WIENER RE A.D.O. BELGRADE · WIENER RE A.D.O. BELGRADE . Financial statements . for the year ended December 31, 2015 . prepared in accordance with . International Financial Reporting

WIENER RE A.D.O. BELGRADE

Financial statements for the year ended December 31, 2015

prepared in accordance with International Financial Reporting Standards

with Independent Auditors’ Report

CONTENT

I Independent Auditors’ Report

II Financial Statements: Statement of Profit or Loss and Other Comprehensive Income Statement of Financial position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements

kpmg

KPMG d.o.o. Beograd Kraljice Natalije 11 11000 Belgrade Serbia

Tel.: +381 (0)11 20 50 500 Fax: +381 (0)11 20 50 550 www.kpmg.com/rs

KPMG d.o.o. Beograd, a Serbian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Matični broj:17148656 PIB: 100058593 Račun: 265-1100310000190-61

T R A N S L A T I O N

Independent Auditors’ Report TO THE SHAREHOLDERS WIENER RE A.D.O. BEOGRAD We have audited the accompanying financial statements of Wiener re a.d.o. Beograd (“the Company”), which comprise the balance sheet as at 31 December 2015, the income statement, statement of other income, statement of changes in equity and cash flow statement for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the Law on Accounting of the Republic of Serbia, the Insurance Law and other relevant by-laws issued by the National Bank of Serbia, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Law on Auditing of the Republic of Serbia, the Decision on the content of reports on the audit of financial statements of an insurance company and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the preparation and true and fair view of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

kpmg T R A N S L A T I O N

2

Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Company as at 31 December 2015, its financial performance and its cash flows for the year then ended in accordance with the Law on Accounting of the Republic of Serbia, the Insurance Law and other relevant by-laws issued by the National Bank of Serbia. Belgrade, 15 March 2016 KPMG d.o.o. Beograd (L.S.) Dušan Tomić Certified Auditor

This is a translation of the original Independent Auditors’ Report issued in the Serbian language. All due care has been taken to produce a translation that is as faithful as possible to the original. However, if any questions arise related to interpretation of the information contained in the translation, the Serbian version

of the document shall prevail.

Belgrade, 15 March 2016 KPMG d.o.o. Beograd (L.S.) Dušan Tomić Certified Auditor

Wiener Re. a.d.o. Belgrade TRANSLATION Financial statements from 1 January to 31 December 2015

TRANSLATION NOTE: This is translation of the original document issued in the Serbian language. All due care has been taken to produce a translation that is as faithful as possible to the original. However, if any questions arise related to interpretation of the contained in the translation, the Serbian version of the document shall prevail.

INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2015 In thousands of RSD Note 2015 2014 Operating income Reinsurance and retrocession premium income 4,657,274 3,786,234

Premium transferred through reinsurance retrocession and retrocession (4,127,382) (3,297,486) Increase in unearned reinsurance premium and retrocession (77,543) (97,638)

Decrease in unearned reinsurance premiums and retrocession - 629

Total 4 452,349 391,739 Operating expenses

Expenses for long-term provisions and functional contributions 6 (80) (143)

Expenditure for claim settlement - share of claims in reinsurance and retrocession 7 (3,282,104) (3,318,134)

Expenses for investigation, estimation, settlement and payment for claims and contracted amounts 7 (8,694) (5,707)

Income from reinsurance and retrocession share in claim settlement 7 3,074,667 3,106,324 Provisions for outstanding claims – increase 8 (1,805,465) (31,229) Provisions for outstanding claims – decrease 8 1,813,753 189

Increase in other technical reserves – net (70) - Total (207,993) (248,700) Gross operating profit 244,356 143,039 Investment income 5 67,844 111,576 Investment expenses 9 (22,606) (29,309) Profit from investment activity 45,238 82,267 Insurance administration costs

Acquisition costs Commission (1,142,024) (992,732) Other acquisition costs (16,023) (15,023) Change in deferred acquisition costs - increase 14,000 - Administrative costs Depreciation (2,505) (2,233) Costs of material, energy, service and intangible costs (9,219) (7,528) Salaries, fringe benefits and other personal expenses (30,305) (27,466) Other costs of managing (19,965) (16,365) Other administrative costs (85) -

Commission from reinsurance and retrocession 10.4 991,811 917,740 Total 10.1 (214,315) (143,607)



Net operating profit/(loss) 75,280 81,699 Financial income 11 28,358 16,878 Financial expenses 12 (33,459) (25,430) Income from asset value adjustment 13 2,519 1,863 Expenses from asset value adjustment 14.1 (797) (2,813) Other income 7 138 Other expenses 14.2 (19) (48) Net gains/losses from discontinued operations - 420 Profit before tax 71,889 72,707 Income tax 15 (4,472) (4,834) Deferred tax 15 123 133 NET PROFIT 67,540 68,006



STATEMENT OF OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2015 In thousands of RSD Note 2015 2014 Profit/(loss) for the year 67,540 68,006 Gains from securities available for sale 14,530 5,265 Losses from securities available for sale - - Other comprehensive income /(loss) 14,530 5,265 Total comprehensive profit / (loss) 82,070 73,271



BALANCE SHEET AS AT 31 DECEMBER 2015 In thousands of RSD Note 2015 2014 ASSETS Non-current assets Intangible assets 16 4,926 3,719 Software and licenses 16 800 984 Property, plant and equipment 16 5,828 6,851 Other long-term financial investments 17 9,328 24,084 Total 20,882 35,638 Current assets Inventories 772 1,265 Receivables 18 1,347,408 1,346,359 Current income tax receivables 18 7,988 12,060 Financial investments 19.1 977,393 943,373 Cash and cash equivalents 20 32,037 51,071 Accrued expenses 21.1 167,670 149,900 Technical reserves charged to reinsurer and coinsurer 21.2 2,349,856 3,586,767 Total 4,883,124 6,090,795 TOTAL ASSETS 4,904,006 6,126,433 EQUITY AND LIABILITIES Equity Share capital 22.3 631,919 631,919 Reserves 13,149 13,149 Unrealized gains on securities available for sale 26,726 12,196 Unrealized losses on securities available for sale - - Accumulated earnings/(loss) 182,046 140,136 Total equity and reserves 22.1 853,840 797,400 Liabilities and provisions Risk equalization reserves 23 705 625 Other long-term provisions 23 133 46 Deferred tax liabilities 27 1,492 2,239 Short term liabilities 24 1,411,848 1,472,000 Reserves for unearned premium 25 976,081 898,538 Other accruals 25 163,808 144,784 Provision for outstanding claims 26 1,496,029 2,810,801 Other technical reserves - up to one year 70 - Total 4,050,166 5,329,033 TOTAL EQUITY AND LIABILITIES 4,904,006 6,126,433



CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2015 In thousands of RSD 2015 2014 Cash flow from operating activities Reinsurance and retrocession premiums 2,570,432 2,480,459 Cash receipts from participation in settlement of claims 2,369,214 2,397,579 Other receipts from operating activities 48,718 17,084 Claims paid and participation in claims settlement from reinsurance and retrocession (2,299,090) (2,884,139) Paid coinsurance, reinsurance and retrocession premiums (2,602,616) (1,935,867) Salaries, benefits and other personal expenses (33,828) (29,105) Income tax (400) (7,608) Payments of contributions and other charges (24,129) (19,552) Other payments from operating activities (68,670) (37,666) Net cash generated/ (used) from operating activities (40,369) (18,815) Cash flow from investment activities Inflows from depositing and other financial investments 24,500 29,593 Interest received 20,976 10,592 Purchase of intangible assets, property and equipment (746) (2,640) Net outflows from depositing and other financial investments - - Net cash (outflow) / inflow from investment activities 44,730 37,546 Cash flow from financial activities Outflows from paid dividends and profit share (25,630) (42,517) Net cash (outflow) / inflow from financial activities (25,630) (42,517) Net cash (outflow) / inflow (21,269) (23,786) CASH AT THE BEGINNING OF THE YEAR 51,071 70,677 Foreign exchange gains on cash translation 13,783 10,081 Foreign exchange losses on cash translation (11,547) (5,901) CASH AT THE END OF THE YEAR 32,037 51,071



STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015

In thousands of RSD Share capital Share

premium

Unrealized gains and losses on securities

available for sale Accumulated

earnings/(loss) TOTAL Balance as at 1 January 2014 631,919 13,149 6,992 119,390 771,450 Revaluation of available for sale securities gains/(losses) - - 5,204 - 5,204 Current year profit - - - 68,006 68,006 Dividend paid - - - (47,260) (47,260) Balance as at 31 December 2014 631,919 13,149 12,196 140,136 797,400 Balance as at 1 January 2015 631,919 13,149 12,196 140,136 797,400 Revaluation of available for sale securities gains/(losses) - - 14,530 - 14,530 Current year profit - - - 67,540 67,540 Dividend paid - - - (25,630) (25,630) Balance as at 31 December 2015 631,919 13,149 26,726 182,046 853,840

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WIENER RE A.D.О. BEOGRAD

Notes to the financial statements

2015

4 March 2016

WIENER RE a.d.o. Beograd T R A N S L A T I O N Note to the financial statements for 2015

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1. FOUNDATION AND ACTIVITY “Wiener Re” a.d.o. Beograd (hereinafter: “the Company”) was established on 24 July 2008 based on the Agreement on Establishment of a Closed Joint Stock Company. The Company’s founders and shareholders are “WIENER STÄDTISCHE Versicherung AG Vienna Insurance Group”, Schottering 30, A-1011, Vienna, Austria and Novak Lukić, PIN 0804959710173, no. 10 Deligradska Street, Belgrade. WIENER STÄDTISCHE Versicherung AG Vienna Insurance Group on 23 July 2010 sold all the shares in the reinsurance company "Wiener Re" j.s.r.c to reinsurance company VIG RE Zajištovna a.s from Prague (6,046 shares). On 11 November 2008 the National Bank of Serbia issued a license for conducting reinsurance, decision number 8033. Registration in the Serbian Business Registers Agency was confirmed by decision number BD 145442/2008 dated 10 December 2008. Managing bodies of the Company are: the Shareholder’s Assembly, Executive Board and Supervisory Board. Persons responsible for the preparation of financial statements for 2015 are Vidan Slana, CEO, and Radmila Miletić, Executive Board member. The Company provides reinsurance and retrocession of risks to domestic and foreign insurance companies (reinsurance business) and transfers surplus risk from reinsurance to retrocession to domestic and foreign reinsurance companies (retrocession). The Company headquarter is in Belgrade, no. 1 Trešnjinog cveta street. Registration number of the Company is 20483733, and taxpayer identification number is 105892185. As at 31. December 2015, the Company has 18 employees of which 16 have a higher education (2014:15).

