.12.2012
31.12.2011
5,403.5
5,171.3
between 0% and 1%
2,862.9
2,514.3
between 1% and 3%
763.0
733.1
between 3% and 4%
632.5
628.3
between 4% and 5%
955.3
1,076.1
more than 5%
189.8
219.5
1,544.0
1,378.3
Provisions and Liabilities with guaranteed interest*
Provisions and Liabilities without guaranteed interest
Provisions and Liabilities matched by specific assets**
Total
126.9
119.5
7,074.4
6,669.1
* The upper bound of each range is excluded.
** Provisions matched by specific assets relate to contracts with minimum guaranteed interest where the final yield to policyholders depends on performance of underlying
assets.
Insurance provisions include the gross direct amount of mathematical provisions (€2,935.7 million), provisions for unit-linked products
(€1,378.1 million), and financial liabilities related to investment contracts with DPF (€2,760.5 million).
The table above shows a progressive shift of the exposure towards the lower level of guaranteed interest or without any guaranteed
interested, as a consequence of the new business subscibed in 2012 characterized by a lower level of guarantees compared to
previous years.
105
ANNUAL REPORT 2012
FINANCIAL SECTION
E.7.1.4 Non-life underwriting risk
Pricing risk covers the risk that the premium charged is insufficient to cover actual future claims and expenses.
Reserving risk relates to the uncertainty of the run-off of reserves around its expected value which is the risk that the actuarial reserve is
not sufficient to cover all liabilities of claims incurred. Its assessment is closely related to the estimation of reserves. Both processes are
performed together for consistency reasons, using claim triangles and all other relevant information collected and analysed according to
specific guidelines.
The Group has the right to re-price risk on contract renewal and to reject fraudulent claims. These contracts are underwritten by
reference to the commercial replacement value of the properties and contents insured, and claims payment limits are always included to
cap the amount payable on occurrence of the insured event.
The following table shows the cumulative claims payments and the ultimate cost of claims by accident year and their development from
2003 to 2012. The ultimate cost includes paid losses, outstanding reserves on reported losses, estimated reserves for IBNR claims, and
claim handling costs.
The amounts refer to direct business gross of reinsurance and recoveries (the latter amounting to €8.3 million). Values are included and
presented in the development table fully retrospectively for all the entities in the Group, in order to provide a better comparability.
The observed trend in the ultimate cost for generations 2003–2012 indicates the adequate level of prudence adopted by the Group in its
reserving policy.
106
ANNUAL REPORT 2012
(€ million)
FINANCIAL SECTION
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Total
at the end of underwriting year
413.8
484.6
518.5
575.3
597.5
667.2
716.7
744.4
632.0
626.5 5,976.5
one year later
617.2
679.9
721.9
765.9
830.8
922.1
968.6 1,027.6
853.9
two years later
643.6
708.3
750.1
795.0
866.6
968.2 1,011.8 1,075.8
three years later
653.8
721.3
762.7
812.5
885.1
995.0 1,033.3
four years later
659.7
726.8
770.0
820.8
897.8 1,011.3
five years later
663.9
732.4
774.2
828.2
906.9
six years later
667.3
735.6
776.2
833.1
seven years later
686.5
745.6
779.0
eight years later
672.3
750.8
nine years later
668.7
Cumulative claim payments
Estimate of ultimate cumulative
claims costs
at the end of underwriting year
772.3
885.2
963.1 1,034.8 1,111.7 1,218.6 1,272.9 1,331.3 1,191.0 1,163.9 10,944.8
one year later
764.6
855.2
917.6
993.1 1,087.8 1,194.6 1,219.2 1,291.1 1,113.2
two years later
749.1
836.9
890.7
967.2 1,046.2 1,156.0 1,194.2 1,269.5
three years later
733.8
820.1
866.9
948.3 1,022.2 1,147.1 1,177.2
four years later
727.4
801.1
850.8
925.9 1,005.3 1,126.0
five years later
714.4
790.7
838.8
911.0
six years later
710.3
781.2
826.3
904.6
seven years later
722.4
782.9
820.4
eight years later
701.9
783.6
nine years later
692.9
990.0
Estimate of ultimate cumulative
claims costs at the end
of reporting period
Cumulative payments to date
692.9
783.6
820.4
904.6
(668.7)
(750.8)
(779.0)
(833.1)
24.2
32.8
41.4
71.5
990.0 1,126.0 1,177.2 1,269.5 1,113.2 1,163.9 10,041.3
(906.9) (1,011.3) (1,033.3) (1,075.8)
(853.9)
(626.5) (8,539.3)
259.3
537.4 1,502.0
Provision recognized in the
Statement of financial position
83.1
114.7
143.9
193.7
Provision not included in the
claims development table
Catastrophic events
155.2
42.5
Provisions for outstanding claims
not included
in accident years
121.0
Recoveries excluded from
the analysis
(8.3)
Total provision as at
31 December 2012
E.7.2
1,657.2
Reinsurance strategy
All business units of the Group reinsure some of the risks they underwrite to control their exposure to losses and to protect their
capital resources.
The Group concludes a combination of proportionate and non-proportionate reinsurance treaties to reduce its net exposure. The
maximum net exposure limits for particular business lines are reviewed annually. To provide additional protection, the Group uses
facultative reinsurance for certain insurance policies. The reinsurance arrangements include quota-share, excess, stop-loss, and
catastrophe coverage.
The Group has a captive reinsurance company, GP Reinsurance EAD (GP RE), located in Bulgaria. The majority of reinsurance treaties
are concluded with GP RE. In addition, the Group benefits from the consolidated reinsurance program and the diversification of its risks
due to the GP RE group coverage which is retro-ceded onto the regular reinsurance market.
107
ANNUAL REPORT 2012
FINANCIAL SECTION
The overview of obligatory reinsurance treaty parameters for the main program and underwriting year 2012:
Line of business / Treaty
Form of reinsurance
Leader
Property/Engineering per Risk
Excess of Loss
Partner Re
Property Catastrophe
Excess of Loss
Partner Re
Property Catastrophe (Annual Aggregate Protection)
Excess of Loss
Swiss Re
Liability per Risk
Excess of Loss
Partner Re
Motor Third Party Liability
Excess of Loss
Swiss Re
Excess of Loss
Munich Re
Livestock & Crop
Stop Loss
Swiss Re
Drought & Extreme Rainfall
Quota Share
Swiss Re
Quota Share
Hannover Re
Life
Surplus
Generali Trieste
Life & Disability
Surplus
Swiss Re
Property
Liability
Marine
Marine LoBs
Agriculture
Bonds
Bond
Life, pensions
As a part of its reinsurance strategy, the Group carries out regular monitoring of the financial position of its reinsurers, as shown in Note F.4.
Ceded reinsurance contains a credit risk as the ceding of risk to reinsurers does not relieve the Group of its obligations to its clients.
Through the GPH credit risk management system, the Group regularly evaluates the financial status of its reinsurers and monitors the
concentration of credit risk to minimise its exposure to financial loss caused by a reinsurer’s insolvency. Placement of reinsurance
treaties is managed by GPH and is guided by the Security List of Generali Trieste.
All reinsurance issues are subject to strict review. This includes the evaluation of reinsurance arrangements, setting the minimum
capacity and retention criteria, monitoring the purchase of reinsurance against those criteria, erosion of the reinsurance program and its
ongoing adequacy, and credit risk. The treaty capacity needed is based on both internal and group modelling.
E.8
OPERATING RISK AND OTHER RISKS
Operational risk is defined as potential losses, including opportunity costs, arising from shortcomings or underperformance in internal
processes, human resources, and systems or from other causes which may result from internal or external factors.
As part of the on-going processes of the Generali Group, the Group has set some common principles for these kinds of risks:
• Policies and basic requirements to handle specific risk-sources as defined at the Generali Group level.
• Criteria to measure operational risk. Moreover, a specific worldwide task force has been set up to define a common Generali Group
methodology to identify, measure and monitor operational risks.
• Common methodologies and principles guiding internal audit activities to identify the most relevant processes to be audited.
The operational risk management process is primarily based on analysing the risks and designing modifications to work procedures
and processes to eliminate, as far as possible, the risks associated with operational events (losses caused by risks other than market
and credit risk). Work procedures governing the investment and risk management processes constitute a part of the Group’s system of
mandatory policies and procedures.
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FINANCIAL SECTION
FINANCIAL STRENGTH MONITORING BY THIRD PARTIES
The Group’s and/or its subsidiaries’ financial strength is also monitored by third parties such as insurance regulators.
Also, the leading rating agencies periodically assess the financial strength of the whole Generali Group expressing a judgment on the
ability to meet the ongoing obligations assumed toward policyholders.
This assessment is performed taking into account several factors such as, financial and economic data, the positioning of the Group
within its market, and the strategies developed and implemented by the management.
As at 31 December 2012, the Group’s largest subsidiary Česká pojišťovna, a.s. has been rated by agency Standard & Poor’s (S&P) with
the long-term counterparty credit and insurer financial strength rating of A– with a stable outlook. The rating was confirmed on
28 February 2013 emphasizing strong operating performance, strong competitive position Česká pojišťovna, a.s. and strong
capitalization and noticing relatively low quality of capital and highly competitive environment.
E.10
CAPITAL MANAGEMENT
The objectives of the Group as well as the capital management policy of individual business units are:
• To guarantee the accomplishment of solvency requirements as defined by the specific laws of each sector where the participating
companies operate (insurance or financial sector);
• To safeguard the going concern and the capacity to finance expansion through internal growth;
• To continue to guarantee an adequate return on the shareholders’ capital;
• To determine adequate pricing policies that are suitable for the risk level of each sector’s activity.
In every country in which the Group operates, local laws and/or local supervisory authorities require a minimum capital. This minimum
capital should be maintained by each subsidiary to face its insurance obligations and operational risks. This minimum level of capital has
been continuously maintained during the financial year.
E.10.1 Solvency I
The Group undertakes insurance business which is a regulated industry. In every country in which the Group operates, local law and/or
local supervisory authorities have minimum capital requirements for insurance companies.
The Group closely monitors its compliance with regulatory capital requirements. The minimum amount of capital should be maintained
by each business unit to meet its insurance obligations and operational risks.
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FINANCIAL SECTION
The following table summarises the minimum capital requirements prescribed by the different local supervisory authorities and the capital
available for the main companies.
Required solvency margin
Company
Country
Available solvency margin
2012
2011
2012
2011
Belarus
0.5
0.3
4.4
2.8
Bulgaria
5.0
5.2
10.8
10.8
Bulgaria
0.5
0.5
3.9
3.9
Bulgaria
0.5
0.5
2.0
0.7
GP Reinsurance EAD
Bulgaria
120.8
121.6
262.8
164.8
Serbia
16.3
15.9
29.1
25.5
Czech Republic
43.6
42.4
87.5
64.3
Czech Republic
203.2
206.9
788.3
779.3
Czech Republic
2.3
2.2
10.4
8.7
Croatia
8.0
7.6
13.1
10.8
Hungary
55.9
50.5
82.9
76.9
Hungary
2.8
0.8
6.7
6.1
Hungary
2.1
1.2
3.7
4.5
Kazachstan
3.7
0.4
12.1
7.3
Generali T.U. S.A.
Poland
26.5
24.3
76.4
44.5
Poland
14.6
13.1
29.4
30.3
Generali Romania Asigurare Reasigurare S.A.
Romania
18.0
30.4
39,1
41.1
Russia
32.5
11.5
49.3
40.0
Generali PPF General Insurance
Russia
11.3
6.3
16.4
11.4
Slovenia
12.7
11.6
16.5
13.1
Slovakia
23.8
23.9
82.2
59.1
Česká pojisťovna Ukraine – Life Insurance
Ukraine
0.5
0.2
3.5
3.5
E.10.2 Solvency II
The Group is gradually implementing the Solvency II standards into its own risk capital management procedures, starting with its most
important business units.
The capital management policy is based on a consistent approach for evaluating economic value and its related risks and uses the
proper internal models (i.e. Embedded Value, Economic Balance Sheet).
This approach anticipates an expected development within the “Solvency II” framework, which is the solvency regulation for insurance
companies which the European Union is now developing. As confirmed in the Framework Directive issued in 2007, the future capital
requirements will focus on the economic solvency of insurance companies and will reflect more precisely the specific risk positions, also
giving possible credits for better risk management policies.
In this phase of changes in the law and in market conditions, the capital management policy integrates internal economic logic with the
necessary considerations about existing capital constraints, with reference in particular to current local and Group solvency requirements
and Rating Agency requirements.
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FINANCIAL SECTION
F. NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND INCOME
STATEMENT
F.1
INTANGIBLE ASSETS
(€ million)
Goodwill
of which is goodwill on Česká pojišťovna a.s.
of which is goodwill on Česká pojišťovna a.s. – Polish branch
31.12.2012
31.12.2011
1,488.2
1,551.6
1,089.8
1,072.4
17.5
0.0
314.1
314.1
0.0
95.0
of which is goodwill on Delta Generali Osiguranje A.D.O.
20.1
21.3
of which is goodwill on Penzijní fond České pojišťovny, a.s.
17.3
17.1
of which is goodwill on Generali Romania / ARDAF
29.1
29.9
of which is goodwill on Generali PPF General Insurance
0.0
1.4
of which is goodwill on other companies
0.3
0.4
1,233.1
1,299.5
88.6
88.6
918.3
988.4
of which is goodwill on Generali Slovensko poisťovňa, a. s.
of which is goodwill on Generali PPF Life Insurance
Other intangible assets
Software
Present value of future profits from portfolios acquired
of which Česká pojišťovna a.s.
806.4
864.4
of which Penzijní fond České pojišťovny, a.s.
66.0
70.1
of which Generali Slovensko poisťovňa, a. s.
38.6
42.9
7.3
11.0
226.2
222.5
2,721.3
2,851.1
Others
Total
The remaining amortisation period of the Present value of future profits from the portfolios acquired listed above is between 21 and 25 years.
F.1.1Goodwill
(€ million)
Gross book value as at 1 January
Accumulated impairment as at 1 January
Carrying amount as at 1 January
Business combinations
Impairment charge for the period
2012
2011
1,609.2
1,629.1
(57.6)
(57.6)
1,551.6
1,571.5
17.9
0.0
(100.7)
0.0
Foreign currency translation effects
19.4
(19.9)
Carrying amount as at 31 December
1,488.2
1,551.6
Accumulated impairment as at 31 December
(158.3)
(57.6)
Gross book value as at 31 December
1,646.5
1,609.2
The goodwill is allocated to individual cash-generating units and recognised in the functional currency of the respective unit.
Subsequently, goodwill is translated to the Group’s presentation currency at the end of the reporting period. The related translation
differences are recognised in other comprehensive income.
