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ANNUAL REPORT POISŤOVŇA SLOVENSKEJ SPORITEĽNE, A.S. VIENNA INSURANCE GROUP 2017
2
Table of Contents 3 Foreword of the Chairman of the Board of Directors 4 Company Details 5 Selected Indicators 6 Company structure 9 Vienna Insurance Group 11 Supervisory Board Report 12 Corporate Identity 13 Achievements and Awards 14 Product portfolio 15 Report on Business Activity 17 Report on the Financial Situation of the Company 19 Other Key Circumstances 21 Projected Development
Annexes 22 Financial statement compiled in line with IFRS for the year ended 31 December 2017
3
Foreword of the Chairman of the Board of Directors
Dear Ladies and Gentlemen,
2017 was a successful year in particular for Poisťovňa
Slovenskej sporiteľne, a.s. VIG, in fact it was the most
successful year in the company’s history. The foundation of
this success is a strong team of professionals who have
identified themselves with the company’s principles such as
quality and efficient work and building a stable and reliable
insurance company representing the Vienna Insurance
Group.
The group has been operating in Central and Eastern Europe
since 1990, and the proximity to customers has been
underlined by around 50 group companies in 25 countries.
The results achieved exceeded our plans. Both in written
premium in the total amount of EUR 154.3 million and the
profit before tax in the total amount of EUR 18.0 million.
Poisťovňa Slovenskej sporiteľne significantly exceeded the
set goals and thus firmly contributed to the position of
market leader of the Vienna Insurance Group in Slovakia.
Thanks to our excellent business results we were awarded
the prize for the most successful insurance company at the
award ceremony of annual prizes of TREND weekly in 2017.
This award has definitely ranked Poisťovňa Slovenskej
sporiteľne, a.s. VIG among the best players on the Slovak
insurance market.
With all these successes, we can start 2018 optimistically. It
will be a year of major changes and new challenges.
We offer our helping hand to clients not only in the form of
insurance claims, but we also help through social
sponsorship. As in previous years, we supported socially
disadvantaged people to give them a chance to find their
place in society.
Finally, I would like to thank our shareholders for their
support, I wish to express my thanks to our partners,
Slovenská sporiteľňa and Prvá stavebná sporiteľňa, last but
not least I want to thank my colleague from the Board of
Directors Viera Kubašová and all our team members, who
have the greatest share in the successful development of
Poisťovňa Slovenskej sporiteľne, a.s. VIG over the past few
years.
Kurt Ebner Chairman of the Board of Directors
Poisťovňa Slovenskej sporiteľne, a. s. Vienna Insurance Group
4
Company Details
Business name
Poisťovňa Slovenskej sporiteľne, a. s. Vienna Insurance
Group (hereinafter “Company” or “Poisťovňa Slovenskej
sporiteľne”)
Registered office
Tomášikova 48, 832 68 Bratislava, Slovak Republic
Headquarters
Polus Tower 1, Vajnorská 100/A, 831 04 Bratislava, SR
Legal form
Joint-stock company
Company ID No.: 35851023 / VAT No.: SK2021710064
Objects of Business
� pursuing insurance activities for the area of life
insurance as per the Act on Insurance, in the following
fields of insurance cover:
� insurance payable on death, insurance payable at
maturity or insurance payable on death or at
maturity,
� investment-linked insurance,
� bodily harm or sickness insurance if it is a rider to
the main policy.
� pursuing insurance activities for the area of non-life
insurance as per the Act on Insurance to the scope of
the following fields of cover:
� insurance against bodily harm,
� insurance against illness.
� pursuing activities of an independent financial agent in
the insurance or reinsurance sector.
Establishment
27. 1. 2003, by registration to the Companies Register of the
District Court of Bratislava I., entry ref no. 3085/B
Share capital
EUR 7 011 000
Shareholders
VIENNA INSURANCE GROUP AG
WienerVersicherungGruppe 90 %
KOOPERATIVA poisťovňa, a. s.
ViennaInsuranceGroup 5 %
Slovenská sporiteľňa, a. s. 5 %
Board of Directors
Ing. Martin Kaňa, Chairman to 16.10.2017
Kurt Ebner, Chairman from 16.10.2017
Ing. Viera Kubašová, member
Supervisory board
Dkfm. HansRaumauf - Chairman
Mag. Erwin Hammerbacher - Vice-chairman
Prof. Elisabeth Stadler - member
JUDr. Judit Havasi - member
Mag. Hans Meixner - member
Ing. Daniel Morvay - member
RNDr. Mária Maryniaková - member
Distribution Channel
Branch network of Slovenská sporiteľňa, a. s. .
Retail network of Prvá stavebná sporiteľňa, a. s.
Contact
Sporotel: 0850 111 888
Poisťovňa Slovenskej
sporiteľne, a. s. tel.: 02/5022 9300
ViennaInsuranceGroup fax: 02/4862 7040
Tomášikova 48 web: www.pslsp.sk
832 68 Bratislava 3 e-mail: [email protected]
5
Selected Indicators
Financial indicators 2015 2016 2017
Total assets 366 323 408967 525 752
Shareholders’ equity 44 305 49 683 56 457
Comprising, share capital 7 011 7 011 7 011
Technical provisions 308 617 345 085 447 602
Profit after tax 8 159 9 378 12 959
Business indicators
New business 59 329 55 968 114 628
Gross written premium 86 804 89 202 154 336
Other data
Average payroll 57 63 65
Data are given in thousands of Euros or as quantities, unless stipulated otherwise. The company reports data in line with the IFRS of the EU �. New business is given as annualized premium, including riders.
6
Company Structure
The majority shareholder of Poist ̌̌ ̌̌ovn ̌̌ ̌̌a Slovenskej sporitel ̌̌ ̌̌ne, a. s. Vienna Insurance Group is VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe with a 90 % subscription to its share capital. Kooperativa poist ̌̌ ̌̌ovn ̌̌ ̌̌a, a. s. Vienna Insurance Group a Slovenská� sporitel ̌̌ ̌̌n ̌̌ ̌̌a, a. s. each hold 5 % stakes.
VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe
Vienna Insurance Group (hereinafter also “VIG“ or “Group“)
boasts the best rating as part of the main index of the Vienna
stock exchange, the ATX. Vienna Insurance Group is an
international insurance group based in Austria’s capital,
developing insurance solutions in line with personal and local
needs, making it one of the leading insurance companies in
Austria and Central and Eastern Europe (CEE).
On the Austrian market, Vienna Insurance Group is
represented by the companies Wiener Städtische
Versicherung VIG, Donau Versicherung AG and Sparkassen
Versicherung AG.
KOOPERATIVA poisťovňa, a.s. ViennaInsuranceGroup
KOOPERATIVA poisťovňa, a. s. ViennaInsuranceGroup offers
individuals and business entities a range of over 60 products
in life and non-life insurance. It provides its services to 1.5
million clients.
The first private universal insurance company,
KOOPERATIVA poisťovňa, a. s. Vienna Insurance Group was
established on 30 October 1990. The major shareholder is
one of the most significant insurance companies in Austria,
Vienna Insurance Group AG Wiener Versicherung Gruppe
with representation in Central and Eastern Europe.
In 2001, KOMUNÁLNA poisťovňa, a. s. Vienna Insurance
Group was affiliated to the VIG group in Slovakia, and in 2008
also Poisťovňa Slovenskej sporiteľne, when Erste Group Bank
culminated the sale of its insurance companies in Central and
Eastern Europe to Vienna Insurance Group.
Slovenská sporiteľňa, a. s.
Slovenská sporiteľňa is the largest bank in Slovakia with
almost 2.3 million clients. It has long held the leading
position in terms of total assets, personal loans, client
deposits, and in the number of branches and ATMs. It offers
a comprehensive range of services at 270 branch points and 8
regional corporate centers across Slovakia. Slovenská́
sporiteľňa has been generating excellent economic results
for an impressively long time. In 2001, the bank became a
member of Erste Group, one of the largest financial groups in
Central Europe, with over 46,000 employees serving 16
million clients at almost 2,600 branches in seven European
countries (Austria, Czech Republic, Slovakia, Romania,
Hungary, Croatia and Serbia).
7
Board of Directors
Kurt Ebner Chairman of the Board of Directors
He holds a degree from the Technical University of Vienna in Insurance Mathematics. He has been
a part of Wiener Städtische Versicherung since 1976, he has since held several management
positions in various companies of Vienna Insurance Group. He performed most of his professional
duties in Austria, Poland Croatia, Hungary and Slovakia.
Kurt Ebner was named the Chairman of the Board of Directors Poisťovňa Slovenskej sporiteľne on
16. October 2017.
Ing. Viera Kubašová Member of the Board of Directors
A graduate of the Slovak University of Technology in Bratislava, she has 20 years of experience in
the insurance and finance business. Her association with Poisťovňa Slovenskej sporiteľne started
while she was still with Slovenská́ sporiteľňa, where she worked on the project to establish the
insurer. Once it was formed, she entered the Company as Head of Finance and as Confidential Clerk
during the period from December 2003 to May 2007. She has been a member of the Board of
Directors of Poisťovňa Slovenskej sporiteľne since 1 May 2007.
In 2010, she became a member of the extended management and from 2014, a member of the
Board of Directors of KOOPERATIVA poisťovňa, a. s. Vienna Insurance group.
CEO
Legal &
Compliance dpt.
Policy Services,
Underwriting and
Claims dpt.
IT dpt.
Sales Managemnt &
Insurance Brokerage
Sales Support &
Marketing dpt.
Organizational structure
Organizational structure as of 31. December 2017
8
Supervisory Board
Sales Managemnt &
Insurance Brokerage
Sales Support &
Marketing dpt.
Board of Dire ctors
CFO
Actuarial dpt.
Financial dpt.
Asset
Management dpt.
Organizational structure
31. December 2017
CFO
Risk Management
dpt.
Internal Audit
We focus on providing our customers in Austria and CEE with custom products and services tailored to their needs. Our strategy is geared towards longprofitability and steady earnings growth, changing times.
Over 25,000 employees work for the Vienna Insurance Group (VIG), at around 50 companies in 25 countries. We develop insurance solutions in line with personal and local needs, which insurance industry in Austria and Central and Eastern Europe (CEE
Expertise and stability
The Vienna Insurance Group is an international insurance
group headquartered in the Austrian capital. After the fall of
the Iron Curtain in 1989, VIG expanded rapidly from a purely
Austrian business into an international group. VIG is
synonymous with stability and expertise in providing
financial protection against risks. The Group’s orig
back to 1824. Almost two centuries of experience, coupled
with a focus on our core competence of providing insurance
coverage, forms a solid and secure basis for the Group’s 20
million-plus customers.
Focus on Central and Eastern Europe
Besides Austria, VIG places a clear emphasis on Central and
Eastern Europe as its home market. The Group generates
more than half of its premium income in CEE. VIG’s
operations are also focused on this region. This primarily
reflects the forecasts for economic growth in CEE, which is
predicted to be twice as high as in Western Europe, as well as
the current level of insurance density, which is still well below
the EU average.
9
Insurance Group
We focus on providing our customers in Austria and CEE with custom products and services tailored to their needs. Our strategy is geared towards longprofitability and steady earnings growth, making us a reliable partner in rapidly
Over 25,000 employees work for the Vienna Insurance Group (VIG), at around 50 companies in 25 countries. We develop insurance solutions in line with personal and local needs, which have made us one of insurance industry in Austria and Central and Eastern Europe (CEE
The Vienna Insurance Group is an international insurance
Austrian capital. After the fall of
the Iron Curtain in 1989, VIG expanded rapidly from a purely
Austrian business into an international group. VIG is
synonymous with stability and expertise in providing
financial protection against risks. The Group’s origins date
back to 1824. Almost two centuries of experience, coupled
with a focus on our core competence of providing insurance
coverage, forms a solid and secure basis for the Group’s 20
Focus on Central and Eastern
Austria, VIG places a clear emphasis on Central and
Eastern Europe as its home market. The Group generates
more than half of its premium income in CEE. VIG’s
operations are also focused on this region. This primarily
wth in CEE, which is
predicted to be twice as high as in Western Europe, as well as
the current level of insurance density, which is still well below
Local market presence
For VIG, protecting customers financially against risk is a
responsibility. The Group pursues a multi
based on established local markets as well as local
management. Ultimately, the Group’s success and closeness
to its customers is down to the strengths of each individual
brand and local know-how.
Strong finances and credit rating
VIG has an A+ rating with stable outlook from well
rating agency Standard & Poor’s, meaning that it remains
the top-rated company on the Vienna Stock Exchange’s
index of leading shares, the ATX. The Vienna Insurance
Group is listed in both Vienna and Prague
Versicherungsverein – a stable core shareholder with a long
term focus – owns around 70% of VIG’s shares. The
remaining shares are in free float.
Further information on Vienna
is available at the VIG Group Annual Report.
Vienna Insurance Group
We focus on providing our customers in Austria and CEE with custom products and services tailored to their needs. Our strategy is geared towards long-term
making us a reliable partner in rapidly
Over 25,000 employees work for the Vienna Insurance Group (VIG), at around 50 companies in 25 countries. We develop insurance solutions in line with
the leaders in the insurance industry in Austria and Central and Eastern Europe (CEE).
Local market presence
For VIG, protecting customers financially against risk is a
ibility. The Group pursues a multi-brand strategy
based on established local markets as well as local
management. Ultimately, the Group’s success and closeness
to its customers is down to the strengths of each individual
finances and credit
VIG has an A+ rating with stable outlook from well-known
rating agency Standard & Poor’s, meaning that it remains
rated company on the Vienna Stock Exchange’s
index of leading shares, the ATX. The Vienna Insurance
s listed in both Vienna and Prague. Wiener Städtische
a stable core shareholder with a long-
owns around 70% of VIG’s shares. The
remaining shares are in free float.
Further information on Vienna Insurance Group
is available at www.vig.com or in the VIG Group Annual Report.
10
11
Supervisory Board Report
12
Corporate Identity
Vision
Modern Life Insurance Company.
Mission
Reliable insurer for whole life.
Strategy
Quality, effective, simple, innovative.
13
Achievements and Awards
TREND weekly has awarded the twentieth annual awards for extraordinary business results. Poisťovňa Slovenskej
sporiteľne, a.s. VIG took first place. It has been awarded The Insurance Company of the year 2017 for the second
time. Thus, defending its position as the most successful insurer.
Poisťovňa Slovenskej sporiteľne, a.s. VIG places regularly in the ranking of the best insurance companies. It's
already its seventh placement in the top three, which signifies that it is not a random success but a result of long-
lasting work.
14
Product Portfolio
In line with the strategy, the insurance company offers a lean portfolio of life and non-life insurance. Products are simple and flexible which enables them to cover the customer needs in the scope of life and accident insurance or sickness insurance.
Capital – investment life insurance
ŽIVOT This flexible product combines insurance, saving and
investing. The product adapts to the current possibilities and
needs of clients. Clients can choose between a solely capital
form or combined capital-investment forms, whether they
wish the insurance to be more focused on risk cover or on the
saving element. With progressive payment of premium,
clients have the option of taking out rider insurance for
accidental death, permanent disability, fractures, serious
illness or hospitalization. The insurance policy can cover the
parent with all their children.
Capital life insurance
Funeral insurance A specific purpose form of insurance cover that provides
funds for arranging a dignified final farewell and for easing
the negative financial impact on those left behind. Funeral
insurance offers cover in the event of death up to the age of
85. The premium can be paid progressively or as a lump sum.
Payment protection insurance
Loan protection insurance Insurance cover for the event of death by whatever cause,
total and permanent disability, incapacity to work and loss of
employment. It is offered with consumer loans and loans
secured by real estate when taking out a loan with Slovenská́
sporiteľňa. The loan borrower is the insured person.
Poisťovňa Slovenskej sporiteľne offers this product in co-
operation with Poisťovňa Cardif Slovakia and KOOPERATÍVA
poisťovňa, a. s. Vienna Insurance Group.
Accidental risk insurance
SPOROIstota Insurance of death by whatever cause and for injury that
causes death or leaves the insured with permanent bodily
harm. It is intended for holders of current accounts, natural
persons or persons with account handling rights. Considering
the scope of insurance cover and the low price, it serves as a
good addition to lump sum payment of life insurance.
Group accident insurance
Children savings book insurance It is compulsory risk insurance to the bank product “Children
savings book “. Insurance of death by injury for parents listed
in the child’s birth certificate. The Insurance sum is in the
amount of EUR 7,000 and is paid directly to Children savings
book. This insurance is offered to children in the age 0-18
who own the above bank product.
Individual accident insurance
Children savings book insurance PLUS Individual risk insurance that can be entered into together
with the bank product “Children savings book “. This is
insurance of death by injury of parents listed in the child’s
birth certificate. Alongside Children savings book insurance,
clients can increase the sum paid to the child in case they
lose their parent to EUR 27,000.
15
Report on Business Activity
Activities and standing of the Company on the insurance market
After several years of stagnation, the Slovak life insurance
market has come to life, with a volume of 1.25 billion EUR
that represents a year-on-year increase of 6.2%.
