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Česká pojišťovna a.s.

Annual Report 2007

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Česká pojišťovna is the largest insurer with an overall market

share of over 30 percent. We manage over 10 million

insurance contracts and our insurance premium revenues

reached CZK 39.8 billion. In 2007 the Company posted

a record profit of CZK 6.7 billion.

Česká pojišťovna has shareholders’ equity of CZK 17.2 billion

and share capital totaling

CZK 4 billion. Our total assets

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For the fourth time in a row, Česká pojišťovna was declared

Insurance Company

of the Year in the MasterCard Bank

of the Year 2007 competition. Compared to the other

insurers operating in the Czech Republic, Česká pojišťovna

has the broadest product offering

and the most product

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Česká pojišťovna a Member of Generali PPF Holding B.V.

Generali and PPF Group have combined their operations

in 12 countries of Central & Eastern Europe, thereby

creating one of the region’s largest insurance groups.

The Joint Venture Agreement was signed on 10 July 2007

and took effect on 17 January 2008.

Through its subsidiaries, Generali PPF Holding manages

nearly EUR 10 billion in assets and provides services

to 9 million customers. Annual insurance premium revenue

is approximately EUR 2.6 billion. Generali PPF Holding

is headquartered in the Netherlands and its primary

organizational branch is located in the Czech Republic.

Česká pojišťovna is a part of Generali PPF Holding.

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in early 2007, is designed to help the Company grow

further and reinforce our position as the number-one

player in the Czech insurance market by gaining a closer

understanding of customers’ needs, improving their

experience with Česká pojišťovna, and increasing the

flexibility and efficiency of the Company as a whole.

During over 180 years in business, the Company has

built itself a reputation as a high-quality, quick-working,

reliable and customer-focused institution.

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Česká pojišťovna continually monitors the changing requirements of our customers.

Our goal is to provide the best possible services and

maximize the flexibility of products

so they can adapt to customers’ current needs. In 2007, Česká pojišťovna launched

a number of new initiatives in both insurance and customer services.

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Letter from the Chairman 4

Description of the Company 6

Company History 6

Company Profile and Position

in the Czech Insurance Market 6

Joint Venture Agreement

between PPF Group and Generali Group 6 Most Important Events

and Awards Received 8

Financial Highlights 14

Description of Group Structure, Position of Česká pojišťovna

and Selected Group Companies 16

Description of Selected Companies

of Česká pojišťovna Group 18

Directors and Officers 26

Board of Directors 26

Supervisory Board 27

Company Management 28

Board of Directors’ Discussion and Analysis of the Company’s Business Activities

and Financial Condition 30

Situation in the Czech Insurance Market 30 Company Financial Performance in 2007 31 Financial Performance Commentary 31 Insurance Performance Commentary 33

Non-life Insurance 37 Reinsurance 38 Nuclear Pool 39 Life Insurance 40 Customer Services 43 Financial Investments 44 Human Resources 48 Marketing Communication 49 Information Technologies 51

Česká pojišťovna’s New Strategy:

Closer to Customers 52

Supplemental Information on the Financial Situation

and Information for Investors 53

Listed Securities Issuer Information 53 Shareholder Structure of the Company 53 Securities Issued by Česká pojišťovna 54 Principal Businesses According

to Current Articles of Association

and Types of Insurance Written 55 Shareholder Rights and Obligations 56

Articles of Association 57

Summary of Fees Paid to the Auditor 57 Development of Česká pojišťovna’s

Solvency Over Time 57

Principal Non-financial Investments 57 Present Value of Land and Buildings 58 Monetary Income of Statutory Boards

and Executives in 2007 59

Information on Entities in Which Česká pojišťovna Holds a Participating Share Exceeding 10% of Its Own

Net Current Period Earings 60

Supervisory Board’s Report 61

Auditor’s Report 62

Auditor’s Report 64

Persons Responsible

for the Annual Report 66

Organization and Contacts 67

Basic Organization Chart of Česká pojišťovna 67 Directory of Selected Companies

in the Česká pojišťovna Financial Group 67 Directory of Česká pojišťovna Head Office,

Regions and Agency Offices 68

Česká pojišťovna a.s. Financial Statements,

Year Ended 31 December 2007 *

Česká pojišťovna a.s. Consolidated Financial

Statements, Year Ended 31 December 2007 * Report on Relations Among Related Parties,

Year Ended 31 December 2007 *

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Letter from the Chairman

4

Dear business friends

Without any exaggeration, 2007 was an historic year for Česká pojišťovna. We remembered our successful past while at the same time beginning to build a modern European company with an interesting future.

Right from the start of 2007 we introduced a new strategy – Closer to Customers. These three words symbolize the tasks that await Česká pojišťovna in the next three years and are to help Česká pojišťovna to achieve further growth and enhance its position as the number-one insurance company in the Czech Republic. The goals of the new strategy are to maintain our positions in key business lines (motor vehicles, retail non-life insurance), further grow our life insurance, supplementary pension insurance, and small business insurance lines, and also develop two new business

History obliges us, but definitely does not bind us. Thus, 2007 brought a sea change in the modern history of Česká pojišťovna. Commercially, Česká pojišťovna Group was once again very successful. In addition to being today’s leader in the Czech market, we are winning new markets in Slovakia, Russia, Ukraine, and Kazakhstan. And it is in these countries that we see great future potential. This fact was also one of the reasons why our company’s shareholders agreed to create a joint holding company with one of the world’s biggest insurance groups, Assicurazioni Generali. The new company represents a combination of all insurance activities of the PPF and Generali groups in Central & Eastern Europe.

The plan to set up a holding company was made public in April 2007 and implemented in January 2008. The joint venture entitled Generali PPF Holding began to operate on 17 January 2008, after both partners obtained the necessary regulatory permits. Thus, Assicurazioni Generali and PPF Group created one of the biggest insurance groups in the region with annual insurance premium revenue of over EUR 3 billion. The new company manages assets totalling EUR 10 billion and cares for 9 million customers in 12 countries. Its strategy includes not only expanding into other countries in the region, but also further developing businesses in its existing markets. This, of course, will benefit Česká pojišťovna and its employees, who will gain the opportunity to share extensive experience with colleagues from abroad, as well as to play a direct role in the Group’s international expansion.

For us, the partnership with Generali is interesting not only commercially and strategically, but in terms of corporate culture as well. The markets we operate in today

complement each other well and are creating huge potential for cooperation and joint opportunity. This partnership is a logical step in the development of Česká pojišťovna Group and enables us to take a leading position in the Central and Eastern European insurance market. We have the ability

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Thanks to sharing of best practices, we will be able to bring new products to market more quickly and provide

customers even better services. Česká pojišťovna Group will have the backing of a big international company with a long professional history.

The integration of Česká pojišťovna into the new Generali PPF Holding was also reflected in the latest (February 2008) rating of Česká pojišťovna by the international credit rating agency Standard & Poor’s. Česká pojišťovna received one of the highest possibly ratings that can be obtained in the Czech Republic. Standard & Poor’s increased both our credit rating and our financial strength rating by three levels, from BBB up to A, with stable outlook. In its evaluation report, Standard & Poor’s expressed appreciation not only for the great progress Česká pojišťovna has made in recent years, but also for Česká pojišťovna’s performance in life and non-life insurance markets as well as Česká pojišťovna’s strong position in the Czech Republic. The agency also gave prominent mention to our extensive network of sales locations, supported by other members of PPF Group. The response of international credit rating agency Moody’s to Česká pojišťovna’s new position was similar; it increased our financial strength rating by three levels, from Baa3 to A3, with a stable outlook.