The overall goodwill is allocated to individual cash-generating units according to the proportion they contribute to the overall surplus
between the fair value less cost to sell resulting from the impairment test model and the net asset value of the cash-generating
unit. In particular, the Dividend Discount Model (DDM) has been used for the determination of the fair value less cost to sell. Only
established insurance companies and pension funds are considered to be cash-generating units for the purpose of goodwill allocation
(corresponding to entities with allocated goodwill in Note F.1 with a further split between life and non-life insurance operations for
composite companies).
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ANNUAL REPORT 2012
FINANCIAL SECTION
The Dividend Discount Model is based on the hypothesis that the value of a cash-generating unit is equal to the present value of
the cash flows available for its shareholders. These cash flows are supposed to be equal to the flows derived from the distributable
dividends, while maintaining an adequate capital structure as required by the laws in force and the entity’s economic nature and to
maintain its expected future development.
According to this method, the value of the cash-generating unit is equal to the sum of the discounted value of future dividends plus the
terminal value of the cash-generating unit itself.
The application of this criterion has generally entailed the following phases:
• For forecasting the future cash flows of each cash-generating unit, the detailed information included in the last available Rolling Plan
2013–2015 has been considered. The main economic-financial data (i.e. required and available solvency margin, net profit) has been
calculated for two additional years (2016 and 2017) on the basis of the growth rate in the last year of the Rolling Plan (2015) to extend
the forecast period. Concerning non-life cash-generating units, the combined ratios considered are included within the range
75.6% – 84.6%.
• Explicit forecasting of the future cash flows to be distributed to shareholders in the planned time frame, taking into account limits
requiring the maintenance of an adequate capital level.
• Calculating the cash-generating unit’s terminal value, which is the expected value of the cash-generating unit at the end of the latest
year planned.
• Regarding the terminal value, applying a growth rate between 2.0% and 3.0% on the cash flows of the latest Plan year.
• The post-tax discount rate of the future cash flows (between 7.12% and 11.50%) has been defined on the basis of the Capital Asset
Pricing Model (CAPM) formula. This model considers the return rate of risk-free investments (between 2.12% and 6.50%) and the
consequent premium return requested by the capital market of reference regarding risk-free investments.
Assumptions used in goodwill impairment test:
Česká pojišťovna – Life
Česká pojišťovna – Non-Life
Generali Slovensko poisťovňa – Life
Generali Slovensko poisťovňa – Non-Life
Delta Generali Osiguranje A.D.O. – Life
Delta Generali Osiguranje A.D.O. – Non-Life
Penzijní fond České pojišťovny
Asigurare Reasigurare Generali Romania
Combined
ratio*
Long term
growth rate
Discount
rate
–
2.0%
7.12%
82.7%
2.0%
7.12%
–
2.0%
7.19%
75.6%
2.0%
7.19%
–
3.0%
11.11%
79.0%
3.0%
11.11%
–
2.0%
7.12%
84.6%
3.0%
11.50%
* Combined ratio is a measure for profitability of non-life insurance companies comparing claims expenses, acquisition costs and administration costs with insurance
premium revenues.
After the shareholders’ agreement regarding the sale of insurance business in CIS countries was reached (please refer to Note G.1), the
Group performed a recoverability analysis of goodwill allocated to cash generating units located in these countries. The agreed purchase
price for assets disposed of is significantly lower than its carrying amount in the consolidated financial statements, which has resulted in
an impairment of goodwill allocated to cash generating units Generali PPF Life Insurance and Generali PPF General Insurance in the total
amount of €100.7 million.
The impairment test did not give rise to any write-downs of goodwill for other cash-generating units in 2012, no impairment loss has
been charged to income statement in 2011 (see Note F.25).
For the cash-generating units where no goodwill impairment was recognised, there is a sufficient surplus of economic value above
book value.
112
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ANNUAL REPORT 2012
FINANCIAL SECTION
The tables below show the changes in individual classes of other intangible assets:
Software
Present
value
of future
profits
Brands
Other
intangible
assets
Total
301.6
1,371.8
220.2
11.2
1,904.8
Additions
39.2
0.0
0.0
1.6
40.8
Disposals
(11.0)
0.0
0.0
(0.2)
(11.2)
1.6
0.0
0.0
0.0
1.6
2012
(€ million)
Balance as at 1 January – Gross amount
Other changes
Balance as at 31 December – Gross amount
8.2
21.9
3.3
0.0
33.4
(5.6)
0.0
0.0
(0.3)
(5.9)
334.0
1,393.7
223.5
12.3
1,963.5
(213.0)
(383.4)
(0.2)
(8.7)
(605.3)
Accumulated amortisation and impairment losses
Balance as at 1 January
Amortisation of the period
(30.5)
(82.3)
(0.1)
(1.0)
(113.9)
Amortization – Foreign currency translation effects
(5.5)
(6.6)
0.0
0.0
(12.1)
(0.5)
0.0
0.0
0.0
(0.5)
1.7
0.0
0.0
0.2
1,9
(3.0)
(3.0)
0.0
0.0
(6.0)
Disposals of accumulated amortisation
Net impairment loss of the period
Other changes
5.2
0.0
0.0
0.3
5.5
(245.6)
(475.3)
(0.3)
(9.2)
(730.4)
88.4
918.4
223.2
3.1
1,233.1
Software
Present
value
of future
profits
Brands
Other
intangible
assets
Total
281.4
1,393.7
223.6
11.4
1,910.1
Additions
38.7
0.0
0.2
2.0
40.9
Disposals
(9.0)
0.0
0.0
0.0
(9.0)
1.0
0.0
0.0
0.8
1.8
(11.3)
(21.9)
(3.6)
(0.2)
(37.0)
0.8
0.0
0.0
(2.8)
(2.0)
301.6
1,371.8
220.2
11.2
1,904.8
(193.6)
(303.3)
(0.1)
(8.3)
(505.3)
(28.1)
(88.1)
0.0
(2.2)
(118.4)
7.6
8.0
0.0
0.2
15.8
(0.5)
0.0
0.0
(0.8)
(1.3)
Balance as at 31 December
Total – Net amount
2011
(€ million)
Balance as at 1 January – Gross amount
Other changes
Balance as at 31 December – Gross amount
Accumulated amortisation and impairment losses
Amortisation of the period
Amortization – Foreign currency translation effects
Disposals of accumulated amortisation
Other changes
Total – Net amount
2.4
0.0
0.0
0.0
2.4
(0.8)
0.0
(0.1)
2.4
1.5
(213.0)
(383.4)
(0.2)
(8.7)
(605.3)
88.6
988.4
220.0
2.5
1,299.5
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ANNUAL REPORT 2012
FINANCIAL SECTION
The Brands item primarily consists of the Česká pojišťovna brand. As the brand name has an indefinite useful life, it is not subject to
amortisation and is recorded at cost less accumulated impairments. The fair value of the brand is determined using a royalty savings
approach. The brands are tested annually for impairments. In 2012 and 2011, no impairment losses were recognised in the statement of
comprehensive income.
Carrying amount (€ million)
Česká
pojišťovna
Delta Generali
Osiguranje A.D.O.
Generali
Osiguranje d.d.
217.4
3.7
1.9
1.45%
1.60%
1.60%
Assumptions used in the impairment test:
Royalty rate
Long-term growth
Cost of capital
F.2
TANGIBLE ASSETS
F.2.1
Land and buildings (own use)
2.0%
3.0%
2.0%
7.12%
11.50%
9.69%
(€ million)
2012
2011
116.9
118.7
Accumulated depreciation and impairment as at 1 January
(31.8)
(28.8)
85.1
89.9
3.5
(7.0)
Increases
5.8
5.7
0.0
3.4
Reclassifications
(0.2)
(0.6)
Decreases
(2.0)
(0.7)
0.0
(0.2)
(1.7)
(2.4)
(3.6)
(3.0)
0.0
(1.5)
Depreciation of the period
(2.8)
(2.8)
Depreciation – Foreign currency translation effects
(1.1)
1.8
Depreciation – Business combinations
0.0
(0.8)
Decreases of accumulated depreciation
0.2
0.0
Depreciation – Other changes
0.1
0.3
Other changes
Depreciation and impairment
86.9
85.1
Accumulated depreciation and impairment as at 31 December
(35.4)
(31.8)
122.3
116.9
114
F.2.2
ANNUAL REPORT 2012
FINANCIAL SECTION
Other tangible assets
(€ million)
2012
2011
156.8
161.3
(117.0)
(124.3)
39.8
37.0
4.0
(6.5)
12.7
22.8
1.8
5.6
(20.8)
(24.6)
(3.3)
(1.8)
3.3
7.3
Increases
Decreases
Other changes
(14.3)
(14.4)
Depreciation – foreign currency translation effects
(3.1)
4.6
Depreciation – business combinations
(0.9)
(2.9)
11.7
7.5
9.9
12.5
Depreciation – other changes
Fair value
37.5
39.8
(113.7)
(117.0)
151.2
156.8
38.9
40.8
The €37.3 million (2011: €39.8 million) of other tangible assets consists mainly of furniture, office and IT equipment.
F.3INVESTMENTS
F.3.1
Investment properties
(€ million)
2012
2011
86.7
88.5
(3.2)
(2.9)
83.5
85.6
1.3
(1.3)
23.8
0.4
0.2
0.6
Increases
Reclassifications
Decreases
(0.5)
0.0
Other changes
(0.3)
(1.5)
(2.3)
(0.3)
(1.6)
(0.2)
0.0
0.1
Depreciation – foreign currency translation effects
0.1
0.0
(0.8)
(0.2)
105.7
83.5
(5.5)
(3.2)
111.2
86.7
Fair value
110.5
85.0
The fair value of investment property is based on valuations of independent experts who hold a recognised and relevant professional
qualification and have recent experience in the location and category of the investment properties being valued.
115
ANNUAL REPORT 2012
FINANCIAL SECTION
The key variables used in this method are estimated market rental income (calculated including the inflation rate), capacity utilisation,
maintenance and renewal expenses (based on the acquisition price, technical condition, useful life and discount rate depending
on the conditions).
Additions in 2012 represent mainly property acquired by the purchase of Solitaire Real Estate, a.s. amounting to €23.3 million. The
transaction is considered to be a purchase of a group of assets and their related liabilities.
F.3.2
Investments in subsidiaries and joint ventures
(€ million)
Investments in non-consolidated subsidiaries
31.12.2012
31.12.2011
11.9
11.3
Generali PPF Fund Management
0.0
7.8
Generali PPF Insurance
8.1
0.0
Generali PPF Asset Management Ukraine
0.0
0.8
Novi Blutek
1.0
0.0
ČP Asistence s.r.o.
0.2
0.0
REFICOR s.r.o.
0.9
0.9
GP Consult Pénzügyi Tanácsadó
0.3
0.3
Autotál Biztosítási Szolgáltat
1.1
0.8
Others
0.3
0.7
7.6
7.0
7.6
7.0
19.5
18.2
2012
2011
7.1
6.2
Investments in associated companies and joint ventures
VUB Generali d.s.s., a.s.
Total
Changes in joint ventures
(€ million)
Change in value recognised in income statement
1.2
0.8
(0.7)
0.0
7.6
7.0
(€ million)
2012
2011
11.3
14.4
0.3
(0.3)
Acquisitions
8.5
0.2
Change in value recognised directly in equity
Movements in non-consolidated subsidiaries
Increase in participation
1.1
2.2
Sales and disposals
(1.1)
(1.0)
Impairment
(0.3)
(2.4)
Reclassification to consolidated
0.0
(1.8)
Reclassification to held-for-sale
(7.9)
0.0
11.9
11.3
The impairment losses in 2012 contain the impairments for the following companies: Familio Befektetési és amounting to €0.2million,
Generali Multiinvest Pénzügyi (Hungary) amounting to €0.1 million, GP Consulting (Hungary) amounting to €0.2 million and the reversal of
impairment on Autotál Biztosítási (Hungary) in the amount of €0.2 million.
The impairment losses in 2011 contain the impairments for the following companies: GP Consulting (Hungary) amounting to
€0.7 million, Autotál Biztosítási (Hungary) amounting to €0.2 million, Generali PPF AM Ukraine amounting to €0.6 million and Gradua
Finance (Slovakia) amounting to €0.9 million.
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ANNUAL REPORT 2012
FINANCIAL SECTION
Generali PPF Fund Management (Russia) was reclassified as held-for-sale in 2012.
Acquisitions in 2012 are represented mainly by the purchase of Generali PPF Insurance in Russia (€8.1 million). The remaining amount
represents the purchase of Familio Group in Hungary in 2012.
Summarised financial information of joint ventures
(€ million)
31.12.2012
31.12.2011
16.2
14.5
Liabilities
1.0
0.5
Revenues
5.3
3.8
Profit or loss
2.4
1.7
Assets
F.3.3
Held-to-maturity investments
31.12.2012
(€ million)
31.12.2011
Book value
Fair value
Book value
Fair value
Quoted bonds
209.9
216.4
199.5
193.9
Total
209.9
216.4
199.5
193.9
Current portion
Non-current portion
87.4
16.5
122.5
183.0
The fair value of quoted bonds is determined in accordance with the principles described in Note D.1.4.
