ÃÎÄÈØÅÍ ÎÒ ÅÒ 2011 YEARS ANNUAL REPORT 2011

Transcription

1 ÃÎÄÈØÅÍ ÎÒ ÅÒ 2011 YEARS ANNUAL REPORT 2011

2 VIENNA INSURANCE GROUP With a premium volume of approximately EUR 9 billion and around 25,000 employees, Vienna Insurance Group (VIG) is one of the leading insurance groups in Austria and Central and Eastern Europe (CEE). Innovation, strong customer relationships and an emphasis on customer service create a high quality product portfolio offering attractive solutions in both life and non-life insurance segments. VIG s clearly focused strategy for expansion in the CEE region has enabled it to make a transition from being an Austrian insurance company to an international group at an early stage. Today, VIG is represented by approximately 50 insurance companies in 25 countries. VIG stands for financial stability, and offers a high level of security to customers, shareholders, partners and employees. One of the key reasons is its conservative investment policy. This is reflected in its A+ rating with a stable outlook, which makes Vienna Insurance Group the best-rated company in the ATX leading index of the Vienna Stock Exchange. VIG has also been listed on the Prague Stock Exchange since In addition to economic considerations, the Group also places great importance on an involvement with social concerns and helping to create a future society worth living. In this way, Vienna Insurance Group remains true to its fundamental goal of value-oriented growth. Core market: Austria Vienna Insurance Group is the largest insurer in Austria, where it holds an excellent position with its group companies Wiener Staedtische Versicherung, Donau Versicherung and Sparkassen Versicherung. The strength shown in this core market since 1824 is one of the reasons for the successful realisation of VIG s internationalisation strategy. Major player in the CEE region Vienna Insurance Group started its expansion in 1990, making it one of the first Western European insurance companies to expand into Central and Eastern Europe. Today the Group is one of the most important players in this region and earns more than 50% of its total Group premiums in the CEE region. It has group companies and branches in the following countries in this region: Albania, Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey and the Ukraine. VIG has also been represented in Bosnia-Herzegovina since Due to many years of experience and excellent knowledge of the markets in this region, and to its expertise in all insurance matters, VIG is optimally positioned to continue benefiting from future increases in the standard of living in the CEE region and from the accompanying increased need for insurance. Vienna Insurance Group is also represented in Germany, Liechtenstein and Italy. A common goal: to offer security to customers Every customer is unique. They differ in their need for insurance and retirement provisions, living circumstances and the way they like to receive advice. Vienna Insurance Group is aware of this. There is no standard insurance customer for VIG, it therefore pays close attention to special local characteristics, and maintains a presence with more than one brand name and broad distribution networks in many of its markets. There is one thing, however, that all Vienna Insurance Group companies have in common: the goal of providing security to customers. VIG companies have offered a complete range of insurance solutions in Austria for many decades in both non-life and life segments. Although the markets in Central and Eastern Europe are currently still at a different economic level, they are increasingly moving in

3 a similar direction. While demand in this region in the period following 1989 was initially strongest for motor vehicle insurance, and then household and homeowner insurance as well, today retirement provisions, savings and investment products in the form of life insurance policies are enjoying rising popularity. With the establishment of VIG RE, the Group has also had its own reinsurance company since The location of the company s registered office in the Czech Republic underscores the importance of the CEE region as a growth market for VIG. Strategic partnership with Erste Group Erste Group is a strong partner for Vienna Insurance Group. It also operates independently, has the same values and follows a similar growth strategy. The two companies benefit equally from a long-term cooperation agreement concluded in 2008 for Austria and the CEE region. Erste Group distributes VIG insurance products, whereas VIG companies offer Erste Group banking products in return. The cooperative arrangement gave Vienna Insurance Group access to a well-established bank distribution network. Capable employees bring success Employees play a particularly important role in the success of a service company. Here too, in addition to dedication, professional advice, and excellent service, Vienna Insurance Group places great importance on understanding local markets and close customer relationships. Further information on the Vienna Insurance Group is available at or in the VIG Group Annual Report.

