Pojistovaci maklerstvi INPOL a.s.

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1 CREDIT OPINION Pojistovaci maklerstvi INPOL a.s. Annual Update Update Summary Pojistovaci maklerstvi INPOL a.s.'s (Inpol) B1 corporate family rating, B1-PD probability of default rating and B1.cz national scale rating, with a stable outlook, reflect Inpol's very low debt levels, good profitability fundamentals and strong client retention. Pojistovaci maklerstvi INPOL a.s. Domicile Czech Republic Long Term Rating B1 Type LT Corporate Family Ratings Outlook Stable Please see the ratings section at the end of this report for more information. The ratings and outlook shown reflect information as of the publication date. Nevertheless, the rating is constrained by the company's very modest size both domestically and particularly internationally and its susceptibility to political change. The company's small size also leads to a significant concentration both by client and insurance provider, albeit we note that client retention has been good over a number of years. In the next months, we expect stable premium rates and growth trends across the Czech non-life insurance market to support organic growth. Exhibit 1 Total Revenue and EBITDA Margins Contacts Marina Cremonese VP-Senior Analyst marina.cremonese@moodys.com Helena Kingsley Tomkins AVP-Analyst helena.kingsley-tomkins@moodys.com Simon Hennige Associate Analyst simon.hennige@moodys.com Revenue (CZK millions) Revenue EBITDA Margin (%) % % % % % 80 15% 60 10% 40 5% 20 0% Credit Strengths» Extremely low financial leverage» Good bottom line profitability and EBITDA margins CLIENT SERVICES Credit Challenges Asia Pacific Japan EMEA Source: Company reports and Moody's Investors Service Antonello Aquino Associate Managing Director antonello.aquino@moodys.com Americas 2016» Good client retention» Relatively small size on a global and national basis» Lack of geographic diversification outside of the Czech insurance market» High client concentration with around 60% of revenues generated by 10 largest clients» Susceptibility to political risk EBITDA Margin (%) RATINGS

2 Rating Outlook The rating outlook is stable, which reflects our expectation that Inpol will continue to generate strong EBITDA margins, good cashflows and a bottom line profits without increasing the level of debt on its balance sheet. Factors that Could Lead to an Upgrade An upgrade is considered unlikely in the short term. However, a meaningful expansion in the company's business profile, for example through a sustained growth in market share or co-operation with or takeover by a stronger international broker, and absent of change in key personnel could strengthen Inpol s credit profile. Factors that Could Lead to a Downgrade» Significant market position deterioration due to abrupt changes in the broker market, for example through the introduction of government-mandated market reforms or a significant deterioration in client retention» Substantially reduced net profit margin to levels consistently below 5%» Substantial increases in leverage with debt/ebitda ratios above 3x Key Indicators Exhibit 2 Pojistovaci maklerstvi INPOL a.s. [1] Total Revenues (CZK millions) EBITDA (CZK millions) Interest Expense & Equivalents (CZK millions) Net Profit (CZK millions) Debt & Equivalents (CZK millions) Free Cash Flow (CZK millions) Capex & Equivalents (CZK millions) EBITDA Margin (%) 19.4% 21.7% 21.9% 33.7% 25.0% Net Profit Margin (%) 11.8% 14.8% 14.2% 21.7% 15.4% Sharpe Ratio of Net Profit Margin (x) (5-Yr) 4.2x 3.3x 3.3x 2.3x 2.2x Debt / EBITDA (x) 0.2x 0.2x (EBITDA - Capex) Cvrg of Interest (x) 99.1x 74.1x 85.5x 163.6x 69.3x Free Cash Flow % Debt (x) 1.4x 1.5x -4.7x 15.0x -11.3x [1] Information based on consolidated GAAP financial statements. All figures reflect Moody's standard accounting adjustments. Source: Company reports and Moody's Investors Service Profile Inpol is a small player in the Czech broker market. The company ranks amongst the top 10 brokers domestically, but its market position is well behind that of the international brokers and larger domestic players This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on for the most updated credit rating action information and rating history. 2