Maturity of held-to-maturity investments – bonds
(€ million)
Book value 2012
Book value 2011
Up to 1 year
87.4
16.5
98.4
138.4
21.7
42.4
More than 10 years
Total
F.3.4
2.4
2.2
209.9
199.5
Loans and receivables to credit institutions
31.12.2012
(€ million)
Unquoted bonds
Deposit under reinsurance business accepted
Other loans and receivables
Term deposit with credit institutions
Buy-sell transactions
Other loans
Loans and receivables total
31.12.2011
Book value
Fair value
Book value
Fair value
63.3
65.1
59.3
52.8
0.1
0.1
0.0
0.0
417.8
397.1
580.7
606.2
235.4
235.4
408.3
408.3
50.6
50.6
35.0
35.0
131.8
111.1
137.4
162.9
481.2
462.3
640.0
659.0
Current portion
357.2
343.2
555.7
584.0
Non-current portion
124.0
119.1
84.3
75.0
117
F.3.5
ANNUAL REPORT 2012
FINANCIAL SECTION
Available-for-sale financial assets
(€ million)
Quoted
Unquoted
Bonds
31.12.2012
31.12.2011
2.7
4.6
239.3
163.5
233.6
158.1
5.7
5.4
8,082.4
7,246.6
Quoted
6,862.8
6,023.7
Unquoted
1,219.6
1,222.9
284.5
329.8
Total
Investments in fund units and other AFS assets
8,608.9
7,744.5
Current portion
1,367.0
1,296.5
Non-current portion
7,241.9
6,448.0
Maturity of available-for-sale financial assets – bonds
(€ million)
Fair value 2012
Fair value 2011
Up to 1 year
1,367.0
1,296.5
3,693.2
3,193.6
1,776.9
1,456.6
More than 10 years
1,245.4
1,299.9
Total
8,082.5
7,246.6
Realised
losses
Impairment
losses
Realised gains and losses, and unrealised losses on available-for-sale financial assets
2012
(€ million)
Realised
gains
Equities
12.3
(5.8)
(12.3)
Bonds
71.7
(25.3)
0.0
19.2
(14.5)
(2.2)
103.2
(45.6)
(14.5)
Realised
gains
Realised
losses
Impairment
losses
Equities
30.3
(31.3)
(9.9)
Bonds
92.2
(30.9)
0.0
61.2
(48.7)
(0.1)
183.7
(110.9)
(10.0)
Total
2011
(€ million)
Total
118
ANNUAL REPORT 2012
FINANCIAL SECTION
Fair value measurement at the end of the reporting period
31.12.2012
(€ million)
Level 1
Level 2
Level 3
Total
0.0
0.0
2.7
2.7
233.6
0.0
5.7
239.3
Quoted
233.6
0.0
0.0
233.6
0.0
0.0
5.7
5.7
6,052.6
2,029.9
0.0
8,082.5
6,052.6
810.3
0.0
6,862.9
0.0
1,219.6
0.0
1,219.6
Unquoted
Bonds
Quoted
Unquoted
283.1
1.3
0.0
284.4
Total
6,569.4
2,031.2
8.4
8,608.9
31.12.2011
(€ million)
Level 1
Level 2
Level 3
Total
0.0
0.0
4.5
4.5
158.1
0.0
5.4
163.5
158.1
0.0
0.0
158.1
Quoted
Unquoted
Bonds
Quoted
0.0
0.0
5.4
5.4
5,160.4
2,086.2
0.1
7,246.7
5,145.0
878.8
0.0
6,023.8
Unquoted
15.4
1,207.4
0.1
1,222.9
327.8
2.0
0.0
329.8
5,646.3
2,088.2
10.0
7,744.5
(€ million)
2012
2011
Opening balance
10.0
5.3
Transfers into Level 3
0.0
4.4
Total gains or losses
(2.0)
0.1
(2.0)
0.1
Foreign currency translation effect
0.4
0.0
Business combination
0.0
0.2
Closing balance
8.4
10.0
(2.0)
0.1
Total
The following table presents the changes in Level 3 instruments:
in income statement
Total gains/(losses) for the period included in income statement
for assets held at the end of the reporting period
119
F.3.6
ANNUAL REPORT 2012
FINANCIAL SECTION
Financial assets
designated as at fair value
through profit and loss
Financial assets
held-for-trading
(€ million)
Equities
Quoted
Bonds
Total financial assets at
fair value through profit
and loss
31.12.2012
31.12.2011
31.12.2012
31.12.2011
31.12.2012
31.12.2011
0.0
0.0
42.2
24.9
42.2
24.9
0.0
0.0
42.2
24.9
42.2
24.9
8.9
0.0
33.5
73.8
42.4
73.8
Quoted
8.9
0.0
31.7
49.1
40.6
49.1
Unquoted
0.0
0.0
1.8
24.7
1.8
24.7
6.6
1.6
61.3
115.6
67.9
117.2
21.2
12.3
6.5
0.8
27.7
13.1
0.0
0.0
1,576.8
1,273.6
1,576.8
1,273.6
36.7
13.9
1,720.3
1,488.7
1,757.0
1,502.6
86.5
147.5
1,670.5
1,355.1
Derivatives
Total
Current portion
Non-current portion
All financial instruments held-for-trading are valued based on quoted market prices, except derivatives, which are valued based on generally
accepted valuation techniques depending on the product (i.e. discounted expected future cash flows, Black-Scholes model, etc.).
Fair value measurement at the end of the reporting period
31.12.2012
(€ million)
Equities
Level 1
Level 2
Level 3
Total
42.2
0.0
0.0
42.2
42.2
0.0
0.0
42.2
20.5
21.9
0.0
42.4
20.5
20.1
0.0
40.6
0.0
1.8
0.0
1.8
67.9
0.0
0.0
67.9
1.2
26.5
0.0
27.7
1,404.4
172.4
0.0
1,576.8
Total
1,536.2
220.8
0.0
1,757.0
31.12.2011
(€ million)
Level 1
Level 2
Level 3
Total
24.9
0.0
0.0
24.9
24.9
0.0
0.0
24.9
11.7
53.2
8.9
73.8
11.7
31.1
6.1
49.0
0.0
22.1
2.8
24.9
112.2
5.0
0.0
117.2
Quoted
Bonds
Quoted
Unquoted
Derivatives
Equities
Quoted
Bonds
Quoted
Unquoted
Derivatives
0.4
12.7
0.0
13.1
1,167.8
105.8
0.0
1,273.6
Total
1,317.0
176.7
8.9
1,502.6
120
ANNUAL REPORT 2012
FINANCIAL SECTION
The following table presents the changes in Level 3 instruments:
(€ million)
2012
2011
8.9
8.6
Transfers into Level 3
0.0
0.1
Total gains or losses
(0.2)
0.2
(0.2)
0.2
0.1
0.0
Settlements
(8.7)
0.0
Transfers out of Level 3
(0.1)
0.0
0.0
8.9
(0.2)
0.2
Opening balance
in income statement
Foreign currency translation effect
Closing balance
Total gains/(losses) for the period included in income statement for assets held
at the end of the reporting period
F.4
REINSURANCE ASSETS
Direct insurance
(€ million)
Non-life
Accepted reinsurance
Total
31.12.2012
Restated
31.12.2011
31.12.2012
Restated
31.12.2011
31.12.2012
Restated
31.12.2011
177.5
166.2
28.6
33.5
206.1
199.7
Provisions for unearned premiums
33.6
28.1
5.7
5.0
39.3
33.1
138.4
134.3
22.9
28.5
161.3
162.8
5.5
3.8
0.0
0.0
5.5
3.8
46.0
43.3
0.1
0.0
46.1
43.3
Other insurance provisions
Life
3.3
3.3
0.1
0.0
3.4
3.3
42.7
40.0
0.0
0.0
42.7
40.0
Total
223.5
209.5
28.7
33.5
252.2
243.0
Current portion
108.9
98.4
28.2
33.3
137.1
131.7
Non-current portion
114.6
111.1
0.5
0.2
115.1
111.3
Mathematical provisions
The amounts included in reinsurance assets represent expected future claims to be recovered from the Group’s reinsurers and the
reinsurers’ share of unearned premiums.
The amount of “Other insurance provisions” in the non-life section mainly represents for profit-sharing and premium refunds together
with provisions for premium reversals.
Ceded reinsurance arrangements do not relieve the Group of its direct obligations to policyholders. Thus, a credit exposure exists
with respect to reinsurance ceded to the extent that any reinsurer is unable to meet the obligations assumed under the reinsurance
agreements (see Note E.5 for detailed analysis of credit risk associated with reinsurance assets).
121
ANNUAL REPORT 2012
FINANCIAL SECTION
F.5RECEIVABLES
(€ million)
Receivables arising out of direct insurance operations
Amounts owed by policyholders
Amount owed by intermediaries and others
Receivables arising out of reinsurance operations
Trade and other receivables
31.12.2012
31.12.2011
275.9
259.6
252.1
235.0
23.8
24.6
35.1
42.1
100.9
74.1
Receivables from derivatives collateral
35.5
40.5
Current income tax receivables
10.4
44.4
Total receivables
457.8
460.7
Current portion
417.2
404.5
40.6
56.2
(€ million)
2012
2011
Non-current portion
The following table shows the roll-forward of receivables:
460.7
425.5
30.3
28.4
Change of receivables
(35.4)
3.0
Impairment
Carrying amount as at 31 December current year
F.6
2.2
3.8
457.8
460.7
31.12.2012
31.12.2011
OTHER ASSETS
(€ million)
Deferred acquisition costs
561.9
335.8
Deferred tax assets
10.9
55.4
Other assets
88.5
90.6
Prepaid rent
1.7
1.4
Other accrued income
4.7
4.5
69.4
72.0
Deferred costs for investment management services
Other prepayments
8.7
8.7
Other assets
4.0
4.0
Other assets total
661.3
481.8
Current portion
521.4
314.4
Non-current portion
139.9
167.4
122
F.6.1
ANNUAL REPORT 2012
FINANCIAL SECTION
Deferred acquisition costs (DAC)
Gross amount
Reinsurance
Net amount
(€ million)
2012
2011
2012
2011
2012
2011
338.0
248.0
(2.2)
(2.5)
335.8
245.5
Change of DAC
Impairment
0.0
8.1
0.0
0.0
0.0
8.1
260.4
81.9
(1.3)
0.3
259.1
82.2
(33.0)
0.0
0.0
0.0
(33.0)
0.0
565.4
338.0
(3.5)
(2.2)
561.9
335.8
Impairment in the amount of €33 million was posted on DAC in Russian company Generali PPF General Insurance. This impairment is
a consequence of the agreement between shareholders regarding the sale of insurance business in CIS countries which took place in
March 2013 (please refer to note G.1) and reflects the reduction of the carrying amount of the company in the consolidated financial
statements, to align it to the sale price agreed by the shareholders.
No impairment on DAC has been recorded in 2011.
F.7
CASH AND CASH EQUIVALENTS
(€ million)
31.12.2012
31.12.2011
1.6
1.8
Cash at bank
758.6
463.8
Total
760.2
465.6
31.12.2012
31.12.2011
7.9
0.0
F.8
NON-CURRENT ASSETS HELD-FOR-SALE
(€ million)
Non-current assets held-for-sale
As at 31 December 2011, there were no non-current assets classified as held-for-sale.
In December 2012 the Board of Directors of Generali PPF Holding B.V. approved the sale of of shares in Generali PPF Fund
Management Ltd., which was therefore reclassified as non-current asset held-for-sale. The sale was finalized in February 2013.
123
F.9
ANNUAL REPORT 2012
FINANCIAL SECTION
SHAREHOLDERS’ EQUITY
The following table provides details on the distribution restrictions of equity:
31.12.2012
Restated
31.12.2011
4,759.1
4,406.2
565.1
309.9
0.1
0.1
Revaluation – financial assets AFS
213.8
5.6
Translation reserve
133.6
57.3
(0.8)
(1.2)
(€ million)
Shareholders’ equity attributable to owners of the parent
Not available for distribution to shareholders
Share capital
Other capital reserves
Available for distribution to shareholders
Additional paid in capital
Retained earnings
Shareholders’ equity attributable to non-controlling interests
Total
218.4
248.1
4,194.0
4,096.3
3,601.8
3,601.8
0.0
(28.1)
592.2
522.6
29.0
61.5
4,788.1
4,467.7
The following table provides details of unrealised gains and losses on investments available-for-sale:
(€ million)
2012
2011
Beginning of the year
(22.5)
146.1
(22.5)
145.0
Attributable to owners of parent
Attributable to non-controlling interests
Gross revaluation as at 1 January
Tax on revaluation as at 1 January
0.0
1.1
(36.5)
169.0
14.0
(22.9)
Revaluation gain/(loss) in equity – gross
508.8
(164.9)
Realisation in income statement – gross
(57.5)
(72.7)
14.5
10.1
(183.5)
22.0
Impairment losses
Change in Deferred policyholder liabilities
(45.7)
36.9
Gross revaluation as at 31 December
Tax on revaluation
245.8
(36.5)
Tax on revaluation as at 31 December
(31.7)
14.0
End of the year
214.1
(22.5)
213.8
(22.5)
0.3
0.0
(€ million)
2012
2011
(1.2)
0.7
Fair value gains/(losses) of the year
0.6
(2.1)
Tax on fair value gains/(losses)
(0.2)
0.2
(0.8)
(1.2)
Attributable to owners of parent
Attributable to non-controlling interests
Movements in the reserve for cash-flow hedges were as follows:
124
ANNUAL REPORT 2012
FINANCIAL SECTION
The following table provides details of authorised and issued shares:
31.12.2012
31.12.2011
Number of shares authorised
500,000
500,000
Number of shares issued and fully paid
100,000
100,000
1
1
Par value per share (€)
F.9.1Dividends
On 29 June 2012, the Company’s shareholders adopted a decision, whereby the shareholders declared a dividend in the total amount
of €123.0 million.
On 8 January 2013, the Company’s shareholders adopted a decision, whereby the shareholders declared an interim dividend in the total
amount of €82.0 million out of retained earnings.
On 28 March 2013, the Company’s shareholders adopted a decision, whereby the shareholders declared an interim dividend in the total
amount of €270.0 million, out of which €186.0 million were charged to retained earnings reserve and €84.0 million was paid out of 2012 profits.
F.10
OTHER PROVISIONS
(€ million)
Provisions for taxation
Provisions for commitments
Provision for restructuring charges
Other provisions
31.12.2012
31.12.2011
1.6
0.7
65.3
75.5
4.4
4.1
6.3
3.3
Total
77.6
83.6
Current portion
19.5
13.1
Non-current portion
58.1
70.5
(€ million)
2012
2011
83.6
111.8
1.4
(1.3)
1.1
0.2
(8.5)
(27.1)
77.6
83.6
(€ million)
2012
2011
75.5
100.9
1.2
(1.0)
Variations
Provisions for commitments
Variations
1.1
0.0
(12.5)
(24.4)
65.3
75.5
Provisions for commitments mainly consist of provisions for the MTPL deficit, which as at 31 December 2012 amounted to
€58.7million (2011: €71.9 million).
Both in the Czech Republic and in Slovakia statutory MTPL insurance was replaced by contractual MTPL insurance
(on 31 December 1999 and on 31 December 2001 respectively). All rights and obligations arising from MTPL insurance prior to those
dates, including the deficit of received premiums to cover the liabilities and costs, were transferred to the Czech and Slovak Bureaus of
Insurers (“the Bureaus”).
125
ANNUAL REPORT 2012
FINANCIAL SECTION
Companies belonging to the Group having obtained licence to write contractual MTPL insurance in the Czech Republic and in Slovakia
are members of the Bureau (see Note F.29.2.2).
Each member of the Bureaus guarantees the appropriate portion of the Bureau’s liabilities based on the member’s market share for this
class of insurance.
Based on information publicly available and information provided to members of the Bureau, the Company created a provision adequate
to cover the cost of claims likely to be incurred in relation to the liabilities ceded. However, the final and exact amount of the incurred
cost of claims will only be known in several years.
The variations relate primarily to decrase of the Czech Bureau provision due to change in estimate of claims to be paid by the Czech
Bureau and also Group’s decline on the share of Czech MTPL market.
With the exception of provisions for commitments, all the other provisions are current.