Poisťovňa Slovenskej sporiteľne also made a significant
contribution to this growth, which is also evidenced by a 73%
increase in the written premium compared to 2016. The
company thus not only confirmed the excellent results of
previous years but also exceeded them well.
PSLSP achieved a written premium volume of EUR 154 336
thousand. This was higher by EUR 65.1 mil compared to the
volume of written premium in 2016. Written premium in life
insurance achieved a volume of EUR 154 122 thousand.
Thanks to these results PSLSP confirmed its standing among
the top insurers on the Slovak life insurance market and
moved to third place in this ranking.
Thanks to the excellent results of PSLSP, the Vienna
Insurance Group was ranked 1st in the life insurance market
and defended its position from previous years. The market
share of the VIG Group was 37.1%, with a written premium of
EUR 464,587 thousand. This result has also been achieved by
the excellent results of the PSLSP in 2017.
Source: Slovak Insurance Association (SLASPO)
Slovak life insurance market 2015 2016 2017
(Written premium in thousands of EUR) 1 208 497 1 178 041 1 251 569
Poisťovňa Slovenskej sporiteľne, a. s. Vienna Insurance Group
Written premium (in thousands of EUR) 86 804 89 080 154 122 Market share of Company 7,18 % 7,56 % 12,31%
Vienna Insurance Group on the Slovak life insurance market
Written premium (in thousands of EUR) 399 539 399 529 464 587 Market share of Vienna Insurance Group 33,06 % 33,91 % 37,1 % Market ranking of Vienna Insurance Group 1. 1. 1.
68,24%
15,04%
16,70%
risk loan insurance and risk accident insurance
funeral insurance
capital investment life insurance
11,2%
57,2%
0,8% 0,7%
risk loan insurance and accident-oriented risk insurance funeral insurance
capital-investment life insurance
capital life insurance
16
Composition of new 2017
The number of new insurances in 2017 was 168 527 pcs. As in the
past years, in 2017, the dominant product in the number of
insurance was credit insurance. 110,556 of this insurance
accounted for 68.2% of the total number of insurances signed in
2017. There was a very significant shift in the number of
insurances the company achieved in the sale of capital
investment insurance. Compared to 2016, the PSLSP recorded a
22.5% increase. In numerical terms, this represents 27,078 units
sold, which is 4,982 more than the previous year. Traditionally,
the company has also been able to rely on a representative for
capital life insurance. It is represented by 24,384 pieces of funeral
insurance. A significant year-on
in capital life insurance. With a total of 24,384 funeral insurance
for 2017, this number is higher by 4,933
Premium written in 2017
Historical results were achieved by PSLSP in written premium in
2017, which is also confirmed by a 73% increase compared to
2016. The dominant share of the overall capital investment policy
is the capital investment life insurance. This carrier product
contributed to the total insured volume of EUR 88,215 thousand,
which is 57.2% of the share of the premium. The increase in
funeral insurance also accounts for 30.1% of this type of
insurance, which was the second highest share in 2017. The third
basic pillar of premiums written is
credit insurance. The company confirmed the results of 2016 with
a premium amounting to EUR 17,333.9 thousand
68,24%
risk loan insurance and risk accident insurance
30,1%
oriented risk
Composition of new business in
The number of new insurances in 2017 was 168 527 pcs. As in the
past years, in 2017, the dominant product in the number of
insurance was credit insurance. 110,556 of this insurance
accounted for 68.2% of the total number of insurances signed in
2017. There was a very significant shift in the number of
insurances the company achieved in the sale of capital
investment insurance. Compared to 2016, the PSLSP recorded a
numerical terms, this represents 27,078 units
sold, which is 4,982 more than the previous year. Traditionally,
the company has also been able to rely on a representative for
capital life insurance. It is represented by 24,384 pieces of funeral
on-year increase was also recorded
in capital life insurance. With a total of 24,384 funeral insurance
for 2017, this number is higher by 4,933.
Premium written in 2017
Historical results were achieved by PSLSP in written premium in
2017, which is also confirmed by a 73% increase compared to
2016. The dominant share of the overall capital investment policy
is the capital investment life insurance. This carrier product
tributed to the total insured volume of EUR 88,215 thousand,
which is 57.2% of the share of the premium. The increase in
funeral insurance also accounts for 30.1% of this type of
insurance, which was the second highest share in 2017. The third
of premiums written is risk insurance and, above all,
credit insurance. The company confirmed the results of 2016 with
a premium amounting to EUR 17,333.9 thousand.
17
Report on the Financial Situation of the Company
2017 was the most successful year in Poist ̌̌ ̌̌ovn ̌̌ ̌̌a Slovenskej sporitel ̌̌ ̌̌ne, a. s. Vienna Insurance Group (hereinafter Poist ̌̌ ̌̌ovn ̌̌ ̌̌a or the Company) 15-year history. Poist ̌̌ ̌̌ovn ̌̌ ̌̌a recorded an increase in profit before tax to EUR 18 mil (EUR 12.5 million in 2016), which represents an increase by 44% and a significant increase in written premiums.
The assets of the Company increased by almost 29% in 2017
and as of 31.12.2017 achieved a value of EUR 525.8 million.
Due to the high premium written, the Company also
recorded a significant positive position in the net cash flow
from operating activities at the level of EUR 112 million (EUR
40 million in 2016).
The growth and composition of new premium production,
rigorous cost management and the result of investing
financial assets contributed to these results.
The financial results of the Company depend on the situation
on the financial markets. In recent years the situation,
besides fundamental aspects, has been vastly dependent on
the monetary policy of the main central banks.
During the year 2017, the US Central Bank (FED) acceded
three times to raise its main interest rate, which ended year
at 1.25-1.5%. At the same time, in October, it ended the
quantitative easing program. The gradual departure from the
markedly relaxed monetary policy was due to the good
performance of the US economy and the significant
strengthening of the labor market. On the opposite side of
the Atlantic, the ECB remains at -0.40% for daytime
sterilization operations with commercial banks and 0% for
main refinancing operations. Since April, the ECB has cut the
purchase of assets on the financial market to EUR 60 billion
continued at this pace until the end of the year. Since
January 2018, it has decreased the monthly purchase of
assets to EUR 30 billion and this should last at least until
September 2018. The ECB is driven to slowing down the
quantitative easing with the rising economic growth rate and
declining unemployment. But as inflation is not yet reaching
target value, interest rates will remain at the current levels
even longer, and they will start to decline significantly
beyond the QE program's horizon.
In Europe, a number of elections took place last year (the
Netherlands, France, Austria, and Germany). There were
fears that the anti-European far-right parties could gain
a significant foothold. This eventually did not happen and the
political situation in Europe stabilized and calmed down. The
release of tensions had an impact on the narrowing of
corporate bond spreads, which led to a decline in their yield
to maturity.
The 10-year yield of Slovak government bonds declined
slightly in 2017 from 0.94% at the beginning of the year to
0.89% at the end of the year.
The stock markets had another very successful year.
Profitability of companies on a global scale rose by 1.5%
more than analysts expected. In addition to low interest
expense, future positive expectations are reflected in the
economic activities of companies. The International
Monetary Fund has increased the world economic growth
forecast to 3.9% in 2018 and 2019.
Thanks to a conservative and responsible approach to
investment, the Company maintains a stable financial
position over the long term. An important step for its
preservation is also the management of the technical
interest rate for capital life insurance products in line with
developments on the financial markets. This management is
important for the long-term maintenance of the ability to
repay the Company's liabilities to policyholders.
18
he return on investment of the investment portfolio covering
the traditional technical provisions declined slightly in 2017.
Since the bulk of the portfolio is made up of bonds, debt
purchases in 2017, at the current low yields, have reduced the
average return. On the other hand, the average technical
interest rate of the insurance portfolio fell from 1.98% at the
beginning of the year to 1.71% at the end of the year.
In 2017, the investment appreciation was once again higher
than the average guaranteed technical interest rate, which
allowed the re-allocation of 2.25% share of premiums to the
clients.
In addition to investments serving to cover traditional
insurance and own funds the Company’s portfolio also
includes assets covering technical provisions from managed
investment life insurance and index-linked life insurance with
a predefined investment strategy. These investments
appreciated during the course of the by more than EUR 5.6
million year which represents an average output of 2.5% per
annum.
Proposal for the distribution of profit for 2017
Poisťovňa Slovenskej sporiteľne, a. s. Vienna Insurance
Group ended the year 2017 with a profit after tax of EUR13.0
million. The Company has fulfilled all the legal conditions for
the payment of dividends, therefore the Board of Directors
the company proposes to pay part of the profit in the form of
dividends.
19
Other Key Circumstances
Impact of the accounting entity on employment and the environment
As of 31 December 2016, Poisťovňa Slovenskej sporiteľne
employed 77 full-time employees. The organizational
structure included 2 members of the Board of Directors, 10
employees in management posts and 7 employees on
maternity leave. From the total of 77 employees, 62.3 % are
women and 37.7 % men.
During 2016, the Company recorded a fluctuation rate of 9%,
with an annual decline by more than 7%. The ratio of
employees with higher education to those with a middle
school education was 3:1. The average age of an employee is
39 years old.
Besides the salary, the company offers its employees a
variety of employee benefits divided into 5 basic programs:
Health program, Loyalty program, Family program,
Education and Cafeteria. The most commonly used
employee benefits were the ones from the Cafeteria system,
medical check-ups, injury insurance, pension contributions,
flexible work time, and free time for regeneration.
Poisťovňa Slovenskej sporiteľne employees have in 2017
actively participated on vocational educational programs
organized by companies in Slovakia and other EU countries.
Educational investment in 2017 represented on average EUR
450 per employee.
Poisťovňa Slovenskej sporiteľne, a. s. Vienna Insurance
Group confirmed its market position and was among the top
insurers on the market in 2017.
Risk Management
Based on the activities associated with the insurance
business the Company is exposed to underwriting and
market risks, to general risks, which is the risk of the failure
of a counterpart, concentration risk and operational risks.
Besides this, the Company monitors risks following from
business activity, such as reputation and strategic risk.
Risk management forms an inseparable part of Company
operation. Risk management processes are focused on
securing the financial force and supporting sustainable
growth.
The Company has implemented a complex system of tools
and measures the aim of which is monitoring and
assessment of risks.
In 2017 the company focused on the follow processes
targeted to effective risk management:
� Valuation of assets and liabilities - Calculation of
technical provisions in accordance with the
requirements of the Solvency II (Calculation of technical
provisions)
� Calculation of the Solvency Capital Requirement and
own resources
� Inventory of risks
� System of internal control
� Own risk and solvency assessment, including an
assessment of potential risks affecting the Company's
key indicators
� Submission of information to supervisory authorities –
quantitave statements according to the requirements
of the supervisory authorities.
During 2017, the Company has on quarterly basis analyzed
the possible exceeding of limits for the position of solvency,
capital requirements for solvency and risk bearing capacity
(RBC). Monitoring of limits is an important part of risk
management and serves as early warning of insolvency
danger for the Company.
20
Company satisfies the requirements of solvency in
accordance with valid legislation and throughout the year
has not recorded any significant facts that may endanger the
financial stability of the Company. Therefore, the Company
provides their clients with sufficient security of covering
liabilities following from insurance policies.
Risk management is dealt with in a separate part of the notes
to the financial statements.
Company philanthropy and charity
Company employees actively participate in the long-term
voluntary project Social Active Day with the aim of helping
people living in the crisis center Brána do života in Bratislava.
Both long-term and new projects have been supported by
grants as well. For the 6th year the varied year-round
volunteer activities give space to the staff of Poisťovňa
Slovenskej sporiteľne to be an integral part of philanthropic
projects and activities that share moments of happiness with
a good purpose.
Verifying adequacy of technical provisions
Technical provisions of the Company as of the day the
Financial Statements were compiled were calculated and
established as per the applicable formulas and principles for
their establishment and release, on the basis of the original
actuarial assumptions.
The Company verified the adequacy of technical provisions
by conducting a test of adequacy of the provisions using the
method of discounted cash flows, this with the use of the
best estimates of future development of actuarial and
economic conditions.
All insurance contracts were included in the test, with riders
evaluated together with primary insurance.
The company tests the adequacy of its reserves on its
portfolio individually for three homogeneous groups:
� traditional insurance with shares of surplus,
� traditional insurance without shares of surplus,
� investment insurance.
.
The conducted test of adequacy demonstrated the
sufficiency of reserves for all three monitored groups.
The details are given in the Notes to the Financial
Statements
Information on received bank loans and on other bank loans
As of 31 December 2017, the Company had not taken out any
bank or other loans.
Equity participations
Poisťovňa Slovenskej sporiteľne, a. s. ViennaInsuranceGroup
holds no equity participations in other companies h.
Litigations
In 2017, the Company was a party to seven passive litigations
and is currently a party to one active litigation. The Company
does not anticipate any significant impact on its financial
situation from these litigations.
Acquisition of own shares
Poisťovňa Slovenskej sporiteľne did not acquire any of its
own shares, short-term commercial papers, business stakes
and equities, or short-term commercial papers and business
stakes of the parent company to its portfolio in the 2017
accounting period.
Expenditure on Research & Development
Poisťovňa Slovenskej sporiteľne did not spend any funds on
research and development.
Events of significance occurring after the reporting period
No events occurred after the balance sheet date that could
have a significant influence on the reflection of
circumstances that are the subject of reporting.
21
Projected Development
Poisťovňa Slovenskej sporiteľne is a modern financial institution that also defended its stable position on the life insurance market in 2017.
Key factors for the company remain the same – provide the
clients with high-quality, fast and available services. One of
our main goals is to be a stable partner for our client
throughout their whole life. It currently offers its services to
almost half a million clients. Permanent year on year
increase in the number of clients is a sign of their confidence.
It will start 2018 with all of its successes. 2018 will be a year
of fundamental changes and a number of new challenges.
One of the strategic goals of the Vienna Insurance Group is
the developing of the area of bank insurance.
In order to strengthen its bank insurance position Poisťovňa
Slovenskej sporiteľne, a.s. Vienna Insurance Group is
planning to merge with Kooperativa poisťovňa, a.s. Vienna
Insurance Group in 2018.
The Board of Directors of the company on 27.10.2017
negotiated the intent of merging Poisťovňa Slovenskej
sporiteľne, a.s. Vienna Insurance Group and KOOPERATIVA
poisťovňa, a.s. Vienna Insurance Group (hereinafter
“KOOPERATIVA”) according to which, with effect to
01.04.2018 Poisťovňa Slovenskej sporiteľne voluntarily closes
without liquidation with a legal successor with the company
KOOPERATIVA as the successor and all assets, liabilities and
equity, including the rights and obligations of the PSLSP
company's employment relationships shall pass to the
effective date of the merger to KOOPERATIVA which will
become the universal legal successor of PSLSP.
The National Bank of Slovakia as a financial supervisory
authority, on 19 December 2017 granted a prior consent to
the merger of the companies.
Both the merger and the draft of the merger agreement
were submitted to the Extraordinary General Meeting of the
Company for approval by the Board of Directors on
28.2.2018.
The clients of Slovenská sporiteľňa, the largest bank in
Slovakia, will continue to be offered tailor-made special
products under the brand name of the bank. They will benefit
from a wider product range in the field of insurance, such as
new types of motor insurance and a richer range of services.
By combining the resources and competencies of both
companies implies the creation of a strong, stable, leading-
edge insurance company.