The accomplishments of Česká pojišťovna in the insurance market and the quality of our services helped us, for the fourth time, to be named Insurance Company of the Year in the MasterCard Bank of the Year competition. Just like in the years 2004, 2005 and 2006, out of 18 competing insurance companies in 2007, Česká pojišťovna came out on top. Česká pojišťovna’s market share has remained above 30 percent for a long time now. Today, Česká pojišťovna administers 10 million insurance contracts, which is roughly one half of all insurance contracts in the Czech Republic. Calculated using Czech Insurance Association methodology, Česká pojišťovna’s insurance premium revenue reached CZK 39.8 billion last year. Non-life premium revenue totaled CZK 26.2 billion for a market share of 34.4%. In life insurance where premiums are paid in regular installments, which forms the basis for an insurance company’s stable growth, we saw our premium revenue increase to CZK 12.1 billion, for a Česká pojišťovna market share of 32.8% in this segment. Growth in premium revenue in this segment

was driven in particular by the insurance products DYNAMIK, DYNAMIK Plus, and SLUNÍČKO.

The good commercial performance could not have been achieved without the good work of ČP Client Services, which administrates all insurance contracts and handles all claims. After successfully completing the process of centralizing policy administration functions that had previously been done by the agencies, Client Services continued to steadily increase the productivity of all its activities. A big

accomplishment of 2007 was the handling of Hurricane Kyrill in January, which affected Česká pojišťovna’s performance primarily in the first half of last year. The loss experience in the second half was favorable. Another factor contributing to the good financial performance was a reduction in general administrative expenses.

The total assets of Česká pojišťovna reached CZK 122 billion and insurance provisions totaled CZK 89 billion. Contributing to the Company’s financial performance in this area were, in particular, operating profits and investment returns, which include gains realized on sales of equity holdings. Thanks to all the changes, today Česká pojišťovna is one of the most profitable corporations in the Czech Republic. Profit after tax reached CZK 6.7 billion in 2007. Our return on equity (ROE) figure, which substantially exceeds 20%, is one of the highest in the European insurance industry. I am pleased that the largest number of insureds mention Česká pojišťovna as their primary insurer and that all relevant surveys show that we are perceived as the company that sets new trends in the insurance business. These are firsts that we will do our best to preserve in the years to come. And for this reason, we intend to continue to leverage best practices to further reinforce our strong position in distribution and product innovation, as well as in the overall market. I am confident that, thanks to our experience, Česká pojišťovna has plenty to offer, and not only in the Czech Republic.

Ladislav Bartoníček

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Description of the Company

6

Description of the Company

Company History

Česká pojišťovna a.s. (also referred to as “Česká pojišťovna” or “the Company”) has a long and rich tradition. It is the oldest insurance institution in the Czech lands and the legal successor to First Czech Mutual Insurance Company (První česká vzájemná pojišťovna), founded in 1827. It was part of the original State Insurance Company (Státní pojišťovna) until 1969, when, on the basis of the territorial principle, Státní pojišťovna was broken up into Česká státní pojišťovna and Slovenská státní pojišťovna. Česká pojišťovna was founded by the National Property Fund of the Czech Republic under a Deed of Incorporation dated 28 April 1992 and was incorporated by registration in the Commercial Register on 1 May 1992. The Company’s shares were first listed on the Main Market of the Prague Stock Exchange (PSE) in 1993. The shares of Česká pojišťovna were withdrawn from trading both on the Exchange and on the RM-System in conjunction with a buy-out of minority shareholders on 31 August 2005. Company bonds issued on 13 December 2007 are listed on the PSE Official Free Market.

A Joint Venture Agreement signed on 10 July 2007 between Assicurazioni Generali and PPF Group N.V. took effect on 17 January 2008, after all regulatory permissions were obtained. The agreement represents the combination of Generali’s and PPF Group’s insurance operations in Central & Eastern Europe.

Company Profile and Position

in the Czech Insurance Market

Since its inception, Česká pojišťovna has been a composite insurer offering a wide range of life and non-life insurance and is currently the largest insurer in the Czech Republic. We administer over 10 million insurance contracts. In 2007,

Joint Venture Agreement between

PPF Group and Generali Group

On 26 April 2007, PPF Group and Generali Group signed a preliminary agreement on a combination of their insurance operations in Central & Eastern Europe, which would lead to the creation of a joint venture. The Joint Venture Agreement between Assicurazioni Generali and PPF Group N.V. was signed on 10 July 2007 and took effect on 17 January 2008, after regulatory permissions were obtained.

Generali PPF Holding B.V. is 51% owned by Assicurazioni Generali S.p.A and the remaining 49% is held by PPF Group N.V. The new joint venture is one of the biggest insurance groups in Central & Eastern Europe; in 2006, it had EUR 5.1 billion in assets and over 9 million customers in 12 countries. Joint insurance premium revenue in 2006 reached EUR 2.6 billion.

The formation of the joint venture is an important step in the strategic expansion of both groups in one of the most attractive regions for insurance services. In addition, it will create a strong platform for exploiting more growth opportunities in surrounding areas.

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Most Important Events and Awards Received

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2007

February

Česká pojišťovna wins Rhodos Image Prize

Česká pojišťovna placed first in the insurance companies category of the jubilee 10th annual nationwide Rhodos Image Prize competition. The award, which goes to the company with the most convincing image, was granted on the basis of a survey conducted amongst managers from all over the Czech Republic.

April

Česká pojišťovna teams with Generali to form top insurance group in Central & Eastern Europe On April 26, the PPF and Generali groups announced a plan to create a joint holding company that would combine the insurance and insurance-related operations of both groups in Central & Eastern Europe (CEE). Česká pojišťovna, the biggest domestic insurance institution, and Generali, the third largest insurer in Europe, will combine to form the biggest insurance group in CEE, with operations in 12 countries in the initial phase. In combination with Česká pojišťovna, Generali will draw ahead of most of its competitors. The CEO of the new holding company is the current Chairman of the Board of Directors of Česká pojišťovna a.s., Ladislav Bartoníček. Implementation of the transaction is conditional upon obtaining consents from supervisory and regulatory bodies both in local markets and at the European Union level.

May

Česká pojišťovna a winner in Golden Crown contest Česká pojišťovna won two medals in the 5th annual Golden Crown (Zlatá koruna), a noted financial

June

Changes in the Česká pojišťovna Board of Directors and Supervisory Board

On June 1, based on a decision of the shareholder, changes were made in the Board of Directors and Supervisory Board of Česká pojišťovna. Eliard Friese, who has been Česká pojišťovna’s CEO since October 2006, became a new member and Vice Chairman of the Board of Directors. Milan Maděryč, who had been Vice Chairman of the Board of Directors of Česká pojišťovna, became the new Chairman of the Supervisory Board.

The Board of Directors, which also saw the departures of Jiří Šmejc and Ladislav Chvátal, was newly joined by Marcel Dostal, who also serves as Česká pojišťovna’s Executive Board Member for Investment Policy.

Česká pojišťovna declared number-one insurer in Czech Top 100

In the prestigious competition Czech Top 100 – 100 Most Admired Companies of the Czech Republic, Česká pojišťovna once again was the winner in the insurance companies category. Also successful in the competition was our pension fund Penzijní fond České pojišťovny, which also won first place in its category.

Česká pojišťovna expands its services to motorists Česká pojišťovna has launched a new service for its customers – repair audits. With just one telephone call, customers who are in doubt whether their insured car or truck was properly repaired following a traffic accident can order an audit and find out once and for all. With its new repair audit service, Česká pojišťovna defends the interests of its customers – both those who were affected by the accident and those who might see their premium rates increase due to unfair billing practices of certain auto repair shops.