Other provisions
(€ million)
2012
2011
3.3
5.9
0.1
(0.2)
0.0
0.2
Variations
2.9
(2.6)
6.3
3.3
F.11
INSURANCE PROVISIONS
Direct insurance
Accepted reinsurance
Total
31.12.2012
Restated
31.12.2011
31.12.2012
Restated
31.12.2011
31.12.2012
Restated
31.12.2011
Non-life insurance provisions
2,689.7
2,285.0
33.4
31.5
2,723.1
2,316.5
1,002.3
702.5
5.5
7.5
1,007.8
710.0
1,657.2
1,557.5
25.9
22.8
1,683.1
1,580.3
(€ million)
30.2
25.0
2.0
1.2
32.2
26.2
Life insurance provisions
4,660.0
4,277.8
0.1
0.0
4,660.1
4,277.8
35.4
17.8
0.0
0.0
35.4
17.8
118.9
113.8
0.1
0.0
119.0
113.8
Mathematical provisions
2,935.9
3,009.0
0.0
0.0
2,935.9
3,009.0
Provisions for unit-linked policies
and provisions for pension funds
1,378.1
1,102.7
0.0
0.0
1,378.1
1,102.7
191.7
34.5
0.0
0.0
191.7
34.5
14.9
9.4
0.0
0.0
14.9
9.4
10.8
10.0
0.0
0.0
10.8
10.0
151.8
4.4
0.0
0.0
151.8
4.4
Provisions for Liability Adequacy Test
Ageing provisions
Deferred policyholder liabilities (assets)
Other
14.2
10.7
0.0
0.0
14.2
10.7
7,349.7
6,562.8
33.5
31.5
7,383.2
6,594.3
Current portion
2,115.7
1,685.7
Non-current portion
5,267.5
4,908.6
Total
126
ANNUAL REPORT 2012
FINANCIAL SECTION
F.11.1 Life insurance provisions
F.11.1.1 Provisions for outstanding claims
(€ million)
2012
2011
113.8
113.4
2.5
(3.3)
Change of the period
2.6
1.8
0.0
1.9
118.9
113.8
F.11.1.2 Mathematical provisions for life segment
Gross direct amount
(€ million)
2012
2011
3,009.0
3,197.7
53.1
(76.2)
(226.9)
(243.4)
94.3
98.7
0.0
31.5
Other changes
6.2
0.7
2,935.7
3,009.0
Premiums and payments
Interests and bonuses credited to policyholders
F.11.1.3 Provisions for unit-linked policies and for pension funds
Gross direct amount
(€ million)
2012
2011
1,102.7
1,084.0
48.0
(64.7)
Premiums and payments
110.7
150.4
Interests and bonuses credited to policyholders
116.7
(70.2)
0.0
3.2
1,378.1
1,102.7
The positive development of of the provisions for the unit-linked policites and for pension funds highlights the increase of the profit
shared with policyholders due to the unrealised gains on assets backing unit-linked policies triggered by the financial markets conditions.
F.11.1.4 Provisions for Liability Adequacy Test
(€ million)
2012
2011
9.4
7.0
0.2
(0.6)
Change due to deficiency of reserves-financial risk
0.6
0.6
Change of the period
4.7
2.4
14.9
9.4
127
ANNUAL REPORT 2012
FINANCIAL SECTION
F.11.1.5 Deferred policyholder liabilities
(€ million)
2012
2011
4.4
14.7
0.3
0.0
Change of the period with impact on income statement
(36.4)
11.7
Change of the period without impact on income statement
183.5
(22.0)
151.8
4.4
The development in 2012 was mainly driven by significant increase in value of AFS financial portfolio of Czech pension funds.
F.11.1.6 Provisions for unearned premiums
(€ million)
2012
2011
17.8
3.0
(1.1)
0.9
Change of current year
18.7
13.9
35.4
17.8
F.11.1.7 Ageing provisions
(€ million)
2012
2011
10.0
10.0
0.2
(0.2)
0.6
0.2
10.8
10.0
F.11.1.8 Other provisions
(€ million)
2012
2011
10.7
26.0
0.4
(0.7)
3.1
(16.2)
0.0
1.6
14.2
10.7
Other provisions cover mainly provisions for premium reversals and provisions for profit-sharing and premium refunds.
128
ANNUAL REPORT 2012
FINANCIAL SECTION
F.11.1.9 Insurance provisions and financial liabilities related to policies of the life segment
Net position
(€ million)
31.12.2012
31.12.2011
4,203.2
4,027.7
Insurance contracts without Discretionary Participation Feature
1,590.9
1,450.9
Insurance contracts with Discretionary Participation Feature
2,612.3
2,576.8
Insurance constracts
Investment contracts with Discretionary Participation Feature
78.8
54.0
4,282.0
4,081.7
208.9
168.8
Investment contracts at amortised cost
2,551.6
2,388.6
Total investment contracts
2,760.5
2,557.4
Total insurance provisions
Investment contracts fair valued
Total insurance provisions include the following items – all net of reinsurance: the mathematical provisions in the amount of
€2,893.1 million (2011: €2,968.9 million) , the provisions for policies where the investment risk is borne by the policyholders in the
amount of €1,378.1 million (2011: €1,102.7 million) and ageing provisions for life segment, which amounted to €10.9 million
(2011: €10.0 million).
F.11.2 Non-life insurance provisions
F.11.2.1 Provision for unearned premiums
The table below shows the roll-forward of the non-life provision for unearned premiums:
Gross
(€ million)
Movements of the year
Reinsurance
31.12.2012
Restated
31.12.2011
709.9
Net
31.12.2012
Restated
31.12.2011
31.12.2012
Restated
31.12.2011
610.7
(33.0)
(26.3)
676.9
584.4
256.0
86.7
(5.2)
(3.4)
250.8
83.3
16.4
(25.9)
(1.1)
1.6
15.3
(24.3)
25.2
38.1
0.0
(2.3)
25.2
35.8
Portfolio transfer
0.0
0.0
0.0
(2.4)
0.0
(2.4)
Effect of change of accounting methodology
0.0
0.1
0.0
(0.2)
0.0
(0.1)
Other changes
0.1
0.2
0.0
0.0
0.1
0.2
1,007.6
709.9
(39.3)
(33.0)
968.3
676.9
F.11.2.2 Provisions for outstanding claims
The following table shows the roll-forward of provisions for outstanding claims, including claims incurred but not reported:
Gross
(€ million)
Reinsurance
31.12.2012
Restated
31.12.2011
1,580.2
Net
31.12.2012
Restated
31.12.2011
31.12.2012
Restated
31.12.2011
1,603.2
(162.8)
(198.4)
1,417.4
1,404.8
561.2
573.7
(39.2)
(39.0)
522.0
534.7
Change of previous year
(516.0)
(538.6)
46.8
63.1
(469.2)
(475.5)
8.4
25.0
0.0
(3.5)
8.4
21.5
Portfolio transfer
0.0
(0.9)
0.0
0.0
0.0
(0.9)
47.3
(71.1)
(5.4)
7.5
41.9
(63.6)
Effect of change of accounting methodology
0.0
(16.4)
0.0
7.3
0.0
(9.1)
Other changes
2.1
5.3
(0.6)
0.2
1.5
5.5
1,683.2
1,580.2
(161.2)
(162.8)
1,522.0
1,417.4
129
ANNUAL REPORT 2012
FINANCIAL SECTION
F.11.2.3 Provisions for outstanding claims – non-life
(€ million)
Motor
Non-Motor
Personal and commercial lines
Personal
Commercial/industrial
Accident/health
Total
31.12.2012
Restated 31.12.2011
1,049.1
1,018.3
608.1
539.2
564.0
495.1
91.3
81.3
472.7
413.8
44.1
44.1
1,657.2
1,557.5
F.11.2.4 Other non-life insurance provisions
Gross
(€ million)
2012
Reinsurance
Net
2011
2012
2011
2012
2011
26.2
37.4
(3.8)
(4.9)
22.4
32.5
(14.7)
(14.1)
0.7
1.3
(14.0)
(12.8)
0.0
0.1
0.0
0.0
0.0
0.1
Other changes
0.7
(1.4)
(0.2)
0.4
0.5
(1.0)
19.9
4.3
(2.2)
(0.5)
17.7
3.8
32.1
26.3
(5.5)
(3.7)
26.6
22.6
Other non-life insurance provisions primarily comprise provisions for profit sharing and premium refunds.
F.12
FINANCIAL LIABILITIES
(€ million)
Financial liabilities at fair value through profit or loss or related to investment contracts
Financial derivatives
Financial liabilities at amortised cost
Financial liabilities at amortised cost related to investment contracts
Bonds
Net asset value attributable to unit holders
Other
Total
Current portion
Non-current portion
Book value
31.12.2012
Book value
31.12.2011
305.6
296.7
208.9
168.8
96.7
127.9
2,736.1
2,552.8
2,551.6
2,388.6
16.4
19.6
64.2
52.4
103.9
92.2
3,041.7
2,849.5
621.4
555.6
2,420.3
2,293.9
Financial liabilities at amortised cost related to investment contracts represent on-demand financial instruments carried at an amount
payable to the holders.
In December 2012, at maturity date, The Group (through its subsidiary Česká pojišťovna), paid up the 250 fixed-coupon bonds in the
nominal value of €19.9 million and issued a new emission in the same nominal value1. The new emission of bonds bear an interest rate
of 1.83% p.a. Transaction costs related to the bond issue amounted €0.1 million. The bond is quoted on secondary market of Prague
Stock Exchange and its maturity will be in the year 2017.
1
The amount shown in table F.12 is lower since part of the new bond was subscribed by other Group companies.
130
ANNUAL REPORT 2012
FINANCIAL SECTION
The amortisation of any discount, premium or direct transaction cost and interest related to other liabilities, evidenced by paper,
is calculated using an effective interest rate method, and is recognised in interest expense and similar charges.
Other liabilities at amortised cost consist primarily of reinsurance deposits in the amount of €51.2 million (2011: €45.9 million) and a
bank loan to CITY EMPIRIA a.s. and Solitaire a.s. in the amount of €51.2 million (2011: €40.2 million). As collateral to the loan, the Group
pledged the CITY EMPIRIA a.s. and Solitaire a.s. investment properties and also other receivables, fixed assets, shares, receivables from
bank accounts, service charge account and claims arising from lease agreements, existing and future claims arising from the insurance
agreement of the CITY EMPIRIA a.s. and Solitaire a.s.
The fair value measurement of Financial liabilities at fair value through profit or loss at the end of the reporting period:
31.12.2012
(€ million)
Financial liabilities at fair value through profit or related to investment contracts
Other
Total
31.12.2011
(€ million)
Financial liabilities at fair value through profit or related to investment contracts
Other
Total
Level 1
Level 2
Level 3
Total
176.7
128.9
0.0
305.6
176.4
32.5
0.0
208.9
0.3
96.4
0.0
96.7
176.7
128.9
0.0
305.6
Level 1
Level 2
Level 3
Total
171.4
125.3
0.0
296.7
165.1
3.7
0.0
168.8
6.3
121.6
0.0
127.9
171.4
125.3
0.0
296.7
31.12.2012
31.12.2011
254.8
202.3
42.9
56.8
F.13PAYABLES
(€ million)
Payable arising out of direct insurance operations
Payable arising out of reinsurance operations
Current income tax payables
42.8
7.6
100.5
91.6
Payables to employees
25.3
18.8
Payables to clients and suppliers
27.5
28.4
5.1
5.1
Other payables
Social security
Payables to shareholders
0.1
0.1
42.5
39.2
Total
441.0
358.3
Current portion
426.9
357.8
14.1
0.5
Other payables
Non-current portion
131
F.14
ANNUAL REPORT 2012
FINANCIAL SECTION
OTHER LIABILITIES
31.12.2012
Restated
31.12.2011
Deferred tax liabilities
245.3
289.3
Other liabilities
190.4
172.8
Provision for other defined benefit plans
0.1
0.1
Termination benefit liabilities
0.0
0.0
Accrued interest expense
2.1
3.1
145.4
123.4
15.4
21.6
(€ million)
Other accrued expenses
Deferred expenses
Deferred income for investment management services
0.3
0.4
27.1
24.2
Total
435.7
462.1
Current portion
400.6
404.1
35.1
58.0
Other liabilities
Non-current portion
Other accrued expenses consist of accruals for commissions, bonuses, salaries, investments and other accruals.
F.15
NET EARNED PREMIUMS
Gross amount
(€ million)
Reinsurers’ share
Net amount
31.12.2012
31.12.2011
31.12.2012
31.12.2011
31.12.2012
31.12.2011
2,125.9
2,097.8
(181.6)
(174.6)
1,944.3
1,923.2
2,381.9
2,184.5
(186.8)
(178.1)
2,195.3
2,006.3
(256.0)
(86.7)
5.2
3.5
(250.8)
(83.2)
Life premium
1,144.7
1,135.0
(29.5)
(26.7)
1,115.2
1,108.3
Total
3,270.6
3,232.8
(211.1)
(201.3)
3,059.5
3,031.5
Non-life earned premium
Premiums written
Change in the provision for unearned premium
F.16
FEE AND COMMISSION INCOME AND INCOME FROM FINANCIAL SERVICES ACTIVITIES
(€ million)
2012
2011
Fee and commission income from asset management activity
37.4
38.8
Fee and commission income related to investment contracts
4.7
3.8
42.1
42.6
Total
132
ANNUAL REPORT 2012
FINANCIAL SECTION
F.17 NET GAINS/(LOSSES) FROM FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH
PROFIT OR LOSS
Financial investments
held-for-trading
(€ million)
Unit-linked financial
investments and
financial investments
related to pension
funds
Financial
investments
designated as at fair
value through profit
or loss
Total financial
investments at fair
value through profit
or loss
2012
2011
2012
2011
2012
2011
2012
2011
13.1
14.3
17.7
18.8
6.9
9.1
37.7
42.2
Financial assets
Interest income
and other income
Realized gains
117.2
140.8
21.3
13.5
103.9
90.7
242.4
245.0
Realized losses
(32.1)
(77.0)
(9.9)
(43.4)
(68.6)
(68.8)
(110.6)
(189.2)
Unrealized gains
32.3
9.3
95.5
24.8
39.1
1.4
166.9
35.5
Unrealized losses
(2.9)
(10.2)
(19.2)
(90.8)
(12.8)
(26.4)
(34.9)
(127.4)
Interest expenses
(14.3)
(12.0)
0.0
0.0
(4.3)
(5.7)
(18.6)
(17.7)
Other income
0.8
1.0
0.0
0.0
1.3
1.8
2.1
2.8
Realized gains
19.7
40.8
0.7
10.8
0.1
0.2
20.5
51.8
Realized losses
(80.2)
(145.1)
(8.8)
(7.4)
(20.3)
(38.1)
(109.3)
(190.6)
6.9
4.1
2.6
9.8
3.8
2.6
13.3
16.5
(23.8)
(76.4)
(14.3)
(1.8)
(5.7)
(29.3)
(43.8)
(107.5)
36.7
(110.4)
85.6
(65.7)
43.4
(62.5)
165.7
(238.6)
Unrealized gains
Unrealized losses
Total
F.18
INCOME AND EXPENSES FROM NON-CONSOLIDATED SUBSIDIARIES AND JOINT VENTURES
F.18.1 Income and expenses from non-consolidated companies
(€ million)
Income
Dividends and other income
Expenses
Impairment
Realized losses
Net income
2012
2011
0.1
0.1
0.1
0.1
(1.7)
(5.1)
(0.3)
(2.4)
(1.4)
(2.7)
(1.6)
(5.0)
The impairment losses in 2012 contain the impairments for the following companies: Familio Befektetési és amounting to €0.2 million,
Generali Multiinvest Pénzügyi (Hungary) amounting to €0.1 million, GP Consulting (Hungary) amounting to €0,2 million and reversal of
impairment on Autotál Biztosítási (Hungary) in the amount of €0.2 million.