FINANCIAL STATEMENTSCOMPILED IN COMPLIANCE WITH IFRS AS ADOPTED BY THE EUROPEAN UNION POISŤOVŇA SLOVENSKEJ SPORITEĽNE, A.S. VIENNA INSURANCE GROUP
2017 31.december
Table of Contents Independent Auditor´s Report Financial Statements as of 31. December 2017 1 Balance Sheet 2 Comprehensive Profit and Loss Statement 3 Report of Changes in Equity 4 Report on Cash Flows Note to the Financial Statements 6 General Information 7 Summary of Basic Accounting Policy 17 Critical Accounting Estimates and Judgments in Applying Accounting Policies
18 Application of new Accounting Standards and Interpretations 19 New Reporting Standards that the Company does not apply Prematurely 23 Other Financial and Insurance Assets 25 Other Assets 27 Technical Provisions and Related Insurance Liabilities 28 Trade and Other Accounts Payable
29 Changes in Technical Provisions 31 Share Capital and Other Funds 32 Gross Written Premium 33 Income from Fees and Commissions 34 Result of Reinsurance 35 Profit and Loss from Asset Allocation 36 Claims and Insurance Benefits before Reinsurance 37 Operating and Other Expenses
38 Income Tax and Specific Levy from Profit 40 Insurance Risk Management 45 Financial Risk Management 49 Capital Management 50 Fair Value of Financial Instruments 55 Financial Instruments by Category 57 Transactions with Associates
58 Events after the Reporting Period
1 Notes on pages 5 to 58 comprise an integral part of these Financial statements.
Balance Sheet
In EUR thousands Note 31. December
2017 31. December
2016 ASSETS Loans 20, 22 2 909 2 980 Bonds: - held to maturity 20, 22 44 692 47 652 - at fair value through profit or loss 20, 22 98 596 93 710 - classified as loans and receivables 20, 22 25 484 20 697 - available for sale 20, 22 248 499 178 743 Equity securities: - available-for-sale 20, 22 66 438 36 430 - at fair value through profit or loss 20, 22 22 635 20 452 Other financial and insurance assets 6, 22 2 996 2 508 Other assets 7, 22 1 423 1 259 Corporate income tax receivable - 278 Cash and cash equivalents 20 12 082 4 258 TOTAL ASSETS 525 752 408 967 LIABILITIES Provision for life insurance and related insurance liabilities 8, 10 348 682 247 190 Provision for investment insurance 10 113 859 107 829 Trade and other payables 9 2 305 1 554 Deferred tax liability 18 2 578 2 609 Corporate income tax liability and specific levy from profit 1 871 101 TOTAL LIABILITIES 469 295 359 284 EQUITY Share capital 11 7 011 7 011 Statutory reserves 11 1 402 1 402 Other capital funds 11 4 302 4 302 Difference in valuation from available-for-sale assets 11 16 591 14 799 Retained earnings 27 151 22 169 TOTAL EQUITY 56 457 49 683 TOTAL EQUITY AND LIABILITIES 525 752 408 967
2 Notes on pages 5 to 58 comprise an integral part of these Financial statements.
Comprehensive Profit and Loss Statement
In EUR thousands Note 2017 2016 Gross written premium 12 154 336 89 202 Change in Unearned premium reserve 10 -1 6 Gross earned premium 154 335 89 208 Share of reinsurer in earned premium 10 -2 195 -1 993 Net earned premium 152 140 87 215 Interest income 7 929 6 745 Income from fees and commissions 13 2 435 2 058 Profits minus losses from asset allocation 15 6 459 3 269 Other revenues 593 164 Transaction administration costs for asset allocation -137 -63 Claims and insurance benefit costs before reinsurance 16 -130 901 -72 871 Share of reinsurer on claims and insurance benefit costs 10, 14 380 433 Acquisition costs of insurance contracts 7 -9 864 -6 606 Operating and other expenses 17 -11 010 -7 798 Income before tax 18 024 12 546 Income tax and specific levy from profit 18 -5 066 -3 168 INCOME FOR REPORTING PERIOD 12 959 9 378 Other comprehensive profit / loss: Items that will be reclassified subsequently to profit or loss Financial assets available for sale - Revaluation in year 2 690 3 821 - Losses minus profits reclassified to income upon sale 15 -421 -288 - Deferred tax 18 -476 -590 Other comprehensive income in total, minus tax 1 792 2 943 COMPREHENSIVE INCOME FOR REPORTING PERIOD 14 751 12 321
3 Notes on pages 5 to 58 comprise an integral part of these Financial statements.
Report of Changes in Equity
In EUR thousands Note Share
capital
Statutory reserve
fund
Other capital
funds Revaluation
funds Retained earnings
Own capital in total
As of 1. January 2016 7 011 1 402 4 302 11 856 19 734 44 305 Income for the period - - - - 9 378 9 378 Other comprehensive
income - - - 2 943 - 2 943 Total comprehensive
income - - - 2 943 9 378 12 321 Payment of dividends 11 - - - - -6 943 -6 943 As of 31. December 2016 7 011 1 402 4 302 14 799 22 169 49 683 Income for the period - - - - 12 959 12 959 Other comprehensive
income - - - 1 792 - 1 792 Total comprehensive
income - - - 1 792 12 959 14 751 Payment of dividends 11 - - - - -7 977 -7 977 As of 31. December 2017 7 011 1 402 4 302 16 591 27 151 56 457
4 Notes on pages 5 to 58 comprise an integral part of these Financial statements.
Report on Cash Flows In EUR thousands Note 2017 2016
Cash flows from operating activities Received premium 154 283 79 359 Received commission 877 203 Payments for insurance benefits -25 785 -24 714 Cash flows from guaranteed return on investments 4 935 4 331 Cash flows from reinsurance -785 -454 Commission payments for intermediaries -11 993 -10 178 Payments to employees and suppliers -3 951 -2 430 Other taxes and levies -1 552 -1 413 Other operating cash flows -430 -303 Income tax paid and specific levy from profit -3 511 -4 617 Net cash generated from operating activities
112 088 39 784
Cash flows from investing activities
Interest received 2 658 2 791 Received dividends and other incomes from securities 1 130 921 Cash flows from acquisition of tangible and intangible assets 7 -360 -497 Cash flows from sale of tangible and intangible assets 7 87 19 Cash flows from acquisition of financial investments -124 980 -54 063 Cash flows from sale of financial investments 25 178 19 698 Net cash used in investing activities
-96 287 -31 131
Cash flows from financing activities
Dividends paid 11 -7 977 -6 943 Net cash used in financing activities
-7 977 -6 943
Net growth of cash and cash equivalents
7 824 1 710
Change in cash and cash equivalents
Cash and cash equivalents at beginning of period 4 258 2 548 Cash and cash equivalents at end of period 12 082 4 258
Net change in cash and cash equivalents 20 7 824 1 710
NOTESTO THE FIANANCIAL STATEMENTS POISŤOVŇA SLOVENSKEJ SPORITEĽNE, A.S. VIENNA INSURANCE GROUP 2017 31.december
6
General Information
These financial statements have been compiled as annual
financial statements of the company Poisťovňa Slovenskej
sporiteľne, a. s. Vienna Insurance Group for the year of 2017
in line with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union. The financial
statements were approved by the Board of Directors of the
Company on 27 February 2018. The financial statements for
the preceding reporting period were approved on 21 March
2017 by the General Meeting of the Company.
Poisťovňa Slovenskej sporiteľne, a. s. Vienna Insurance
Group (hereinafter “Company”) was established on 20
September 2002 and commenced operations on 27 January
2003. It is registered in the Companies Register of the District
Court of Bratislava I under entry no. 3085/B. The company’s
identification number is 35851023 and its taxpayer
identification number is 2021710064. The Company is not an
unlimited liability partner in other accounting entities. As of
31 December 2017, Vienna Insurance Group AG Wiener
Versicherung Gruppe was its parent company, with its
registered office at Schottenring 30, 1010 Wien, Austria, and
Wiener Städtische Wechselseitige Versicherungsanstalt –
Vermogensverwaltung was its final controlling entity. The
ownership structure of the Company remained unchanged in
2017 as well as in 2016. From 1 January 2018, the Company's
operations from the accounting point of view are considered
to be operations carried out on behalf of the successor
company, which is KOOPERATIVA poisťovňa, a.s. Vienna
Insurance Group, due to merger (Note 25).
Basic activities of the accounting entity
The Company conducts life and non-life insurance, namely:
� Death insurance cover ,endowment assurance or both
death insurance and endowment cover,
� Investment fund insurance cover,
� Accident and illness insurance, provided that it is
additional insurance,
� Non-life insurance in the segments of accident and
illness insurance,
� Activities of an independent financial agent in the
insurance or reinsurance sector.
The company is active in the Slovak Republic nationwide
through its Slovenská́ sporiteľňa a.s. and Prvá́ stavebná ́
sporiteľňa, a.s branches.
Registered office The company’s registered office is Tomášikova 48, 832 68
Bratislava 3, Slovak Republic.
Currency of financial statements The financial statements are quoted in EUR in thousands,
unless stated otherwise.
As of 31.12.2017 the Company’s Board of Directors was made
up of: Chairman Kurt Ebner (since 23.11.2017 and until
22.11.2017 Ing. Martin Kaňa) and member Ing. Viera
Kubašová. The Supervisory Board was made up of Chairman
Dkfm. Hans Raumauf, Vice-chair Mag. Erwin Hammerbacher
and members Mag. Hans Meixner, Prof. Elisabeth Stadler,
JUDr. Judit Havasi, Ing. Daniel Morvay and RNDr. Mária
Maryniaková. The company maybe be represented as of
31.12.2017 and 31.12.2016 Ing. Anna Samuelová and Ing.
Richard Schiffer.
As of 31 December 2017 the average number of employees
was 74 (in 2016: 69), out of which 10 were management
employees 10 (2016: 10).
7
Summary of Basic Accounting Policy
Basis for preparation of financial statements
These financial statements were compiled under the historical cost convention, with the exception of financial assets available for sale and financial assets at fair value through profit or loss. The following text states the basic accounting principles and methods. These were applied consistently in the current and the previous accounting periods, unless otherwise stated.
Financial instruments – basic terms of measurement
Depending on their classification, financial instruments are
measured at fair value or at amortized cost using the
effective interest method, as described below.
Fairvalue is the price that the owner would have received from the sale
of the asset or that the debtor would have paid for the
transfer of liability in a standard transaction between parties
on the market, on the day of valuation. The best proof of fair
value is the price on the active market. A market is deemed
active if transactions with the said assets or liabilities are
made with sufficient frequency and volume so that it
continually provides the information about the price. The fair
value of financial instruments traded on the active market is
determined as the sum of their quoted prices and their
volumes owned by the Company. This procedure is applied
also where the daily volume traded on the market is not
sufficient to be able to absorb the volume owned by the
accounting entity and the instruction to sell a position within
a single transaction could affect the quoted price.
The quoted price used for valuation of an asset is the quoted
bid price and the quoted price for valuation of liabilities is the
quoted ask price.
When the closing rate is not available for the given day of
valuation, the market price is determined by the market
makers. If the market price cannot be determined even by
the market makers, the closing price of the security is used
not more than 30 calendar days from the day the valuation is
made. If it is not possible to determine the market price
using the price acquired by the above methods, the price is
calculated from the yield produced by interpolation between
the closest points of the yield curve for the given type of
security. Where there is no financial market for the particular
investment, the fair value is determined using valuation
techniques which include reference to the current fair value
of another similar instrument or by analysis of discounted
cash flows.
The fair value is analyzed depending on the level in the fair
value hierarchy as follows: (i) level one represents valuation
of the market price (unadjusted) from the active market for
identical assets or liabilities, (ii) level two represents
valuation using techniques or other models whose
fundamental inputs are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices), and (iii) level three represents the valuation whose
inputs are not based on observable market data (i.e. there
are subjectively set input parameters). For the purposes of
financial reporting, it is assumed that any shifts between the
levels in the fair value hierarchy always occurred only by the
end of the reporting period.
Transaction costs are costs directly associated with the purchase, issue or sale
of a financial instrument. These costs would not have been
8
incurred if the transaction had not occurred. Transaction
costs include fees and commissions paid to intermediaries
(including employees working as intermediaries), advisors,
brokers and dealers, fees to regulatory agencies and stock
markets, and transfer taxes and fees. Transaction costs do
not include discounts or surcharges, costs of financing or
internal administrative costs.
Amortized costs determined by the effective interest method is the value representing the amount at which the financial
instrument was carried at the time of acquisition, minus
payments of principal, plus accrued interest, and minus any
adjusting entries for impairment of financial assets. Accrued
interests include accrued transaction costs and the difference
between the acquisition cost and the nominal value using the
effective interest method. Interest accrued in this way is part
of the valuation of financial instruments in the balance sheet.
The effective interest method is the method of calculating the redemption value and for
setting interest income and costs for the given period with
the aim of achieving a constant interest rate (effective
interest rate). The effective interest rate is one that precisely
discounts estimated future cash flows (with the exception of
future loan losses) for the period the financial instrument
exists, or for a shorter period, to the net carrying value of the
financial instrument. The effective interest rate discounts
cash flows of instruments with variable interest rate until a
further change of the interest rate is made, excepting a
bonus or discount, which reflects credit risk above the
variable interest rate specified for the financial instrument,
and with the exception of the other variables that do not
change along with the market interest rate. These bonuses
or discounts are accrued throughout the whole expected life
of the financial instrument. Calculation of the current value
includes all fees between the parties, paid or received, which
are an integral part of the effective interest rate.
Initial measurement of financial instruments Financial instruments at fair value through profit or loss are
carried at the fair value at the time of acquisition or creation.
Other financial instruments are measured at the time of
acquisition or creation by the fair value plus transaction
costs. The best evidence of the fair value at the time of
acquisition is the transaction price. The profit or loss at the
time of acquisition is accounted only if the difference
between the transaction price and the fair value could be
supported by the price from other simultaneously executed
transactions on the market with the same financial
instrument or by the valuation model, the inputs of which
only comprise of data from available markets.
Current purchases and sales of financial assets are reported
on the date the deal is financially settled, being the date
when the Company receives or supplies the said asset. This
method is used thoroughly for all purchases and sales of
financial assets.
De-recognition of financial assets The Company derecognizes financial assets in the following
cases: (a) the asset or receivable was paid off or the right to
income from this asset has expired in some other way or (b)
the Company has transferred the right to the cash flows from
the financial asset or has concluded an agreement on the
transfer of income from the said asset immediately after
receipt, which complied with the set conditions, whereby: (i)
in fact it transferred all risks and rewards of ownership of the
asset or (ii) it did not transfer nor retain in essence all risks
and rewards of ownership, but retained control. Control
remains on the side of the Company in the event that the
counterparty is practically not able to sell the said asset as a
whole to an independent party without the sale being
subject to further restrictions.
Securities held to maturity This class of financial instrument represents securities
quoted on the active market with firmly fixed or
determinable payments, which the Company intends and is
able to retain till maturity. The security may not be classified
as held to maturity if the Company or issuer is entitled to
request its premature payment, because the price paid for
such a right is not consistent with the objective to hold the
security to maturity. The company management sets the
classification of securities as held to maturity at the time of
acquisition and revaluates it to the end of each reporting
period. Securities held to maturity are carried at amortized
cost set by the effective interest method.
9
Securities at fair value through profit or loss Securities at fair value through profit or loss are so classified
at the time of acquisition based on how this classification
leads to the limitation of accounting non-compliance, which
would otherwise arise in connection with accounting related
provisions for investment insurance that is covered by these
securities. The risk from changes to the fair value of these
financial assets is borne by the insured, whereby the
respective revaluation of provisions from investment
insurance is accounted with an impact on profit or loss.
These securities are valued at their fair value, whereby all
changes to the fair value in the respective period, including
interest income and realized profits and losses from sale, are
reported as part of the profit or loss from asset allocation.
Securities available for sale These securities represent investment securities that the
Company owns, and which may be sold as required in respect
of liquidity or changes to market interest rates. Securities
available for sale are valued at fair value. Interest income
calculated by the effective interest method at the amortized
cost of these securities is accounted with an impact on profit
or loss. Other changes to the fair value are credited to the
other comprehensive income or loss until the security is
derecognized or until the onset of a loss from impairment,
when cumulative revaluation is reclassified from other
comprehensive income or loss to operating results.
Impairment losses are accounted as an expense to profit or
loss at the moment of creation, if one or more events occur
after acquisition of the securities that have a negative impact
on the amount or time the estimated cash flows are received.
Loss events registered by the Company are the same as
those of financial assets carried at amortized cost, which is
given in the section “Adjusting entries to financial assets
carried at amortized cost”. If, in a subsequent period, the fair
value of a security increases and the increase can be
objectively related to an event occurring after the
impairment loss was recognized, the impairment loss is
derecognized through the income statement in the given
period.
Equity securities available for sale These securities represent investments that the Company
owns, and which may be sold as required in respect of
liquidity or changes to market prices and exchange rates.
Equity securities available for sale are carried at their fair
value.
Dividend income from equity securities is carried with an
impact on income at the time it is approved by the General
Meeting and where it is probable that the Company will
receive it. Other changes to the fair value are carried to the
other comprehensive income or loss until derecognition of
the security or the onset of an impairment loss, when the
cumulative revaluation is reclassified from other
comprehensive income to profit or loss. Losses from
impairment are carried as an expense to income at the time
they occur, i.e. where there is a significant or prolonged
decline in their value below acquisition cost.
In such an event, the cumulative revaluation – set as the
difference between acquisition cost and the current fair value
minus losses already recognized in profit or loss in the past –
is reclassified from other comprehensive income to profit or
loss. Impairment losses are then not derecognized from the
profit or loss and subsequent profits from revaluation are
credited to other comprehensive income.
Equity securities at fair value through profit or loss Equity securities at fair value through profit or loss are so
classified at the time of acquisition based on how this
classification leads to limitation of accounting non-
compliance, which would otherwise arise in connection with
the recognition of related provisions for investment
insurance, which is covered by these securities. The risk of
changes to the fair value of these financial assets is on the
insure, whereby the respective revaluation of provisions from
investment insurance is carried with an impact on profit or
loss.
These securities are carried at their fair value, whereby all
changes to the fair value in the respective period, including
dividend income and realized profits and losses from sale,
are credited as part of profit and loss from asset allocation.