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS 2.1. Basis of preparation and presentation of the financial statements

a) Statement of compliance The financial statements have been prepared in accordance with the following laws and regulations: Law on Accounting (“Official Gazette of the RS”, no. 62/2013), Insurance law (“Official Gazette of the RS”, no. 55/2004, 70/2004, 61/2005, 85/2005, 101/2007, 63/2009, 107/2009, 99/2011, 119/2012 and 116/2013 and 139/2014), Decision on the Chart of Accounts and Content of Accounts in the Chart of Accounts for Insurance Companies (“Official Gazette of the RS”, no. 135/2014 and 102/2015), Decision on the content and form of financial statements of insurance companies (Official Gazette of the RS, no. 135/2014, 141/2014 and 102/2015) and relevant bylaws based on mentioned laws and general documents of the Company. During 2014 and 2015, new laws and bylaws which regulate insurance activities have been adopted in the Republic of Serbia. In accordance with new regulations, the Company made following changes in the financial statements for 2015:


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The reserves which were introduced for the first time based on the Decision on technical reserves made by NBS include bonus and discount reserves, and unexpired risk reserves. Bonus and discount reserves are calculated in accordance with Decision on Detailed Criteria and the Manner of Calculation of Bonus and Discount Reserves, and are disclosed in the balance sheet (within AOP 0457), while the change of these reserve is disclosed in the income statement (within AOP 1045). Bonus and discount reserves are presented in note 28. According to prescribed calculation method, unexpired risk reserves amounted to RSD 0 as at 31 December 2015. In accordance with the Law on Accounting, legal entities and entrepreneurs in Republic of Serbia prepares and presents financial statements in accordance with the law, professional and internal regulations, where under the professional regulations are considered applicable Framework for the Preparation and Presentation of Financial Statements („Framework“), International Accounting Standards („IAS“), International Financial Reporting Standards („IFRS“) and interpretations that are part of the standard, in regard to text of IAS and IFRS which has been implemented, does not include grounds for concluding, illustrating examples, guidelines, comments, opposing views, elaborated examples and other supplementary material. Translation of IFRS is determined by the Minister of Finance's Decision on determining translation of the Conceptual framework for financial reporting and basic IAS texts and IFRS texts No. 401-00-896 / 2014-16 dated 13 March 2014, which was published in the Official Gazette No. 35 on 27 March 2014. The mentioned translation of IFRS applies from the financial statements, which are prepared on 31 December 2014. Amended or issued IFRS and interpretations of the standards after this date, have not been translated and published, and therefore are not applied in the preparation of these accompanying financial statements. Besides that, financial statements, as well as some elements of financial statements are disclosed in accordance with the Decision on the content and form of financial statements of insurance companies (Official Gazette of the RS, no. 135/2014, 141/2014 and 102/2015) and Decision on the Chart of Accounts and Content of Accounts in the Chart of Accounts for Insurance Companies (“Official Gazette of the RS”, no. 135/2014 and 102-2015), which can deviate from the requirements of IFRS. Given the foregoing and the fact that certain laws and subordinate legislation prescribes the accounting procedures, which in some cases differ from the requirements of IFRS and that the Law on Accounting established dinar as the official reporting currency, accounting regulations of the Republic of Serbia may deviate from the requirements of IFRS which may have an impact on the reality and objectivity of the accompanying financial statements. Management assesses the impact of changes in IAS, new IFRS and interpretations on the financial statements and, although many of these changes are not applicable to the Company, the Company's management does not express an explicit and unreserved statement of compliance of the accompanying financial statements with IAS and IFRS, which apply to periods shown in the accompanying financial statements. Accordingly, the accompanying financial statements can not be considered as financial statements prepared in full compliance with IFRS in the manner defined by the provisions of IAS 1 "Presentation of Financial Statements".


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b) Basis of measurement Financial statements are prepared based on the historical cost principle, except for the following items: • Financial instruments at fair value through profit and loss, which are measured at fair

value;

• Available-for-sale financial instruments, which are measured at fair value; and Derivatives, which are measured at fair value.

c) Going concern concept

The financial statements are prepared on a going concern basis which presupposes that the Company will continue its operations for an indefinite period of time into the foreseeable future. Functional and reporting currency The Company’s financial statements are disclosed in thousands of dinars (RSD). The dinar is the functional currency and the currency used for financial reporting purposes in the Republic of Serbia.

d) Use of estimates and judgments Presentation of financial statements requires of Company’s’ management to use best estimates and reasonable assumptions, which have effect on presented values of assets and liabilities and disclosure of potential receivables and liabilities as of balance sheet date and income and expenses items during the reporting period. These estimates and assumptions are based on previous experience, as well as different information available as of balance sheet date, and that seem realistic and reasonable in the given circumstances. In continuing to use best estimates and reasonable assumptions available as of balance sheet date the Company seeks to determine their effects on reported values of assets and liabilities, which cannot be confirmed in another, more precise way. Actual results may differ from estimated values. Estimates, as well as assumptions on which the estimates are based, are the result of regular reviews. If through review we find that a change occurred in the estimated value of assets and liabilities, related effects are recognized in the financial statements in the period when the change in estimate occurred, if the change in estimate affects only that financial period, or in the period when changes in the evaluation occurred and subsequent financial periods, if the change in estimate affects the current and subsequent financial periods. Key accounting estimates and judgments Through continual use of best estimates and reasonable assumptions available as at balance sheet date, the Company seeks to establish their effect on reported amounts of assets and liabilities, income and expenses, as well as their effect on future events. Actual results may differ from these estimates. When adjustments become necessary, they are disclosed to the income statement in the period when they came to attention. The most significant estimates relate to assessment of financial assets held for sale impairment, actuarial categories and fair value estimation.


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i. Impairment of financial assets In accordance with International Accounting Standard 39, if decrease in value of an asset available for sale is deemed significant and long-term, such asset should be impaired by transferring or cancelling revaluation reserves and charging the corresponding amount to the income statement. Additional criteria used in estimating fair value of such assets include: the financial position of the investee, stock exchange volume for investment, liquidity of each individual security, etc.

ii. Actuarial categories Rates for property insurance are determined on the basis of frequency of occurrence of insured risks. In order for the rate be determined more precisely there is need for monitoring risks which are being insured for many years. This represents the largest source of uncertainty given the lack of adequate statistics for precisely determining tariffs. Property insurance is usually short-term so that there is certain protection that if the rate is incorrectly estimated, it can be immediately corrected. Besides that, additional protection is also provided by reinsurance because risk is accepted by the reinsurer on the basis of rates at which reinsurance is agreed.

iii. Fair value The determination of fair value for financial assets and liabilities for which there is no readily available market price requires the use of valuation techniques. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgment depending on liquidity, concentration of risks, uncertainty of market factors, pricing assumptions and other risks affecting the specific financial instrument.

e) Reconciliation of receivables and payables In compliance with statutory regulations, the Company reconciled its receivables and payables with its creditors and debtors. Out of 68 requests sent for reconciliation, 41 were reconciled, 1 reconciliation in the amount of RSD 52,542 was disputed, while 26 requests for reconciliation were not answered.

f) Comparative data The Company presented comparative data for the Income statement for the period from 1 January to 31 December 2014, the Balance sheet with initial and final state, Statement of changes in equity, the Cash flow statement and Other comprehensive income for the year ended 31 December 2014.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basic accounting policies applied in the preparation of the 2015 financial statements are presented below.


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3.1. Intangible assets, property, plant and equipment

i. Recognition and measurement Intangible assets, property, plant and equipment are reported at cost reduced for accumulated depreciation. Property, plant and equipment consist of equipment, fixed assets under construction, leasehold improvements and advances for fixed assets, while intangible assets comprise licenses, computer software, advances for intangible assets and intangible assets under construction. Initial recognition of intangible assets, property, plant and equipment is at cost which comprises the amount invoiced by supplier and all costs associated with bringing the asset into use. Subsequent measurement after initial recognition is at cost reduced for accumulated depreciation and any impairment.

ii. Subsequent costs Costs of replacement of a part of a fixed asset are recognised at carrying amount, if there is a likelihood that future economic benefits will flow to the Company and if the cost of such part can be measured reliably. Spare parts and servicing equipment are recorded in the income statement when used.

iii. Depreciation In establishing the base for depreciation of intangible assets, property, plant and equipment, the cost of an asset is reduced for residual value of the asset. Depreciation of intangible assets, property, plant and equipment is provided on a straight line basis. Depreciation of an asset commences in the month subsequent to the month when it is put into use.

Useful life Depreciation/

(years) Amortization rate (%)

Intangible assets 5 20 Computers 5 20 Transport equipment 6.5 15.5

Machinery and office furniture 6 – 14 7 – 16.5

Once a year and at the latest on balance sheet date the Company reviews remaining useful lives of assets and makes adjustments to initially applied depreciation rates in order to better reflect remaining useful lives of assets.