The impairment losses in 2011 contain the impairments for the following companies: GP Consulting amounting to €0.7 million, Autotál
Biztosítási amounting to €0.2 million, Generali PPF AM Ukraine amounting to €0.6 million and Gradua Finance amounting to €0.9 million.
133
F.19
ANNUAL REPORT 2012
FINANCIAL SECTION
INCOME FROM OTHER FINANCIAL INSTRUMENTS AND INVESTMENT PROPERTIES
(€ million)
2012
2011
Interest income
339.5
336.8
14.4
18.8
Interest income from held-to-maturity investments
Interest income from loans and receivables
25.0
22.8
292.8
289.4
Interest income from other receivables
2.6
0.7
Interest income from cash and cash equivalents
4.7
5.1
16.9
21.6
Interest income from available-for-sale financial assets
Other income
Income from investment properties
7.0
7.3
Other income from available-for-sale financial assets
9.9
14.3
Realized gains
103.3
183.9
Realized gains on investment properties
0.1
0.0
Realized gains on loans and receivables
0.0
0.2
103.2
183.7
23.8
31.1
23.8
31.1
17.1
15.1
16.8
14.6
Realized gains on available-for-sale financial assets
Unrealized gains
Unrealised gains on hedging instruments available-for-sale
Reversal of impairment
Reversal of impairment of loans and receivables
Reversal of impairment of other receivables
Total
0.3
0.5
500.6
588.5
The following table shows the total of future minimum lease income from investment properties under non-cancellable operating leases
for each of the following periods:
(€ million)
Not later than one year
Later than one year and not later than five years
Later than five years
2012
2011
6.1
3.8
15.5
3.1
1.0
0.1
22.6
7.0
2012
2011
Gains on foreign currencies
0.0
122.9
Income from tangible assets
0.6
0.5
Income from intangible assets
0.1
0.0
Income from service and assistance activities and recovery of charges
11.3
12.5
Other technical income
23.1
23.3
Other income
17.1
15.5
Total
52.2
174.7
Total
F.20
OTHER INCOME
(€ million)
134
F.21
ANNUAL REPORT 2012
FINANCIAL SECTION
NET INSURANCE BENEFITS AND CLAIMS
Gross amount
(€ million)
Non-life net insurance benefits and claims
2012
2011
2012
2011
1,050.9
1,109.6
(47.6)
(59.4)
1,003.3
1,050.2
997.4
1,079.9
(52.6)
(83.9)
944.8
996.0
53.5
29.7
5.0
24.5
58.5
54.2
861.6
735.7
(14.2)
(10.9)
847.4
724.8
793.5
802.9
(11.3)
(10.6)
782.2
792.3
68.1
(67.2)
(2.9)
(0.3)
65.2
(67.5)
1,912.5
1,845.3
(61.8)
(70.3)
1,850.7
1,775.0
Change in technical provisions
Life net insurance benefits and claims
Claims paid
Change in technical provisions
F.22
Net amount
2011
Claims paid
Total
Reinsurers’ share
2012
FEE AND COMMISSION EXPENSES AND EXPENSES FROM FINANCIAL SERVICE ACTIVITIES
(€ million)
2012
2011
0.1
0.1
Fee and commission expenses from asset management activity
15.1
14.3
Fee and commission expenses related to investment contracts
35.7
14.5
Total
50.9
28.9
Fee and commission expenses from banking activity
F.23
EXPENSES FROM OTHER FINANCIAL INSTRUMENTS AND INVESTMENT PROPERTIES
(€ million)
2012
2011
Interest expense
53.6
37.8
0.1
0.2
Interest expense on subordinated liabilities
Interest expense on loans, bonds and other payables
52.2
37.0
Interest expense on deposits received from reinsurers
1.2
(1.2)
Other interest expense
0.1
1.8
3.5
3.6
1.6
1.6
Other expenses
Depreciation of investment properties
Expenses from investment properties
Realized losses
Realized losses on loans and receivables
Realized losses on available-for-sale financial assets
Realized losses on other receivables
Unrealized losses
Unrealized losses on hedged instruments
Impairment losses
1.9
2.0
46.6
114.0
0.0
1.3
45.7
111.0
0.9
1.7
3.8
0.3
3.8
0.3
34.2
24.8
Impairment of investment properties
0.8
0.2
Impairment of loans and receivables
13.8
10.4
Impairment of available-for-sale financial assets
14.5
10.1
5.1
4.1
141.7
180.5
Impairment of other receivables
Total
135
F.24
ANNUAL REPORT 2012
FINANCIAL SECTION
ACQUISITION AND ADMINISTRATION COSTS
Non-life segment
Life segment
Financial segment
Total
(€ million)
2012
2011
2012
2011
2012
2011
2012
2011
Net acquisition costs
and other commissions
563.8
509.5
258.6
220.3
0.0
0.0
822.4
729.8
Acquisition costs and
other commissions
584.8
529.0
267.5
227.8
0.0
0.0
852.3
756.8
Received reinsurance
commissions
(21.0)
(19.5)
(8.9)
(7.5)
0.0
0.0
(29.9)
(27.0)
Investment
management expenses
3.0
2.9
0.3
0.3
16.8
18.3
13.5
15.1
Other administration
costs
129.5
125.9
81.6
82.2
27.7
33.5
238.8
241.6
Total
706.8
650.5
343.2
305.4
28.0
33.8
1,078.0
989.7
Other administration costs consist mainly of wages and salaries, building and office rentals, and IT expenses.
The following table shows the total of future minimum lease payments under non-cancellable operating leases for each of the
following periods:
(€ million)
2012
2011
Not later than one year
25.4
25.6
Later than one year and not later than five years
64.2
69.3
Later than five years
10.8
22.4
100.4
117.3
Total
F.25
OTHER EXPENSES
(€ million)
2012
2011
Amortisation of intangible assets
113.8
118.6
Impairment of goodwill
100.7
0.0
Impairment of other intangible assets
6.1
0.0
Impairment of DAC
33.0
0.0
Depreciation of tangible assets
17.1
17.4
Expenses from tangible assets
0.5
2.6
40.1
0.0
Losses on foreign currencies
Restructuring charges and allocation to other provisions
5.7
2.6
(12.5)
(24.5)
Expenses from service and assistance activities and charges incurred on behalf of third parties
24.2
24.0
Other technical expenses
33.1
28.6
Holding costs
15.2
16.6
Changes in provision for commitments
Other charges
Total
47.6
58.6
424.6
244.5
Other technical expenses consist mainly of a fire brigade charge amounting to €5.7 million (2011: €6.3 million), contributions paid to
insurance regulators in the amount of €2.6 million (2011: €2.1 million), charges relating to government guaranteed funds of €2.1 million
(2011: €2.1 million) used to cover MTPL injuries from unknown or uninsured drivers, and cancellation of premiums written in previous
years amounting to €6.3 million (2011: €2.0 million).
Other charges include primarily the “special tax on financial institution” in Hungary amounting to €18.2 million in 2012
(2011: €18.8 million) and other usually one-off charges not directly connected with the insurance business.
136
F.26
ANNUAL REPORT 2012
FINANCIAL SECTION
INCOME TAXES
The table below shows breakdown of income taxes recognized in the income statement:
(€ million)
31.12.2012
31.12.2011
Current income taxes
112.3
84.4
Czech Republic
68.8
44.8
Bulgaria
21.1
16.1
Hungary
4.0
5.8
Russia
7.7
4.1
Slovakia
2.9
2.8
Poland
3.6
2.3
Other countries
4.2
8.5
Income taxes related to previous period
0.3
(1.5)
Czech Republic
0.5
1.2
Bulgaria
0.0
0.0
Hungary
0.2
(1.8)
Russia
0.0
2.2
Slovakia
0.5
(0.1)
Poland
0.0
(0.7)
(0.9)
(2.3)
Deferred income taxes
(48.6)
(12.3)
Czech Republic
(44.6)
(23.4)
Bulgaria
(0.6)
11.5
Hungary
(0.9)
(1.6)
Russia
(3.1)
2.5
Slovakia
0.3
(0.3)
Poland
(0.4)
(1.3)
Other countries
Other countries
Total
0.7
0.3
64.0
70.6
The tax authorities of the territories in which Group entities operate may at any time inspect the books and records of Group entities
within a maximum period of 3 to 10 years, depending on the tax jurisdiction subsequent to the reported tax year, and may impose
additional tax assessments and penalties. The Group’s management is not aware of any circumstances that might give rise to a
potential material liability in this respect.
The table below shows tax rates in selected countries:
(€ million)
31.12.2012
31.12.2011
Czech Republic
19%
19%
Bulgaria
10%
10%
Hungary
19%
19%
Poland
19%
19%
Russia
20%
20%
Slovakia
19%
19%
137
ANNUAL REPORT 2012
FINANCIAL SECTION
The table below shows the reconciliation between the expected and actual income tax. The expected income tax rate is calculated on
the basis of the weighted average of the tax rates currently in force in each country for each consolidated subsidiary. This tax rate is then
applied to the consolidated earnings before taxes to calculate the expected tax expense.
(€ million)
Expected income tax rate
Earnings before taxes
2012
2011
19.0%
19.0%
266.7
378.4
Expected income tax expense (benefit)
50.7
71.9
Effect of foreign tax rate differential
(10.6)
(13.8)
(6.0)
(1.2)
Effect of special (lower) tax rate
Tax exempt income and other tax decreasing items
(17.9)
(21.1)
Tax non-deductible expenses and other tax increasing items
47.7
26.4
Effect of tax losos
(1.3)
(0.1)
Other (local) income taxes
3.6
3.8
Foreign WHT not recoverable
0.6
3.5
Income taxes for prior years
Tax reliefs
0.7
1.5
(0.5)
(2.0)
Other
(3.0)
1.7
Tax expense
64.0
70.6
24.0%
18.7%
Effective tax rate
Tax non-deductible expenses and other tax increasing items includes the impact from impairment of goodwill and other intangible
assets.
F.26.1 Deferred tax
Deferred tax assets
Deferred tax liabilities
31.12.2012
Restated
31.12.2011
31.12.2012
Restated
31.12.2011
Intangible assets
0.0
0.0
(200.2)
(211.2)
Land and buildings
1.8
0.8
(0.9)
(0.9)
Loans
3.5
3.4
0.0
0.0
Financial assets held-to-maturity
0.0
0.0
0.0
0.0
Financial assets available-for-sale
27.8
0.2
(1.2)
(1.0)
Financial assets at fair value through profit and loss
0.6
2.0
(6.7)
(1.0)
Receivables
3.8
2.5
(0.7)
(0.6)
Deferred acquisition costs
0.3
0.3
(75.8)
(20.1)
70.9
18.8
(12.5)
(12.1)
8.6
7.3
0.0
0.0
12.9
6.1
0.0
0.0
0.3
0.3
(24.5)
(23.7)
10.7
6.1
(60.4)
(14.4)
(€ million)
Insurance provisions
Paybles
Fiscal losses carried forward
Accrued income and prepayments
Deferred tax asset / liability with impact on equity
Other
Total deferred tax asset/liability before set off
Set off of tax
11.8
7.6
(4.6)
(4.2)
153.0
55.4
(387.5)
(289.2)
(142.2)
0.0
142.2
0.0
Net deferred tax asset/liability
10.8
55.4
(245.3)
(289.2)
Current portion
10.8
23.8
(85.7)
(31.6)
0.0
31.6
(159.6)
(257.6)
Non-current portion
In accordance with the accounting method, the amount of deferred tax provided is based on the expected manner of realisation
or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the end of the
reporting period.
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The changes in the net deferred tax position are presented in the following table:
Net deferred tax asset/liability
(€ million)
Deferred income tax for the period
Deferred tax recognised directly in equity
2012
Restated 2011
(233.9)
(267.0)
48.7
12.3
(44.0)
15.5
Total deffered tax income for the period
4.7
27.8
Business combination
0.0
0.8
Change of accounting methodology
(5.1)
5.6
0.0
(1.0)
(234.3)
(233.8)
The Group did not recognise deferred tax assets of €36.7 million (2011: €42.5 million) from deductible temporary differences (unused tax
losses) since their realisation is not considered probable by certain individual entities in the Group. Tax losses of these entities cannot be
offset against taxable profits of other entities in the Group.
Expiration of unused tax losses caried forward are presented in the following table:
Not recognized temporary differences
(€ million)
31.12.2012
Expire in 1 year
31.12.2011
60.5
27.0
Expire between 1 and 3 years
113.1
213.2
Expire between 3 and 5 years
97.7
133.5
Expire in more than 5 years
45.1
38.8
Expire in indefinite time
20.0
16.6
336.4
429.1
Total
F.27
INFORMATION ON EMPLOYEES
The number of employees is presented in the following table:
31.12.2012
Managers
Employees
Sales attendants
Others
Total
31.12.2011
371
316
10,124
10,204
2,577
2,621
27
95
13,099
13,236
31.12.2012
31.12.2011
217,9
217,9
60,2
64,3
43,4
42,6
16,4
16,7
1,4
1,6
294,5
298,9
Decrease in number of employees in 2012 is mainly driven by restructuring process in Romania.
The staff expenses are presented in the following table:
(€ million)
Wages and salaries
Compulsory social security contributions
of which State-defined contribution pension plan
Others
of which Contribution to private pension funds
Total
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According to functional area accounting, staff costs are distributed to their respective functional areas and presented within applicable
acquisition costs, claims handling costs, administrative expenses, and other expenses.
Compulsory social security contributions mainly comprise contributions to state-defined contribution pension plans.
Other expenses include the costs of the Group’s health and social programs (e.g. health program for managers, medical check-up for
employees, and social benefits).