Most Important Events

and Awards Received

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September

Česká pojišťovna has new financial director Starting in September, the management team of Česká pojišťovna has an experienced new member. As of 1 September 2007, the Board of Directors of Česká pojišťovna appointed Ivan Vodička (43) the new Executive Board Member for Financial Management. In this position, he replaces Lubomír Bušek, who will now hold an important position in the team preparing for the formation of the new international joint venture, Generali PPF Holding. Česká pojišťovna extra bonuses send cost of motor third party liability even lower than before Česká pojišťovna opened the fall season with a broader offering of services in its existing products, and even bigger bonuses. Thanks to extra bonuses, motorists who drive carefully will see their MTPL insurance rates fall and the Company’s offering now covers the last remaining vehicle seat not yet covered by MTPL. Now, with the purchase of MTPL insurance from Česká pojišťovna, the client will receive accident insurance for the driver, free of charge. This sends a strong signal, that Česká pojišťovna is not only about attracting new customers, but also expressing appreciation for long-term loyal customers of the Company.

October

Česká pojišťovna once again among the top three corporate philanthropists

On October 25th, Česká pojišťovna was declared the third largest corporate philanthropist in the Czech Republic, as the only insurance company in the top ten. This was the third time in a row that the Company has placed first, second or third in this contest. We are no newcomers to the field; our roots as a corporate philanthropist reach deep into history. Česká pojišťovna has always found a way to provide comfort and hope to those who have lost their property or suffered a personal disaster, and not only in cases when bound to do so by an insurance contract. We are also a prominent giver to charity, providing long-term financial support to a number of volunteer and charity organizations that give help to those who need it most.

180 years of Česká pojišťovna

On October 27th, Česká pojišťovna, the oldest and largest insurance company in the Czech insurance market, celebrated a major jubilee – the 180th anniversary of its establishment.

November

Česká pojišťovna declared Insurance Company of the Year for the fourth consecutive time

For the fourth time, Česká pojišťovna won the Insurance Company of the Year title in the MasterCard Bank of the Year 2007 competition. Once again, it was chosen as the winner, beating 18 other insurance companies that operate in the Czech Republic. The Insurance Company of the Year title went to Česká pojišťovna in the year 2004, 2005 and 2006 as well.

2008

January

Tranche 2 of GARANCE life insurance from Česká pojišťovna issued after first tranche oversubscribed by 43%

Česká pojišťovna commenced selling the second tranche of its single-premium life insurance product, GARANCE. In the first tranche of GARANCE, which successfully closed on 30 November 2007, people invested CZK 171.5 million in the product’s investment component. The number of contracts exceeded 1,400 and the average amount invested exceeded CZK 120,000. In some cases, however, the amounts invested by customers went into the millions. Česká pojišťovna has a new Executive Board Member for Business Risks

The Česká pojišťovna Board of Directors discussed a request from senior management member Jan Ježdík to be released from the position of Executive Board Member for Business Risks. Jan Ježdík will leave the Company at the end of August 2008, until which time he will serve as a member of the Board of Directors, but he will continue to work with PPF Group and Česká pojišťovna. His successor on the Executive Board will be Mr. Milan Beneš (39).

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Most Important Events and Awards Received

10

Employee Benefits Unit formed, new position on Česká pojišťovna Executive Board filled

In conjunction with fulfillment of its Closer to Customers strategy, in January 2008 Česká pojišťovna established a new “Employee Benefits” business unit, whose principal task will be to link up Česká pojišťovna’s life insurance offering with Penzijní fond České pojišťovny’s supplemental pension insurance offering for both employers and employees. In conjunction with the new unit’s launch, a new position will be added to Česká pojišťovna’s senior management – the Executive Board Member for Employee Benefits. The Board of Directors of Česká pojišťovna selected Mr. Tomáš Matoušek (42), who comes from a successful, ten-year career with Penzijní fond ČP, to fill the new position. Mr. Matoušek was also appointed General Manager of the pension fund and will hold both positions – in the managements of both Česká pojišťovna and PF ČP. As the general manager of PF ČP he replaces Mr. Ivo Foltýn, who joined the management of Generali PPF Holding where, among other responsibilities, he will be in charge of all the new joint venture’s pension funds. Generali PPF Holding begins operating in Central & Eastern Europe as one of the largest insurance groups in the region

Generali PPF Holding announced that, on January 17th, it obtained the necessary regulatory permits to trigger the effectiveness of the Joint venture Agreement signed on 10 July 2007 between Assicurazioni Generali (“Generali”) and PPF Group N.V. (“PPF Group”). Generali Group and PPF Group combined their operations in Central & Eastern Europe (CEE), thereby creating one of the biggest insurance groups in the region, with annual insurance premium revenue of approximately EUR 2.6 billion (based on 2006 figures). The Group administers insurance contracts of over 9 million customers.

Generali, the third largest insurance company in Europe, and PPF Group acting through its subsidiary Česká

Day-to-day management of the new holding company’s operations will be conducted from Prague. The cooperation between the two international groups creates an excellent opportunity for becoming the leader in the emerging insurance markets of Central & Eastern Europe. In terms of business and corporate culture, it represents a strategic partnership for the companies.

Generali PPF Holding began operating immediately as a legal entity. Ladislav Bartoníček, the current Chairman of the Board of Directors of Česká pojišťovna, is Chief Executive Officer of Generali PPF Holding. Sergio Balbinot, Chief Executive Officer of Generali Group, will serve as Chairman of the new holding company’s Board of Directors.

Generali PPF Holding is run by an Executive Committee, which currently consists of seven veteran managers:

Area of responsibility Ladislav Bartoníček Chief Executive Officer Jaroslav Mlynář financial and IT director

Eilard Friese operations in the Czech Republic and Slovakia, competency centers: marketing, distribution channels, claims handling, and

bancassurance

Matyás Palvölgyi operations in Hungary, Croatia, Slovenia, and Bulgaria, competency centers: motor vehicles insurance and life insurance

Ivo Foltýn operations in the Commonwealth of Independent States,

health insurance, pensions, credit insurance

Vít Sedláček operations in Romania and Serbia, business development and M&A Klára Starková operations in Poland, organizational

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the holding company plans to operate in 12 countries of Central & Eastern Europe: the Czech Republic, the Slovak Republic, Poland, Hungary, Romania, Bulgaria, Ukraine, Russia, Serbia, Slovenia, Croatia, and Kazakhstan. Generali PPF Holding is headquartered in the Netherlands and its primary organizational branch is located in Prague, Czech Republic.

Last year, Česká pojišťovna uncovered insurance fraud amounting to over a quarter billion CZK

In 2007, Česká pojišťovna uncovered 739 cases of insurance fraud, thereby saving CZK 264 million in claims expenditures. In 2006 the numbers were 1,175 cases and CZK 310 million. Motor vehicles insurance and property insurance accounted for the largest portion, with CZK 137 million and CZK 118 million in attempted fraud cases, respectively. The remainder is attributable to shipping insurance and insurance of persons. The decline in the fraud amounts uncovered by Česká pojišťovna’s detectives in 2007 compared to 2006 is related to the type of insurance losses recorded by Česká pojišťovna in the past two years. In 2006, nearly CZK 70 million in losses was caused by heavy snow loads on buildings, shifting snow, and subsequent floods.

February

Česká pojišťovna obtains ‘A’ rating, one of the highest in the country

Česká pojišťovna received one of the highest possible ratings achievable in the Czech Republic. The international credit rating agency Standard & Poor’s increased the Company’s credit rating and financial strength rating by three levels, from BBB to A, with a stable outlook. An increase of three levels is very significant and reflects the fact that Česká pojišťovna became part of Generali PPF Holding. The new rating also reflects the huge strides made by Česká pojišťovna in recent years.