3.2. Financial investments

i. Classification The Company classifies its financial assets into the following categories: financial assets at fair value where changes in fair value reflects through profit and loss account, loans and receivables, financial assets available for sale and financial assets held to maturity. Classification depends on the purpose for which assets were acquired. Management classifies its financial assets at the moment of initial recognition. In view of the statutory financial statement forms, the Company reported all of its financial investments, irrespective of their classification, in the balance sheet as short-term and long-term financial investments.


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ii. Recognition Purchase or sale of a financial asset or liability is recorded using accounting principles as of settlement date.

iii. Measurement Financial instruments are initially recognised at market value which includes transaction costs for all financial assets or liabilities, except those that are measured at fair value through profit and loss account. Initial recognition of financial assets at fair value through profit and loss account is at fair value, with related transaction costs charged to operating expenses in the income statement. After initial recognition financial assets available for sale and financial assets at fair value though profit and loss account are measured at fair value. Loans and receivables, as well as financial assets held to maturity, are measured at amortised cost using the effective interest rate method. After initial recognition, financial liabilities are disclosed at amortised cost using the effective interest rate method, except for financial liabilities which are disclosed at fair value through profit and loss account.

iv. Derecognition The Company derecognises financial assets when the right to cash inflows from an asset expires or when such right is transferred to another party. All rights related to a transferred financial asset, whether created or retained by the Company, are recognised as a separate asset or liability. The Company derecognises liabilities when a liability is settled, cancelled or transferred to another party.

v. Measurement at amortised cost Amortised cost of a financial asset or liability is the value at which the asset or liability is initially recognised, reduced for principal payment, and increased or decreased for accumulated amortised cost using the effective interest rate method applied to the difference between initial value and nominal value as at date of maturity, reduced for any impairment.

vi. Measurement at fair value Fair value of financial instruments is the value at which an asset can be exchanged, or liability settled, through an arm’s length transaction between informed parties. Fair value is determined using available market information as at reporting date and other valuation methods used by the Company. Fair value of particular financial instruments reported at nominal value is approximately equal to their net book value. Such instruments comprise cash, as well as receivables and liabilities without contractual dates of maturity and without contractual fixed interest rate. Other receivables and liabilities are reduced to their present value by discounting future cash flows, using current interest rates. Management holds that due to the nature of the Company’s business and its general policies, there are no significant differences between the net book value and fair value of financial assets and liabilities.


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vii. Impairment In 2015, the Company has performed the change in accounting policy, after repeal of NBS’ Decision on assessment of balance sheet positions for insurance companies. Financial assets are tested for impairment as at balance sheet date to assess whether there is objective evidence of impairment. If there is evidence of impairment, the recoverable value of the asset is assessed. For adequate and efficient credit risk management the Company defined separate policies and procedures in its internal regulations for identifying and managing impaired assets. Company management estimates the collectability of receivables and provisions for individual estimates of the risk of receivables. Risk receivables are deemed to be all receivables that are overdue. The Company estimates the collectible amount of receivables and investments, keeping in mind the regularity of settlement, the financial position of the debtor and quality of collateral, as well as the contractual cash flow and historical information on losses. The Company makes provision for the estimated amount of impairment and charges it to period expenses in the period when the impairment occurred. If in subsequent periods the Company determines that circumstances have changed and that there is no longer any impairment, the previously made provision is reversed and credited to income. Reversal of a provision cannot result in a higher carrying amount of the asset than the value such asset would have, had no provision been made previously. Since it was practically unfeasible to calculate and disclose the effects of the change in accounting policy using the comparative period (retroactive method), the Company has applied accounting policy to the earliest period for which the application was feasible, which in this case was the current period.

viii. Final assets held to maturity Financial assets held to maturity are non-derivative financial assets with fixed or determined payment schedules and fixed maturities, which the Company has the intention and ability to hold to maturity. Such financial assets comprise old foreign currency savings bonds issued by the Republic of Serbia, corporate bonds and short-term and long-term deposits. In the event the Company decides to sell a significant portion of its financial assets held to maturity, the entire category will be reclassified as available for sale. Financial assets held to maturity are classified as long-term financial assets, except if maturities fall within less than 12 months as of balance sheet date, when they are classified as short-term assets. Financial assets held to maturity are initially recognised at cost, and as at balance sheet date they are reported at amortised cost which is the present value of future cash flows discounted using the effective interest rate specific to the instrument. As at 31 December 2015 the Company owns coupon bonds issued by RS and corporate bonds classified as securities held to maturity.


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ix. Financial assets at fair value through profit and loss account Financial assets at fair value through profit and loss account are financial assets held for trading. A financial asset is classified into this category if it is acquired principally for sale within the short term. Derivatives are also classified as assets held for trading, unless they are used for hedging risks. Assets in this category are classified as short-term financial investments. Financial assets at fair value through profit and loss account are initially recognised at cost and on balance sheet date are reported at market value. Changes in market value are reported in the Company’s income statement as income or expense from adjustment in value of assets. The Company reports gains or losses on the sale of such securities. As at 31 December, 2015 the Company did not have any assets within this category.

x. Financial assets available for sale and equity investments Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale and are not classified as loans and receivables, financial assets held to maturity or financial assets at fair value through profit and loss account. Available-for-sale financial assets are investments for which there is an intention to hold them for an indefinite period of time and that could be sold for liquidity purposes or due to fluctuations in interest rates, exchange rates or market prices. If there is no active market for available-for-sale financial assets, if they have fixed maturities, available-for-sale financial assets are measured at amortised cost using the effective interest rate method. Available-for-sale financial assets are initially measured at cost and on balance sheet date are reported at market value, if available. Changes in market value are reported within equity, credited or debited against revaluation reserves, up to the date when securities are sold when revaluation reserves are transferred to income. Equity investments are characterised by the intention of holding them for an indefinite period of time. Such investments can be sold in case of cash shortage or in the event of change in market price. Equity investments for which there is no active market are measured at cost. There was no trade on the secondary market or the volume of the trade was at the level which did not indicate significant changes in market value of coupon bonds of the Republic of Serbia held by the Company. Available-for-sale financial assets are measured at fair value taking into account the rate of return of the last trading with that security or if there was no trading with that security, rate of return of the last primary issue of a similar security (in terms of residual maturity). The Company’s available for sale financial assets include old foreign currency savings bonds issued by the Serbian Government classified as available for sale, coupon bonds of the Republic of Serbia and investment units of the Raiffeisen Cash Investment Fund.

3.3. Receivables Receivables comprise reinsurance and retrocession premium receivables, receivables from retrocessioner for share in claim settlement, receivables from reinsurance and retrocession commissions, receivables from recourse rights, receivables for advance payments, receivables for interest on deposits that the Company holds in its portfolio, as well as other receivables.


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If there is a likelihood that the Company will not be able to collect all amounts due as per terms of contract, management estimates the amount of provision for reducing a receivable to its actual value. The Company evaluates the worth and collectibility of the receivables in accordance with the contracts signed and other methods in accordance with IAS 39 - Financial Instruments: Recognition and measurement. In previous periods the Company used impairment methods in accordance with the Decision of the National Bank of Serbia on the method for evaluation of the balance sheet and off balance sheet positions of an Insurance company. After the nullification of this Decision, the Company changed the impairment methodology, but due to the accordance with IAS 8, which prohibits retrospective changes, the opening balance was not corrected.

Unearned premium Unearned premium relates to premium that belongs to a subsequent reporting period. In accordance with business policy, calculation of unearned premium is based on the type and group of reinsurance. Unearned premium is calculated based on the gross premium principle – the base for calculation is the invoiced premium. Unearned premium calculation is performed as per reinsurance and retrocession business at home and abroad, applied to total premium on a “pro rata temporis” basis, except for reinsurance contracts where coverage changes within the reinsurance period (reinsurance of properties under construction, liability reinsurance of construction contractor, liability reinsurance of structures under installation, liability reinsurance of installation work contractor), which ensures that in the period for which operating result is calculated only earned and invoiced premium will be recorded as income for that period. In the case of reinsurance contracts when the coverage changes within the reinsurance period (reinsurance of properties under construction, liability reinsurance of construction contractor, liability reinsurance of structures under installation, liability reinsurance of installation work contractor) calculation of unearned premiums is done for reinsurance and retrocession in domestic and in foreign countries in relation to the change of coverage within the insurance period, in accordance with “the Decision on Specific Criteria and the Manner of Calculating Unearned Premiums“ issued by the National Bank of Serbia.

3.4. Provisions for outstanding claims The Company calculates and forms from net premium funds a provision for incurred but unsettled liabilities (amount of provision for outstanding claims) related to reinsurance contracts, in accordance with the “Rules for Calculating Part of Net Premium for Payment of Incurred But Unsettled Liabilities – Provisions for Outstanding Claims”. Provisions for outstanding claims are calculated separately by type of reinsurance for reported but not settled and for incurred but not reported claims.

i. Reported but not settled claims Provisions for outstanding claims are formed by types of insurance and reported claims by cedants. Claims are provisioned in the amount sufficient for payment of the reinsurance share in the payment to the insurer, cedant and insured on claim settlement date.


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ii. Incurred but not reported claims The Company makes provisions for incurred but not reported claims in accordance with the “Rules on Calculating Provisions for Outstanding Claims and Coefficients for Provisioning Such Claims” which is harmonised with the National Bank of Serbia’s Decision issued on 11 May 2015. Based on these Rules, provisions for incurred but not reported claims are made by applying the annual coefficient to the amount of provisions for outstanding claims for the year for which the financial statements are prepared. The coefficient is calculated by dividing the amount of occurred claims in the previous year and reported in the year for which the coefficient is calculated, with the total amount of reported (settled and provisioned) claims in that year. The coefficient is calculated separately for each type of insurance annually, except MPTL insurances, where the provisions are calculated as the bigger number between the Chain Ladder method (which is based on paid claims) and the average of paid claims and incurred claim.