F.28
HEDGE ACCOUNTING
F.28.1 Fair value hedge
F.28.1.1 Foreign currency risk hedging
Starting 1 October 2008, hedge accounting has been applied by some of the Group companies to foreign currency risks (FX risk). The
Group applies the fair value hedge.
The Group’s investment strategy results in an investment portfolio, which consists of securities denominated in different currencies.
On the other hand, the currency of the Group’s liabilities is the functional currency of individual subsidiaries. Following the Group’s risk
policy, all these instruments are dynamically hedged into the functional currency of their respective subsidiaries via FX derivatives.
Hedge accounting is applied selectively for individual subsidiaries. For the entities that apply hedge accounting, foreign currency hedging
is in place for chosen foreign currency investments (i.e. bonds, investment fund units, equities, etc.) and insurance liabilities to fully
hedge the implied FX risk. The process in place guarantees high effectiveness in hedging.
The FX difference on hedged financial assets and liabilities and hedging instruments, except for equities classified in the available-forsale portfolio, is reported in the profit or loss account according to IFRS rules. FX revaluation on AFS equities included within the hedge
accounting is reported in the income statement either as other income – gains on foreign currencies or other expenses – losses on
foreign currencies.
Hedged items
Hedge accounting is applied in each subsidiary individually. In general the hedged items consist of selected non-derivative financial
assets and financial liabilities denominated or exposed in foreign currencies (with respect to the functional currency of each subsidiary)
except for:
a) Financial assets backing unit-linked products
b) Other particular exclusions predefined by the investment management strategy
Hedged items include financial assets classified in the available-for-sale category, fair value to profit or loss, other investments, cash and
cash equivalents and insurance liabilites.
Hedging instruments
In general hedging instruments are defined as FX derivatives except for options and the cross-currency swaps.
As at 31 December, hedged items and hedging instruments were as follows:
(€ million)
Equities, bonds, investment funds units
Term deposits and current bank accounts
Insurance liabilities
Derivatives
Hedging effectiveness
Fair value
as at 31.12.2012
FX gain/(loss) for the period
from 1.1. to 31.12.2012
3,520.5
(76.0)
80.9
4.4
220.3
0.4
36.0
74.8
104.5%
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ANNUAL REPORT 2012
FINANCIAL SECTION
(€ million)
Equities, bonds, investment funds units
Term deposits and current bank accounts
Insurance liabilities
Derivatives
Fair value
as at 31.12.2011
from 1.1. to 31.12.2011
1,163.2
61.4
2.1
(1.3)
0.0
0.0
(31.4)
(65.5)
108.9%
F.28.1.2 Interest rate risk hedging
Starting 1 July 2011 the hedge accounting has been applied to derivatives hedging an interest rate exposure of interest-bearing financial
assets by some of the Group companies. The Group uses fair value hedging.
The Group has implemented a risk management strategy for interest rate risk. The objective of the investment and hedging strategy is
to manage the overall interest rate risk position on a continuous basis. The Group achieves this objective by a dynamic strategy. Hedge
accounting is applied selectively for individual subsidiaries.
Change in the fair value of interest rate derivatives and FVPL interest-bearing financial assets is reported in the profit or loss account
according to IFRS rules. Change in the fair value of AFS interest-bearing financial assets attributable to the interest rate risk is within the
hedge accounting reported in the profit or loss account either as other income from financial instruments and other investments or other
expenses for financial instruments and other investments.
Hedged items
The Group designates as a hedged item a group of fixed income instruments. Hedged items include financial assets classified in the
available-for-sale category and fair value to profit or loss category. The hedged items do not include financial liabilities.
Hedging instruments
Hedging instruments are defined as a group of interest rate derivatives. The derivatives are designated as hedging instruments in its
entirety.
Assets and derivatives according to this definition can be clearly identified at any time. As at 31 December hedged items and hedging
instruments were as follows:
(€ million)
Fair value
as at 31.12.2012
from 1.1. to 31.12.2012
Fixed income instruments
725.9
19.9
Derivatives
(58.9)
(22.7)
(€ million)
113.8%
Fair value
as at 31.12.2011
from 1.1. to 31.12.2011
Fixed income instruments
827.7
30.9
Derivatives
(49.3)
(32.9)
106.4%
F.28.2 Cash-flow hedge
F.28.2.1 Foreign currency risk hedging
Starting 1 June 2010, cash-flow hedge has been applied by the Group’s company CITY EMPIRIA (further referred as to “the Company”
in this section) to foreign currency risk (FX risk).
As a result of its real estate rent operations, most of the Company’s transactions are denominated in foreign currencies. In terms of the
Company’s overall currency risk management strategy, the Company minimises its exposure to changes in the cash flows from the
rental contracts by entering into loan denominated in foreign currency.
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Hedged items
The hedged items are expected payments (cash inflows) in EUR (“€”) from lease contracts concluded in EUR (“€”). During the period of
validity of current existing rental contracts, the cash inflows are constituted by payments related to these contracts. As the Company
intends to continue entering into lease contracts denominated in EUR (“€”), the expected future lease contracts that will be entered
into after the existing contracts have expired are also presented as a hedged item. The future lease payments are modelled over the
depreciation period of the building.
Hedging instruments
The Company hedges the leasing receivables by foreign currency loans received and used for the acquisition and operation of the real
estate owned by the company. The loan is being prolonged. In the case that the loan is not prolonged, the Company expects to get
a new loan in the same currency that will be used to repay the current loan. This assumption is based on the fact that rental contracts
denominated in EUR (“€”) will be a sufficient guarantee for receiving a new loan in EUR (“€”).
Prospective effectiveness test
(€ million)
31.12.2011
30.6.2012
31.12.2012
Loan balance – actual
39.7
39.3
38.9
Loan balance – theoretical
41.1
40.2
39.2
The amount of the loan used as hedging instrument
39.7
39.3
38.9
PV of lease payments
41.5
40.6
39.7
PV od hedged lease payments
39.7
39.3
38.9
25.80
25.64
25.14
Change in value of the hedging item
(2.4)
(0.4)
(0.4)
Change in value of the hedged item
2.4
0.4
0.4
Fx rate difference of the hedging item (in CZK)
3.4
(0.1)
(0.2)
Fx rate difference of the hedged item (in CZK)
(3.4)
0.1
0.2
Ratio of rent payments to hedging item
100%
100%
100%
Is the hedging prospectively effective?
Yes
Yes
Yes
Czech National Bank FX rate as of the date
As the present value of future cash flows is higher than the loan balance, only the present value put to the loan balance should be taken
into the effectiveness test.
Retrospective effectiveness test
(€ million)
31.12.2011
30.6.2012
31.12.2012
6.6
8.8
10.9
Cumulative values
Value of modelled cash flow from rent
Received rent volume
2.9
2.6
2.6
Received rent volume – cumulative
10.0
12.2
14.7
Is the hedging retrospectively effective?
Yes
Yes
Yes
The retrospective effectiveness is measured as the ratio of payments that are expected by the model to arrive and rental income that is
really obtained. The company has to obtain at least the expected amount of rental payments in order for the hedging to be effective.
F.28.2.2 Interest rate risk hedging
Starting 17 October 2011, cash-flow hedge has been applied by the Group’s company CITY EMPIRIA (further referred as to
“the Company” in this section) to the interest rate risk (IR risk).
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The Company hedges itself against the interest rate risk by entering into interest rate swap, to pay interest at a fixed interest rate and to
receive interest at a variable interest rate. The Company hedges interest payments from the loan (commencing interest period starting
17 October 2011 until 30 September 2015) with interest rate of 3M EURIBOR. The Company does not hedge the margin over this
interest rate, because it is not the subject to interest rate risk.
Hedging item
The Company entered into the interest rate swap, which was designated as a hedging instrument as at 17 October 2011.
Hedged item
The hedged items are interest payments resulting from the loan drawn.
The measurement of the retrospective hedge effectiveness is based on comparison of the cumulative changes in the fair value of the
hedging instrument and cumulative changes in the fair value of the hypothetical derivative instrument that represents the hedged item.
(€ million)
Fair value at inception
at 17.10.2012
Fair value
as at 31.12.2012
Gain/(loss) for the period
from 1.1. to 31.12.2012
(0.1)
(1.5)
(1.4)
0.1
1.5
1.4
Hedging item – IR swap
Hedged item – hypothetic derivative (loan)
Effectiveness test
(€ million)
100.0%
Fair value at inception
at 17.10.2012
Fair value
as at 31.12.2012
Gain/(loss) for the period
from 1.1. to 31.12.2012
(0.1)
(0.6)
(0.5)
0.1
0.6
Hedging item – IR swap
Hedged item – hypothetic derivative (loan)
0.5
Effectiveness test
F.29
99.7%
OFF BALANCE SHEET ITEMS
The Group had no significant contractual commitments or contingent liabilities as at 31 December 2012 other than those provided for
and the following items below.
F.29.1Commitments
As at 31 December 2012 the Group had no significant contractual commitments other than contractual leasing payments showed in
Note F.24.
F.29.2 Other contingencies
F.29.2.1 Participation in nuclear pools
As a member of the Czech and Slovak Nuclear Pools, the Group is jointly and severally liable for the obligations of the pools. This means
that in the event that one or more of the other members are unable to meet their obligations to the pool, the Group would take over the
uncovered part of this liability, pro-rata to its own net retention for the contracts in question. Management does not believe that the risk
of another member being unable to meet its obligations to the pool to be material to the financial position of the Group. In addition, the
potential liability of the Group for any given insured risk is contractually capped at twice the Group’s net retention for that risk
The subscribed net retention is as follows:
(€ million)
31.12.2012
31.12.2011
Liability
10.2
10.0
Fire, lightning, explosion, aircraft (“FLEXA”) and break down of operations
29.5
29.1
5.3
5.3
Technical insurance and breakdown of operations
Transportation risk
13.2
13.0
Total
58.2
57.4
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ANNUAL REPORT 2012
FINANCIAL SECTION
F.29.2.2 Membership in the Czech and Slovak Insurance Bureaus
As a member of both the Czech and Slovak Insurance Bureaus (“the Bureaus”) related to MTPL insurance in each country, the Group
is committed to guarantee the MTPL liabilities of the Bureaus. For this purpose, the Group makes contributions to a guarantee fund for
each Bureau based on the calculations of the relevant Bureau.
In the event of a fellow member of the Bureau being unable to meet its liabilities arising from MTPL due to insolvency, the Group may be
required to make additional contributions to the guarantee fund. Management considers the risk of this to be immaterial to the financial
position of the Group.
F.30
RELATED PARTIES
This chapter contains information about all important transactions with related parties, excluding those which are described in other
parts of the notes.
F.30.1 Identity of related parties
As at 31 December 2012 and 2011, Generali (51%) and PPF (49%) were the shareholders of the Company. The ultimate parent
company is Assicurazioni Generali S.p.A.
Related parties are GPH’s shareholders, entities outside the Group controlled by them, its associates and joint ventures, key
management personnel, their close family members, and other parties that are controlled, jointly controlled or significantly influenced by
such individuals. Entities in which such individuals hold significant voting power are also considered related parties.
Key management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of
the Group, either directly or indirectly.
Key management personnel of the Group comprises the members of the Board of Directors.
In considering each possible related party relationship, attention is directed to the substance of the relationship and not merely to the
legal form.
F.30.2 Transactions with key management personnel of the Group
The following table shows the short-term employee benefits for the members of Generali PPF Holding B.V. Board of Directors.
Board of Directors
Related to the
board membership
Related to
employment contract
(€ thousand)
2012
2011
2012
2011
Short-term employee benefits
26.7
28.5
463.1
489.0
Monetary benefits from the Group
26.7
28.5
463.1
489.0
0.0
0.0
16.5
0.0
Contribution to State-defined contribution pension plans
Short-term employee benefits include wages, salaries and social security contributions, allowances provided for membership in the
statutory bodies, bonuses and other benefits such as medical care and cars. Bonuses are conditional upon achievement of specific
targets linked to profitability levels of the Group insurance business; these targets have been largely met in the current financial year.
There were no other post-employment benefits other than contributions to state defined contribution pension plans, no other long-term
benefits or termination benefits paid to the key management personnel of the Group in 2012.
As at 31 December 2012, the members of the statutory bodies held no shares in the Group.
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F.30.3 Related party transactions
The related parties fall into the following groups:
Group 1 – Enterprises directly consolidated within the group of the ultimate parent company (Generali in 2012 and 2011)
Group 2 – Other related parties, primarily enterprises part of PPF Group.
31.12.2012
(€ million)
notes
Group 1
Group 2
8.9
0.0
Reinsurance assets
i
103.5
0.0
Other financial assets
ii
0.0
554.0
Receivables from insurance and reinsurance business
Other assets
Total assets
Payables from insurance and reinsurance business
iii
1.9
3.3
114.3
557.3
(73.4)
(64.5)
Technical provisions
0.0
(1.0)
0.0
(1.1)
Other liabilities
Total liabilities
(7.3)
(2.2)
(80.7)
(68.8)
Notes:
i. The balances with companies in Group 1 mainly comprise technical provisions ceded to Generali Holding Vienna group companies
for €37.4 million and technical provisions ceded to Assicurazioni Generali S.p.A. for €60.3 million.
ii. The balances with companies in Group 2 include bonds issued by Home Credit Group companies for €180.9 million, bonds issued
by Energetický a prumyslový holding, a.s. for €20.2 million, bonds issued by EP Energy a.s. for €18.4 million, deposits with PPF
Banka a.s. (PPFB) for €291.5 million and deposits with Home Credit & Finance Bank for €37.3 million.
iii. The balances in Group 1 comprise mainly liabilities from reinsurance to Assicurazioni Generali S.p.A. for €63.7 million and liabilities
from reinsurance to Generali Holding Vienna group companies for €7.1 million. The balances in Group 2 comprise mainly payables for
commissions related to insurance business generated through Home Credit & Finance Bank for €64.3 million.
31.12.2011
(€ million)
notes
Receivables from insurance and reinsurance business
Group 1
Group 2
8.8
0.0
Technical provisions ceded to reinsurers
i
103.0
0.0
Other financial assets
ii
0.0
645.7
Other assets
Total assets
Payables from insurance and reinsurance business
iii
1.6
3.8
113.4
649.5
(70.6)
(31.6)
Technical provisions
0.0
0.2
0.0
(4.5)
(6.0)
(2.6)
(76.6)
(38.5)
Other liabilities
Total liabilities
Notes:
i. The balances with companies in Group 1 mainly comprise technical provisions ceded to Generali Holding Vienna group companies
for €39.0 million and technical provisions ceded to Assicurazioni Generali S.p.A. for €56.6 million.
ii. The balances with companies in Group 2 include bonds issued by Home Credit Group companies for €183.5 million, bonds issued
by Nomos bank for €37.1 million, reverse repurchase agreements with PPF Banka a.s. (PPFB) for €86.9 million, deposits with PPFB
for €247.1 million, deposits with Nomos Bank for €30.9 million and with Home Credit & Finance Bank for €39.2 million.
iii. The balances in Group 1 comprise mainly liabilities from reinsurance to Assicurazioni Generali S.p.A. for €59.3 million and liabilities
from reinsurance to Generali Holding Vienna group companies for €8.4 million. The balances in Group 2 comprise mainly payables
for commissions related to insurance business generated through Home Credit & Finance Bank for €31.3 million.