10
Other assets Other assets include tangible and intangible assets (primarily
software), which are carried at acquisition cost minus
correcting and adjusting entries for its impairment. Tangible
assets are subject to straight-line depreciation over the
assumed life of the asset, lasting for 4 to 6 years, with the
exception of furniture, which is depreciated over a 6-to-12-
year period. Intangible assets are amortized over a life of 2 to
5 years. The residual life of the asset is reviewed each year.
Other assets also include timing differences of commissions
for acquisition of insurance contracts. Timing differences of
acquisition commissions are used by the Company for
investment life insurance for current premiums with a
premium payment periodicity other than one year. The
reason for this is to harmonize the time the commission is
paid with the calculated initial costs.
Other financial and insurance assets Other financial and insurance assets comprise of receivables,
including receivables from insurance. Receivables at initial
recognition are carried at nominal value and then their value
is reduced by the value of adjusting entries. Adjusting entries
to receivables from insurance are formed in dependence on
how overdue the receivable is, based on the results of the
analysis of the development of the due date. Where
insurance ceases due to non-payment, an adjusting entry is
generated amounting to 100% of the receivable. The
Company demands payment of the owed premium from
clients and with receivables where the costs of enforcement
would exceed the actual debt, the Company does not pursue
enforcement further. Receivables that were not settled even
after urging clients are assigned by the Company to a third
party, which proceeds to enforce them.
Term deposits term deposits and receivables are financial assets with a
firmly fixed due date. They are accounted at the time the
funds are transferred to the bank. Term deposits are valued
at amortized cost using the effective interest method.
Cash and cash equivalents Cash and cash equivalents include cash in hand, valuables,
deposits held at call with banks, other short-term highly
liquid assets with original maturities of three months or less,
with the exception of short-term term deposits that were
agreed for the purpose of investing. Cash and cash
equivalents are valued at nominal value increased by accrued
interest.
Liabilities from insurance contracts and investment insurance An insurance contract is a kind of agreement on
compensation for the insuree, based on which one party
(insurer) accepts a substantial insurance risk from the other
party (insuree) in the event that a specified uncertain future
event (claim) negatively affects the insured. An insurance
contract is not the kind of contract that exposes the insurer
to a financial risk without the transfer of a significant
insurance risk. The financial risk comprises of the risk of a
possible future change to the interest rate, price of a
security, commodity price, exchange rate, price index or rate,
credit rating or other variable that is independent of the
parties to the contract. The insurance risk is significant if
upon the onset of an insured event the Company is obliged
to pay out a substantial amount of additional benefits (in
excess to payments paid by the policyholder to the
Company). Once the contract is classified as an insurance
contract, it remains so until all rights and obligations arising
thereof cease.
The Company tested the level of risk transfer as the
difference between paid premiums (payments made by the
policyholder to the Company) and claims to insurance
benefits in the case of a claim. Contracts are classified on the
level of portfolios of individual product contracts. If the entire
portfolio in question comprises of contracts that carry
insurance risk, the Company does not examine individual
contracts so as to identify an insubstantial group that carries
insubstantial insurance risk. If even a small number of
contracts fail to satisfy the requirement of being classified as
an insurance contract, the whole portfolio is deemed as
insurance contracts. Some insurance contracts carry riders.
These riders are not classified separately as they constitute
an integral part of the insurance contract.
All contracts with policyholders that the Company issued
were classified as insurance contracts. Some of the insurance
contracts of the Company are entitled to a share in the
surplus of premium and they all contain embedded
derivatives, which are nevertheless closely tied to the main
contract, and thus there is no need to separate them and set
a fair value for them. The amount of the shares in the surplus
is dependent on the decision of the Company.
By their nature, the products of the Company are long-term
insurance contracts with fixed and guaranteed terms. For
each product, the Company issued insurance terms and
11
conditions, defining all rights and obligations of the parties.
Insurance contracts of the Company can be divided into the
following product groups, depending on what insurance risks
they cover: (1) risk insurance, (2) capital insurance, (3)
investment insurance (4) combined insurance and (5) non-life
insurance (accident).
Risk insurance comprises of
(a)Credit life insurance with regular premium, which covers
the risk of death and permanent disability arising from an
accident, whereby it is possible to take out a rider covering
accidental death (this risk covers 17% of insurance contracts;
in 2016: 19%),
(b)Group insurance covering death, a possibility of a rider
for total and permanent disability, and
(c)Accident insurance as part of a regularly paid uniform
premium, covering the compulsory risks: death, permanent
disability and accidental death.
Capital insurance comprises of
(a) Single-premium capital life insurance, covering benefits
on death and endowment assurance,
(b) Single-premium capital insurance with fixed maturity,
which covers the following three compulsory risks:
endowment, permanent disability and serious illness,
(c) Capital life insurance with regular premium, covering
death and endowment; it is possible to arrange the following
riders to this insurance: permanent disability (this risk covers
81% of insurance contracts – 2016:82%) and accidental death
(this risk covers 83% of insurance contracts – 2016:84%),
(d) Capital life insurance with regular premium with a
possibility of a rider covering children (rider insurance of
permanent disability from injury and of serious illness covers
all children of the insured), and
(e) Funeral insurance with single or regular premium with
reduced term for payment of premium, covering the risk of
death.
Investment insurance comprises of
(a) Single-premium investment life insurance,
(b) Investment life insurance with regular premium, and
(c) Single-premium index-linked life insurance.
Investment insurance products as well as index-linked life
insurance cover the risk of death, whereby the insured bears
the risk from investment of the funds. In case of survival to
maturity, the insured is entitled to payment of the capital
value of the insurance contract.
Index-linked life insurance is associated with a security, the
detailed characteristic of which is dependent on a particular
tranche. In addition to insurance of death, this insurance also
contains compulsory rider insurance of permanent accidental
disability. In cases of survival to maturity, the benefits carry
issuer-guaranteed appreciation, the amount of which
depends on the terms of the insurance contract.
The Company does not assume any warranty with this
product for the solvency of the issuer of the security. The
potential risk of insolvency of the issuer and the related risk
of non-payment of any benefits from the investment life
insurance contract is borne by the insured.
Combined insurance comprises of
(a) Single premium capital investment life insurance
(b) Regular premium capital investment insurance
Both products cover the risk of death and endowment,
whereby optional riders can be agreed for this insurance:
� Accidental death
� Permanent accidental disability
� Serious/Civilization illness
� Fractures
� Hospitalization due to illness
� Hospitalization due to injury
There was no fewer than one rider agreed to 59% of single
premium insurance contracts, whereby the number of riders
to a contract was 1.2 on average.
There was no fewer than one rider agreed to 92% of regular
premium insurance contracts, whereby the number of riders
to a contract was 3.9 on average.
In the case when an insurance contract has been concluded
without delay after maturity of any other capital insurance of
12
the Company, or the insurance meets the criteria defined by
the Company, the insurance includes an accidental death
rider, where the obligation to pay for the premium does not
arise on the part of the insured.
Combined insurance incorporates elements of capital and
investment insurance. The policyholder is entitled to
determine the respective percentage shares of capital and
investment components in the insurance.
Risk insurance and capital insurance are referred to by the
common name of traditional insurance, while they contain
also the capital element of combined insurance. The
investment part of combined insurance is reported on under
investment insurance.
Non-life insurance comprises of Group insurance payable at death caused by an accident for
regular Premium
Personal insurance payable at death of a parent caused by an
accident
Unearned premium reserve Unearned premium reserve (UPR) is formed for traditional
insurance and for non-life insurance from gross written
premium and for investment insurance from set fees, while
respecting that part of the premium or fees that are
attributed to future reporting periods. For insurance
contracts with regular premium, the provision is created
using the pro-rata temporize method.
For single- premium insurance this provision is not created.
The provision is not created either for a monthly periodicity
of premium payment, due to the fact that the Company
issues contracts with the inception of insurance always as of
the 1st day of the month. Similarly, the provision is not
created for combined insurance with regular premium: the
risk premium is depleted on a monthly basis and the retained
part of the premium (capital and investment) is immediately
credited to the provision. The change in the balance of the
provision is accounted through expenses and income.
Outstanding claims provision Outstanding claims provision (OCP) is intended for
settlement of claims in the current or future reporting
periods. This provision is made up of two parts: (i) a provision
for insurance claims that have been incurred but not
reported (IBNR), and a provision for claims reported but not
settled (RBNS).
IBNR provision The Company forms this provision following monitoring of
delays in reporting insurance claims using the Chain – Ladder
method, where the monitored period spans a quarter. The
IBNR provision is dissolved in the event of a claim reported in
the current calendar quarter, despite the fact that the
insured event occurred in preceding calendar quarters. The
amount of the dissolved IBNR provision for the particular
reported insurance claim is equal to the total amount of the
RBNS provision for the given insurance claim, including
anticipated costs related to the settlement of the claim. The
respective part of the provision is then dissolved in the
quarter in which the claim was reported.
RBNS provision The Company forms this provision in dependence on the
type of insurance claim to the amount of the estimated
insurance benefits plus costs likely associated with the claim
settlement. When reporting a claim from previous reporting
periods the IBNR provision is dissolved. Where an insurance
contract ceases to exist due to an insurance claim, so does
the provision for life insurance, as well as the fund
investment risk coverage in the name of the insured and also
unearned premium reserve. The RBNS provision is dissolved
as of the date the decision is made on the amount of
insurance benefits for the client.
Life insurance reserve (LIR) For risk and capital insurance, this represents the current
value of the Company’s liabilities toward the insured after
deducting the current value of unearned premium. The
provision is calculated using the same assumptions as for the
calculation of the premium (mortality, interest rate,
administration costs). It is reported in gross amount in the
Company’s accounting. The reserve is calculated on a
monthly basis, by linear interpolation between respective
years, regarding the effective date of each insurance
contract. If the value of the reserve is below zero, the value is
replaced by zero and the incurred difference is carried in
accounting as accrued acquisition costs. For single-premium
capital life insurance, the discounted value of future
insurance administration expenses related to ongoing cover
is also credited to the life insurance reserve. The reserve
includes a provision for riders to single- premium capital
13
insurance contracts with fixed maturity. For capital and
life insurance with regular premium, the value of the
life insurance reserve is reduced by a zillmerised
reserve. Zillmerisation of a reserve takes into account
the fact that in case of a regular premium, the
acquisition costs incurred upon entering into the
insurance contract are paid up (amortized)
progressively, as the unearned premium related to the
insurance contract occurs.
For the capital part of combined insurance, the reserve is
created by the retrospective rating method, (i.e. as the value
of past incomes minus the value of past expenses) with the
monthly gain corresponding to the set technical interest rate
and by applying the same assumptions about mortality and
costs as when calculating the premium.
The reserve for life insurance also includes a profit-sharing
reserve (PSR) – both allocated and unallocated. The sum of
dissolved reserve for life insurance for a specific insurance
contract is equal to the sum of gross reserves and the reserve
for shares in the profit-sharing reserve (allocated and un-
allocated).
The life insurance reserve is dissolved on the day the
insurance ceases to exist. The life insurance reserve is not
formed for investment life insurance, including the
investment component of combined insurance, as in the
event of the risk of death of the insured this constitutes a
natural monthly premium corresponding to the age and sex
of the insured and the current amount of the risk sum (RS).
Provision for investment insurance The provision for investment insurance (PII) is formed to
cover the risk of investing financial resources on behalf of the
insured in the case of investment life insurance policies,
index-linked life insurance policies and for the investment
component of combined insurance.
This provision is generated as the total sum of the current
value of individual accounts of the insured available for active
insurance. The current value of the account corresponding to
the insurance contract of the insured is calculated as the sum
of the number of all current accounts and of the current unit
price on the day the financial statements are compiled. Any
change in the balance of the provision is accounted through
profit and loss.
Embedded derivatives All products of the Company, with the exception of the group
product of loan insurance, contain embedded derivatives.
Embedded derivatives comprise of the right to the
redemption value, right to reduced insurance, right to
indexation, right to change of premium or sum insured, right
to extended insurance life, right to extraordinary withdrawal,
right to extraordinary premium, right to change in the ratio
of capital and investment components of premium, right to
fund transfers between the investment and capital
components of insurance. The test of reserve adequacy
includes the right to redemption value, right to reduction and
right to indexation. Other derivatives are insignificant and
are therefore not included in the adequacy test.
Reserve adequacy test The Company carries out the test of reserve adequacy as of
the balance sheet day. The aim of the test is to verify
whether the amount of provisions calculated according to
the original actuarial assumptions is sufficient in comparison
with the calculation that considers estimated cash flows
while using current actuarial assumptions and the influence
of risk factors.
The applied adequacy test comes from the
recommendations of the Slovak Society of Actuaries and
assumptions defined by the Company either based on its
own experience or based on estimates of development. The
company tests the portfolio of its insurance contracts
separately for traditional insurance contracts and separately
for investment insurance contracts, whereby combined
insurance is tested in the investment insurance grouping. If
the test shows that the amount of provisions is inadequate,
the difference is carried through profit or loss.
Reinsurance contracts The Company provides reinsurance contracts into which the
Company enters with reinsurers and based on which the
Company claims insurance benefits resulting from contracts,
which the Company issued, and which are defined as
insurance contracts thereby.
The Company assigns self-retention that arises from routine
operations to the reinsurer in order to reduce potential net
losses by means of transferring the risk. Items in the balance
sheet and the statement of comprehensive income arising
from reinsurance contracts are presented separately from
balance sheet items and items arising from insurance
14
contracts. The reason is that reinsurance contracts do not
relieve the Company from direct liabilities toward the
insured.
Insurance contracts of the Company are reinsured by surplus
reinsurance on risk basis and by quota share reinsurance.
Reinsured risks are: death, accidental death, persistent
effects of injury, fractures and total and permanent
disability.
Receivables toward the reinsurer and the share of the
reinsurer in technical provisions are registered within other
financial and insurance assets. The premium assigned to the
reinsurer is reported as an expense. Assigned insurance
benefits are charged as an income. The sums of receivables
from reinsurance and liabilities toward the reinsurer
represent the amounts claimed or paid out in compliance
with the terms of the reinsurance contract. Reinsurance has
an impact on the UPR and on provisions for RBNS insurance
claims; it does not apply to other reserves of the insurer. The
Company charges the reinsurer’s share in losses and benefits
once they have been paid out.
Assets arising from reinsurance are assessed in term of
impairment related to the day the financial statements are
compiled, in the same way as when assessing financial assets
at amortized cost.
Trade and other payables Trade payables are accounted at the time delivery by the
counterparty and are carried at amortized cost.
Written and earned premium and share of reinsurer in premium The premium is determined by the value of the payment to
the insured for the provided insurance cover. A regular
premium (i.e. a premium that is specified in the insurance
contract and relates primarily to the scope of insurance cover
and the amount of insured sums) is determined by the
Company based on actuarial methods either by a portfolio
rate (for group insurance, accident insurance), or in
dependence on the sex of the insured (contracts with effect
date before 1.12.2012), age, policy life, times and frequency
of premium payments (for credit life insurance, capital
insurance and investment insurance), alternatively in
dependence on age, ratio of the capital and investment parts
of the premium, policy life, the times and frequency of
premium payments (for combined insurance).
A regular premium determined thereby contains –
depending on a particular product – a surcharge for the
method of paying premium (if the payment of premium is
paid at intervals other than annual intervals), a surcharge for
assumed risk (state of health, occupation, interests) and a
discount for the agreed amount of the sum insured.
The Company’s entitlement to premium results from the
insurance contract and therefore starts on the day when it
comes into force and ends on the day when it ceases to exist.
The Company determines a gross predefined premium, i.e.
regardless of whether the premium was actually paid or not,
regardless of whether the whole or just part of the premium
corresponds to the respective reporting period, with regard
to lapsed insurance contracts, regardless of reinsurance. The
gross written premium is the sum of all individual written
premiums that arose in the given reporting period. That part
of the gross written premium that belongs to the next
reporting period is accrued by the Company by way of
provisions for unearned premium. The earned premium
represents the gross written premium adjusted by the
unearned premium reserve. The share of the reinsurer in the
premium is reported separately.
Interest income Interest yields from assets that are not classified as assets at
fair value through profit or loss are acknowledged using the
effective interest method. The value of the financial
investments carrying the interest income is increased each
month by the proportionate interest income on the last day
of the month.
Dividend income Dividend income is carried providing that the dividend was
approved by the General Meeting and that there is the
likelihood of the dividend being paid to the Company.
Income from fees and commissions Co-insurers and the Company participate in the common
insurance cover at death intended for credit life insurance
and group insurance. The Company is entitled to commission
for administering insurance in the name of co-insurers.
Income from fees represents fees from insurance contracts.
The profit commission concerning reinsurance contracts is
reported in the accounting period in which the right to the
profit commission occurred. The fee for the purchase of units
in funds, paid by the Company to asset management
15
companies usually on a quarterly basis (kick-back fee), is
charged proportionately to revenues from fees.
Insurance contract acquisition costs Costs for the acquisition of insurance contracts include the
agent commission and other costs related to the acquisition
and administration of new insurance contracts, for example
costs for marketing, medical reports and examinations,
postal costs, printing, training of advisors. These costs are
accrued as set out above.