3.5. Risk equalisation reserves Risk equalisation reserves are calculated in compliance with the Decision on Detailed Criteria and the Manner of Calculation of Risk Equalisation Reserves issued by the NBS. These reserves are used for the equalization of the claims flow and are part of the technical reserves of the Company. Risk equalisation reserves are formed for each type of insurance separately. Risk equalisation reserves are increased if the annual net result is positive in the observed insurance type, and are decreased when the net result is negative. The limits of the increase or decrease are regulated by the Decision.

3.6. Bonus and discount reserves The bonus and discount reserves to which cedants have a right to are formed on several bases. The calculation of bonus and discount reserves is done according to the type of insurance in question, separately for profit sharing and future limited discounts, and separately for the return of premium. The bonus and discount reserves are the sum of these reserves. The criteria, methodology and timeframe for forming of reserves are regulated by the Decision on Detailed Criteria and the Manner of Calculation of Bonus and Discount Reserves.

3.7. Unexpired Risk Reserve Unexpired Risk Reserves are formed over the unearned premium reserves in order to cover payables from reinsurance which will be formed in the future according to the contracts from the current period. The Company forms reserves if they determine that the expected future claim amounts and costs which relate to current contracts are higher than the unearned premium reserves amount. The criteria, methodology and time frame for forming these reserves are regulated by the Decision on Detailed Criteria and the Manner of Calculation of Unexpired Risk Reserves. The Company has performed the change in accounting policy, and for the first time formed unexpired risk reserves in 2015. Since the effects of the change are not material, the Company did not correct the comparative period, in accordance with Company’s Accounting manual.


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3.8. Reinsurance administration costs The costs of reinsurance activity relate to costs of doing reinsurance business, such as material costs, rent, depreciation/amortisation, gross wages, commissions, advertising and promotion costs, entertainment expense, etc.

3.9. Financial income and expense Financial income represents interests from old foreign currency savings bonds issued by the Republic of Serbia, Treasury bills, corporate bonds and interest from deposits with banks and foreign exchange gains. Financial expenses represent foreign exchange losses and interest expenses. Accounting policies for recognition and measurement of financial income and expenses are disclosed within the relevant balance sheet position.

Foreign currency transactions Transactions in foreign currencies are translated into RSD at the average exchange rate set by the interbanking foreign currency exchange market ruling as at transaction date. All assets and liabilities denominated in foreign currencies are translated into RSD at the average exchange rate set by the interbanking foreign currency exchange market ruling as at balance sheet date. Foreign exchange gains and losses arising from foreign currency transactions and during recalculation of balance sheet items denominated in foreign currency are debited or credited to the income statement, including foreign exchange gains or losses. Commitments and contingent liabilities denominated in foreign currency are translated into RSD at the average exchange rate set by the interbanking foreign currency exchange market ruling on the date of the undertaking of the commitment or contingent liability. The exchange rates of the principal currencies used in translating balance sheet items ruling at the balance sheet date were as follows:

Currency 2015 2014

EUR 121.626 120.958 USD 111.247 99.4641

3.10. Taxes and contributions

i. Income tax

Current income tax relates to the amount calculated by applying the prescribed tax rate of 15% to profit before tax. The final amount of income tax liability is calculated by applying the prescribed tax rate to the tax base reported in the tax balance. In accordance with the amendments of the Corporate Income Tax Law, in 2013 the Company will use the prescribed rate of 15%, which is also used in the calculation of deferred taxes for 2015.


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The Serbian Tax Law does not allow tax losses of the current period to be used to recover tax paid within a specific carry back period. However, losses from 2010 and later, reported for tax purposes can be used to reduce the tax base in future periods, but not longer than five years, while the losses of the tax balance for 2009 and previous years can be used to reduce profit in the next ten years.

ii. Deferred tax assets and deferred tax liabilities Deferred tax assets and deferred tax liabilities are calculated on temporary differences arising from differences between the tax bases of assets and liabilities disclosed in the balance sheet and their carrying amounts. Effective tax rates as at balance sheet date or tax rates that went into effect after that date are used for computing the accrued amount of income tax. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax receivables are recognised for all deductible temporary differences and effects of tax losses and credits that can be transferred to subsequent reporting periods, to the extent that taxable profits will be available against which tax losses and credits can be utilised.

iii. Taxes and contributions which are not dependent on results Taxes and contributions which are not dependent on results relate to property taxes, and taxes and contributions in accordance with the laws and regulations specified by Serbian Government and by local municipal governments.

iv. Transfer pricing The tax balance for 2015 was not submitted until the date of the financial statements of the Company since the deadline for submission is 30 June 2016. The Company has accrued tax effects on the basis of the Law on Corporate Income Tax. The Company has not finished the study on Transfer pricing yet, but according to management’s opinion this will not cause materially significant effects on 2015, because transactions with related parties can be fully considered “arm’s length” transactions.

4. REINSURANCE AND RETROCCESION PREMIUM Income from reinsurance premiums and retrocessions has the following structure: In thousands of RSD 2015 2014

Reinsurance and retrocession premium income 4,657,274 3,786,234 Premium transferred through reinsurance retrocession and retrocession (4,127,382) (3,297,486) Increase in unearned reinsurance premium and retrocession (77,543) (97,638) Decrease in unearned reinsurance premiums and retrocession - 629 Total 452,349 391,739


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5. INVESTMENTS INCOME Income from investments and depositing include: In thousands of RSD 2015 2014 Interest income 50,518 47,599 - a vista deposits 3,480 3,334 - term deposits 479 1,643 - securities held to maturity 7,357 15,933 - securities available for sale 39,202 26,689 Security trading income 4,066 - Real estate sale gains 19 - Exchange rate gains 8,597 38,895 Foreign currency clause income 159 349 Foreign exchange gains from transactions with related parties 4,485 24,733 Total 67,844 111,576

6. EXPENSES FOR LONG-TERM PROVISIONS AND FUNCTIONAL CONTRIBUTIONS Expenses for long-term provisions and functional contributions consist of: In thousands of RSD 2015 2014 Risk equalization reserves 80 143 Total 80 143 In 2015 the Company formed risk equalization reserves only for credit insurance, which represent change in accounting policy compared to 2014, while the effects of this change are immaterial. Hence, the Company did not correct the comparative period.

7. SETTLED CLAIMS AND CONTRACTED INSURANCE AMOUNTS Expenses from claims settlement and contracted insurance amounts: In thousands of RSD 2015 2014 Expenditure for claim settlement - share of claims in reinsurance and retrocession 3,282,104 3,318,134 Expenses for investigation, estimation, settlement and payment for claims and contracted amounts 8,694 5,707 Income from reinsurance and retrocession share in claim settlement (3,074,667) (3,106,324) Total 216,131 217,517


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8. PROVISIONS FOR OUTSTANDING CLAIMS Provisions for outstanding claims from reinsurance relate to: In thousands of RSD 2015 2014 Provisions for outstanding claims – reported but not settled 1,668 2,523,104 Provisions for outstanding claims – incurred but not reported 497,314 493 Provisions for outstanding claims - retrocessioner’s share 1,306,483 (2,492,368) 1,805,465 31,229 Decrease in risk equalisation reserves (1,813,753) (189) (1,813,753) (189) TOTAL (8,288) 31,040 In 2015 there was a significant decrease in provisions for outstanding claims – reported but not settled, as well as provisions for outstanding claims - retrocessioner’s share due to floods occurred in the area of Serbia and Bosnia and Herzegovina during May 2014, which were included in the provisions for outstanding claims on 31 December 2014. Increase in incurred but not reported provisions for outstanding claims is a direct consequence of the change in the calculation method of these provisions. From 31 December 2015 these provisions are calculated on a gross basis, according to the Decision on Technical Reserves by NBS.

9. INVESTMENT EXPENSE Expenses on investment in insurance assets include: In thousands of RSD 2015 2014 Foreign exchange losses from transactions with related parties 3,839 17,456 Foreign exchange rate losses 6,646 118 Foreign currency clause expenses 15 - Impairment losses for bonds - 193 Impairment of receivables for matured coupons - 300 Other expenses from investment activities 12,106 11,242 Total 22,606 29,309


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10. INSURANCE ADMINISTRATION COSTS

10.1. Reinsurance administration costs relate to: In thousands of RSD 2015 2014 Acquisition costs 1,144,047 1,007,755 Administration costs 61,994 53,592 Other administrative costs 85 - Commission from reinsurance and retrocession (991,811) (917,740) Total 214,315 143,607

10.2. Acquisition costs have the following structure: In thousands of RSD 2015 2014 Commission 1,128,024 992,732 Gross salaries 6,154 6,300 Retirement benefits and jubilee awards 14 - Costs of non-production services 1,705 1,482 Taxes and contributions paid by employer 952 843 Fees for banking services 355 270 Other personal expenses 1,057 892 Production services costs 2,205 1,965 Material costs and energy 279 237 Representation costs 216 180 Contributions 2,988 2,662 Advertising costs 5 3 Other non-operating costs 93 189 Total 1,144,047 1,007,755

10.3. Administration costs have the following structure: In thousands of RSD 2015 2014 Gross salaries 22,845 21,537 Taxes and contributions paid by employer 3,535 2,881 Retirement benefits and jubilee awards 54 - Other personal expenses 3,925 3,048 Contributions 11,095 9,099 Non-production costs of services 6,331 5,068 Fees for banking services 1,319 923 Depreciation 2,505 2,233 Production services costs 8,182 6,719 Material costs and energy 1,037 809 Representation costs 800 617 Advertising costs 19 11 Other non-operating costs 347 647 Total 61,994 53,592


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10.4. Commission from reinsurance and retrocession Commission income from reinsurance and retrocession amount to RSD 991,811 thousand (2014: RSD 917,740).