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ANNUAL REPORT 2012
FINANCIAL SECTION
2012
(€ million)
notes
Income from insurance and reinsurance business
Income from financial activities
i
Other income
Total income
Expenses from insurance and reinsurance business
ii
Group 1
Group 2
16.4
8.7
0.0
23.2
(0.1)
2.6
16.3
34.5
(71.0)
(401.8)
Expenses from financial activities
(0.1)
(6.4)
Other expenses
(4.2)
(9.6)
(75.3)
(417.8)
Total expenses
Notes:
i. Group 2 includes mainly the income related to interest on the bonds issued by Home Credit group companies for €12.7 million,
interests from term deposits and reverse repurchase agreements with PPF group companies for €6.4 million.
ii. Group 1 mainly includes ceded result from insurance business to Assicurazioni Generali S.p.A for €58.2 million.
Group 2 mainly represents the claims, commissions, and profit sharing related to insurance business generated through Home Credit
group companies for €387.6 million; this figure is significantly higher compared to last year because of very high growth of business
generated through Home Credit in 2012. The substantially higher amount reported in comparison to “Income from insurance and
reinsurance business” is explained primarily by the fact that the corresponding premiums written by the Russian company Generali
PPF Life Insurance LLC and Generali PPF General Insurance LLC are not included in this table, since the related insurance contracts
are written directly with Home Credit clients, and not with Home Credit itself.
2011
(€ million)
notes
Group 1
Group 2
Income from insurance and reinsurance business
i
23.8
10.5
Income from financial activities
ii
0.0
31.9
Other income
Total income
Expenses from insurance and reinsurance business
iii
Expenses from financial activities
Other expenses
Total expenses
iv
0.1
3.0
23.9
45.4
(40.5)
(170.6)
(2.7)
(3.7)
(3.3)
(19.3)
(46.5)
(193.6)
Notes:
i. Group 1 mainly includes the claims and the change in the insurance provisions ceded to Assicurazioni Generali S.p.A for
€22.4 million. Group 2 mainly includes earned premium from Home Credit Group companies for €7.0 million.
ii. Group 2 includes mainly the income related to interest of the bonds issued by Home Credit group companies and Nomos Bank for
€18.4 million, interests from term deposits and reverse repurchase agreements with PPF group companies for €7.4 million.
iii. Group 1 mainly includes ceded results from the insurance business to Assicurazioni Generali S.p.A for €32.0 million.
Group 2 mainly represents the claims, commissions, and profit sharing related to the insurance business generated through Home
Credit group companies for €169.1 million. The substantially higher amount reported in comparison to “Income from insurance and
reinsurance business” (Note i) is explained primarily by the fact that the corresponding premiums written by the Russian company
Generali PPF Life Insurance LLC are not included in this table, since the related insurance contracts are written directly with Home
Credit clients, and not with Home Credit itself.
iv.Group 2 mainly includes expenses paid to PPF group companies for the rental of buildings.
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FINANCIAL SECTION
G.SUBSEQUENT EVENTS
The following significant non-adjusting events have occurred since the end of the reporting period up to 25 April 2013:
G.1
SALE OF COMPANIES FROM CIS REGION
On 8 January 2013 Generali and PPF Group announced that they have agreed on the conditions for the resolution of the GPH joint
venture and transferring of full ownership and management control to Generali. An integral part of the agreement was the sale to PPF
Group its insurance operations in Russia, Ukraine, Belarus and Kazakhstan. The sale was concluded on 28 March 2013.
G.2
INTERIM DIVIDENDS FOR THE 2012 FINANCIAL YEAR
On 8 January 2013, the Company’s shareholders declared an interim dividend in the total amount of €82 million, i.e. in the amount of
€820 per share.
On 28 March 2013, following the Framework Agreement between Companys’s shareholders, the General Meeting of the Company’s
shareholders resolved upon interim dividend distribution in the total amount of €270.0 million, i.e €2,700 per share.
G.3
CHANGE IN THE POSITION OF CHIEF EXECUTIVE OFFICER
In accordance with the agreement of the shareholders from the beginning of January Mr. Luciano Cirinà has become the new CEO of
Generali PPF Holding as at 28 March 2013.
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FINANCIAL SECTION
III. Company Financial Statements
for the Year Ended 31 December 2012
COMPANY STATEMENT OF FINANCIAL POSITION
The statement of the financial position was prepared prior to profit appropriation.
(€ million)
Note
31.12.2012
31.12.2011
0.3
0.3
4,365.5
4,147.7
3.2
28.7
A.
Intangible assets
B.
Financial fixed assets
C. I.
Investments in group companies
C.
Current assets
C. I.
Receivables
D.2.1
C. II.
Loans
D.2.2
4.3
15.5
C. III.
Securities
D.2.3
201.0
92.6
C. IV.
D.2.4
165.9
14.1
C. V.
Term deposits with credit institutions
D.2.5
D.1
Total current assets
Total assets
22.7
112.6
397.1
263.5
4,762.9
4,411.5
A.
D.3
A.I.
Paid-up and called capital
D.3.1
0.1
0.1
A.II.
Share premium reserve
C.3.3
4,009.8
4,039.5
A.III.
Revaluation reserves
C.3.2
164.3
(64.8)
A.IV.
Currency translation reserve
119.9
43.6
A.V.
Retained earnings
268.1
74.6
A.VI.
A.VII.
Result of the period
(0.8)
(1.2)
197.7
314.4
4,759.1
4,406.2
D.4
0.2
0.3
D.5.1
3.6
5.0
3.6
5.0
4,762.9
4,411.5
C.3.5
Total shareholders’ equity
B.
Provisions
C.
Current liabilities
C.I.
Other liabilities
Total current liabilities
Total equity and liabilities
COMPANY INCOME STATEMENT
(€ million)
Note
A.
Result from investments in Group companies after tax
B.
Other income and expenses after tax
E.1
2012
2011
208.1
324.7
(10.4)
(10.3)
197.7
314.4
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ANNUAL REPORT 2012
FINANCIAL SECTION
Notes to the Company Financial Statements
A.GENERAL INFORMATION
The Company financial statements of Generali PPF Holding B.V. should be read in conjunction with the consolidated financial
statements.
A.1
DESCRIPTION OF THE COMPANY
Generali PPF Holding B.V. (“the Company”) was incorporated under Dutch law as a limited liability company on 8 June 2007. The
Company is enrolled in the Commercial Register kept by the Chamber of Commerce of the city of Amsterdam under Registration
Number 34275688 and is based in Amsterdam, Strawinskylaan 933, The Netherlands.
The Company’s shareholders as at 31 December 2012 were Assicurazioni Generali S.p.A. (“Generali”, 51%) and PPF Group N.V.
(“PPF”, 49%). The Company was founded for the purpose of integrating the business activities of both financial groups in Central and
Eastern Europe. The Company’s business activities are consulting services in the entrepreneurial, financial, economic, and organisational
fields and their procurement throughout the companies in the Group.
A.2
STATUTORY BODY
The statutory body of the Company was as at 31 December 2012 as follows:
Sergio Balbinot
Petr Kellner
Aleš Minx
Jaroslav Mlynář
Mario Greco
Jiří Šmejc
Valter Trevisani
Director
Director
Director
Director
Director
Director
Director
Following the shareholders’ agreement described in note A.1 of the consolidated financial statements, since from 28 March 2013 the
Board of Directors is composed of:
Sergio Balbinot
Luciano Cirinà
Mario Greco
Lubomír Král
Jaroslav Mlynář
Nikhil Srinivasan
Valter Trevisani
Director
Director
Director
Director
Director
Director
Director
The Company founded a branch (Generali PPF Holding B.V., organizační složka) in the Czech Republic which was entered into the
Commercial Register kept by the Municipal Court in Prague, Section A, Insert 59992 on 30 January 2008 under Identification Number
28239652 and is situated in Prague 6, Evropská 2690/17. As at 31 December 2012, the director of the branch was
Mr. Ladislav Bartoníček.
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ANNUAL REPORT 2012
FINANCIAL SECTION
The Company is subject to Dutch corporate income taxation, as well as to Czech corporate income taxation due to its branch in the
Czech Republic. Since all the assets and activities of the Company have been transferred to the Czech branch, Czech tax law has
primacy for the Company’s tax status.
B.BASIS OF PREPARATION
These financial statements are prepared in accordance with the financial reporting requirements included in Part 9 of Book 2, of the
Netherlands Civil Code. The principles of valuation and determination of results described in the consolidated financial statements
prepared under International Financial Reporting Standards (IFRS) as endorsed by the European Commission are also applicable to
the individual financial statements. Investments in Group companies and investments in associates are initially recognised at cost and
subsequently accounted for by the equity method of accounting.
The accounting policies with regard to presentation and disclosures are in accordance with the financial reporting requirements included
in Part 9 of Book 2, of the Netherlands Civil Code. The income statement has been drawn up in accordance with Section 402, Book 2,
of the Dutch Civil Code.
The financial statements will be adopted by the Annual General Meeting which is expected to take place in June 2013. Expectations are
that the financial statements will be adopted without any changes.
C.ACCOUNTING POLICIES
C.1
FUNCTIONAL AND PRESENTATION CURRENCY
The functional currency of the Company is the Czech Koruna (“CZK”), the domestic currency of the Czech Republic. The amounts in the
financial statements are presented in EUR (“€”), if not stated otherwise.
C.2
INVESTMENTS IN GROUP COMPANIES
Investments in group companies are entities (including intermediate subsidiaries and special purpose entities) over which the Company
has control, i.e. the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half
of the voting rights. Subsidiaries are recognised from the date on which control is transferred to the Company or its intermediate holding
entities. They are derecognised from the date that control ceases.
The Company applies the acquisition method to account for acquiring subsidiaries, consistent with the approach identified in the
consolidated financial statements. The consideration transferred for the acquisition of a subsidiary is the fair value of assets transferred,
liabilities incurred to the former owners of the acquiree and the equity interests issued by the Company. The consideration transferred
includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and
liabilities and contingent liabilities assumed in an acquisition are measured initially at their fair values at the acquisition date, and are
subsumed in the net asset value of the investment in group companies. Acquisition-related costs are expensed as incurred.
Investments in group companies are measured at net asset value. Net asset value is based on the measurement of assets, provisions
and liabilities and determination of profit based on the principles applied in the consolidated financial statements.
The Company’s share of the net income of Group companies is included in results relating to investments in Group companies in
the Income Statement. Unrealised revaluations within consolidated Group companies are presented in the related equity items in the
Company financial statements.
When an acquisition of an investment in a group company is achieved in stages, any previously held equity interest is remeasured to fair
value on the date of acquisition. The remeasurement against the book value is accounted for in the income statement.
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ANNUAL REPORT 2012
FINANCIAL SECTION
When the Company ceases to have control over a subsidiary, any retained interest is remeasured to its fair value, with the change in
carrying amount to be accounted for in the income statement.
When parts of investments in group companies are bought or sold, and such transaction does not result in the loss of control, the
difference between the consideration paid or received and the carrying amount of the net assets acquired or sold, is directly recognised
in equity.
C.3
INVESTMENTS; RECOGNITION OF LOSSES
When the Company’s share of losses in an investment equals or exceeds its interest in the investment, (including separately presented
goodwill or any other unsecured non-current receivables, being part of the net investment), the Company does not recognise any further
losses, unless it has incurred legal or constructive obligations or made payments on behalf of the investment. In such case the Company
will recognise a provision.
C.4
INVESTMENTS; UNREALISED GAINS AND LOSSES
Unrealised gains on transactions between the Company and its investments in consolidated subsidiaries are eliminated in full, based on
the consolidation principles. Unrealised gains on transactions between the Company and its investments in associates are eliminated to
the extent of the Company’s stake in these investments.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the assets transferred.
C.5
CURRENT ASSETS
Current assets include securities, derivative contracts, loans and receivables (term deposits included), cash and cash equivalents.
Current assets are recognised in the statement of financial position when the Company becomes a party to the contractual provisions of
the instrument. For standard purchases and sales of financial assets, the Company’s policy is to recognise them using settlement-date
accounting. Any change in the fair value of an asset to be received during the period between the trade date and the settlement date is
accounted for in the same way as if the Company used trade-date accounting. Financial instruments are measured initially at fair value
plus transaction costs directly attributable to the acquisition or issue of the financial instrument.
Current assets are derecognised when the rights to receive cash flows from them have expired or where they have been transferred and
the Company has also transferred substantially all risks and rewards of ownership.
C.5.1
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market,
other than classified as securities.
After initial recognition at fair value, loans and receivables are measured at amortised cost using the effective interest method less
provision for impairment.
C.5.2Securities
Securities are those non-derivative financial assets that are not classified as loans and receivables.
After initial recognition, the Company measures securities at their fair values, without any deduction for transaction costs that it may
incur upon sale or other disposal, with the exception of instruments that do not have a quoted market price on an active market and
whose fair value cannot be reliably measured which are stated at cost, including transaction costs, less impairment losses.
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ANNUAL REPORT 2012
FINANCIAL SECTION
Any revaluation gain or loss is recognised in other comprehensive income with the exception of impairment losses and, in the case of
monetary items such as debt securities, foreign exchange gains and losses. When securities are derecognised, the cumulative gain
or loss previously recognised in other comprehensive income is recognised in the income statement. Where these instruments are
interest-bearing, interest calculated using the effective interest rate method is recognised in the income statement. Dividend income is
recognised in the income statement as other investment income.
C.5.3
Derivative contracts
All derivatives in a net receivable position (positive fair value) are reported as financial assets. All derivatives in a net payable position
(negative fair value) are reported as financial liabilities.
C.5.4
Other receivables
Other receivables include all other receivables not related to tax. They are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less a provision for impairment.
C.5.5
Cash consists of cash in hand and demand deposits with banks and other financial institutions and term deposits due within 15 days.
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value.
C.5.6
Term deposits with credit institutions consist of deposits with banks and other financial institutions with term higher than 15 days.
C.6.
CHANGE IN ACCOUNTING PRINCIPLES
C.6.1
Changes in accounting policies of the subsidiaries
The accounting policy was changed within one of the subsidiaries of the Company, see note D.6.1 in the consolidated financial
statements. Comparatives were adjusted. The following lines of the company statement of the financial position and company income
statement were effected.