Claims and insurance benefit costs
Costs of the Company also include payments from claims
(insurance benefits), payments for the redemption value
upon premature cancellation of insurance (termination of
contract), extraordinary withdrawals from investment and
combined insurance and costs for administration of
insurance benefits. The liability from contractual claims
assumed by the Company based on concluded insurance
contracts arises on the effective day.
To cover its liabilities toward its insured that are to be settled
in future, the Company forms the unearned premium
reserve, provision for insurance claims, life insurance reserve
and the reserve to cover the risk of investing on behalf of the
insured. The change in the balance of the reserves is carried
through expenses and income.
Adjusting entries to financial assets carried at amortized cost Adjusting entries are reported in the income statement at
the moment one or more events (“loss event”) occur after
initial accounting of the financial asset and which have an
impact on the amount or time for receipt of estimated cash
flows from the financial asset or group of financial assets that
can be reliably estimated.
Where the Company deems that there is no objective reason
for the formation of an adjusting entry for a separately
valuated financial asset, regardless of the significance, it will
allocate this financial asset to a group of financial assets with
similar credit risk and evaluate the need to form an adjusting
entry for the group as a whole. Primary factors that the
Company regards as key when determining whether there is
objective evidence of impairment, leading to the formation
of an adjusting entry, are as follows:
� A debtor is in arrear or otherwise in breach of contract,
� A debtor is experiencing financial difficulties, which the
Company determines based on financial information
about the debtor;
� A debtor is considering bankruptcy or financial
restructuring;
� A negative change is seen in the credit quality of the
debtor as a result of changes in the business
environment that affect the debtor.
For the purposes of setting an adjusting entry for a group of
assets, the financial asset is grouped according to the
similarity of credit risk. The credit risk is fundamental when
estimating future cash flows from the asset and is an
indicator of the ability to pay all due amounts as per the
contractual terms.
Future cash flows within the group of financial assets that are
jointly evaluated for the purpose of forming adjusting entries
are estimated based on the contracted cash flows of assets
and based on experience of the management with payment
solvency and experience regarding the success of enforcing
overdue amounts. Past information is modified so as to
reflect the current conditions that did not influence previous
periods and so as to remove the influence of previous
conditions that no longer exist.
Impairment of an asset is always carried through the account
of adjusting entries, which reduces the value of the asset to
the present value of estimated future cash flows (excluding
future credit losses that have not been incurred). The present
value is determined by discounting of the asset’s original
effective interest rate. The calculation of the present value of
estimated future cash flows of financial assets reflects cash
flows from hedging receivables (if existing) reduced by costs
for the acquisition and sale of the hedge, regardless of the
likelihood of the hedge being realized.
If, in a subsequent period, the value of an asset increases,
and this is objectively related to an event occurring after the
adjusting entry was formed (such as an improvement in the
debtor’s credit rating), then the adjusting entry is reduced
through the profit and loss statement.
Irrecoverable assets are written off against the
corresponding adjusting entry after all necessary legal
actions have been executed for recovering the receivable and
when the loss amount was set.
16
Income tax Income tax is recognized based on laws that were adopted or
almost adopted to the end of the reporting period. The
income tax expense represents current and deferred tax and
is reported in the income statement, except for cases when it
relates to items accounted in other comprehensive income
or accounted in the asset itself, where by taxes related to the
transaction will as well be accounted in other comprehensive
income or in the asset itself.
Current tax is the amount that the Company expects to pay
or to receive as a tax refund from the competent tax
authority in connection with the tax base for the current or
past period. Current income tax includes also a special levy
on companies in regulated sectors. Taxes other than income
tax are carried to operating costs.
Deferred income tax is measured using the balance sheet
liability method from amortized tax losses on temporary
differences arising between the tax value of assets and
liabilities and their accounts value.
In line with the exception to the accounting of deferred taxes
upon acquisitions, the deferred tax is not charged in the case
of temporary differences existing at the time of acquiring the
asset or the onset of a liability as part of a transaction other
than a business combination, if the acquisition or onset of
liability does not have an impact on the accounting income
or the tax base of the Company. The deferred taxes are to be
charged at rates approved or almost approved before the
end of the reporting period, which will be applied at the time
of clearing the temporary difference or amortizing the tax
loss. Deferred tax receivables and liabilities of the Company
are carried at their net value. A deferred tax receivable from
amortizable tax losses and deductible temporary differences
are charged only to the extent to which it is probable that, in
the future, the Company will achieve a sufficiently high tax
base against which it is possible to apply these deductible
items.
Share capital Ordinary shares are classified as the equity of the Company
and are recognized at their par value.
Dividends The liability from dividends is charged in the period in which
they are approved by the General Meeting of the Company.
After the end of the reporting period and before approval of
the financial statements, the proposal of the Board of
Directors on the payment of dividends for disclosure is
reported in the Notes.
Offsetting assets and liabilities Financial assets and liabilities are offset and reported at net
value in the balance sheet only if there is a legally
enforceable claim to offsetting and the intention to offset
the items or concurrently realize assets and settle liabilities.
Personnel and related expenses Salaries, wages, contributions to state and private pension
and social schemes, paid holidays and sickness benefits,
remunerations and non- pecuniary benefits are charged as
liabilities in the period in which the employee of the
Company acquired entitlement for their work. The Company
does not have a contractual or promissory obligation to pay
additional contributions to Sociálna poisťovňa, state or
private pension funds, over and above the legally prescribed
payments for the time served by employees.
Reporting of assets and liabilities in order of liquidity The Company does not have any clearly identifiable
operating cycle and so does not present assets and liabilities
in the financial statements divided into current and long
term. Assets and liabilities are therefore stated in the
balance sheet in order of their liquidity. Analysis of financial
instruments, insurance and reinsurance contracts according
to anticipated maturity, is given in item 20 of the Notes.
Other assets are of a long-term nature. Long-term liabilities
amounted to EUR 4,490 thousand (2016: EUR 3,934
thousand).
Changes to financial statements after approval The Board of Directors of the Company may amend the
financial statements after they have been approved, but
pursuant to § 16, subsections 9 to 11 of the Act on
Accounting, the re- establishment of ledgers of the reporting
entity is prohibited after compilation and approval of the
financial statements. If it is found after compilation of the
financial statements that the data for the previous reporting
period are not comparable, the reporting entity is to amend
them in the reporting period when they are discovered, and
to state this circumstance in the notes to the financial
statements.
17
Critical Accounting Estimates and Judgments in
Applying Accounting Policies
The company makes estimates that may significantly influence the carrying value of assets and liabilities in the upcoming period. Estimates are revised regularly and are based on experience from the past and other factors, including future events, which may occur to a certain extent and under certain circumstances, while taking into account current conditions on the market. The Company also applies a judgment when applying accounting methods and principles.
Estimates from long-term insurance contracts Estimates, judgments, assumptions and uncertainties of
future development affecting technical provisions are set out
in more detail under item 19 of the Notes.
Financial assets recognized at market value The Company made estimates also in the event of market
prices of category 3 of the fair value classification. These
prices were determined using data that cannot be derived
from market prices, but which result from expert estimates.
More information is given in item 22 of the Notes.
Financial assets recognized at amortized cost In line with the requirements of applicable reporting
standards, the management of the Company has set losses
from impairment based on the “incurred loss” model. These
standards require the reporting of losses from impairment
that arose as a result of previous events and they prohibit the
reporting of losses from impairment that could arise as a
result of future events, including future changes in the
economic environment, regardless of the likelihood of the
events occurring in future. For this reason, the final losses
from impairment of financial assets and the level of adjusting
entries may differ significantly from the current level.
18
Application of New Accounting Standards and
Interpretations
The following new standards and Interpretation the Company applies from 1. January 2017
Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealized Losses - (issued on 19 January 2016 and effective in the EU for annual periods beginning on or after 1 January 2017) The amendment has clarified the requirements on
recognition of deferred tax assets for unrealized losses on
debt instruments. The entity will have to recognize deferred
tax asset for unrealized losses that arise as a result of
discounting cash flows of debt instruments at market
interest rates, even if it expects to hold the instrument to
maturity and no tax will be payable upon collecting the
principal amount. The economic benefit embodied in the
deferred tax asset arises from the ability of the holder of the
debt instrument to achieve future gains (unwinding of the
effects of discounting) without paying taxes on those gains.
The amendments did not have significant impact on financial
statements.
Disclosure Initiative - Amendments to IAS 7 (issued on 29 January 2016 and effective in the EU for annual periods beginning on or
after 1 January 2017) The amended IAS 7 requires disclosure of a reconciliation of
movements in liabilities arising from financing activities. The
amendments did not have significant impact on financial
statements.
Annual Improvements to IFRSs 2014-2016 cycle - amendments to IFRS 12 (issued on 8 December 2016 and effective in the EU for annual periods beginning on or after 1 January 2017) The amendments clarify the scope of the disclosure
requirements in IFRS 12 by specifying that the disclosure
requirements in IFRS 12, other than those relating to
summarized financial information for subsidiaries, joint
ventures and associates, apply to an entity's interests in
other entities that are classified as held for sale or
discontinued operations in accordance with IFRS 5. These
amendments were endorsed on 7 February 2018
retroactively by the EU with effect from 1 January 2017. The
amendments did not have significant impact on financial
statements.
19
New Reporting Standards That the Company does not
Apply Prematurely
The following new standards and interpretations that were issued and are obligatory for the annual reporting period commencing 1 January 2018 onwards were not applied prematurely by the Company.
IFRS 9, Financial Instruments: Classification and Measurement(issued in July 2014 and effective in the EU for annual periods beginning on or after 1 January 2018 except for insurance companies, for which it will be in effect from 2021) The Company expects an increase in valuation allowances for
loan and debt securities upon applying IFRS 9 as this
standard introduces a new model for accounting valuation
allowances, the ECL-model (Expected Credit Losses). Under
the new rules under this model, the Company will be obliged
to book a valuation allowance immediately after a receivable
is originated, i.e. when the receivable is not overdue and
even does not show other indications of being impaired.
However, a reasonable estimate of this increase in valuation
allowances cannot be made as it cannot be reliably foreseen
what information about future events, including
macroeconomic assumptions and probabilities allocated to
alternative macroeconomic forecasts, will be relevant at 1
January 2021 when the effect of applying the standard will be
posted against the opening balance of retained earnings. The
Company is currently assessing other aspects of the new
standard and their impact on its financial statements.
IFRS 15, Revenue from Contracts with Customers (issued on 28 May 2014 and effective in the EU for the periods beginning on or after 1 January 2018) The new standard introduces the core principle that revenue
must be recognized when the goods or services are
transferred to the customer, at the transaction price. Any
bundled goods or services that are distinct must be
separately recognized, and any discounts or rebates on the
contract price must generally be allocated to the separate
elements. When the consideration varies for any reason,
minimum amounts must be recognized if they are not at
significant risk of reversal. Costs incurred to secure contracts
with customers have to be capitalized and amortized over
the period when the benefits of the contract are consumed.
The standard will not have significant impact on the financial
statements.
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB) These amendments address an inconsistency between the
requirements in IFRS 10 and those in IAS 28 in dealing with
the sale or contribution of assets between an investor and its
associate or joint venture. The main consequence of the
amendments is that a full gain or loss is recognized when a
transaction involves a business. A partial gain or loss is
recognized when a transaction involves assets that do not
constitute a business, even if these assets are held by a
subsidiary. These amendments were not yet endorsed by the
EU. The Company is currently assessing the impact of the
amendments on its financial statements.
IFRS 16 "Leases" (issued on 13 January 2016 and effective in the EU for annual periods beginning on or after 1 January 2019) The new standard sets out the principles for the recognition,
measurement, presentation and disclosure of leases. All
20
leases result in the lessee obtaining the right to use an asset
at the start of the lease and, if lease payments are made over
time, also obtaining financing. Accordingly, IFRS 16
eliminates the classification of leases as either operating
leases or finance leases as is required by IAS 17 and, instead,
introduces a single lessee accounting model. Lessees will be
required to recognize: (a) assets and liabilities for all leases
with a term of more than 12 months, unless the underlying
asset is of low value; and (b) depreciation of lease assets
separately from interest on lease liabilities in the income
statement. IFRS 16 substantially carries forward the lesser
accounting requirements in IAS 17. Accordingly, a lesser
continues to classify its leases as operating leases or finance
leases, and to account for those two types of leases
differently. The Company is currently assessing the impact of
the amendments on its financial statements.
Amendments to IFRS 15, Revenue from Contracts with Customers (issued on 12 April 2016 and effective in the EU for annual periods beginning on or after 1 January 2018) The amendments do not change the underlying principles of
the Standard but clarify how those principles should be
applied. The amendments clarify how to identify a
performance obligation (the promise to transfer a good or a
service to a customer) in a contract; how to determine
whether a company is a principal (the provider of a good or
service) or an agent (responsible for arranging for the good
or service to be provided); and how to determine whether
the revenue from granting a license should be recognized at
a point in time or over time. In addition to the clarifications,
the amendments include two additional reliefs to reduce cost
and complexity for a company when it first applies the new
Standard. The amendments will not have a significant
impact on the financial statements.
Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts - Amendments to IFRS 4 (issued on 12 September 2016 and effective in the EU, depending on the approach, for annual periods beginning on or after 1 January 2018 for entities that choose to apply temporary exemption option, or when the entity first applies IFRS 9 for entities that choose to apply the overlay approach)
The amendments address concerns arising from
implementing the new financial instruments Standard,
IFRS 9, before implementing the replacement Standard
that the IASB is developing for IFRS 4. These concerns
include temporary volatility in reported results. The
amendments introduce two approaches: an overlay
approach and a deferral approach. The amended
Standard will give all companies that issue insurance
contracts the option to recognize in other
comprehensive income, rather than profit or loss, the
volatility that could arise when IFRS 9 is applied before
the new insurance contracts Standard is issued. In
addition, the amended Standard will give companies
whose activities are predominantly connected with
insurance an optional temporary exemption from
applying IFRS 9 until 2021. The entities that defer the
application of IFRS 9 will continue to apply the existing
financial instruments Standard—IAS 39. The
amendments to IFRS 4 supplement existing options in
the Standard that can already be used to address the
temporary volatility. The Company has decided to
apply a temporary exception to the application of
IFRS9 until the year 2021. IFRS 17 "Insurance Contracts"(issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2021) IFRS 17 replaces IFRS 4, which has given companies
dispensation to carry on accounting for insurance contracts
using existing practices. As a consequence, it was difficult for
investors to compare and contrast the financial performance
of otherwise similar insurance companies. IFRS 17 is a single
principle-based standard to account for all types of insurance
contracts, including reinsurance contracts that an insurer
holds.
The standard requires recognition and measurement of
groups of insurance contracts at: (i) a risk-adjusted present
value of the future cash flows (the fulfillment cash flows) that
incorporates all of the available information about the
fulfillment cash flows in a way that is consistent with
observable market information; plus (if this value is a
liability) or minus (if this value is an asset) (ii) an amount
representing the unearned profit in the group of contracts
(the contractual service margin).
Insurers will be recognizing the profit from a group of
insurance contracts over the period they provide insurance
21
coverage, and as they are released from risk. If a group of
contracts is or becomes loss-making, an entity will be
recognizing the loss immediately. This standard was not yet
endorsed by the EU. The Company is currently assessing the
impact of the standard on its financial statements.
IFRIC 23 "Uncertainty over Income Tax Treatments" (issued on 7 June 2017 and effective for annual periods beginning on or after 1 January 2019) IAS12 specifies how to account for current and deferred tax,
but not how to reflect the effects of uncertainty. The
interpretation clarifies how to apply the recognition and
measurement requirements in IAS 12 when there is
uncertainty over income tax treatments. An entity should
determine whether to consider each uncertain tax treatment
separately or together with one or more other uncertain tax
treatments based on which approach better predicts the
resolution of the uncertainty. An entity should assume that a
taxation authority will examine amounts it has a right to
examine and have full knowledge of all related information
when making those examinations. If an entity concludes it is
not probable that the taxation authority will accept an
uncertain tax treatment, the effect of uncertainty will be
reflected in determining the related taxable profit or loss, tax
bases, unused tax losses, unused tax credits or tax rates, by
using either the most likely amount or the expected value,
depending on which method the entity expects to better
predict the resolution of the uncertainty. An entity will reflect
the effect of a change in facts and circumstances or of new
information that affects the judgments or estimates required
by the interpretation as a change in accounting estimate.
Examples of changes in facts and circumstances or new
information that can result in the reassessment of a
judgment or estimate include, but are not limited to,
examinations or actions by a taxation authority, changes in
rules established by a taxation authority or the expiry of a
taxation authority's right to examine or re-examine a tax
treatment. The absence of agreement or disagreement by a
taxation authority with a tax treatment, in isolation, is
unlikely to constitute a change in facts and circumstances or
new information that affects the judgments and estimates
required by the Interpretation. This interpretation was not
yet endorsed by the EU. The Company is currently assessing
the impact of the interpretation on its financial statements.