3 Detailed Credit Considerations Business Profile: Weak market position on a global and national basis as well as limited product diversification Inpol's 2017 total revenues of CZK131.9m (USD6.2m) are extremely low on both a global and a national comparative basis. Excluding the big international players, Inpol's market share of intermediated premiums in the Czech non-life market has historically amounted to around 4-5%. While sufficient to place it amongst the 8 largest national brokers in the Czech Republic, Inpol remains well behind the larger names such as RENOMIA and RESPECT. Following strong growth in recent years, revenue peaked in 2014 largely driven by one-off commissions earned on the sale of construction insurance policies. Revenue then declined for two consecutive years in 2015 and In 2017, revenue grew by 7.4% to CZK131.9 million supported by stable insurance premium rates and growth in the Czech non-life insurance market. We expect these stable market conditions to persist in 2018 and support moderate organic growth. In addition to its small size, Inpol's diversification is also limited, both in terms of geography and product. Inpol is focused on insurance brokering, specialising in the distribution of industrial and business risk insurance to large corporate clients. The company s international operations are very small and close to 90% of the company's broking revenue also come from Prague, although Inpol's five branches cover all domestic regions. We view client concentration and political change as the key credit risk for Inpol s business. Client concentration risk is viewed as high given that the top 5 clients represented around 55% of Inpol's 2017 YTD revenues. Thus, the defection of only a very small number of key clients could have a disproportionately large impact on the group's revenues and profitability. Mitigating some of this concentration risk, we note that client retention has remained high in recent years. Regarding political risk, a change in ruling parties or ministries could lead to lower client retentions and thus a lower market share, if this resulted in a change in the leadership of some of the Inpol's large long-term clients. Exhibit 3 Net Profit and Net Profit Margin CZK million Net Profit (CZK millions) Net Profit Margin (%) 40 25% % 20 10% 15 NEt Profit Margin (%) NEt Profit (CZK millions) 20% % 5 0 0% Source: Company reports and Moody's Investors Service Profitability: Good margins but modest profits in absolute terms with high volatility expected to remain a feature Profitability is considered adequate with a 3 year average ( ) EBITDA margin of 21%. The EBITDA margin declined slightly in 2017 to 19.4% from 21.7% a year before despite the growth in revenue due to higher operating expenses. The operating expense increase relates to the implementations costs to comply with several EU directives, in particular the General Data Protection Regulation and the Insurance Distribution Directive. Inpol's net profit margin at 11.8% for 2017 remains good, albeit down from last year (14.8%). The 3 year average at 13.6%, continues to compare favourably to broking peers. However, with 2017 net profit totalling only CZK15.5m (c. USD0.7m), Inpol's absolute profitability is and will remain modest for the foreseeable future and thus susceptible to volatility. 3

4 Financial Flexibility: Excellent cash flow and very low indebtedness, offset by limited access to external funding Inpol's leverage remained extremely low and the company scored very highly on all Moody's financial flexibility ratios. Inpol had total outstanding debt of CZK3.1m (USD0.1m) at YE2017, comprised of loans provided by Mercedes-Benz Financial Services a SkoFIN, Volkswagen Financial Service and RCI Financial Services, used exclusively to purchase cars for the management team in Inpol has continued to deleverage its balance sheet, voluntarily repaying CZK2.3m since Although we expect the company's outstanding debt levels to remain minimal, Inpol s financial flexibility is constrained by its limited access to external funding, reflecting the company's private ownership and small size. However, we do believe that bank facilities may be available should the need arise. Liquidity Analysis Inpol's cash flow management is also a credit strength, with strong net cash inflows a feature. Inpol has a very strong level of liquidity to comfortably support its broking operations, while meeting its historically limited interest payments and any future capital expenditures. Rating Methodology and Scorecard Factors Inpol's corporate family rating of B1 is four notches below the Baa3 rating indicated by the scorecard. The difference reflects Inpol's very small size, high political risk exposure, volatile earnings and limited access to funding. Exhibit 4 Pojistovaci maklerstvi INPOL a.s. Scorecard YE2017 [1] Reporting Period LTM (12.16) Measure Business Profile (30%) Score Moody's Month Forward View [2] Measure Caa Score Caa Total Revenues ($ Mil) (LTM) 6 Ca 5-7 Ca Diversification Score (#) 2 B 2 B Profitability (20%) Baa Baa EBITDA Margin (%) (3-Yr Avg) 21.0% Ba 20% - 24% Ba Net Profit Margin (%) (3-Yr Avg) 13.6% A 12% - 15% Aa Baa 3.0x - 4.0x Ba Sharpe Ratio of Net Profit Margin (x) (5-Yr) 4.2x Financial Flexibility (50%) A Debt / EBITDA (x) (LTM) 0.15x x (EBITDA - Capex) Cvrg of Interest (x) (LTM) 99.1x 70x - 100x 141.2% (5.0)% - 5.0% Ca Free Cash Flow % Debt (LTM) Aggregate Credit Profile: Weighted Average Factor Score Senior Unsecured Debt Rating Baa1 Baa3 B1 [1] Scorecard used to generate senior unsecured debt ratings of investment-grade issuers and corporate family ratings of speculative-grade issuers. [2] This represents Moody's forward view, not the issuer's, and unless noted in the text, does not incorporate significant acquisitions or divestitures. Source: Moody's Investors Service. 4

5 Other Considerations OWNERSHIP Inpol's ownership is concentrated in the hands of just two individuals who are members of the management board. NATIONAL SCALE RATING Moody's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs in the Czech Republic are designated by the.cz suffix. NSRs differ from global scale ratings in that they are not globally comparable to the full universe of Moody's rated entities, but only with other rated entities within the same country. Ratings Exhibit 5 Category POJISTOVACI MAKLERSTVI INPOL A.S. Rating Outlook LT Corporate Family Ratings Moody's Rating STA B1 Source: Moody's Investors Service 5

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7 CLIENT SERVICES 7 Americas Asia Pacific Japan EMEA