As at and for the year ended:
(€ million)
31.12.2012 31.12.2012
new superseded
policy
policy
31.12.2011 31.12.2011
new superseded
policy
policy
Company statement of financial position
4,365.5
4,355.6
4,147.7
4,140.5
4,759.1
4,750.2
4,406.2
4,399.0
197.7
196.0
0.0
0.0
208.1
206.4
0.0
0.0
Company income statement
Result from investments in Group companies after tax
Since it was impracticable to determine the period specific effect of changes prior to 31 December 2011, the effect of the new
accounting policy for the periods prior to 2012 is not disclosed.
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ANNUAL REPORT 2012
FINANCIAL SECTION
D.NOTES TO THE COMPANY STATEMENT OF FINANCIAL POSITION
D.1
FINANCIAL FIXED ASSETS
Investments in Group companies comprise the following:
(€ million)
31.12.2012
31.12.2011
4,365.5
4,147.7
Total investments in subsidiaries and associates
4,365.5
4,147.7
Identification of group companies, their country of residence and proportion of ownership interest is provided in Note C.1 of the
consolidated financial statements.
Changes in Group companies comprise the following:
(€ million)
Additional investments in group companies
31.12.2012
31.12.2011
4,147.7
4,237.2
101.9
0.0
(366.2)
(133.2)
Other movements in group companies’ equity
274.0
(288.2)
Result of group companies
Dividend distribution
208.1
324.7
Effect of changes in subsidiaries’ accounting policies
0.0
7.2
4,365.5
4,147.7
The amount of €101.9 million in line Additional investments in group companies in 2012 refers to acquisition of 66% interest
in S.C. Generali Romania Asigurare Reasigurare S.A. from Generali Holding Vienna A.G. (€88.6 million) and capital increases
in Generali Bulgaria Holding (€1.8 milion), Generali Zavarovalnica (€1.5 million) and S.C. Generali Romania Asigurare Reasigurare S.A.
(€10.0 million).
Other movements in group companies equity primarily comprise changes in the revaluation reserve arising from changes in the fair value
of available-for-sale financial instruments held by the Group companies and changes in the currency translation reserve arising from
differences between functional currencies and the presentation currency.
The statement of investments in Group companies is presented in the consolidated financial statements (see Note C.1 in the
consolidated financial statements).
D.2
CURRENT ASSETS
D.2.1Receivables
Receivables comprise the following:
(€ million)
Receivables from clients and suppliers
31.12.2012
31.12.2011
1.2
27.1
Accrued income and prepayments
2.0
1.6
Total
3.2
28.7
All receivables are due within one year.
153
ANNUAL REPORT 2012
FINANCIAL SECTION
D.2.2Loans
In 2012, the Company provided a €3.5 million loan to CZI Holdings N.V. The loan was repaid on 15 February 2013.
In 2011, the Company provided a €5.0 million loan to Generali Slovensko poisťovňa, a. s. The loan was repaid on 9 February 2012. The
Company also provided a subordinated loan to Generali Romania amounting to €10.0 million which was capitalized on 6 November 2012.
Changes in company loans provided were as follows:
(€ million)
2012
15.5
160.4
Redemptions
(4.7)
(159.6)
(10.0)
0.0
New loans
3.5
14.7
4.3
15.5
(€ million)
2012
2011
Quoted securities
199.7
91.4
149.2
82.3
50.5
4.0
Reclassifications
2011
All the loans presented above are due within one year.
D.2.3Securities
Securities as at 31 December comprise:
Government bonds
Corporate bonds
0.0
5.1
Unquoted securities
1.3
1.2
Unquoted equities
1.3
1.2
201.0
92.6
2012
2011
Total
Changes in company securities were as follows:
(€ million)
Investments
Revaluation in equity
92.6
35.6
449.4
180.9
4.3
(0.1)
(0.3)
0.1
3.7
(0.2)
(348.7)
(123.7)
201.0
92.6
(€ million)
2012
2011
14.1
40.5
Increase/(decrease) in cash at bank and in hand
151.8
(26.4)
165.9
14.1
Revaluation in income statement
Exchange differences
Sold
D.2.4.
Cash and cash equivalents are as follows:
No restrictions are applicable to cash balances.
154
D.2.5
ANNUAL REPORT 2012
FINANCIAL SECTION
The term deposits with credit institutions are as follows:
(€ million)
2012
2011
112.6
115.4
Decrease in term deposits with credit institutions
(89.9)
(2.8)
22.7
112.6
D.3
SHAREHOLDERS’ EQUITY
The following table shows the roll-forward of shareholders’ equity:
(€ million)
Balance as at 31 December 2010
Paid-up and
called capital
0.1
Share
premium Revaluation
reserve
reserves
4,078.0
95.5
Currency
translation
reserve
Cash-flow
hedge
reserve
Retained
earnings
Result of
the period
Total
131.7
0.7
(105.2)
246.1
4,446.9
246.1
(246.1)
140.9
0.0
Transfer of net gain 2010
0.1
4,078.0
95.5
131.7
0.7
0.0
(4.1)
Other movements in subsidiaries equity
0.0
(4.1)
(38.5)
(167.5)
(84.0)
(1.9)
3.7
(38.5)
(167.5)
(88.1)
(1.9)
3.7
Net gain 2011
for the period
0.0
(38.5)
(167.5)
(88.1)
(1.9)
Dividends to shareholders
previously reported
0.1
4,039.5
(72.0)
43.6
(1.2)
0.1
4,039.5
(72.0)
43.6
(1.2)
0.1
4,039.5
(72.0)
43.6
(1.2)
314.4
314.4
22.1
74.6
(70.0)
314.4
0.0
81.8
314.4
314.4
(314.4)
396.2
0.0
(29.7)
234.1
74.3
0.4
(5.1)
236.3
76.3
0.4
(5.1)
236.3
76.3
0.4
Dividends to shareholders
(5.1)
274.0
0.0
278.2
197.7
197.7
197.7
(123.0)
0.1
4,009.8
164.3
4,406.2
2.0
(29.7)
(29.7)
4,406.2
2.2
Net gain 2011
0.0
4,399.0
7.2
2.0
Other movements in subsidiaries’ equity
(292.3)
2.2
for the period
0.0
314.4
7.2
Transfer of net gain 2011
3.7
(288.2)
(70.0)
Adjustment from change of accounting
policy
(restated)
4,446.9
119.9
(0.8)
268.1
475.9
(123.0)
197.7
4,759.1
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ANNUAL REPORT 2012
FINANCIAL SECTION
The following table provides details on the distribution restrictions of equity:
(€ million)
Not available for distribution to shareholders
Share capital
31.12.2012
31.12.2011
565.1
309.9
0.1
0.1
Share premium reserve – portion not available for distribution
232.1
261.8
213.8
5.6
Translation reserve
119.9
43.6
(0.8)
(1.2)
4,194.0
4,096.3
3,777.7
3,777.7
(49.5)
(77.6)
Available for distribution to shareholders
Share premium reserve – portion available for distribution
Retained earnings
Total shareholders’ equity
D.3.1
465.8
396.2
4,759.1
4,406.2
Paid-up and called capital
The authorised share capital amounts to €0.5 million and is divided into 500,000 shares at €1.0 par value, of which 100,000 have been
issued and fully paid.
D.3.2
Revaluation reserve
The revaluation reserve includes a positive revaluation reserve from the available-for-sale securities of Group companies for
€213.8 million (2011: €5.6 million) which is not available for distribution.
D.3.3
Profit distribution
Dividends are recognised as a liability provided they are declared before the end of the reporting period. Dividends declared after the
end of the reporting period are not recognised as a liability but are disclosed in the notes.
On 29 June 2012, the Company declared an interim dividend of €123 million.
On 8 January 2013, the Company’s shareholders adopted a decision, whereby the shareholders declared an interim dividend in the total
amount of €82.0 million out of retained earnings.
On 28 March 2013, following the Framework Agreement between Company’s shareholders, the Company declared an interim dividend
in the total amount of €270.0 million, out of which €186.0 million were paid out of retained earnings and €84.0 million out of 2012 profits.
As of the date of the issue of the financial statements, no decision has been taken by the Company Board of directors in respect of the
appropriation of the remainder of 2012 results.
D.4PROVISIONS
This item comprises the provision for unpaid holidays totalling €0.2 million (2011: €0.3 million).
156
ANNUAL REPORT 2012
D.5.
CURRENT LIABILITIES
D.5.1
Other liabilities
FINANCIAL SECTION
Other liabilities consist of the following:
(€ million)
31.12.2012
31.12.2011
Liabilities for social security and health insurance
0.1
0.1
Liabilities to employees
1.7
0.3
Payables to clients and suppliers
0.5
0.6
Payables related to taxation
0.4
0.1
Accrued charges
0.9
3.9
Total
3.6
5.0
E.NOTES TO THE PROFIT AND LOSS ACCOUNT
E.1
OTHER INCOME AND EXPENSES
Other income and expenses can be analysed as follows:
(€ million)
2012
2011
Interests and other investment income
7.7
3.4
Currency gains
0.0
6.1
Other income
9.6
10.4
Total income
17.3
19.9
Expenses for investments
12.1
13.8
Administration costs
14.7
16.4
Currency losses
0.5
0.0
Other expenses
0.1
0.0
Total expenses
27.4
30.2
Income taxes
Other income and expenses
0.3
0.0
(10.4)
(10.3)
Interest and other investment income consist of:
(€ million)
2012
2011
Interests from loans
0.2
0.2
Interests from term deposits
1.1
2.3
Interest income from government bonds
2.0
0.6
Interest income from corporate bonds
2.2
0.3
Other investment income
2.2
0.0
Total Interests and other investment income
7.7
3.4
The line Other income consists of income from Group companies for rendering consultancy services.
Expenses for investments represent the costs for the right of first refusal related to equity securities transactions.
157
E.2
ANNUAL REPORT 2012
FINANCIAL SECTION
COMMITMENTS AND CONTINGENT LIABILITIES
The Company had no significant contractual commitments or contingent liabilities as at 31 December 2012 other than those already
provided for.
E.3EMPLOYEES
Number of employees
31.12.2012
31.12.2011
Managers
23
22
Employees
64
79
Total
87
101
Employee expenses have been €8.0 million (2011: €8.8 million) and are recognised among Administration costs (Note E.1). Further
information about employees is provided in Note F.27 of the consolidated financial statements. All employees of the Group work outside
the Netherlands.
E.4
COMPANY DIRECTORS
Further information about the remuneration of Company directors is provided in Note F.30.2 of the consolidated financial statements.
E.5
TRANSACTIONS WITH RELATED PARTIES
All investments in Group companies and other investments disclosed in the consolidated financial statements qualify as related parties.
Information on related party transactions is provided in Note F.30 of the consolidated financial statements.
E.6
AUDIT FEES
Audit fees related to the audit of financial statements for 2012 amounted to €2.9 million, net of VAT (2011: €3.0 million) and are due to
the Ernst & Young network of firms. No other services have been provided by the audit firm.
25 April 2013
Signed on behalf of the Board of Directors:
Luciano Cirinà
(Chief Executive Officer)
Jaroslav Mlynář
(Chief Financial Officer)
Board of Directors of Generali PPF Holding has granted power of attorney to Jaroslav Mlynář for signing the annual report. The annual
report has therefore not been signed by the other Board of Directors members.
158
ANNUAL REPORT 2012
FINANCIAL SELECTION
IV. Other Information
A.PROFIT APPROPRIATION
Provisions in the Articles of Association governing the appropriation of profit (Article 22):
• Distributions can only take place up to the amount of that part of the company’s net assets which exceeds the aggregate of the
issued capital and reserves which must be maintained by virtue of the law.
• Distribution of profits shall take place upon adoption of the Annual Accounts from which it appears that such distribution is allowed.
Interim dividends of €82.0 million (out of retained earnings) and €270.0 million (€186.0 million out of retained earnings and €84.0 million
out of 2012 profits) were declared on 8 January and 28 March 2013, respectively.
No decision about appropriation of the 2012 results in excess of the interim dividends has been proposed by the Company’s Board
of Directors to the General Meeting of shareholders as of the date of the issue of the financial statements. It is expected that it will be
proposed to allocate the amount of 2012 result exceeding the interim dividend, already paid, to retained earnings.
B.SUBSEQUENT EVENTS
Information on subsequent events is provided in Note G of the consolidated financial statements.
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ANNUAL REPORT 2012
FINANCIAL SECTION
C.AUDITOR’S INDEPENDENT REPORT
Independent auditor’s report
To: the board of directors of Generali PPF Holding B.V.
Report on the financial statements
We have audited the accompanying financial statements 2012 of Generali PPF Holding B.V., Amsterdam. The financial
statements include the consolidated financial statements and the company financial statements. The consolidated financial statements
comprise the consolidated statement of financial position as at 31 December 2012, the consolidated income statement, the
consolidated statement of comprehensive income, changes in equity and cash flows for the year then ended and notes, comprising a
summary of significant accounting policies and other explanatory information. The company financial statements comprise the company
statement of financial position as at 31 December 2012 and the company income statement for the year then ended and the notes,
comprising a summary of the accounting policies and other explanatory information.
Board of directors’ responsibility
The board of directors is responsible for the preparation and fair presentation of these financial statements in accordance with
International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code, and
for the preparation of the board of directors report in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore the board
of directors is responsible for such internal control as it determines is necessary to enable the preparation of the financial statements that
are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit
in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement
of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion with respect to the consolidated financial statements
In our opinion, the consolidated financial statements give a true and fair view of the financial position of Generali PPF Holding B.V. as
at 31 December 2012, and of its result and its cash flows for the year then ended in accordance with International Financial Reporting
Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code.
Opinion with respect to the company financial statements
In our opinion, the company financial statements give a true and fair view of the financial position of Generali PPF Holding
B.V. as at 31 December 2012, and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.
160
ANNUAL REPORT 2012
FINANCIAL SECTION
Report on other legal and regulatory requirements
Pursuant to the legal requirement under Section 2:393 sub 5 at e and f of the Dutch Civil Code, we have no deficiencies to report as
a result of our examination whether the board of directors report, to the extent we can assess, has been prepared in accordance with
Part 9 of Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b-h has been annexed. Further we
report that the board of directors report, to the extent we can assess, is consistent with the financial statements as required by Section
2:391 sub 4 of the Dutch Civil Code.
The Hague, 25 April 2013
Ernst & Young Accountants LLP
Original signed by J. Niewold
161
ANNUAL REPORT 2012
FINANCIAL SECTION
Consulting, design and production: © B.I.G. Prague, 2012
Graphic design: Jan Jiskra

Generali PPF Holding Annual Report 2012

Transcription

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