In its evaluation report, Standard & Poor’s expressed appreciation for the results achieved by Česká pojišťovna in life and non-life insurance markets. It also mentioned the extensive network of sales locations supported by other members of PPF Group, which demonstrates Česká pojišťovna’s strong position in the Czech Republic.

March

Moody’s increases Česká pojišťovna’s rating Moody’s, the international credit rating agency, increased Česká pojišťovna’s financial strength rating by three levels, from Baa3 to A3, with a stable outlook.

In first three months of 2008, Česká pojišťovna solves as many cases of insurance fraud as in six months of 2007

In the entire year 2007, Česká pojišťovna solved 739 cases of insurance fraud totaling CZK 264 million and during just the first three months of 2008 our investigators concluded 353 cases of insurance fraud, saving the Company over CZK 97 million in claims expenditures. Over half the cases related to motor vehicles and property insurance, and some of the cases related to Emma, a windstorm that affected the Czech Republic in January. Česká pojišťovna’s investigators had the most work in the Central Bohemia Region, Prague, and East Bohemia.

Česká pojišťovna is repeat winner of good brand 2008 title

Česká pojišťovna remains the country’s most trustworthy insurance company, according to the results of a survey conducted by Reader’s Digest. This was the fourth year in a row that Česká pojišťovna placed first in the survey for the most trustworthy brand in the insurance segment. Česká pojišťovna enters mortgage lending market Česká pojišťovna has entered a new product area. In cooperation with two strong banking partners – Hypoteční banka and Raiffeisenbank, we began offering customers our own mortgage solution entitled Hypotéka České pojišťovny, which includes a unique offering of cost-effective insurance as well as other benefits, both financial and non-financial.

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The Česká pojišťovna brand is one of the most highly valued brands in the Czech

Republic. The three linden leaves symbolize

guaranty, security, and safety

.

Recognition of the Česká pojišťovna logo in the Czech market reached 98%.

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In recent years, windstorms most frequent cause of insured business losses

During the past three years, the Czech Republic has been hit by several natural disasters and many businesses were among those affected. During that period, Česká pojišťovna took in over 129,000 business claim reports. The most common cause was windstorms, with heavy snow and flooding in second and third place, respectively. The most business losses (34%) were caused by Hurricane Kyrill in spring, 2007. Most frequently, damage was caused to roofs. In this case, the businesses affected were fortunate because their operations were not interrupted: the hurricane hit the Czech Republic at the end of the work week and businesses were able to take advantage of the following weekend to repair the worst damage. Heavy, sliding snow and ice buildups in the winter of 2006 caused nearly 26% of all business claims. This catastrophe was followed immediately by floods in the spring of 2006, which accounted for 8% of all business claims. This year’s windstorm Emma was to blame for 13% of all business insurance claims.

June

Miroslav Matocha leaves Česká pojišťovna

At the end of June, Miroslav Matocha will be leaving the management of Česká pojišťovna and Generali PPF Holding. Mr. Matocha served for eight years as Executive Board Member for Reinsurance and International Underwriting.

During that time, he also represented Česká pojišťovna in the Czech Nuclear Insurance Pool, where he was Chairman of the Executive Committee.

Česká pojišťovna Board of Directors decides to establish new subsidiary: Pankrác services s.r.o. In accordance with its previous decisions to restrict non-core operations, the Board of Directors of Česká pojišťovna decided to establish a subsidiary, Pankrác services s.r.o., to engage in real estate development and, in particular, to finish construction of the Pankrác II administrative complex. In conjunction with the decision, the unfinished Pankrác II project was contributed to the share capital of Pankrác services s.r.o. and certain contractual obligations related to the project were assigned to the new company.

The Česká pojišťovna Brand

The annual survey conducted by Millward Brown, the independent marketing agency, shows that the Company’s brand-building goals were met. Česká pojišťovna

succeeded in becoming even more attractive for younger customers and customers from higher-income groups while maintaining its position among other monitored socio-demographic groups. In terms of attractiveness as perceived by the Czech population, Česká pojišťovna retained first place, reaffirming our long-standing position as the brand with the biggest commercial potential.

Current Rating of Česká pojišťovna

Agency Rating

Standard & Poor’s Standard & Poor’s Insurer Financial Strength Rating A/Stable (from 7 February 2008)

Moody’s A3, outlook stable (from 4 March 2008)

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Financial Highlights

14

Financial Highlights

Units 2007 2006 2005 2004 2003 2002 2001

Highlights from the financial statements

Total assets CZK million 122,015 121,285 131,558 122,081 120,655 115,560 108,626

Basic share capital CZK million 4,000 4,000 2,981 2,981 3,412 3,412 3,412

Shareholders‘ equity CZK million 17,180 17,077 20,863 15,965 15,455 15,684 11,108

Dividend per share 2) CZK 0 2,684 0 670 1,178 340 1,140

Retained earnings CZK million 10,194 9,202 9,147 6,947 4,669 4,227 1,269

Net earnings CZK million 6,675 8,293 4,641 1,864 3,138 4,047 4,180

Performance indicators

Total gross premiums written CZK million 37,544 37,836 39,968 39,644 37,875 33,280 31,036 – non-life insurance CZK million 24,008 24,635 24,966 23,804 23,581 20,909 19,026 – life assurance CZK million 13,536 13,201 15,002 15,840 14,294 12,371 12,010 Total claims paid, gross CZK million 21,535 23,158 22,310 22,586 25,628 22,896 18,625 – non-life insurance CZK million 12,801 13,628 9,487 8,830 15,928 14,822 9,382

– life assurance CZK million 8,734 9,530 12,823 13,756 9,700 8,074 9,243

Total technical provisions CZK million 88,972 88,369 87,652 83,610 89,532 87,854 81,055 – life assurance provision CZK million 66,101 66,499 65,865 64,002 62,187 62,276 61,613 – other technical provisions CZK million 22,871 21,870 21,787 19,608 27,345 25,578 19,442 Number of claims processed thousand 1,074 1,131 1,275 1,481 1,261 1,286 1,298 Number of policies thousand 10,544 10,345 12,994 13,315 13,897 14,282 11,187

Other figures

Market share in terms of premiums written % 30.6 33.1 35.9 36.7 36.2 37.2 39.2

– non-life insurance % 34.4 36.4 37.4 37.2 37.1 37.8 37.4

– life assurance % 25.2 28.1 33.4 36.0 34.8 36.2 42.3

Number of employees number 4,924 5,251 5,562 6,224 6,585 6,425 6,158

Number of agencies number 70 70 71 80 74 74 74

Number of regions number 7 7 7 8 8 8 8

Performance ratios

ROA % 5.5 6.8 3.5 1.5 2.6 3.5 3.8

ROE % 38.9 48.6 22.2 11.7 20.3 25.8 37.6

Shareholders‘ equity per share 1) CZK 429,500 426,925 6,999 5,356 4,530 4,597 3,256

Earnings per share 1) CZK 166,875 207,325 1,557 625 920 1,186 1,225

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0 5 10 15 20 25 2001 2002 2003 2004 2005 2006 2007 19.0 20.9 23.6 23.8 25.0 24.6 24.0 Non-life Insurance Premium Revenue, Gross (CZK billions) 0 5 10 15 20 2001 2002 2003 2004 2005 2006 2007 12.0 12.4 14.3 15.8 15.0 13.2 13.5 Life Insurance Premium Revenue, Gross (CZK billions) 0 50 100 150 2001 2002 2003 2004 2005 2006 2007 108.6 115.6 120.7 122.1 131.6 121.3 122.0 Total Assets (CZK billions) 0 10 20 30 40 50 60 70 80 2001 2002 2003 2004 2005 2006 2007 19.5 25.6 62.2 61.6 62.3 21.8 19.6 64.0 65.9 66.1 27.3 21.9 66.5 22.9 other life insurance Insurance Premiums (CZK billions) 0 5 10 15 20 25 2001 2002 2003 2004 2005 2006 2007 11.1 15.7 15.5 16.0 21.0 17.1 17.2 Shareholders’ Equity (CZK billions) 0 2 4 6 8 10 2001 2002 2003 2004 2005 2006 2007 4.2 4.0 3.1 1.9 4.6 8.3 6.7 Profit for the Accounting Period (CZK billions)

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Description of Group Structure, Position of Česká pojišťovna and Selected Group Companies

16

Based on information known to the issuer, as at 31 December 2007 Česká pojišťovna a.s. was part of a corporate grouping under the holding company PPF Group N.V., the identification information of which is set forth below.