10.5. Coverage of reinsurance cost is presented below: In thousands of RSD 2015 2014 Overhead addition 134,013 113,665 Reinsurance administration costs 214,315 143,607 Uncovered part of the cost of reinsurance activity 80,302 29,942

11. FINANCIAL INCOME, OTHER THAN FINANCIAL INCOME FROM INVESTMENT ACTIVITIES

In thousands of RSD 2015 2014

Exchange rate gains

23,367 13,492 Gains on effects of foreign currency clause 4,991 3,386 Total 28,358 16,878

12. FINANCIAL EXPENSES, OTHER THAN FINANCIAL EXPENSES FROM INVESTMENT ACTIVITIES In thousands of RSD 2015 2014 Losses on penalty interest for past due paid taxes - 1 Exchange rate losses 31,175 22,762 Losses on foreign currency clause effects 2,284 2,667 Total 33,459 25,430

13. INCOME FROM ASSETS VALUE ADJUSTMENT Income from assets value adjustment and other income consist of: In thousands of RSD 2015 2014 Income from impairment reduction of reinsurance and retrocession premium 734 432 Income from impairment reduction 1,785 1,431 Total 2,519 1,863


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14. EXPENSES FROM ASSETS VALUE ADJUSTMENT

14.1. Expenses from asset value adjustment relates to: In thousands of RSD 2015 2014 Write-off of receivables from share in claim settlement - 272 Write-off of receivables from reinsurance premium 797 2,502 Write-off of receivables from reinsurance and retrocession commission - 39 Total 797 2,813

14.2. Other expenses relates to: In thousands of RSD 2015 2014 Losses from fixed assets write-offs and expenses 17 21 Direct write-off of receivables - 14 Non-operating and extraordinary expenses from previous years - 13 Other expenses 2 - Total 19 48

15. INCOME TAX

15.1. Income tax consists of: In thousands of RSD 2015 2014 Current year’s profit tax 4,472 4,834 Gains on deferred tax assets and reduction of tax liabilities 123 133 TOTAL 4,349 4,701

15.2. Reconciliation of effective tax rate is shown as follows: In thousands of RSD 2015 2014 Current year’s profit /loss 71,888 72,707 Calculated tax at tax rate of 15% 10,783 10,906 Adjustment of income and expenses Expenses which are not deductible items in Tax balance 217 98 Interest income (6,649) (6,300) Additional depreciation calculated for tax purposes 108 151 Severance pay and cash compensation based on employment termination, accrued and unpaid in the tax period 13 - Income from unused long-term provisions which were not recognized as an expense in the tax period in which they are performed - (21) Other (123) (133) Tax expense 4,349 4,701 Effective tax rate 6.05% 6.47%


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15.3. Changes in deferred tax liabilities are shown as follows: In thousands of RSD 2015 2014 Balance as at 1 January 2,239 1,442 Tax expense/income (123) (133) Decrease/increase in deferred tax liabilities based on deferred tax on the basis of revaluation reserves for securities available for sale (624) 930 Total 1,492 2,239

16. INTANGIBLE AND FIXED ASSET Intangible and fixed assets include: In thousands of RSD 2015 2014 Intangible assets 4,926 3,719 Software and licenses 800 984 Equipment and means of transport 5,828 6,838 Advances for fixed assets-equipment - 13 Property, plant and equipment – total 5,828 6,851 Total 11,554 11,554

16.1. Changes in intangible and fixed assets are presented as follows: In thousands of RSD Intangible

assets Software and other rights

Equipment

Acquisition cost Balance as at 1 January 2015 3,940 2,049 12,420 Additions 5,167 250 967 Disposals (3,792) - (122) Balance as at 31 December 2015 5,315 2,299 13,265 Accumulated depreciation Balance as at 1 January 2015 221 1,065 5,582 Current year depreciation 168 449 1,940 Disposals - (15) (85) Balance as at 31 December 2015 389 1499 7,437 Net book value as at 31 December 2015. 4,926 800 5,828 Advances for fixed assets - Total 5,828 Net book value as at 31 December 2014. 3,719 984 6,838 Advances for fixed assets 13 Total 6,851


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17. LONG - TERM FINANCIAL INVESTMENTS Long - term financial investments relate to: In thousands of RSD 2015 2014 Government bonds held to maturity - 24,084 Corporate bonds held to maturity 15,774 - Impairment – corporate bonds (6,446) - Balance as at 31 December 9,328 24,084

18. RECEIVABLES Receivables relate to: In thousands of RSD 2015 2014 Reinsurance and retrocession premium receivables in the country 1,009,246 875,377 Receivables from share in claim settlement abroad 115,438 189,805 Reinsurance premium receivables abroad 127,443 126,165 Receivables from claims paid in the country 29,491 18,330 Receivables for recourse claims in the country 1,730 2,073 Receivables for reinsurance and retrocession commission 28,674 99,468 Interest receivables 82 2,455 Deposits placed arising from reinsurance operations 38,199 37,478 Receivables from state bodies for maternity leave 693 519 Total 1,350,996 1,351,670 Impairment provision for receivables (3,588) (5,311) Balance as at 31 December 1,347,408 1,346,359 In thousands of RSD 2015 2014 Current income tax receivables 7,988 12,060 Balance as at 31 December 7,988 12,060


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19. FINANCIAL INVESTMENTS

19.1. Financial investments relate to: In thousands of RSD 2015 2014 Short - term deposits placed with banks 53,154 127,069 Investment units available for sale 29,692 27,788 Bonds available for sale 794,181 491,300 Maturity within one year of long-term securities – AFS government bonds 76,257 67,976 Maturity within one year of long-term securities – HTM government bonds 24,109 217,183 Maturity within one year of long-term financial investments – corporate bonds - 18,503 Impairment – corporate bonds - (6,446) Balance as at 31 December 977,393 943,373

19.2. Short – term deposits have the following structure: In thousands of RSD 2015 2014 EUR RSD EUR RSD Findomestic bank a.d. Beograd - - 450 54,431 Findomestic bank a.d Beograd - Overnight - 53,154 - 72,638 Balance as at 31 December - 53,154 450 127,069 The overnight deposit is placed with the interest rate that is equalled to the reference rate reduced for the banking fee.

20. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of: In thousands of RSD 2015 2014 Foreign currency accounts 29,153 44,045 Cash accounts 2,884 7,026 Balance as at 31 December 32,037 51,071


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21. UNEARNED PREMIUMS, PROVISIONS FOR OUTSTANDING CLAIMS AND PREPAYMENTS AND DEFERRED EXPENSES

21.1. Structure of unearned premiums, provisions for outstanding claims and prepayments and deferred expenses is shown as follows:

In thousands of RSD 2015 2014 Accrued expenses

Interest on corporate bonds 23 53 Interest – bonds available for sale 18,965 15,209 Interest on two-year treasury bonds 819 6,504

Deferred commissions from reinsurance activities 140,389 126,389 Deferred reinsurance commission 803 332 Deferred retrocession premium 5,913 1,197 Other prepayments and deferred expenses 758 216 Balance as at 31 December 167,670 149,900

21.2. The structure of unearned premiums and outstanding claims is shown as follows:

In thousands of RSD 2015 2014 Unearned premium Non-life retrocession activities unearned premium 947,691 878,192 Life retrocession activities unearned premium 800 728 Total 948,491 878,920 Provisions for outstanding claims Provisions for deferred outstanding claims reported to retrocession 1,384,875 2,702,955 Retrocessionaire’s participation in outstanding claims - life 16,490 4,892 Total 1,401,365 2,707,847 Balance as at 31 December 2,349,856 3,586,767 As has already discussed in note 8, the increase in provisions for deferred outstanding claims reported to retrocession occurred due to the floods in Serbia and Bosnia and Herzegovina during May 2014.

22. EQUITY

22.1. As at 31 December 2015 equity was as follows: In thousands of RSD 2015 2014 Share capital 631,919 631,919 Share premium 13,149 13,149 Unrealized gains on securities 26,726 12,196 Accumulated profit from previous years 114,506 72,130 Current year profit 67,540 68,006 Balance as at 31 December 853,840 797,400


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22.2. Distribution of profits and capital increase At the regular meeting held on 28 April 2015 the Assembly of the Company adopted the Decision on Profit Distribution and dividend payments for 2014. Profit for 2014 amounted to RSD 68,006, from which the Company has decided to distribute a portion to shareholders in the amount of RSD 25,630 thousands while the remaining profit in the amount of RSD 42,376 thousands remains undistributed. Profit allocated to dividend payments is payable to shareholders in cash, in proportion to the number of shares they hold in the total number of shares.

22.3. Ownership structure The share capital is formed in accordance with the Memorandum of Association and the Company’s Statute, through issue of founders’ shares. The structure of share capital as at 31 December 2015 was as follows:

Shareholder Number of

shares Equity

amount % of

participation VIG RE Zajištovna a.s. Czech Republic 6,949 627,494 99,2998 Novak Lukić 49 4,425 0,7002 Total 6,998 631,919 100 As at 31 December 2015 share capital consists of 6,998 ordinary shares (2014: 6,998 ordinary shares) with nominal value of RSD 90,300 per share. Holders of ordinary shares carry business risks and they are responsible for liabilities of the Company in a portion equal to the number of shares they possess. Shares could be transferred to other parties in accordance with the Articles of Association. Holders of ordinary shares are entitled to receive dividends and they have voting rights in a portion equal to the number of shares they possess.

22.4. Minimum Capital Requirement Under Article 27 of the Insurance Law (hereinafter: “the Law”), the Company is obliged to ensure that the cash part of the capital in RSD is always above or equal to the amount of EUR 3,200,000. The initial capital of the Company as at 31 December 2015 in the amount of RSD 631,919 thousand (2014: RSD 631,919 thousand), or the equivalent value of EUR 5,195,590 exceeds the regulatory minimum in the amount of EUR 1,995,590.

22.5. The structure of the guarantee reserve On 31 December 2015, the Company formed a guarantee reserve which consists of primary and supplementary capital, diminished for additional items, in accordance with Article 124 of the Insurance Law and the Decision on Capital Adequacy by NBS.