Prepayment Features with Negative Compensation - Amendments to IFRS 9 (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019) The amendments enable measurement at amortized cost of
certain loans and debt securities that can be prepaid at an
amount below amortized cost, for example at fair value or at
an amount that includes a reasonable compensation payable
to the borrower equal to present value of an effect of
increase in market interest rate over the remaining life of the
instrument. In addition, the text added to the standard's
basis for conclusion reconfirms existing guidance in IFRS 9
that modifications or exchanges of certain financial liabilities
measured at amortized cost that do not result in the
derecognition will result in a gain or loss in profit or loss.
Reporting entities will thus in most cases not be able to
revise effective interest rate for the remaining life of the loan
in order to avoid an impact on profit or loss upon a loan
modification. These amendments were not yet endorsed by
the EU. The Company is currently assessing the impact of the
amendments on its financial statements.
Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28 (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019) The amendments clarify that reporting entities should apply
IFRS 9 to long-term loans, preference shares and similar
instruments that form part of a net investment in an equity
method investee before they can reduce such carrying value
by a share of loss of the investee that exceeds the amount of
investor's interest in ordinary shares. These amendments
were not yet endorsed by the EU. The Company does not
expect a material impact of the amendments on its financial
statements.
Annual Improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 1 and IAS 28 (issued on 8 December 2016 and effective in the EU for annual periods beginning on or after 1 January 2018) IFRS 1 was amended and some of the short-term exemptions
from IFRSs in respect of disclosures about financial
instruments, employee benefits and investment entities
were removed, after those short-term exemptions have
22
served their intended purpose. The amendments to IAS 28
clarify that an entity has an investment-by-investment
choice for measuring investees at fair value in accordance
with IAS 28 by a venture capital organization, or a mutual
fund, unit trust or similar entities including investment linked
insurance funds. Additionally, an entity that is not an
investment entity may have an associate or joint venture
that is an investment entity. IAS 28 permits such an entity to
retain the fair value measurements used by that investment
entity associate or joint venture when applying the equity
method. The amendments clarify that this choice is also
available on an investment-by-investment basis. These
amendments were endorsed on 7 February 2018
retroactively by the EU with effect from 1 January 2017. The
amendments did not have significant impact on financial
statements
Annual Improvements to IFRSs 2015-2017 cycle - amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (issued on 12 December 2017 and effective for annual periods beginning on or after 1 January 2019) The narrow scope amendments impact four standards. IFRS
3 was clarified that an acquirer should re-measure its
previously held interest in a joint operation when it obtains
control of the business. Conversely, IFRS 11 now explicitly
explains that the investor should not re-measure its
previously held interest when it obtains joint control of a
joint operation, similarly to the existing requirements when
an associate becomes a joint venture and vice versa. The
amended IAS 12 explains that an entity recognizes all income
tax consequences of dividends where it has recognized the
transactions or events that generated the related
distributable profits, e.g. in profit or loss or in other
comprehensive income. It is now clear that this requirement
applies in all circumstances as long as payments on financial
instruments classified as equity are distributions of profits,
and not only in cases when the tax consequences are a result
of different tax rates for distributed and undistributed
profits. The revised IAS 23 now includes explicit guidance
that the borrowings obtained specifically for funding a
specified asset are excluded from the pool of general
borrowings costs eligible for capitalization only until the
specific asset is substantially complete. These amendments
were not yet endorsed by the EU. The Company is currently
assessing the impact of the amendments on its financial
statements.
The Company does not expect the following new standards
and amendments to have any impact on its financial
statements. They have not yet been approved by the
European Union.
IFRS 14, Regulatory Deferral Accounts (issued on 30 January 2014 and effective outside the EU for
annual periods beginning on or after 1 January 2016).
Amendment of the standard IFRS 2, Share-based payment (issued on 20 June 2016 and effective for annual periods
beginning on or after 1 January 2018).
IFRIC 22 – Foreign currency transactions and Advance Consideration (interpretation issued on 8 December 2016 and effective for
annual periods beginning on or after 1 January 2018).
Transfers of Investment property – amendment IAS 40 (issued on 8 December 2016 and effective for annual periods
beginning on or after 1 January 2018).
Plan Amendment, Curtailment or settlement – amendments to IAS 19 (issued on 7 February 2018 and effective for annual periods
beginning on or after 1 January 2019)
23
Other Financial and Insurance Assets
In EUR thousands 31. 12. 2017 31. 12. 2016 Receivables from reinsurance 887 640 Share of reinsurer in technical provisions 22 20 Total reinsurance assets 909 660 Receivables from insurance 1 667 1 448 Receivables from commissions 19 16 Other receivables 401 383 Other financial and insurance assets in total 2 996 2 508
Analysis of receivables by credit quality:
Receivables as of 31. December 2017
In EUR thousands ReinsuranceFrom
insurance Commission Other Total Unimpaired non-due receivables - receivables settled after balance sheet date 909 1 503 19 401 2 832 - receivables becoming overdue after the balance sheet date - - - - -
Total unimpaired non-due receivables 909 1 503 19 401 2 832 Unimpaired overdue receivables - up to 30 days overdue - 139 - - 139 - 31 and more days overdue - 25 - - 25 Total unimpaired overdue receivables - 164 - - 164 Gross individual impairment - 235 - - 235 Adjusting entry to individually impaired receivables - -71 - - -71 Other financial and insurance assets in total 909 1 667 19 401 2 996
24
Receivables as of 31. December 2016
In EUR thousands ReinsuranceFrom
insurance Commission Other Total Unimpaired non-due receivables - receivables settled after balance sheet date 660 1 350 16 383 2 410 - receivables becoming overdue after the balance sheet date - - - - -
Total unimpaired non-due receivables 660 1 350 16 383 2 410 Unimpaired overdue receivables - up to 30 days overdue - 70 - - 70 - 31 and more days overdue - 28 - - 28 Total unimpaired overdue receivables - 98 - - 98 Gross individual impairment - 161 - - 161 Adjusting entry to individually impaired receivables - -64 - - -64 Other financial and insurance assets in total 660 1 448 16 383 2 508
Receivables are not secured.
Changes in adjusting entries were as follows:
In EUR thousands 31. 12. 2017 31. 12. 2016
Initial status 64 86 Formations of adjusting entries to costs (item 17 of Notes) 55 55 Write-off receivables and contract cancellations -47 -77 Balance of adjusting entries 71 64
25
Other Assets
In EUR thousands 31. 12. 2017 31. 12. 2016
Long-term tangible assets 409 490 Long-term intangible assets 463 383 Deferred acquisition cost of insurance (“DAC”) 550 386 Total other assets 1 423 1 259
Changes in long-term tangible and intangible assets and in deferred acquisition costs form insurance (DAC) were as follow:
2017
In EUR thousands Automobiles Other
tangibles Software DAC Total Acquisition cost as of 1 January 400 689 1 644 386 3 119 Correcting and adjusting entries -185 -415 -1 261 - -1 860 Carrying value as of 1 January 215 275 383 386 1 259 Accruals 142 21 196 10 028 10 388 Disposal at residual value -87 -5 - - -92 Depreciation -67 -86 -116 -9 864 -10 132 Acquisition cost as of 31 December 382 528 1 821 550 3 281 Accumulated depreciation -179 -322 -1 357 - -1 859 Carrying value as of 31 December 203 206 463 550 1 423
26
2016
In EUR thousands AutomobilesOther
tangibles Software DAC Total Acquisition cost as of 1 January 348 602 1 433 529 2 911 Correcting and adjusting entries -196 -334 -1 179 - -1 708 Carrying value as of 1 January 152 268 254 529 1 203 Accruals 147 102 211 6 463 6 923 Disposal at residual value -28 -1 - - -29 Depreciation -55 -95 -82 -6 606 -6 838 Acquisition cost as of 31 December 400 689 1 644 386 3 119 Accumulated depreciation -185 -415 -1 261 - -1 860 Carrying value as of 31 December 215 275 383 386 1 259
Acquisition costs for insurance contracts were as follows:
In EUR thousands 2017 2016 Commissions for newly acquired policies 8 338 5 210 Marketing expenses 256 215 Administrative expenses 1 434 1 038 Change in deferred acquisition costs -164 143 Acquisition costs for insurance contracts 9 864 6 606
Indirect costs related to acquisition of insurance contracts including marketing expenses are not accrued via DAC.
27
Technical Provisions and Related Insurance Liabilities
In EUR thousands 31. 12. 2017 31. 12. 2016
Payables toward Insured from insured events and redemption values 1 655 1 403 Payables from cancelled contracts and overpayments 2 163 1 664 Payables toward intermediaries 5 275 3 696 Payables from co-insurance 6 425 Payables from prearranged premium income 5 839 2 748 Life insurance reserve (LIR) 330 993 234 970 Provision for insurance claims reported but not settled (RBNS) 1 303 958 Provision for insurance claims incurred but not reported(IBNR) 1 257 1 137 - non-life insurance thereof 16 15 Unearned premium reserve (UPR) 190 189 - non-life insurance thereof 3 2 Reserve for life insurance and related insurance liabilities 348 682 247 190
28
Trade and Other Accounts Payable
In EUR thousands 31. 12. 2017 31. 12. 2016
Trade accounts payable 1 220 334 Obligations toward employees and directors 886 777 Obligations toward insurers 66 55 Obligations from taxes and fees excluding income tax and specific levy 75 100 Other liabilities 58 288 Trade and other accounts payable in total 2 305 1 554
29
Changes in Technical Provisions
Changes in technical provisions in 2017 were as follows:
In EUR thousands LIR PII RBNS IBNR UPR Gross
total Share of
reinsurer Net
amount
Carrying value as of 1 January 234 970 107829 958 1 137 189 345 083 -20 345 063
Written premium (Note 12) - - - - 154 336 154 336 -2 196 152 139
Earned premium - - - - -154 335 -154 335 2 195 -152 140
Costs of claims (Note 16) 117 937 12 964 - - - 130 901 -380 130 521 Reinsurer payments received - - - - - - 380 380 Transfers between provisions - transfers between provisions and claims -21 915 -6 934 27 910 939 - - - - transfer from IBNR when claims reported - - 819 -819 - - -
Settled claims: - death - - -6 296 - - -6 296 - -6 296 - endowment - - -12 993 - - -12 993 - -12 993 - redemption - - -7 633 - - -7 633 - -7 633 - other - - -873 - - -873 - -873 - administration costs - - -588 - - -588 - -588
Carrying value as of 31 December 330 992
113 859 1 304 1 257 190 447 602 -22 447 580
30
Changes in technical provisions in 2016 were as follows:
In EUR thousands LIR PII RBNS IBNR UPR Gross
total Share of
reinsurer Net
amount Carrying value as of 1 January 197 024 109 219 1 122 1 056 195 308 616 -45 308 571 Written premium - - - - 89 202 89 202 -1 986 87 217 Earned premium (Note 12) - - - - -89 208 -89 208 1 993 -87 215 Costs of claims (Note 16) 64 999 7 872 - - - 72 871 -433 72 439 Reinsurer payments received - - - - - - 450 450 Transfers between provisions - transfers between provisions and claims -27 053 -9 262 35 343 972 - - - - - transfer from IBNR when claims reported - - 891 -891 - - - - Settled claims: - death - - -4 979 - - -4 979 - -4 979 - endowment - - -16 297 - - -16 297 - -16 297 - redemption - - -14 070 - - -14 070 - -14 070 - other - - -684 - - -684 - -684 - administration costs - - -368 - - -368 - -368
Carrying value as of 31 December 234 970 107 829 958 1 137 189 345 083 -20 345 063
31
Capital and Other Funds
The Company issued a total of 171 000 ordinary shares at a
par value of EUR 41.00. All issued shares were paid up in full.
Statutory reserves were formed upon establishment of the
Company and continue to be generated from profit in line
with Slovak legislation.
Other capital funds comprise of the monetary subscriptions
of the shareholders.
Differences in valuation represent cumulative changes in the
fair value of a financial asset for sale.
Following the decision of the General Meeting of the
Company from 22 February 2017 a dividend of EUR 7,977
thousand was approved from the 2016 income (2015: 6,943
thousand).
The dividend per share came to EUR 46,65 EUR (2016: EUR
40.60).
32
Gross Written Premium
In EUR thousands 2017 2016 Investment insurance, including the investment component of combined insurance 9 572 5 947
Capital life insurance, including the capital part of combined insurance 80 924 37 759 Loan insurance (life and related risks) 16 973 15 066 Funeral insurance 46 505 30 151 Other insurance 148 157 Non-life insurance 214 122 Total gross written premium 154 336 89 202
In EUR thousands 2017 2016 Single premium 97 528 40 395 Regular premium (including non-life insurance) 56 808 48 807 Total gross written premium 154 336 89 202
33
Income from Fees and Commissions
In EUR thousands 2017 2016 Share in commissions from asset allocation 889 769 Fee from reinsurance 1 270 1 073 Commission from co-insurance (co-insurance and financial procurement) 258 201
Fees from policies 18 15 Total income fees and commissions 2 435 2 058
34
Result of Reinsurance
In EUR thousands 2017 2016 Share of reinsurer in earned premium (item 10 of Notes) -2 195 -1 993 Share of reinsurer in claims (item 10 of Notes) 380 433 Reinsurance commission received (item 13 of Notes) 1 270 1 073 Reinsurance balance -545 -487
35
Profit and Loss from Asset Allocation
In EUR thousands 2017 2016 Realized profits minus losses from financial assets available for sale 421 288 Securities at fair value through profit and loss 6 038 2 981 Total income from asset allocation 6 459 3 269
36
Claims and Insurance Benefits before Reinsurance
In EUR thousands 2017 2016
Settled claims: - death 6 296 4 979 - endowment 12 993 16 297 - redemption 7 633 14 070 - other 875 684 - administration costs 588 367 Change in provisions 102 516 36 474
Total costs of claims and insurance benefits before reinsurance 130 901 72 871
37
Operating and Other Expenses
In EUR thousands 2017 2016 Salaries and bonuses 2 130 1 811 Pension insurance paid to Sociálna poisťovňa and private funds 477 371 Health and other social insurance 208 138 Other staff expenses 107 107 Other long-term benefits – retirement benefit 18 3
Staff expenses total 2 940 2 429 Renewal commission 6 219 5 074 Depreciation of long-term tangible and amortization of long-term
intangible assets 269 232 Expenses for auditing 25 25 Audit services with the exception of auditing the financial statements 8 - Expenses for tax advising - 9 Expenses for property insurance 21 21 Expenses for maintaining insurance software 357 370 Adjustments for receivables 55 55 Commissions and fees 148 154 Other expenses 2 977 815
- The cost of the merger (Note 25) 1 961 - Reallocation from operating costs to technical accounts -2 009 -1 385
Total operating and other costs 11 010 7 798
38
Income Tax and Specific Levy from Profit
(a) Cost of income tax and specific levy from profit:
In EUR thousands 2017 2016
Current income tax 3 990 2 771 Withholding tax (settled tax) 24 8 Tax – specific levy from profit or regulated sectors 1 555 416 Previous periods tax 2 -55 Deferred tax -505 27
Cost of income tax and specific levy from profit in total 5 066 3 168
(b) Consistency between cost of income tax and specific levy from profit and the tax rate applied to the book profit:
In 2017 an income tax rate of 21% was applicable in Slovakia. The rate of the specific levy in regulated sectors was 8.712%, whereby
the levy is deductible in the determination of income tax.
2017 2016 Income tax rate 21,0% 22,0% Specific levy in regulated sectors (2016: from profit over EUR 3 million, after admitting the levy expense in calculating income tax) 6,9% 3,4%
Tax rate in total 27,9% 25,4%
Consistency between cost of income tax and specific levy from profit and the tax rate applied to book profit:
39
In EUR thousands 2017 2016
Profit before tax 18 024 12 546
Income tax and specific levy (2017: 27,9%; 2016: 25,4%) 5 029 3 187 Tax effects of permanent differences - Inadmissible expenses 41 40 - Non-taxable income -114 -101
Effect of tax rate change on deferred tax - 63 Specific levy not applied to profit under EUR 3 million a year - -132 Previous periods tax 2 -19 Other 108 130
Cost of income tax and specific levy from profit 5 066 3 168
(c) Uncertainty in tax legislation
Considering the fact that many areas of Slovak tax legislation have so far not been attested in practice, there is a certain degree of
uncertainty about how the tax authorities will apply them. The Company may therefore be exposed to the risk of additional
taxation. The management of the Company is not aware of any circumstances thereof that could lead to a significant additional tax
expense in future.
(d) Change in deferred tax
Deferred tax was accounted from the following temporary differences between IFRS and the tax values of assets and liabilities.
In EUR thousands 1. 1.