The issuer’s Controlling Entity is Petr Kellner, who owns a 94.36% stake in the voting rights associated with the shares of PPF Group N.V. (5% is owned by Jiří Šmejc and 0.64% is controlled by Ladislav Bartoníček through the company PPF Co1. B.V).

PPF Group N.V. is the sole shareholder of PPF Co1. B.V. As at 31 December 2007, PPF Co1. B.V. was the sole owner of CZI Holdings N.V.

CZI Holdings N.V. is a legal entity that was the sole shareholder of Česká pojišťovna as of 31 December 2007.

PPF Group N.V.

Date of inception: 29 December 1994 Registered office: Herengracht 450 – 454,

1017 CA Amsterdam, Netherlands Tower B, Level 9, Strawinskylaan 933, 1077 XX Amsterdam, Netherlands (change in registered office effective 1 April 2007) File number at the Register of the Amsterdam Chamber of Commerce and Industry: 33264887 Basic share capital: EUR 667,380

Principal business: holding company activities and financing thereof

PPF Co1. B.V.

Date of inception: 1 June 2007

Registered office: Netherlands, Tower B, Level 9, Strawinskylaan 933, 1077 XX File number at the Register of the Amsterdam Chamber of Commerce and Industry: 34275402 Basic share capital: EUR 50,000

Principal business: holding company activities

Description of Group Structure,

Position of Česká pojišťovna

and Selected Group Companies

(21)

CZI Holdings N.V.

Date of inception: 6 April 2006 Registered office: Herengracht 516,

1017 CC Amsterdam, Netherlands Tower B, Level 9, Strawinskylaan 933, 1077 XX Amsterdam, Netherlands (change in registered office effective 1 April 2007) File number at the Register of the Amsterdam Chamber of Commerce and Industry: 34245976 Basic share capital: EUR 100,000,000

Principal business: holding company activities and financing thereof

The company has no organizational units. The company owns no real property. As of the closing date of this annual report, there are no extraordinary events. The company is not dependent on any patents, licenses, industrial, commercial, or financial agreements or new production processes. In the current accounting period or in any of the four preceding accounting periods, the company was not involved in any court, administrative, or arbitration proceedings that could have a significant impact on its financial situation.

There were no material circumstances relating to research policy or development of new products or production techniques during the past five accounting periods. The company operated as a going concern in each of the last five accounting periods.

The company operates as a going concern and does not expect any change in the character of its business.

Information on principal investments made in the past five accounting periods, including financial investments:

Investment 2007 2006 2005 2004 2003

Financial investments (EUR) 500,285,009 480,768,282 1,664,218 609,004 0

Average number of employees:

2007 2006 2005 2004 2003

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Description of Group Structure, Position of Česká pojišťovna and Selected Group Companies

18

Description of Selected Companies

of Česká pojišťovna Group

Below we provide information on companies that form part of the Česká pojišťovna consolidated group and are of fundamental importance either for the Company’s business or its capital position. Information on certain other companies that belong to the same group as Česká pojišťovna may also be found in the Notes to Financial Statements for the Year Ended 31 December 2007, in the section describing subsidiaries and associates of Česká pojišťovna.

CP REINSURANCE COMPANY LIMITED

Principal business: reinsurance services Date of inception: 21 May 2004 Basic share capital: CYP 24 million Česká pojišťovna stake: 100%

CP REINSURANCE COMPANY LIMITED (“CP Re”) with its registered office in Nicosia, Republic of Cyprus, is a 100% subsidiary of Česká pojišťovna. It was established in 2004 and has been in operation since the second half of that year. The objective for which this company was established is to gradually unify the reinsurance cover of insurance companies in the Česká pojišťovna Group, bringing them under one roof, and to provide reinsurance cover to companies outside the Group as well. CP Re was established under the laws of the Republic of Cyprus and has received a reinsurance license from the local supervision body.

During 2007, CP Re focused its activities on members of the Česká pojišťovna Group and, in particular, on non-life reinsurance business.

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Česká poisťovňa – Slovensko,

akciová spoločnosť

Principal business: insurance services Date of inception: 12 July 1993 Basic share capital: SKK 550 million Česká pojišťovna stake: indirect stake through

CP Strategic Investments B.V. Since 1993, Česká poisťovňa – Slovensko, akciová spoločnosť (“ČPS”), a composite insurer, has been offering comprehensive life and non-life insurance services in the Slovak Republic.

In 2007, ČPS continued to be successful in the Slovak insurance market, becoming the third strongest insurer in the country. It maintained an overall market share of 7%, with insurance premium revenue of SKK 3.8 billion, up 5.2% from the previous year. In life insurance, the company saw its premium revenue grow by 7.8% to SKK 1.4 billion, while premium revenue in non-life business lines totaled SKK 2.4 billion, up 3.7%. The fastest growing product in life insurance was DYNAMIK Plus, which grew by 24% from the previous year, or in absolute terms SKK 100 million. This single product accounts for 36% of the overall life insurance business. In new life insurance business, the hottest product (44%) was Variable Unit-linked Life Insurance, with premium revenue of SKK 606 million. In 2007 the company launched SLUNEČNICE (Sunflower) life insurance, developed especially for women. By 31 December 2007 this variable unit-linked life insurance product had already generated SKK 17.5 million in premiums.

The ČPS non-life business continues to be dominated by motor vehicles insurance, which accounted for SKK 1.7 billion, or 72%, of premiums.

Motor damage insurance written by ČPS grew to a volume of SKK 93 million, for a growth rate of 8.9%, beating the overall market. ČPS increased its market share to 13%, i.e. SKK 1.1 million, occupying the number-three position in this segment.

In June, the company expanded its product portfolio in personal property insurance by adding a unique pet insurance product, dog insurance, which ČPS is offering over its most modern distribution channel – the telephone. Net income rose to SKK 183 million, more than double the 2006 figure.

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Description of Group Structure, Position of Česká pojišťovna and Selected Group Companies

20

Česká pojišťovna ZDRAVÍ a.s.

Principal business: private health

and sickness insurance Date of inception: 17 June 1993 Basic share capital: CZK 100 million Česká pojišťovna stake: 100%

Česká pojišťovna ZDRAVÍ a.s. (“ČP ZDRAVÍ”) was established by Česká pojišťovna and Vereinte Krankenversicherung AG, Berlin und München, the second largest private health insurer in Germany.

ČP ZDRAVÍ was the first insurance company to provide private health insurance products in the Czech market – before that, they were simply unavailable. The company closely collaborates with other members of the financial group to offer private health insurance bundled together with other products from the Česká pojišťovna financial group.