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The structure of the guarantee reserve is as follows: In thousands of RSD 2015 Primary Capital 820,070 Share capital 631,919 Share premium 13,149 Unrealized gains on securities 26,726 Unrealized losses on securities - Undistributed profit from previous years 114,506 Current year profit (up to 50%) 33,770 Supplementary capital - Diminished items I part 5,726 Intangible assets 5,726 Guarantee Capital 814,344 Diminished items II part 9,328 Illiquid assets 9,328 1. Available for sale corporate bonds investments 9,328 Guarantee reserve, preliminary result 805,016 Deduction in case of art. 124 p.1 - Deduction in case of art. 124 p.2 - Deduction in case of art. 124 p.3 - Guarantee reserve, final result 805,016 Required solvency margin 436,380 Difference between available and required solvency margin 368,636 Ratio between required solvency margin and guarantee capital 53.59% Amount of capital stipulated by the Law, art. 27 389,204 Difference between guarantee capital and amount stipulated by art 27 425,140

The guarantee reserve as at 31 December 2015 is adequately formed and in accordance with all specified criteria. Compliance with requirements is shown in the table above. Considering the change of regulations in 2015, and in accordance with the regulations which were in force in 2014, the guarantee reserve of the Company is supposed to amount to a minimum of 4,500,000 EUR, or RSD 554,312 thousands. The guarantee reserve of the Company is above the required minimum. The structure of the guarantee reserve is as follows on 31 December 2014: In thousands of RSD 2014 Share capital 631,919 Share premium 13,149 Unrealized gains on securities 12,196 Unrealized losses on securities - Undistributed profit from previous years (up to 50%) 36,065 Current year profit (up to 50%) 34,003 Balance as at 31 December 727,332


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23. LONG TERM PROVISIONS Long term provisions relate to risk equalization provisions and provisions for retirement benefits. In thousands of RSD 2015 2014 Risk equalization provisions 705 625 Provisions for retirement benefits 133 46 Balance as at 31 December 838 671 In 2015 the Company has formed risk equalization provisions only for credit insurance which represent change in accounting policy, while the effects of the change are immaterial. Hence, the comparative period was not corrected.

24. SHORT-TERM LIABILITIES Short term liabilities relate to: In thousands of RSD 2015 2014 Other short-term financial liabilities Liabilities toward banks 64 48 Liabilities for claims and agreed amounts Reinsurance share in claims settlement 575,258 604,893 Liabilities for reinsurance claims for life insurance 174 9,402 Liabilities for reinsurance claims for life insurance abroad 38,325 30,239 Liabilities for recourse claims in the country - 6 Liabilities for premiums, payroll and other liabilities Retrocession and reinsurance premium liabilities in the country 4,763 3,082 Retrocession and reinsurance premium liabilities abroad 661,320 662,802 Liabilities for recourse claims abroad 1,817 2,899 Liabilities for reinsurance commission 46,948 100,012 Liabilities for refund of reinsurance premiums 35,994 7,109 Liabilities for net salaries 3,904 5,961 Liabilities for contributions and taxes related to salaries 2,210 1,251 Liabilities toward suppliers 3,409 1,383 Liabilities for reimbursement to the National Bank of Serbia 3,136 1,881 Liabilities for refund of advances received 19 7,260 Liabilities for withheld deposits from reinsurance 34,379 33,730 Liabilities for VAT 118 39 Withholding tax 6 - Other liabilities 4 3 Liabilities for income tax - - Balance as at 31 December 1,411,848 1,472,000


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25. DEFERRED INCOME Deferred income consists of: In thousands of RSD 2015 2014 Unearned reinsurance premium Non-life reinsurance unearned premium 975,238 897,770 Life reinsurance unearned premium 843 768 Balance as at 31 December 976,081 898,538 In thousands of RSD 2015 2014 Other accruals Accrued commissions from reinsurance and retrocession 154,722 140,516 Accrued retrocession commission 1,279 484 Accrued reinsurance premium 6,026 1,234 Accrued uninvoiced expenses 1,781 2,550 Balance as at 31 December 163,808 144,784 Total deferred incomes 1,139,889 1.043,322

26. PROVISION FOR OUTSTANDING CLAIMS The structure of provision for outstanding claims is as follows: In thousands of RSD 2015 2014 Provisions for outstanding claims - reported but not settled 964,391 2,776,476 - incurred but not reported 531,638 34,325 Balance as at 31 December 1,496,029 2,810,801 The Company accrued liabilities at 31 December 2015 for costs related to 2015 in the amount of 1,781 RSD thousands. The mentioned costs were not invoiced in 2015 and relate to the audit of financial statements for 2015, as well as the provision of IT consulting services. As has already discussed in note 8, the increase in provisions for outstanding claims - reported but not settled occurred due to the floods in Serbia and Bosnia and Herzegovina during May 2014.

27. DEFERRED TAX LIABILITIES Deferred tax liabilities in the amount of RSD 1,492 thousand (2014: RSD 2,239 thousand) were incurred as a result of the temporary difference between tax depreciation of fixed assets and amortization of fixed assets calculated for accounting purposes, provisions for retirement benefits or termination of employment in accordance IAS 19. In accordance with paragraph 20 IAS 12, The Company has established tax liability by multiplying revaluation reserves on securities with income tax rate for the year 2015. The calculation of deferred tax assets (liabilities) is shown in the table below:


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In thousands of RSD

2015 2014

Assets

Equity and

liabilities Net Assets Equity and liabilities Net

Fixed assets depreciation 17 17 (94) (94) Provisions for retirement benefits - 20 20 - 7 7 Valuation of financial assets available for sale - (1,529) (1,529) - (2,152)

(2,152)

Deferred tax assets / (liabilities), NET - (1,492) (1,492) - (2,239)

(2,239)

Deferred tax is calculated by applying a tax rate of 15 %.

28. TECHNICAL RESERVES FUNDS The structure of technical reserves is as follows: In thousands of RSD 2015 2014 Unearned premium 976,081 898,538 Risk equalization reserves 705 625 Bonus and Discount reserves 70 - Provisions for outstanding claims 1,496,029 2,810,801 Unexpired risk reserve - - Balance as at 31 December 2,472,885 3,709,964 The Company formed technical reserves in accordance with the Decision on Technical Reserves made by NBS. The reserves which were introduced for the first time within the Decision are bonus and discount reserves, as well as unexpired risk reserves. According to the stipulated methods of calculations, the unexpired risk reserves as at 31 December 2015 amount to RSD 0. If the same calculation was performed as at 31 December 2014, unexpired risk reserves would amount to RSD 0, while if calculated on 31 December 2013, they would amount to TSD 54 thousands. The Risk equalization reserves are calculated in accordance with the new methodology stipulated by the National Bank of Serbia. The amount of these reserves as at 31 December 2015 amounts to RSD 705 thousands. If calculated on 31 December 2014, these reserves would amount to RSD 1,022 thousands, and if calculated as at 31 December 2013, less than a RSD thousand. Changing the methodology resulted in changes to the accounting policy, however, taking into consideration the materiality of the effects caused by the change, no corrections were made to the opening balance.


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Technical reserves funds as at 31 December 2015 were invested in the following placements:

Reinsurance

Life Non-life

insurance In thousands of RSD Amount % Amount % Securities issued by the Government and the central bank 0 0% 894,546 28% Cash 20,000 54% 0 0% Accrued claims and unearned retrocession premiums 17,291 46% 2,332,565 72%

Total 37,291 100% 3,227,111 100% The structure of technical reserves investments is in compliance with the Insurance Law, Article no. 132 and with the Decision of National Bank of Serbia about investment insurance funds (Official Gazette of RS, no. 55-2015).

29. RELATED PARTY TRANSACTIONS

Related parties of the Company as at 31 December 2015 are as follows:

• Wiener Städtische Versicherung AG, Vienna • Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna • Wiener Städtische osiguranje ado, Belgrade • VIG RE zajištovna, Prague • Donau Versicherung AG , Vienna • Union VIG,Biztosito ZRt, Budapest • Vig Real Estate doo, Belgrade • Kooperativa poistovna a.s., Bratislava • Kooperativa pojištovna a.s., Prague • Ray Sigorta A.S., Istambul • Wiener Stadtische životno osiguranje ad, Podgorica • Wiener osiguranje, Vienna Insurance Group ad , BiH • Bulstrad Vienna Insurance Group, Sofia • Compensa Towarzystwo S.A., Ubezpieczen S.A., Vienna Insurance Group,

Varsaw Poland • Osiguruvanje Makedonija, Vienna Insurance Group, Makedonia


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Related party transactions for the year ended 31 December 2015 and 31 December 2014 are as follows:

INCOME In thousands of RSD 2015 2014 Reinsurance premiums income Wiener Städtische оsiguranje, Belgrade 2,185,922 1,872,024 Wiener Städtische Versicherung AG, Vienna Wiener Städtische životno osiguranje, Podgorica 7,124 5,270 Wiener osiguranje, Vienna Insurance Group ad , BiH 577,862 373,838 QBE - - Income from participation of reinsurer in claims paid Donau Versicherung AG ,Vienna 180 601 Wiener Städtische Versicherung AG, Vienna 12,961 592,467 VIG RE zajištovna, Prague 629,476 692,857 Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna 233,919 341,195 Ray Sigorta A.S., Istambul 1,493,411 520,498 Compensa Towarzystwo Ubezpieczen S.A., Vienna Insurance Group, Varsaw - - Wiener osiguranje, Vienna Insurance Group ad , БиХ - 406 Kooperativa pojištovna a.s., Prague 1,796 1,180 Bulstrad Vienna Insurance Group, Sofia 144 - Income from reinsurance commissions Wiener Städtische Versicherung AG,Vienna 5,314 5,105 VIG RE zajištovna, Prague 197,595 219,040 Donau Versicherung AG ,Vienna 102 433 Bulstrad Vienna Insurance Group, Sofia (123) 162 Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna 249,420 231,726 Kooperativa pojištovna a.s., Prague 7 798 Kooperativa poistovna a.s., Bratislava 712 252 Ray Sigorta A.S., Istambul - 33 Wiener Städtische životno osiguranje, Podgorica 97 76 Wiener Städtische osiguranje, Belgrade 76,315 78,499 Wiener osiguranje, Vienna Insurance Group ad , BiH 889 3,045 Compensa Towarzystwo Ubezpieczen S.A., Vienna Insurance Group, Varsaw 62 153 Exchange rate gains 16,195 24,734 TOTAL INCOME 5,689,380 4,964,392