2016
Carried to income
Carried to other
comprehensive income
31. 12. 2016
Carried to
income
Carried to other
comprehensive income
31. 12. 2017
Tax effects of deductible/(taxable) temporary differences IBNR provision 230 9 - 239 25 - 264 Other provisions
270 24 - 295 1 262 1 557 Adjusting entries to receivables
17 -5 - 12 1 - 13 Financial assets 32 -2 - 30 -30 - 1 Revaluation to fair value
-3 344 - -590 -3 934 - -476 -4 410 Depreciation/amortization
-25 -2 - -27 16 - -12 Deferred tax from unsettled commissions 773 3 - 776 -767 - 9 Net deferred tax liability -2 047 27 -590 -2 609 507 -476 -2 578
The deferred tax receivables and liabilities are offset in the balance sheet, as there is a legal right to compensation of related
current tax receivables against current tax liabilities.
The deferred tax receivables and liabilities as of 31 December 2017 are calculated by the tax rate of 21% and as of 31 December
2016 by the tax rate of 21%.
40
Insurance Risk Management
The Company issues insurance contracts covering the following insurance risks: death, endowment, accidental death, permanent bodily injury, serious illness, civilization diseases, fractures, hospitalization due to illness and total and permanent disability. When measuring the mortality risk in the premium and in provisions, the Company applies the mortality tables published by the Statistical Office of the Slovak Republic in 1995 (with the exception of combined insurance and funeral insurance taken out from 1 November 2012 onwards). The tables have been modified based on experience of the reinsurer Sparkassen Versicherung AG, Vienna, Austria.
For combined insurance and funeral insurance taken out
after 1.11.2012 including, the Company applies the mortality
tables published by the Statistical Office of the Slovak
Republic in 2005. The tables have been adapted so as to
ignore the sex factor, resulting in the so-called unisex
mortality tables which are calculated (and then modified to
remove fluctuations) for the ratio of men and women that
corresponds to the current ratio of the insured of the
Company and to the product to which they are being
applied.
When measuring the risk of accident in premiums and
provisions, the Company applies an estimate based on
observations from how the Czech and Slovak insurance
markets function and also based on experience of the
reinsurer.
The insurance risks that the Company is exposed to also
include the risk of serious illness, which relates to an insured
child. When measuring the risk included in premiums and
provisions, the Company used the reference materials for the
monitored period of 2000 – 2013 compiled by the Health
Information and Statistics Institute.
When measuring the risks of civilization diseases (the insured
is aged over 18), the Company applied data acquired from
the reinsurer (incidence tables dependent on age) as well as
from the insurance group of Vienna Insurance Group.
When measuring the risk of hospitalization due to illness or
injury, the Company drew also on the experience of the
insurance group of Vienna Insurance Group and available
statistics.
The risk arising from an extending mean life expectancy is
insignificant for the Company, as the Company enters into
only fixed-term policies where the longevity risk is linked to
the mortality risk.
The Company applies the following strategies and programmes to the management of insurance risk
Underwriting risk Underwriting risk is a risk management tool linked to the life
and health of the insured, which the Company assumes when
concluding an insurance contract. When assessing the
assumed risk related to the health, occupation or hobbies of
the insured, the Company applies the following degrees of
underwriting: (i) without examining risks, (ii) health
declaration, (iii) health questionnaire, (iv) health
questionnaire and examination by the contractual doctor of
the Company, and (v) health questionnaire, examination by
the contractual doctor of the Company and a financial
41
questionnaire. The applied degree of underwriting depends
on the age of the insured, the sum insured and the type of
insurance.
Reinsurance The Company has its insurance contracts reinsured by
surplus reinsurance on a risk basis and by quota share
reinsurance. Reinsurance is used to manage insurance risk,
but that does not waive the Company of its liabilities as the
primary insurer. If a reinsurer fails for whatever reason to pay
for a claim, the Company remains responsible for payment of
benefits to the beneficiary. The risk that the Company is
exposed to in connection with reinsurance is, for the purpose
of its operation, regarded by the Company management as
insignificant.
Other risks A key factor contributing to the value of future liabilities
arising from insurance contracts is also the valuation that is
achieved from the financial asset. This parameter is set
based on current market yields, as well as on anticipated
future economic and financial development. The
development of this risk factor is dealt with and managed as
part of Asset liability management (ALM).
Another risk linked to the insurance business for the
Company is the rate of cancellations due to premature
cessation of the insurance contract on the side of the client
or due to non- payment of premium. The cancellation rate is
monitored and evaluated regularly. The Company sets the
projected cancellation rate once a year (to the end of the
current calendar year) based on its own experience from the
2003 to 2017 period, this for each product separately. The
Company monitors the development of the cancellation rate
and takes various steps to reduce it, e.g. by reminders,
communication with intermediaries, change in the method
of paying premium etc.
Other risks of the Company include an estimate of the
amount and future changes in costs relating to the
acquisition and administration of insurance and costs for the
adjustment of claims. The Company sets the value of these
costs always by the end of the current calendar year. As of 31
December 2017 the Company set the value of costs based on
its own data, namely the data about insurance stock, written
premium, amount of acquisition and operating costs, and
number of settled claims. The amount of costs is set for each
product separately. The Company monitors the level of costs
and if the development indicates a substantial excess to the
expected value, it intervenes with measures to reduce them.
The Company regularly monitors these risk factors and
evaluates their actual development compared to estimates.
If there is a significant deviation between the best estimates
and the actual status that would point to potential future
adverse development, the Company adopts measures to
eliminate this.
The Company took all of the said risk factors into account in
its adequacy testing and also in its test of sensitivity to a
change in their forecasts.
Adequacy test of provisions The test of the adequacy of provisions is performed by the
Company with the aim of assessing the adequacy of its
technical provisions. The Company tests all of its traditional
and investment insurance contracts. Alongside the principal
insurance, the Company also tests accompanying riders,
since due to the nature of the policies it is not possible to
divide them from the principal insurance cover and test them
separately.
If partial inadequacies are discovered in the stated test
groups, these are compensated by a surplus in other parts of
the same group. The test of adequacy determines the
minimum value of liabilities from insurance before
reinsurance. The minimum value of insurance liabilities is
compared with technical provisions in life insurance (with
first tier actuarial assumptions before reinsurance) adjusted
by the corresponding unamortized part of the acquisition
costs to accrual accounts.
The basic method of testing the adequacy of provisions is the
discounted cash flow method (DCF). Cash flows are to be
understood as: (i) for traditional insurance: premiums,
expenses, payments of benefits (including shares in excess
premium and redemption values), payment of commissions
and (ii) for investment insurance: premiums, trailer fee,
expenses, payments of benefits, including redemption values
and payment of commissions.
42
When testing the adequacy of its provisions, the Company used the following assumptions:
31 December 2017 31 December 2016 In EUR thousands Forecast Allowance Forecast Allowance Mortality 25% - 60% 10% 30% - 60% 10% Loss ratio: permanent bodily injury 20% 10% 20% - 30% 10% Loss ratio: accidental death 20% - 21,5% 10% 20% - 30% 10% Loss ratio: serious illness 10% - 20% 10% 10% - 30% 10% Loss ratio: total and permanent disability 20% 10% 20% 10% Cancellation rate in first policy year 2% - 35% 25% 2% - 35% 25% Cancellation rate in second policy year 0,5% - 30% 25% 0,5% - 30% 25% Cancellation rate in third policy year 0,5% - 30% 25% 0,5% - 30% 25% Cancellation rate in fourth policy year 0,3% - 25% 25% 0,5% - 25% 25% Cancellation rate in subsequent years 0,3% - 30% 25% 0,5% - 30% 25% Reduction 0,01% - 3,00% 0% 0,02% - 3,00% 0% Initial costs (EUR/contract) 2 – 28 10% 2 – 22 10% Administrative costs (EUR/ contract) 3 – 20 10% 3 – 18 10% Claim adjustments costs (EUR/ contract) 12 – 50 10% 12 – 50 10% Investment income for next year 2,25% 0,10 bp 2,45% 0,10 bp Investment income for subsequent years 0,43% - 2,27% 0,10 bp 0,23% - 1,65% 0,10 bp Discount rate 0,43% - 1,66% 0,10 bp 0,23% - 1,07% 0,10 bp Investment fund performance 0,43% - 2,27% 0,10 bp 0,23% - 1,65% 0,10 bp Trailer fee 0 - 0,012 - 0 - 0,012 - Inflation 2,00% - 2,10% 10% 1,10% - 1,80% 10%
The applied assumptions are modified in the test by
allowances for adverse development. The amount of the
allowances is set according to the percentage increase or
decrease in the said assumption. The investment income and
discount rate are adjusted as a change to the basis point
(hereinafter “bp “).
When testing, the sufficiency of technical provisions is
determined at their carrying value compared to the amount
of a provision as a result of applying the DCF method. The
test of adequacy in the case of investment insurance
considers risks other than the investment risk. The
investment risk is fully covered by the financial assets carried
through profit or loss.
Sensitivity analysis of technical provisions to the change of selected parameters The Company used the same algorithm for the sensitivity
analysis as with the adequacy test of provisions. For the
purposes of the sensitivity analysis, the Company divided its
portfolio into traditional insurance (risk insurance, capital
insurance and combined insurance) and investment
insurance. All traditional and investment insurance contracts
were included to the analysis.
43
31 December 2017 Change in current value of future cash flows
Change of parameter
For traditional insurance For investment
insurance Without shares in
surplus With shares in
surplus
Mortality – growth 10% 1 199 2 959 21 Mortality – decline -10% -1 201 -3 140 -21 Loss ratio – growth 10% 313 6 0 Loss ratio – decline -10% -313 -6 0 Cancellations – growth 10% 2 084 2 024 17 Cancellations – decline -10% -2 327 -2 181 -19 Expenses – growth 10% 245 3 459 102 Expenses – decline -10% -245 -3 459 -102 Discount rate and investment income – growth + 0,5 bp 584 -9 505 18
Discount rate and investment income – decline - 0,5 bp -610 19 118 -18
Reference year:
31 December 2016
Change in current value of future cash flows
Change of parameter
For traditional insurance For investment
insurance Without shares in
surplus With shares in
surplus
Mortality – growth 10% 971 1 892 27 Mortality – decline -10% -972 -1 979 -27 Loss ratio – growth 10% 294 7 - Loss ratio – decline -10% -294 -7 - Cancellations – growth 10% 2 251 823 23 Cancellations – decline -10% -2 535 -897 -26 Expenses – growth 10% 244 3 490 129 Expenses – decline -10% -244 -3 490 -129 Discount rate and investment income – growth + 0,5 bp 651 -15 971 20
Discount rate and investment income – decline - 0,5 bp -683 20 185 -21
Even if the value of the tested parameters was about to
change according to the stated scenarios, the amount of
technical provisions for all risk groups at carrying value is still
adequate to cover all liabilities from insurance, and so none
of the tested changes would individually have an impact on
the expenses and income of the Company.
Concentration of mortality risk An important element of the insured risk is the scope of
concentration of insured risk. Concentration of risk may exist
if a certain event can significantly impact the Company’s
liabilities. With the insured risk of death, the concentration of
the sums insured could impact the amount of insurance
benefits within the portfolio. The table below shows the
concentration of mortality risk according to the sums in the
risk, whereby the said percentage shows the number of
policies belonging to the said band.
44
31 December 2017 31 December 2016
Before
reinsurance % after
reinsurance % before
reinsurance % after
reinsurance % EUR 0 – 9 960,00 78,70% 80,91% 78,87% 81,10% EUR 9 960,01 – 16 600,00 9,65% 10,93% 9,92% 11,21% EUR 16 600,01 – 24 900,00 5,10% 5,55% 4,90% 5,26% EUR 24 900,01 – 33 200,00 2,29% 1,61% 2,33% 1,58% EUR 33 200,01 – 99 600,00 4,06% 0,99% 3,82% 0,85% EUR 99 600,01 – 166 000,00 0,18% 0,00% 0,15% 0,00% EUR 166 000,01 – 332 000,00 0,01% 0,00% 0,01% 0,00% Over 332 000,01 EUR 0,00% 0,00% 0,00% 0,00% Total 100,00% 100,00% 100,00% 100,00%
45
Financial Risk Management
The Company is exposed to financial risk by way of its
financial assets, financial liabilities and liabilities from
insurance contracts. The most important components of
financial risk are market risk, liquidity risk and credit risk.
Market risk includes interest, share and currency risks. These
risks arise from the open position in interest, currency and
equity products, which are all exposed to general and specific
market movements.
The Company is predominantly exposed to liquidity risk and
interest risk. Both risks arise out of the fact that income from
financial assets may not be sufficient to finance liabilities
from insurance contracts. The Company manages its
position by way of the asset liability management (ALM).
The basic technique of the ALM is to adapt the maturity of
assets to liabilities from insurance contracts.
Credit risk The Company is exposed to credit risk owing to the fact that
the counterparty will not be able to satisfy its liabilities by the
due date. The maximum exposure to credit risk equals to the
carrying value of the financial asset and assets from
insurance and reinsurance contracts. The Company did not
grant any financial warranties.
Credit risk is limited by internal limits contained in the
Investment and Risk Strategy approved by the Supervisory
Board.
Outstanding premium is monitored progressively and the
method of forming adjusting entries is described in Note 3.
The Company manages outstanding premium using the
reminder process of overdue receivables, which is conducted
at regular intervals. If a client is entitled to a claim for the
redemption value or insurance benefits, their debt is offset
against the respective claimed amount. The enforcement of
receivables from insurance is carried out in co-operation with
an external company. The debts of other contractual parties
did not arise in the reporting period.
Receivables of the Company are not secured, are not
overdue nor were there a need to form adjusting entries for
impairment, with the exception of receivables from
insurance. Receivables from financial investments are
monitored according to their rating, which represents the
second best rating for the issuer given by one of the three
most prestigious rating agencies (Standard &Poor’s,
Moody’s, Fitch). If none of these agencies gives a rating for
the issuer, the issuer is given an internal rating. The internal
rating of an issuer in the VIG group is given by the VIG Asset
Risk Management department. If an issuer is not given an
internal rating, then the issuer is considered to be without
rating. For all mortgage bonds, a rating of AA- is used. An
exception are the mortgage bonds issued by Všeobecná
úverová banka, a.s., which were assigned the rating of AA2
by Moody’s rating agency in June 2016, and mortgage bonds
issued by Slovenská sporiteľňa, a.s., which were assigned the
rating of A+ by Fitch in 2017.
46
Analysis of individual types of assets exposed to credit risk by credit rating:
Carrying value of assets as of 31. 12. 2017 In EUR thousands AA A BBB BB No rating To maturity and not showing impairment Debt securities
- held to maturity 9 396 35 295 - - - - for sale 13 177 179 192 40 307 12 782 3 041 - at fair value through profit and loss - 12 247 86 349 - - - loans and receivables - 24 834 650 - - Granted loans - - - - 2 909 Other assets 467 442 - - 2 087 Cash and cash equivalents - 12 081 1 - -
Total asset bearing credit risk 23 041 264 090 127 307 12 782
8 036
Carrying value of assets as of 31. 12. 2016 In EUR thousands AA A BBB BB No rating To maturity and not showing impairment Debt securities
- held to maturity 9 941 37 711 - - - - for sale 12 676 126 510 33 464 3 072 3 021 - at fair value through profit and loss - - 93 710 - - - loans and receivables - 19 885 812 - - Granted loans - - - - 2 980 Other assets 339 322 - - 1 847 Cash and cash equivalents - 4 257 1 - -
Total asset bearing credit risk 22 957 188 684 127 987 3 072
7 848
Interest risk Interest risk is the only financial risk that has a different impact on the assets and liabilities categorized in the ALM system. The
Company manages this risk by monitoring the sensitivity of profit to the risk. The sensitivity test evaluated the impact of parallel
growth / decline in the yield curve by 50bp on profit and on other comprehensive income before tax.
31 December 2017 31 December 2016
In EUR thousands Impact on profit
Impact on other comprehensive
income Impact on profit
Impact on other comprehensive
income Impact of change by + 50 bp -121 -11 210 -124 -6 563 Impact of change by - 50 bp 121 11 210 124 6 563
47
Price risk Price risk is a risk that may lead to a change in the fair value
of financial assets for reasons other than a change of interest
rate or foreign currency. The company is exposed to price
risk due to investment in equity securities, whereby the risk is
largely influenced by development on the stock markets. The
company manages this risk by following sensitivity of profit
to the risk.
The results of the sensitivity analysis express the impact on
profit and equity of the Company in the event that market
prices of equity securities change. The total balance of equity
securities held as of 31 December 2017 amounted to EUR
89,073 thousand (2016: EUR 56,882 thsnd). With a drop or
hike in market prices by 10%, the impact on equity would
produce a drop or growth by EUR 6,514 thousand (2016: EUR
3,514 thsnd). The impact of the price risk on profit is
insignificant for equity securities intended for sale, as well as
for equity securities carried at fair value through profit or
loss, covering investment life insurance, because the related
liabilities arising from these contracts are affected to the
same extent as part of changes to provisions for investment
insurance.