In 2007, ČP ZDRAVÍ posted gross premium revenue of CZK 206 million, up CZK 15.9 million (+8.4%) from the previous year. Business growth was driven primarily by PPI cross-selling with Home Credit in the Czech Republic and Slovakia. The company posted a profit of CZK 36.6 million in 2007, and the primary positive factor was favorable development and implementation of controls in the claims handling process (claims paid were down 17% year-on-year). In the product management area, a modification of daily support insurance during hospitalization was prepared in conjunction with the introduction of a statutory fee for hospital stays set to take effect from 1 January 2008. Other initiatives focused on improving existing products and preparing to increase support for sales of group insurance and intra-group offerings.

ČP ZDRAVÍ’s principal near-term strategic goal is to support commercial activities and achieve rapid growth in

insurance premium revenue. The company intends to cooperate more within PPF Group through expanded collaboration in solvency insurance sold with retail credit products, expanded solvency insurance products to go with existing policies taken out by customers with other Group companies (premium payment insurance for life insurance policies, supplemental pension insurance, etc.). Another objective is to prepare for and react flexibly to changes in the legislation governing public health insurance and take full advantage of market opportunities that may arise.

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ČP DIRECT, a.s.

Principal business: acting as an insurance agent, consulting

Date of inception: 1 January 1998 Basic share capital: CZK 70.6 million Česká pojišťovna stake: 100%

Since 25 February 2005, ČP DIRECT, a.s. (“ČPD”) has been registered under number 000561PA in the Register of Insurance Intermediaries maintained by the Czech National Bank as an insurance agent as defined by Section 7 of Act No. 38/2004 Coll. on Insurance Intermediaries and Independent Loss Adjusters and amending the Trades Licensing Act. The company is contractually authorized to act as an intermediary for Česká pojišťovna a.s.

The insurance agent activity of ČPD is focused primarily on non-life insurance – motor damage insurance and motor third-party liability insurance in particular. To develop its business the company has built up a network of cooperating subordinate insurance agents, mostly automotive

dealerships. The company continues to develop the distribution of other insurance products, such as property and casualty insurance, through real estate agencies. In 2007, the company grew service revenues by over 10% compared to the previous year to a total of CZK 80.8 million and generated CZK 6.1 billion in after-tax profit.

ČP INVEST investiční společnost, a.s.

Principal business: collective investment,

management of mutual funds Date of inception: 19 November 1991 Basic share capital: CZK 91 million Česká pojišťovna stake: 100%

The sole shareholder of ČP INVEST investiční společnost, a.s. (“ČP INVEST”) is Česká pojišťovna. ČP INVEST is one of the largest investment companies in the domestic market. As of 31 December 2007 it managed 13 open-end mutual funds with total NAV of CZK 6.4 billion. Net mutual fund sales in 2007 totaled CZK 1.6 billion. The income result as of 31 December 2007 was a profit of CZK 4 million. In 2007, ČP INVEST opened four new mutual funds, began offering its products in the Slovak Republic through its own international branch, and also began preparations for expanding its operations into other countries.

From 1 April 2007 ČP INVEST began utilizing a new way of securing the information system customers use to manage their asset accounts over the Internet. As the first in the Czech Republic, it obtained the highest degree of verification, Extended Validation Certificates SSL, from the world’s biggest certification authority, VeriSign.

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Description of Group Structure, Position of Česká pojišťovna and Selected Group Companies

22

Penzijní fond České pojišťovny, a.s.

Principal business: supplemental

pension insurance Date of inception: 19 September 1994 Basic share capital: CZK 214 million Česká pojišťovna stake: 100%

Penzijní fond České pojišťovny, a.s. (“Penzijní fond České pojišťovny”) has been in the pension funds market since 1994 and burst into its second decade in business as the unchallenged top pension fund in the Czech Republic Last year, the fund reaffirmed its long-term dynamic growth trend. 2007 profit totaled CZK 939 million, which according to data from the Association of Pension Funds was the highest among pension funds in the Czech Republic. The total volume of assets under management grew by 23% in year-on-year terms, to approach CZK 40 billion. In spring 2007, the fund’s number of customers passed one million, and year-on-year growth was 11%. Thanks to extensive distribution, the fund added 195,000 new contracts last year. The total number of customers at year end 2007 was nearly 1.1 million.

Penzijní fond České pojišťovny sells supplemental pension insurance through the Česká pojišťovna network together with independent distribution companies and direct marketing tools. One important part of this multi-channel distribution strategy is a focus on the corporate client segment, in which the fund is also the leader. The number of customers whose employers contribute to their pension plans grew 12% year-on-year to reach 244,000.

The sustained demand for supplemental pension insurance is driven primarily by the high rate of return it offers on savings, the ever increasing level of employer involvement, as well as by the public’s growing awareness of the importance of addressing one’s personal financial needs in retirement without relying entirely on the existing system of social security.

The overall very good performance last year is underlined by awards received by the fund: in spring 2007, the fund once again topped the pension funds category of the prestigious CZECH TOP 100 ranking. In November 2007, after winning in the previous two years, Penzijní fond České pojišťovny placed an excellent second in the pension funds category of the MasterCard Bank of the Year 2007 competition.

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REFICOR s.r.o.

Principal business: administrative management and organizational-economic services business, financial, organizational and economic consulting Date of inception: 12 August 1997 Basic share capital: CZK 100,000 Česká pojišťovna stake: 100% Part of Česká pojišťovna since 9 March 2006,

REFICOR s.r.o. is a 100% subsidiary of Česká pojišťovna. The company’s principal activity is collecting on debts that Česká pojišťovna turns over to a law firm. The company also does other administrative work for said law firm. The company has 28 employees, one half of which work in the Prague office and the other half in the Hradec Králové office.

The change in how debts are collected brought Česká pojišťovna CZK 24.5 million in cost savings. Another benefit for Česká pojišťovna is a major increase in the amount of overdue premiums collected, by CZK 108 million year-on-year.

As of 31 December 2007 the profit figure before tax was CZK 19 million.

Закрите акціонерне товариство

Чеська страхова компанія Україна –

Страхування житя

” (Zakryte akcionerne

tovaristvo “Česka strachova kompaniya

Ukrayina – Strachuvannya žitya”)

Principal business: insurance activity Date of inception: 18 November 2005 Basic share capital: UAH 20,050,000 Česká pojišťovna stake: indirect stake through

CP Strategic Investments B.V. Česká pojišťovna Ukraine is a life insurer focused on selling conventional endowment life insurance and retail credit insurance products offered in cooperation with the Home Credit companies. The company began its collaboration with the Home Credit companies in 2007.

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Description of Group Structure, Position of Česká pojišťovna and Selected Group Companies

24

АО «Чешская Страховая Компания

Казахстан - Страхование жизни,

дочерная компания АО «Чешска

Поиштовна» (AO Češskaya Strachovaya

Kompaniya Kazachstan – Strachovanie

žizni, dočernaya kompaniya AO Češska

Poištovna)

Principal business: insurance activity Date of inception: 4 June 2007 Basic share capital: KZT 1,000,000,000 Česká pojišťovna stake: 100%

The KZT 16 million loss posted by the company in 2007 was due to investments in equipment made when the company was established. Sales of life insurance commenced late in the third quarter of 2007. The company’s principal source of income in 2007 was bancassurance (accident insurance for customers of HCK). In six months of operation, the company achieved a 2.2% share of the accident insurance market, and during three months of operation it reached a life insurance market share of 1.8%.

Общество с ограниченной

ответственностью «Чешская Страховая

Компания» (Obščestvo s ograničennoj

otvetstvennostyu Češskaya Strachovaya

Kompaniya)

Principal business: insurance activity Date of inception: 18 January 2002 Basic share capital: RUB 86.7 million Česká pojišťovna stake: 100%

In July 2002, Češskaya strachovaya kompaniya

(“ČP Russia”) obtained an insurance license and starting in September 2002 it began selling its first product – mixed life assurance. In January 2006, in accordance with new Russian legislation, the company obtained a new license as a life insurer with a wide range of life assurance products. The company is also involved in selling accident insurance to go with consumer loans from Home Credit & Finance Bank.