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EXPENSES In thousands of RSD 2015 2014 Expenses of reinsurance and retrocession premiums abroad Wiener Städtische Versicherung AG,Vienna 66,327 68,996 VIG RE zajištovna, Prague 726,850 721,418 Donau Versicherung AG, Vienna 841 3,426 Compensa Towarzystwo Ubezpieczen S.A., Vienna Insurance Group, Varsaw 203 634 Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna 631,206 589,645 Kooperativa poistovna a.s., Bratislava 11,368 8,593 Kooperativa pojištovna a.s., Prague 5,831 19,523 Ray Sigorta A.S., Istambul - 78,786 Bulstrad, Sofia 697 - Expenses from participation in reinsurance claims Wiener Städtische осигурање, Belgrade 802,050 1,063,744 Wiener Stadtische животно осигурање ад, Podgorica 458 260 Wiener osiguranje, Vienna Insurance Group ad , BiH 1,885,888 1,297,479 Wiener Städtische Versicherung AG, Vienna - - Ray Sigorta A.S., Istambul - 405 Costs of non-production services Wiener Städtische осигурање, Belgrade 144 84 Vig Real Estate doo, Belgrade 1,831 1,560 Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna 2,297 1,002 Rental costs Wiener Städtische осигурање, Belgrade 1,739 1,477 Vig Real Estate doo, Belgrade 8,828 7,056 Direct writte-off of receivables Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna - 7 Loss on exchange differences 13,620 17,456 Costs of commission under reinsurance contracts Wiener Städtische osiguranje, Belgrade 689,948 614,599 Wiener Städtische Versicherung AG, Vienna - 22 VIG RE zajištovna, Prague 11 239 Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna 53,913 47,461 Wiener Städtische животно осигурање, Podgorica 3,956 2,988 Kooperativa pojištovna a.s.,Prague 794 370 Wiener osiguranje, Vienna Insurance Group ad , BiH 38,466 14,524 Ray Sigorta A.S., Istambul - 1,382 Bulstrad Vienna Insurance Group, Sofia 1,405 851 Donau Versicherung AG , Vienna 50 - Total expenses 4,948,721 4,563,987 Income/(Expenses), Net 740,666 400,405


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Balances at the end of the year that resulted from transactions with related parties are as follows:

ASSETS In thousands of RSD 2015 2014 Reinsurance and retrocession premium receivables Wiener Städtische осигурање, Belgrade 336,724 266,573 Wiener Städtische животно осигурање, Podgorica 5,046 3,995 Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna - 9 Wiener osiguranje, Vienna Insurance Group ad , BiH 49,837 94,411 Receivables for reinsurance share in settled claims Wiener Städtische Versicherung AG, Vienna 4,691 1,385 VIG RE zajištovna, Prague 38,239 52,009 Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna 235 9,887 Bulstrad Vienna Insurance Group, Sofia 3 - Donau Versicherung AG , Vienna - 551 Wiener osiguranje, Vienna Insurance Group ad , BiH - 179 Receivables for reinsurance and retrocession commission Wiener Städtische осигурање, Belgrade 5,167 26,944 VIG RE zajištovna, Prague 4,934 8,370 Wiener osiguranje, Vienna Insurance Group ad , BiH 1 28,836 Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna - 23,562 Receivables for recourse claims Wiener Städtische осигурање, Belgrade 1,316 2,073 Receivables for refund of reinsurance premium from abroad Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna 4,447 VIG RE zajištovna, Prague 4 336 Reinsurance deposits placed Wiener Städtische осигурање, Belgrade 38,199 37,478 Total assets 488,843 556,598


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EQUITY AND LIABILITIES In thousands of RSD 2015 2014 Liabilities for claims and agreed amounts from reinsurance Wiener Städtische осигурање, Belgrade 214,599 237,643 Wiener Städtische животно осигурање, Podgorica 321 201 Wiener osiguranje, Vienna Insurance Group ad, BiH 9,556 14,036 Wiener Städtische Versicherung AG, Vienna - 71 VIG RE zajištovna, Prague 291 - Liabilities for reinsurance premium abroad Wiener Städtische Versicherung AG, Vienna 17,767 30,498 VIG RE zajištovna, Prague 92,967 65,955 Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna 24,218 19,241 Ray Sigorta A.S., Istambul 20 20 Kooperativa pojištovna a.s., Prague 4,751 381 Donau Versicherung AG, Vienna 318 205 Compensa Towarzystwo Ubezpieczen S.A., Vienna Insurance Group, Varsaw 463 444 Kooperativa poistovna a.s., Bratislava - 3,581 Bulstrad, Sofia 163 - Trade liabilities in the country Wiener Städtische оsiguranje, Belgrade 190 124 Vig Real Estate doo, Belgrade 877 758 Trade liabilities abroad Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna 783 195 Liabilities for reinsurance and retrocession commission Wiener Städtische осигурање, Belgrade 15,070 42,690 Wiener Städtische животно осигурање, Podgorica 2,220 1,749 Wiener osiguranje, Vienna Insurance Group ad , BiH 52 32 VIG RE zajištovna, Prague 14,450 22,462 Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna 210 23,344 Deposits received from retrocession Vienna Insurance Group,Wiener Versicherung Gruppe, Vienna 34,379 33,730 Liabilities for refund of reinsurance premium Wiener Städtische osiguranje, Belgrade 8,382 1,431 Wiener osiguranje, Vienna Insurance Group ad , BiH 5,747 40 Liabilities for recourse claims VIG RE zajištovna, Prague 294 316


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Liabilities for refund of received advances, premium subscriptions and claims Wiener Städtische osiguranje, Belgrade 8 - Total equity and liabilities 448,096 499,147 Assets/(equity and liabilities), net 40,747 57,451

30. LAWSUITS As at 31 December 2015 the Company is not involved in any lawsuits.

31. RISK AND CAPITAL MANAGEMENT In its business operations the Company is exposed to the following basic types of risk: • Market risk, • Reinsurance risk, • Risk of intangible assets, • Counterparty default risk (Credit risk), • Liquidity risk, • Operational risk, • Strategic risk, • Reputation risk, • Global risk, • Legal risk. Risks are classified, for the purposes of reporting, into three groups: reinsurance risk, financial risk and other risks.

31.1. REINSURANCE RISK The Company has accident reinsurance, property reinsurance, vehicles, vessels and aircraft reinsurance, health insurance, travel assistance, third party reinsurance and life reinsurance in its portfolio and therefore is exposed to reinsurance risk. The main component of this risk is the risk of inadequately contracted reinsurance coverage. The Company is not exposed to regular insurance risks that other insurance companies are exposed to. Prior to signing contracts with cedants, the Company analyses existing and planned cedant portfolio. Individual risk assessment is performed solely in optional reinsurance contracts where the Company carries certain risk of inadequate premiums. Provisions for reported but not settled claims are made by estimating the amount of provisions for claims by cedants, so that Company indirectly bears the risk of inadequate provisions for incurred reported claims. Provisions for incurred but not reported claims are made for each type of insurance in the amount of minimum 10% of the amount of settled claims in retention in the last 12 months and provisions for incurred reported claims in retention on the settlement day. The Company does not run a business long enough to apply actuarial methods such as Chain ladder..


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The risk of inadequate reinsurance coverage represents the risk that the retrocessionaire who reinsures the portfolio does not have sufficient amount of liquid assets to undertake the retrocession contract obligations. Considering the risk, the Company has signed retrocession contracts with leading high rating reinsirance companies, as the main qualitative credit risk rating method, which guarantees stability and safety of retrocessionaire business ensuring smooth and continuous business. All reinsurance contracts are typically annual. The Company reinsures a part of the risk in order to control exposure to losses and protect capital. Combining proportional and non-proportional reinsurance contracts, the Company tends to reduce net exposure to certain risks, depending on the type of insurance. Transferring a part of the risk, the Company achieves global dispersion and homogenization of risk, ensuring business continuity in case of occurrence of catastrophic losses. Reinsurance risk concentration – a key aspect of reinsurance risk the Company is exposed to the degree of risk concentration to which certain event or series of events may affect the Company’s liabilities. Such concentration can arise from an individual reinsurance contract or from a number of contracts. The risk concentration can arise from rare events with large consequences, such as natural disasters, high risk individual fire claims and other related phenomena. The Company does not have significant exposure to any insured group according to social, professional and similar criteria. The techniques and assumptions used for risk assessment include the approximation of the maximum possible claim and reinsuring claim excess. Role of Internal audit Internal audit is independent and autonomous in performing its duties and reports directly to the Supervisory Board of the Company. Internal audit performs continuous and comprehensive monitoring of Company’s business activities, and in particular: • Continuous monitoring, reviewing and improving of system of work; • Identification of risks the Company is or may be exposed to; • Assessment and evaluation of the established system of internal control; • Issuing the appropriate recommendations to remedy identified deficiencies and irregularities and for the improvement of the applied procedures and system of operations.

31.2. FINANCIAL RISK MANAGEMENT In its operations the Company is exposed to the following financial risks: • market risk, • operational risk, • risk of assets and liabilities maturity and structure mismatch, • credit risk.