Liquidity risk The Company is exposed to daily demands on liquidity
resulting from insurance benefits and from liabilities towards
other companies. The liquidity risk is a risk that sufficient
cash may not be available to meet liabilities on time at
reasonable cost. The requirement for liquidity is perpetually
monitored and an increased requirement is reported in
advance to ensure sufficient resources. In the space of one-
year, projected income greatly exceeds forecast expenses.
The analysis of financial instruments, insurance and reinsurance contracts as of 31 December 2017 by expected maturity are as
follows:
In EUR thousands Less than 6 months
6 months to 1 year
1 to 5 years
5 to 10 years
Over 10 years Total
Assets Debt securities:
- held to maturity - 504 7 666 23 722 12 800 44 692 - at fair value through profit and loss - 23 225 57 030 18 341 - 98 596 - classified as loans - - 650 8 878 15 955 25 483 - available for sale 1 048 439 34 907 100 786 111 319 248 499
Equity securities: - available for sale 66 438 - - - - 66 438 - at fair value through profit and loss 22 635 - - - - 22 635
Loans granted - - - 2 909 - 2 909 Other financial and insurance assets 2 996 - - - - 2 996 Cash and cash equivalents 12 082 - - - - 12 082 Total financial and insurance assets 105 199 24 168 100 253 154 636 140 074 524 330 Liabilities Provision for life insurance and related insurance liabilities 26 285 10 746 90 133 82 244 139 274 348 682 Provision for investment insurance 1 914 22 944 76 919 6 627 5 454 113 859 Trade accounts payable 1 220 - - - - 1 220 Liabilities toward employees and directors 886 - - - - 886 Liabilities toward insurers 66 - - - - 66 Other liabilities 133 - - - - 133 Total financial and insurance liabilities 30 504 33 690 167 052 88 871 144 728 464 846 Difference - deficit or surplus of liquidity 74 695 -9 522 -66 799 65 765 -4 654 59 484
48
A liquidity forecast is produced on a monthly basis and
contains operating cash flow, cash flow from investing
activities and cash flow from financing activities. In this way,
the Company compares income and expenditures, the most
relevant of which are received premiums, expected
payments from insurance contracts, due dates and income
from financial investments. The maturity of new investments
is adapted to the structure of the insurance portfolio and
expected payments from insurance contracts in future. The
Company owns liquid financial investments which may be
sold quickly in the event of insufficient liquidity in order to
cover the deficit.
The analysis according to expected maturity represents the
carrying value of assets and liabilities analyzed by their
maturity, or the term of their expected realization, provided
the given item has no maturity, e.g. in the case of equity
securities, it is reported with the maturity date under six
months or according to the investment horizon of the fund.
The analysis of financial instruments, insurance and reinsurance contracts as of 31 December 2016 by expected maturity are as
follows:
In EUR thousands Less than 6 months
6 months to 1 year
1 to 5 years
5 to 10 years
Over 10 years Total
Assets Debt securities: - held to maturity 2 901 - 7 157 20 067 17 528 47 652 - at fair value through profit and loss - - 49 726 43 983 - 93 710 - classified as loans - - 812 8 946 10 939 20 697 - available for sale 1 096 - 34 082 79 518 64 047 178 743 Equity securities: - available for sale 36 430 - - - - 36 430 - at fair value through profit and loss 20 452 - - - - 20 452 Loans granted - - 2 980 - - 2 980 Other financial and insurance assets 2 508 - - - - 2 508 Cash and cash equivalents 4 258 - - - - 4 258 Total financial and insurance assets 67 645 - 94 757 152 514 92 514 407 430 Liabilities Provision for life insurance and related insurance liabilities 20 927 5 912 66 727 54 978 98 646 247 190 Provision for investment insurance 1 999 2 453 51 817 46 901 4 659 107 829 Trade accounts payable 334 - - - - 334 Liabilities toward employees and directors 777 - - - - 777 Liabilities toward insurers 55 - - - - 55 Other liabilities 387 - - - - 387 Total financial and insurance liabilities 24 479 8 365 118 544 101 879 103 304 356 572 Difference - deficit or surplus of liquidity 43 166 -8 365 -23 787 50 634 -10 791 50 858
49
Capital Management
The Company applies capital management to ensure
solvency, maximize the return for shareholders and generate
financial stability.
When setting required solvency margin rates, the Company
applies standard formula. Based on the information provided
to the management internally, as of 31.12.2017, the value of
the Company’s capital and reserves amounts to EUR 93,440
thousand (as of 31.12.2016: EUR 77,700 thousand). All capital
and reserves are of the highest quality – tier1 and in both the
years 2016 and 2017the Company fulfilled all the external
prescribed solvency requirements.
More detailed information on Company’s solvency will be
compiled in the Solvency and financial condition report for
2017 in accordance to Act No 39/2015 on Insurance and on
amendments and supplements to certain acts from 3
February 2015 with effect from 1 January 2016.
50
Fair Value of Financial Instruments
The fair value is analyzed according to its level in the fair
values hierarchy as follows: (i) level one represents the
quoted prices (unadjusted) in active markets for identical
assets and liabilities, (ii) level two represents quotations
using techniques or models whose all relevant input
parameters are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices),
and (iii) level three represents inputs for the asset or liability
that are not based on observable market data (i.e.
subjectively set input parameters exist). The judgment is
applied in the categorization of financial instruments
according to the fair values hierarchy. If the measurement
Systematic measurements at fair value are those where the
reporting standards either require or enable measurement at
fair value in the balance sheet to the end of each reporting
period.
(a) Systematic fair value measurement
Systematic measurements at fair value are those where the
reporting standards either require or enable measurement at
fair value in the balance sheet to the end of each reporting
period.
These measurements are analyzed according to the fair value hierarchy as follows:
31 December 2017 31 December 2016
In EUR thousands Level 1 Level 2 Level 3
Total carrying
value Level 1 Level 2 Level 3
Total carrying
value Assets at fair value Debt securities: - available for sale 226 839 17 963 3 697 248 499 158 494 15 323 4 926 178 743 - at fair value through profit
and loss - 63 124 35 472 98 596 - 58 708 35 001 93 710 Equity securities: - available for sale 65 144 - 1 294 66 438 35 136 - 1 294 36 430 - at fair value through profit
and loss 22 635 - - 22 635 20 452 - - 20 452
Total assets systematically measured at fair value 314 618 81 088 40 463 436 168 214 082 74 031 41 222 329 335
51
A description of the valuation technique and input parameters for level 2 measurement:
In EUR thousands Fair value Valuation technique Input parameters Assets valued at level 2
Securities available for sale 17 963 (2016: 15 323) Discounted cash flows
Interest rate applicable to debtor borrows as of balance
sheet date
During the year there were no changes to the valuation technique for securities with a level 2 fair value. (2016: no change).
The description of the valuation technique and input parameters for level 3 measurement:
In EUR thousands
Fair value
Valuation technique
Input parameters -
description Input
parameters
Potential parameter
change Fair value sensitivity
Assets systematically measured at fair value in level 3 as of 31 December 2017 Debt securities: - available for sale
3 697 Discounted cash flows
Est. Rate applicable to debtor borrowing on
the balance sheet day 3,6% ± 50 bp ± 139,4 - at fair value through
profit and loss 35 472
Discounted cash flows
Est. Rate applicable to debtor borrowing on
the balance sheet day 1,0% ± 50 bp ± 424,0 Equity securities: - available for sale
1 294 Share in equity Shareholder equity Shareholder
equity ± 10% ± 129
52
In EUR thousands
Fair value
Valuation technique
Input parameters -
description
Input parameters
(weighted average)
Potential parameter
change Fair value sensitivity
Assets systematically measured at fair value in level 3 as of 31 December 2016 Debt securities: - available for sale
4 926 Discounted cash flows
Est. Rate applicable to debtor borrowing
on the balance sheet day 3,70% ± 50 bp ± 178
- at fair value through profit and loss
35 001 Discounted cash flows
Est. Rate applicable to debtor borrowing
on the balance sheet day 0,58% ± 50 bp ± 585
Equity securities: - available for sale 1 294 Share in equity Shareholder equity Shareholder equity ± 10% 116
During the year there were no changes to the valuation
technique for securities with a level 3 fair value. (2016: no
change).
The sensitivity of the fair value in the table above represents
a change in value due to the increase or decrease of the
relevant input parameter. For equity securities, an increase in
ratios would mean an increase in fair value. Increasing the
discount due to non-tradability would lead to a decrease in
value. For debt securities, the increase in the discount rate
and the probability of default would together lead to a
decrease in value. Relationships between input parameters
that were not derived from market prices have not been
identified, except that the increase in the probability of non-
payment of the security is generally accompanied by the
related increase in the discount rate.
Changes in valuation 3 for each class of security:
At fair value through profit
and loss Available for sale
In EUR thousands Equity
securities Debt
securities Equity
securities Debt
securities Fair value as of 1 January 2017 - 35 002 1 295 4 926 Revaluation to profit and loss - 471 - - Revaluation to the other comprehensive income - - - -68
Purchase - - - - Sale, payment of principal and interest - - - -153 Transfers from level 3 (to level 2) - - - -1 009 Fair value as of 31 December 2017 - 35 472 1 295 3 697 Unrealized profit and loss as of 31 December 2017
- carried through profit and loss - 471 - - - carried in other comprehensive income - - - -68
53
The company reclassified securities that were originally valuated by the internal model from level 3 measurement to level 2 based
on the grounds of the price available from the non-active market, which is considered more accurate than the internal model.
At fair value through profit and
loss Available for sale
In EUR thousands Equity
securities Debt
securities Equity
securities Debt
securities Fair value as of 1 January 2016 - 33 934 1 159 9 344 Revaluation to profit and loss - 1 068 - Revaluation to the other comprehensive income
- - - 155
Purchase - - 135 1 007 Sale, payment of principal and interest - - - -206 Transfers from level 3 (to level 2) - - - -5 374 Fair value as of 31 December 2016 - 35 002 1 294 4 926 Unrealized profit and loss as of 31 December 2016
- carried through profit and loss - 1 068 - - - carried in other comprehensive income - - 155
(b) Processes in recognizing financial assets at level 3 fair
value
The measurement of financial assets at level 3 fair values
uses inputs that are not observable from market data and
which are determined by expert estimate. For debt securities
in the portfolio of the Company measured at level 3 as an
input not observable from market data, the credit spread of
the securities issuer was used.
The shares of the company VIG FUND uzavřený investiční
fond, a.s. are appreciated by the proportionate share in the
fund equity.
The valuation of securities in the assets of the Company is
carried out by companies that provide PSLSP with securities
management. The percentage change to the price is
evaluated according to the criteria set separately for debt
securities and for equity securities.
The valuation of securities provided by external parties is
also compared with the prices of securities imported to the
investments administration system from the system of
Reuter’s, Bloomberg or with theoretically calculated prices. If
the deviation between the acquired and the internal
valuation is more than the internally set limit, the given price
is justified by the employee of the Asset Management
Division.
(c) Assets and liabilities not carried at fair value for which
fair value is disclosed.
54
Disclosure of fair value of financial instruments analyzed by level in fair value hierarchy:
31 December 2017 31 December 2016
In EUR thousands Level 1 Level 2 Level 3 Carrying
value Level 1 Level 2 Level 3 Carrying
value Assets Debt securities held to maturity 40 596 12 381 - 44 692 32 323 24 223 - 47 652 Debt securities classified as loans and receivables 10 742 14 333 6 207 25 484 11 104 14 544 866 20 697 Credits granted - - 2 909 2 909 - - 2 980 2 980 Cash and cash equivalents - 12 082 - 12 082 - - 4 258 4 258
The fair value of financial instruments on level 2 was set
using the technique of discounted cash flows. The discount
rate was estimated as the interest rate applicable for a
debtor when borrowing as of the balance sheet date.
The fair value of financial instruments on level 3 was set by
the technique of discounted cash flows. The credit spread as
the input factor of valuation is not commonly obtainable
from the market, therefore for the purposes of valuation the
credit spread on the level of the emission spread is used. In
the event of a transaction executed with the said security or
of a real quotation to buy/sell the security, the credit spread
arising from the quoted price is used.
55
Financial Instruments by Category
For the purposes of measurement, IAS 39, Financial Instruments: Recognition and Measurements, sets out the following categories of financial instruments:
(a) Loans and receivables;
(b) Financial assets available for sale;
(c) Assets held to maturity;
(d) Assets at fair value through profit or loss (“FVTPL”).
Financial assets at fair value through profit or loss are subcategorized as follows:
(i) Assets voluntarily designated to this category at the time
of acquisition and
(ii) assets held for trading.
Insurance and reinsurance contracts are not financial
instruments and are subject to standard IFRS 4, Insurance
contracts.
The following table provides the classification as of 31 December 2017 between classes of assets for the purpose of reporting as per
IFRS 7, Financial instruments: Disclosures, and measurement categories set as per IAS 39, Financial instruments: Recognition and
measurement.
In EUR thousands Loans and
receivables
Assets available
for sale
FVTPL classified
optional at acquisition
Assets held to
maturity
Insurance and
reinsurance contracts Total
Debt securities: - held to maturity - - - 44 692 - 44 692 - at fair value through profit and
loss - - 98 596 - - 98 596 - classified as loans and
receivables 25 484 - - - - 25 484 - available for sale
- 248 499 - - - 248 499
Equity securities: - available for sale - 66 438 - - - 66 438 - at fair value through profit and
loss - - 22 635 - - 22 635 Loans granted 2 909 - - - - 2 909 Other financial and insurance
receivables: - - 2 996 - - 2 996 - net receivables from reinsurance - - - - 887 887 - share of reinsurer in unearned
premium reserve - - - - 22 22 - receivables from insurance - - - - 1 667 1 667 - receivables from commissions 19 - - - - 19 - other receivables 401 - - - - 401 Cash and cash equivalents 12 082 - - - - 12 082
56
As of 31 December 2017, and 31 December 2016 all financial
liabilities of the Company were measured at amortized cost
by the effective interest method.
The reason for classifying securities upon acquisition into
FVTPL category is the elimination of the difference in
valuation and accounting due to differing methods of the
measurement of assets and liabilities or due to different
ways of showing a profit and deficit.
The following table shows approvals as of 31 December 2016 between asset classes for the purpose of disclosure as per IFRS 7,
Financial Instruments: Disclosure and categories of measurement laid down by IAS 39, Financial Instruments: Recognition and
Measurement.
In EUR thousands Loans and
receivables
Assets available
for sale
FVTPL classified
optional at acquisition
Assets held to
maturity
Insurance and
reinsurance contracts Total
Debt securities: - held to maturity - - - 47 652 - 47 652 - at fair value through profit and
loss - - 93 710 - - 93 710 - classified as loans and
receivables 20 697 - - - - 20 697 - available for sale - 178 743 - - - 178 743 Equity securities: - available for sale - 36 430 - - - 36 430 - at fair value through profit and
loss - - 20 452 - - 20 452 Loans granted 2 980 - - - - 2 980 Other financial and insurance
receivables: - net receivables from
reinsurance - - - - 640 640 - share of reinsurer in unearned
premium reserve - - - - 20 20 - receivables from insurance - - - - 1 448 1 448 - receivables from commissions 16 - - - - 16 - other receivables 383 - - - - 383 Cash and cash equivalents 4 258 - - - - 4 258
57
Transactions with Associates
The Company conducted transactions with companies under joint control, with the Board of Directors and the Supervisory Board.
The balance of receivables and liabilities with associates were as follows:
31 December 2017 31 December 2016
In EUR thousands Parent
company
Companies under joint
control Company
management Parent
company
Companies under joint
control Company
management Receivables from commissions - - - - - - Receivables from reinsurance - 449 - - 326 - Share of reinsurer in provisions 9 6 - 9 6 - Loans granted - 2 909 - - 2 980 -
Payables from insurance - 4 - - 6 - Payables from reinsurance 16 - - 16 - - Payables from services 17 - - 27 - -
Expense and income from associates were as follows:
2017 2016
In EUR thousands Parent
company
Companies under joint
control Company
management Parent
company
Companies under joint
control Company
management Commissions from reinsurer -8 626 - -25 538 - Revenue from other commissions - 3 - - 5 - Reinsured claims 8 182 - 25 200 - Received dividends - 32 - - 23 - Costs for IT services 86 - - 99 - - Share of reinsurer in written premium 0 1 076 - - 973 - Other services 27 24 - 99 - - Interests charged from loans - 216 - - 14 - Salaries and remunerations to directors - - 456 - - 339 Levies to health and social insurance for board members - - 87 - - 37 Remunerations for Supervisory Board 11 19 9 12 18 10 Other - - 2 - - 5
58
Events after the Reporting Period
The Board of Directors of the Company approved the draft merger agreement of the Company with KOOPERATIVA poisťovňa, a.s.
Vienna Insurance Group on 27 October 2017. The General Meeting approved the merger on 28 February 2018. Date of effective
merger is on 1 April 2018.
No other events occurred after the reporting period that would have a significant impact on the financial situation of the Company.