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In developing distribution channels, the company

emphasizes building its own network, which encompassed over 800 agents and group managers at the end of 2007. In 2007, ČP Russia opened another 16 new agencies and regional representations, bringing the total number of branches to 30. In addition to the existing agencies in Moscow and the Moscow metropolitan area and representations in the regions of the Russian Federation (RF), in 2008 the company plans to open another 4–5 regional branches. At present the company also works with 84 insurance broking firms.

ČP Russia is already recognized as one of the players that sets the trends in the highly competitive life insurance market. According to data from the Federal Service for Insurance Supervision, in 2007 there were 653 insurance companies operating in the RF in life insurance alone. According to the same data, ČP Russia is number 14 in the TOP 20 LIFE INSURERS and number 6 in the TOP 10 LIFE INSURERS ranking according to accident insurance sales results. At the same time, these results placed us in third place among companies with foreign capital that write life insurance in the RF market.

In 2007, the company continued in its successful collaboration with Home Credit & Finance Bank in providing insurance to applicants for consumer loans and newly cash loans, as well as insurance of revolving card holders. Starting in September 2007, the company also provides services to mortgage loan applicants. In late 2007, nearly 80% of new customers had signed up for at least one of the loan products offered.

The project of cooperation with the State enterprise Russian Post continued in 2007, and its most important results were more effective insurance sales and regional development. During the course of 2007, sales activities were introduced in 19 new regions of Russia, bringing the total number to 62.

ČP Russia’s 2007 turnover (gross insurance premium revenue) totaled RUR 3,373 billion, which is 236% of 2006 turnover, and the company closed the year with after-tax profit of RUR 531 million.

In implementation of the company’s strategic development plan, 2007 saw continuation of preparations for developing other alternative sales channels which are to be opened during 2008.

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Directors and Officers

26

Chairman Ladislav Bartoníček Term of office since 3 June 2004 Born in 1964 Domicile: Prague 4, Slepá II/458

Education: Czech Technical University, Prague, Faculty of Electrical Engineering, Rochester Institute of Technology Experience:

ČKD Elektrotechnika, PPF investiční společnost a.s.

Vice Chairman Eilard Friese Term of office since 1 June 2007 Born in 1962 Domicile: Prague 6, Vilímovská 673/16 Education: University of Utrecht, Faculty of Law Experience: ACNielsen Europe, AEGON Nederland N.V., NOG Verzekeringen Vice Chairman Marcel Dostal Term of office since 1 June 2007 Born in 1969 Domicile: Prague 5, Högerova 1098/11 Education: Brno University of Technology, Faculty of Civil Engineering, U.S. Business School, Prague Experience: Rollins Hudig Hall Česká republika, s.r.o., Stratego Invest, a.s., PPF burzovní společnost a.s., Česká pojišťovna a.s., ČP INVEST investiční společnost, a.s., PPF, a.s. Member Jan Ježdík Term of office since 3 June 2004 Born in 1955 Domicile: Liberec, Hálkova 1368/7

Education: Charles University, Prague, Faculty of Law Experience: Česká státní pojišťovna Member Ivan Vodička Term of office since 1 October 2007 Born in 1964 Domicile: Prague 5, Na pomezí 1228/17 Education: Czech Technical University, Prague, major in Technical Cybernetics – Robotics, Ecole Nationale des Ponts et Chauseés (ENPC), University of California at Berkeley Experience: Royal Numico N.V., Pražské pivovary

Directors and Officers

(as at the Annual Report compilation date)

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Supervisory Board

Chairman

Milan Maděryč

Term of office since 1 June 2007 Born in 1955

Domicile: Zlín, Nad Vývozem 4872

Education: Secondary vocational with school-leaving exam, postgraduate study at Brno University of Technology Vice Chairman

Aleš Minx

Term of office since 18 June 2007 Born in 1964

Domicile: Haag, Brugsesstraat 33, Kingdom of the Netherlands

Education: University of Economics, Prague, Faculty of Industrial Economics Member

Marek Orawski

Term of office since 1 March 2006 Born in 1965

Domicile: Havířov, Hlavní třída 25/304

Education: Technical University of Ostrava, Faculty of Electrical Engineering, Liverpool John Moores University

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Directors and Officers

28

Chief Executive Officer

Eilard Friese Term of office since 1 October 2006 Born in 1962 Domicile: Prague 6, Vilímovská 673/16 Education: University of Utrecht, Faculty of Law Experience:

ACNielsen Europe, AEGON Nederland N.V., NOG Verzekeringen

Executive Board Member for Investment Policy and Assets and Liability Management Marcel Dostal Term of office since 6 November 2006 Born in 1969 Domicile: Prague 5, Högerova 1098/11 Education: Brno University of Technology, Faculty of Civil Engineering, U.S. Business School, Prague Experience: Rollins Hudig Hall Česká republika, s.r.o., Stratego Invest, a.s., PPF burzovní společnost a.s., Česká pojišťovna a.s., ČP INVEST investiční společnost, a.s.,

Executive Board Member for Business Risks

Milan Beneš Term of office since 15 January 2008 Born in 1968 Domicile: Chlumčany, Boženy Němcové 307 Education: University of West Bohemia in Pilsen, Faculty of Electrical Engineering Experience: ZČE Plzeň a.s., FCC Folprecht s.r.o., Logica CMG, s.r.o.,

Accenture Central Europe B.V.

Executive Board Member for IT Tomáš Machanec Term of office since 16 January 2006 Born in 1963 Domicile: Prague 9, Bošilecká 1509

Education: Czech Technical University, Prague, Faculty of Nuclear and Physical Engineering,

US Business School, Prague Experience: IHE Praha, SEP Bratislava, ČSAD Nitra, SEP Bratislava, ŽB TRUST, investiční společnost,

Executive Board Member for Retail Petr Kopecký Term of office since 15 September 2003 Born in 1970 Domicile: Horoměřice, Statenice 237 Education: University of Economics, Prague, Faculty of Economics & Public Affairs Experience: Logica

Consulting k.s., Logica CMG s.r.o., MARK/BBDO, a. s., McCANN-ERICKSON PRAGUE spol. s.r.o.

Company Management

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Executive Board Member for Financial Management

Ivan Vodička Term of office since 1 September 2007 Born in 1964 Domicile: Prague 5, Na pomezí 1228/17 Education: Czech Technical University, Prague, major in Technical Cybernetics – Robotics, Ecole Nationale des Ponts et Chauseés (ENPC), University of California at Berkeley Experience: Royal Numico N.V., Pražské pivovary

Executive Board Member for Reinsurance and International Underwriting Miroslav Matocha Term of office since 1 April 2000 Born in 1964 Domicile: Praha 9, bří. Dohalských 140/5 Education: University of Economics, Prague, Faculty of Commerce

Experience: INCOTEX s.r.o., Brno, Federal Ministry of Foreign Affairs of the Czech Republic, Moravskoslezská

KOOPERATIVA, družstevní pojišťovna a.s.,

Winterthur pojišťovna, a.s.

Executive Board Member for Operations and Human Resources Marie Kovářová Term of office since 1 March 2005 Born in 1972 Domicile: Liberec, Na Pískovně 648

Education: Charles University, Prague, Faculty of

Mathematics and Physics Experience: McKinsey & Company, Inc.