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Financial instruments and risk management objectives (continued) Financial instruments categories In thousands of RSD 31 December 2015 31 December 2014 Financial assets Long-term financial investment 15,774 24,084 Short-term financial investment 970,947 943,373 Trade receivables 1,347,408 1,346,359 Receivables for prepaid income tax 7,988 12,060 Cash and cash equivalents 32,037 51,071 Total financial assets 2,374,154 2,376,947 Financial liabilities Liabilities for claims and agreed amounts 613,757 644,534 Liabilities for premiums, payroll and other liabilities 798,027 827,418 Liabilities toward banks 64 48 Total financial liabilities 1,411,848 1,472,000 The Company’s primary financial instruments are cash and cash equivalents, receivables, financial investments, trade receivables and other liabilities. The structure of Company’s long-term and short-term investments is as follows: In thousands of RSD 31 December 2015 31 December 2014 Long - term financial investments 15,774 24,084 Short – term financial investments 970,947 943,373 Total 986,721 967,457

In thousands of RSD 31 December 2015 31 December

2013 Financial assets held to maturity Corporate bonds 15,774 - Corporate bonds – impairment (6,446) - Corporate bonds maturing within 1 year - 18,503 Bonds maturing within 1 year-HTM 24,109 217,183 Corporate bonds within 1 year - impairment - (6,446) Government bonds held to maturity - 24,084 Financial assets available for sale Investment units 29,692 27,788 Government bonds 794,181 491,300 Government bonds maturing within 1 year 76,257 67,976 Other investments Bank deposits 53,154 127,069 TOTAL 986,721 967,457 In the normal course of business, the Company is exposed to the below stated risks.


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Objectives of financial risk management Financial risks include market risk (foreign exchange and interest rate risk), credit risk and liquidity risk. Financial risks are viewed on a time basis and are mainly avoided by reducing the Company’s exposure to these risks. The Company does not use any financial instruments in order to avoid the impact of financial risk to the business, because such instruments are not widely used and there is no organized market for such instruments in the Republic of Serbia.

i. Market risk In its operations the Company is exposed to financial risks from changes in foreign currency exchange rates and interest rate changes.

ii. Foreign currency risk Foreign currency risk is the risk of potential negative effects on the Company’s financial result and equity due to fluctuations in the foreign currency exchange rate. The Company is exposed to foreign exchange risk primarily through cash and cash equivalents, financial investments, trade receivables, trade payables that are denominated in foreign currency. The stability of the economic environment in which the Company operates to a large extent depends on measures the Government in managing the economy, including the institution of an appropriate legal and legislative framework. The book value of the Company’s monetary assets and liabilities denominated in foreign currency at reporting date were the following:

In thousands of RSD EUR Currency clause

Other currenc

ies Total in

currency RSD TOTAL

Long-term financial investments

15,774 0 15,774 0 15,774 Receivables 225,039 284,993 11,111 521,143 826,265 1,347,408 Receivables for prepaid tax - - - - 7,988 7,988 Short-term financial

709,042 - - 709,042 261,905 970,947 Cash and cash equivalents

27,693 - 1,460 29,153 2,884 32,037 TOTAL 961,774 300,767 12,571 1,275,112 1,099,042 2,374,154 Liabilities for claims and agreed amounts

11,395 111,051 - 122,446 491,311 613,757 Liabilities for premiums payroll and other liabilities

365,192 29,640 48,883 443,715 354,376 798,091 Short term financial liabilities - - - - - - TOTAL 376,587 140,691 48,883 566,161 845,687 1,411,848 Net currency position as at 31 December 2015 585,187 160,076 (36,312) 708,951 253,355 962,306


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iii. Interest rate risk The Company is exposed to risk from changes in interest rates on assets and liabilities where the interest rate is variable. This risk depends on the financial markets, and the Company has no available instruments that would lessen its impact. The book value of financial assets and liabilities at the end of a reporting period is given in the following summary: In thousands of RSD 31 December 2015 31 December 2014 Financial assets Non- interest Trade receivables 1,347,408 1,346,359 Other receivables 7,988 12,060 Cash and cash equivalents 421 7,656 1,355,817 1,366,075 Interest Long-term financial investments 15,774 24,084 Short-term financial investments 970,947 943,373 Cash and cash equivalents 31,616 43,415 1,018,337 1,010,872 2,374,154 2,376,947 Financial liabilities Non-interest Liabilities to suppliers 3,409 1,383 Other liabilities and advances received 1,408,439 1,470,617 1,411,848 1,472,000 962,306 904,947 The Company’s financial assets are sensitive to interest rate fluctuations mostly in respect of old foreign currency savings bonds available for sale.

iv. Liquidity risk Liquidity risk is the risk of potential negative effects on the Company’s financial result and equity due to the Company’s inability to settle its liabilities as they mature. The ultimate responsibility for managing liquidity risk rests with the Company’s management which put in place an appropriate management system for short, medium and long term financing of the Company and for liquidity management. The Company manages liquidity risk by maintaining appropriate cash reserves through continued monitoring of planed and actual cash flows, as well as by matching maturities of financial assets and liabilities. The Finance and Accounting department monitors liquidity of the Company daily in compliance with the Decision on the Manner of Determining and Monitoring Liquidity of the Company. Since its founding to the present date, the Company was never insolvent, nor has it been overdue in settling its liabilities.


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Liquidity risk tables The following tables present details of the remaining contracted maturities of financial assets. The amounts shown present non-discounted cash flows of financial assets based on the earliest date on which the Company will be able to claim payment. Maturity of financial assets

In thousands of RSD up to 1 month

1-3 months

from 3 months tо

1 year 1-5 years over 5

years TOTAL

Long-term financial investments

15,774 15,774 Short-term financial investments

76,400 56,049 44,317 499,445 294,736 970,947 Cash and cash equivalents

32,037 32,037 Receivables 795,996 461,108 72,306 17,998 - 1,347,408 Receivables for prepaid tax

7,988 7,988 TOTAL 904,433 517,157 124,611 517,443 310,510 2,374,154 The following table presents the maturity of liabilities of the Company on the earliest date on which the Company will be required to settle them based on the non-discounted cash flows of financial liabilities. Maturity of financial liabilities

In thousands of RSD up to 1 month

1-3 months

from 3 months tо 1 year

1-5 years

over 5 years Total

Short-term liabilities 829,972 469,961 94,557 17,358 - 1,411,848 TOTAL 829,972 469,961 94,557 17,358 - 1,411,848 Liquidity gap 74,461 47,196 30,054 500,085 310,510 962,306

31.3. Capital Risk Management The objective of capital management is to maintain the Company’s ability to continue its business operations for an indefinite period of time into the foreseeable future, to preserve optimum capital structure in order to reduce the cost of capital, and to provide the owners of capital with a return on their investment.

32. CERTIFIED ACTUARY’S OPINION The certified actuary has given a positive opinion on the financial statements and the annual report of the Company’s business operations for 2015, from the standpoint of actuarial and reinsurance profession.


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The premium is determined in accordance with actuarial profession and regulations, and it ensures permanent fulfilment of all Company’s obligations arising from insurance contracts. Technical reserves are determined in accordance with actuarial profession and regulations, providing fulfilment of all Company’s obligations arising from insurance contracts. The rights of the policyholder, the insured and the beneficiary, covered risks and exclusions are defined in terms of cedant’s insurance. Regarding the facultative contracts, those rights are defined for each contract separately. The amounts of net retention provide satisfactory security and stability in the business. The maximum possible amounts of claims by type of insurance which the Company can cover are limited by amounts which are adopted within Tables of maximum net retention limits, as well as within agreed limits from retrocession’s contracts. In the process of reinsuring all of its liabilities from reinsurance contracts, The Company acted in accordance with Regulations on conditions and methods of coinsurance. The Company has performed the risk equalisation, taking into account creditworthiness and financial capabilities of the companies with which it compensates the risk. Moreover, the Company has realized significantly better claim ratio and combined ratio compared to the same period of previous year. Compared to the same quarter of the previous year, better combined ratio in current period resulted from improved claim ratio.

33. INTERNAL AUDIT OPINION In the scope of regular reporting and in accordance with the Insurance Law and Decision on reporting for insurance/reinsurance company, the internal auditor has prepared quarterly reports, and semi-annual and annual reports on internal audit of the Company. In 2015, the internal auditor planned and produced 11 (eleven) individual internal audit reports, which are in accordance with the internal audit plan for 2015, as approved by the Supervisory Board. Audit of the information system is done as request of the Supervisory Board in order to examine compliance with the NBS Decision on minimum information system management standards for financial Institutions. Individual reports include: 1. Investments and depositing of technical and guarantee reserve 2. Solvency margin determination 3. Liquidity Risk Management 4. Life Reinsurance 5. Non-Life Reinsurance 6. Commissions calculation and reconciliation with insurers and retrocessionaires 7. Maximum retention calculation 8. Revision of the information system 9. Life insurance claims settlement 10. Non-life insurance claims settlement 11. Reporting to the National Bank of Serbia Internal Audit conclusions presented in these reports are that there are no materially significant misstatements, nor is the Company exposed to greater risk in its business operations.

34. SUBSEQUENT EVENTS After the balance sheet date, there were no business events that are of significance for the Company’s financial position and its business results as at 31 December 2015.


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35. EXTERNAL SUPERVISION The Company’s business operations were not supervised by the external audit.

36. AVERAGE NUMBER OF EMPLOYEES AND QUALIFICATION STRUCTURE During 2015, the Company’s average number employees was 17, with qualification structure presented below: Qualification structure Number of employees Secondary education 2 Higher education – college level 16 TOTAL 18 Belgrade, 4 Mart 2016

Legal representative Legal representative Radmila Miletić Vidan Slana

Member of Executive Board General Manager

Documents

WIENER RE A.D.O. BELGRADE · WIENER RE A.D.O. BELGRADE . Financial statements . for the year ended December 31, 2015 . prepared in accordance with . International Financial Reporting