Executive Board Member for Retail and Marketing

Pavel Řehák Term of office since 11 September 2006 Born in 1975 Domicile: Mohelnice, Stanislavova 11 Education: University of Economics, Prague, Faculty of International Relations Northwestern University, Kellogg School of Management Experience: McKinsey & Company, Inc.

Executive Board Member for Employee Benefits and Supplemental Pension Insurance Tomáš Matoušek Term of office since 1 February 2008 Born in 1965 Domicile: Prague 8, Nad Okrouhlíkem 2291/5 Education: University of Economics, Prague, Faculty Economics & Public Affairs, University of Pittsburgh Experience: Penzijní fond České pojišťovny, a.s., Komerční banka, a.s.

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Board of Directors’ Discussion and Analysis of the Company’s Business Activities and Financial Condition

30

Situation in the Czech Insurance Market

Since the early 1990s, the Czech insurance market has enjoyed uninterrupted growth – growth that continued in 2007 as well. The market expanded by 8.2 percentage points, with insurance premium revenue of Czech Insurance Association (ČAP) member insurers reaching CZK 130.3 billion (according to ČAP figures from 30 January 2008). Premium revenue in life insurance totaled CZK 53.9 billion, up over 14% from the previous year, while non-life premiums grew by 4.4% year-on-year to a total of CZK 76.4 billion.

The Czech Republic’s overall insurance penetration, the ratio of insurance premium revenue to Gross Domestic Product (GDP), has been rising every year. In the early 1990s it was only slightly above 2%, while in 2006 it had reached 3.73% and in 2007, given estimated GDP growth of 6.9%, it rose to 3.78%. The Czech Republic still lags behind countries with more developed insurance markets, however: in the entire EU25 the average for this indicator is 9%. The Czech Republic’s insurance penetration figure is approximately one half of the EU25 average.

Life insurance’s share in overall premium revenue generated in the Czech Republic increased by 2% in 2007, compared to 2006, and stands at 41.3%. In this indicator, the Czech Republic is slowly approaching Western markets where it stands at approximately 60%.

The sum of the market shares of the five largest insurers, expressed in terms of overall premium revenue, fell in 2007 by 6% compared to 2006, i.e. to 73%. In life insurance this indicator declined from 75% to 57% and in non-life insurance it fell by 2% to 84%. In 2007, Česká pojišťovna once again was the largest player in the Czech insurance market; our market share in terms of overall premium revenue was 30.6%. In life insurance we controlled 25.2% of the market, while in the segment composed of policies where premiums are paid in regular installments our share was 32.8%. Česká pojišťovna’s share of the non-life market was 34.4%.

Board of Directors’ Discussion

and Analysis of the Company’s Business

Activities and Financial Condition

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Company Financial Performance in 2007

Asset Position

Česká pojišťovna is a long-standing, highly capitalized and stable company whose assets totaled CZK 122 billion at 31 December 2007. The Company’s shareholders’ equity is nearly CZK 17.2 billion and the basic share capital totals CZK 4 billion.

In terms of volume, the largest component in assets is financial assets, which stood at CZK 106 billion as of 31 December 2007, up CZK 5.6 billion from 2006. The biggest growth components were Financial assets available-for-sale (up CZK 15 billion) and Loans and receivables (up CZK 4.6 billion). On the other hand, the largest decline was registered in Financial assets at fair value through profit or loss (down CZK 13.2 billion). Another major component of assets is Subsidiaries and associates, which remained stable at around CZK 4 billion (31 December 2007: CZK 4.1 billion).

Investment property, at CZK 523 million, was down CZK 2.4 billion year-on-year, while Reinsurance assets, at CZK 8.1 billion, were down CZK 123 million.

Property, plant and equipment totaled CZK 998 million, down CZK 2.3 billion year-on-year, and Prepayments and accrued income fell by CZK 16 million to CZK 736 million. Cash and cash equivalents fell by CZK 841 million, to a total of CZK 330 million.

Intangible assets decreased by CZK 59 million and stood at CZK 1.4 billion.

Treasury Shares

Česká pojišťovna did not hold any of its own shares during the 2007 accounting period.

Financial Performance Commentary

In this section, individual items of the Company’s assets and liabilities are indicated using terms derived from the Insurance Act, which may be different, in form and/or content, from those used in the financial statements. This is being done as a service to users of the Annual Report who would prefer the information from the financial statements to be presented in a structure and content comparable to that used by other insurers operating in the Czech Republic.

Profit

2007 was the third year in which Česká pojišťovna reported its financial results according to International Financial Reporting Standards (IFRS). The year 2007 reaffirmed the high profitability of Česká pojišťovna. With profit after tax of CZK 6.7 billion, the Company was once again one of the top-earning companies in the Czech Republic. The positive earnings performance was driven in particular by the operating result and investment returns, which include gains on sales of certain equity participations. One of the big accomplishments of 2007 was the handling of a natural catastrophe (Hurricane Kyrill) in January 2007, which affected the Company’s performance primarily in the first half of the year. On the other hand, the fall and the last months of the year in particular were very favorable in terms of losses, and that together with stable development in life insurance contributed to the good operating result. In 2007, the Company also continued to bring new products to market and optimize operating expenses.

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Board of Directors’ Discussion and Analysis of the Company’s Business Activities and Financial Condition

32

Basic Share Capital and Reserves

In April 2007, a decision of the sole shareholder acting with the powers of the General Meeting approved the allocation of the Company’s 2006 profit. CZK 5.5 billion of the profit amount was distributed in the form of a dividend, and the remaining CZK 2.8 billion was transferred to the retained earnings account.

In August 2007, a decision of the sole shareholder acting with the powers of the General Meeting approved the transfer of CZK 117.5 million from retained earnings to the Company’s statutory reserve. Under IFRS, the equalization provision is included in shareholders’ equity. Overall, the Company’s shareholders’ equity grew by CZK 102 million to a total of CZK 17.2 billion.

Profit Allocation Proposal

The Board of Directors of Česká pojišťovna proposes that the profit generated by Česká pojišťovna in the 2007 accounting period, in a total amount of CZK 6,674,685,203.24, be allocated as follows: CZK 4,500,000,000 to be distributed in the form of a dividend and the remaining CZK 2,174,685,203.24 to be transferred to the retained earnings account. Recent Shareholder Dividends

In June and December 2006, the sole shareholder acting with the powers of the General Meeting decided on payment of a gross dividend for 2005 in a total amount of CZK 11.5 billion.

In April 2007, the sole shareholder acting with the powers of the General Meeting decided on payments of a gross dividend for 2006 totaling CZK 5.5 billion.

As of the compilation date of this Annual Report, the dividend for 2007 had not yet been decided.

Insurance Provisions

Insurance provisions were up CZK 0.6 billion year-on-year, to a total of CZK 89 billion. According to IFRS, the equalization provision does not qualify as an insurance provision (see below).

Life Insurance Provision

This provision accounts for roughly three quarters of overall insurance provision and includes the life insurance provision, the provision for unearned life insurance premiums, the life insurance claims provision, and a provision for meeting obligations based on the technical interest rate. As at 31 December 2007, the life insurance provision totaled CZK 66.1 billion. In year-on-year terms, this is a decline of CZK 0.4 billion. The provision for meeting obligations based on the technical interest rate was CZK 1.3 billion at 31 December 2007, down CZK 1.7 billion from the previous year.

Provision for Non-life Insurance Claims

This provision includes claims reported but not settled (RBNS) and claims incurred but not reported (IBNR). It is the second largest insurance provision. At 31 December 2007, the claims provision totaled CZK 16.1 billion, up CZK 0.5 billion from the previous year.

Provision for Unearned Premiums in Non-life Insurance

The total provision for unearned premiums as at 31 December 2007 had risen year-on-year by roughly 10.2%, to CZK 6.4 billion.

References

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