4 Logouebers_HOCH_Feb_RZ.ai :02:36 Uhr Welcome to the family of VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe February

5 YEARS ANNUAL REPORT 2011 MANAGEMENT BODIES

6 YEARS ANNUAL REPORT 2011 SUPERVISORY AND MANAGEMENT BOARD SUPERVISORY BOARD Chairman Peter Hoefinger Members Gerhard Lahner Rudolf Ertl Todor Tabakov AUDITORS KPMG Bulgaria OOD HEAD OFFICE 5 Pozitano Sq Sofia, Bulgaria MANAGEMENT BOARD Chairman Rumen Yanchev _ Chief Executive Officer Members Klaus Muehleder _ Executive Officer Christoph Rath _ Executive Officer Ivan Ivanov Rumyana Milanova Diana Evstatieva

7 YEARS ANNUAL REPORT 2011 MEMBERSHIP AND SHAREHOLDERS MEMBERSHIP OF BULSTRAD VIENNA INSURANCE GROUP BULSTRAD VIENNA INSURANCE GROUP is a member of: IUMI (International Union of Marine Insurance) IUAI (International Union of Aviation Insurers) National Bureau of Bulgarian Motor Insurers Association of Bulgarian Insurers Confederation of the Employers and Industrialists in Bulgaria Prof. Dr. Veleslav Gavriyski Foundation Confederation of the Employers and Industrialists in Bulgaria SHAREHOLDERS OF BULSTRAD VIENNA INSURANCE GROUP TBI Bulgaria AD 97.72% Other 2.28%

8 YEARS ANNUAL REPORT 2011 FINANCIAL DATA FOR 2011

9 YEARS ANNUAL REPORT 2011 GROSS PREMIUM INCOME AND MARKET SHARE GROSS PREMIUM INCOME AND MARKET SHARE OF BULSTRAD VIENNA INSURANCE GROUP FOR 2011 In 2011 BULSTRAD VIENNA INSURANCE GROUP generated gross premium income amounting to BGN 145,160,833, which ranks the Company third at the non-life insurance market with a share of 10.67%. As usual, the Company has kept its leadership position in the major insurance groups _ Cargo Insurance, General Civil Liability and Carrier s Liability _ first place at the market, Marine Insurance _ second place, and Aviation Insurance _ third place. In 2011 the Company focused its efforts into improving the Motor Insurance technical result which brought about a positive financial result. On the other hand, in 2011, the Company suffered a drop in the total premium income amounting to 19.65%. This is mainly due to a decline in Motor Third Party Liability and Casco sales which hold the largest share in the Company s portfolio. There have been reports for a fall in premium income in other kinds of insurance as well, except for Cargo and Aviation Insurance. The table below illustrates the gross premium income of the Company for 2011 and 2010 according to groups and types of insurances; its distribution according to the main insurance groups is shown in the Portfolio section.

10 GROSS PREMIUM INCOME OF BULSTRAD VIENNA INSURANCE GROUP BGN 000 Insurance types Change, % Non-life 145, ,656 _ 19.65% Motor Insurance 89, ,562 _ 27.81% Casco 50,164 67,228 _ 25.38% Motor Third Party Liability (Owning and Using a Motor Vehicle), including 39,760 57,334 _ 30.65% _ Motor Third Party Liability 39,759 57,216 _ 30.51% _ Green Card _ 99.31% Railway Vehicles 3,426 _ n/a Property Insurance 27,560 29,469 _ 6.48% Fire and Natural Perils 22,812 23,757 _ 3.98% Property Damage 4,748 5,712 _ 16.87% Cargo, Marine and Aviation Insurance 12,413 12,904 _ 3.80% Cargo Insurance 4,667 4, % Aviation Insurance 4,687 4, % Marine Insurance 3,059 4,033 _ 24.15% Others 11,838 13,721 _ 13.73% Personal Accident and Travel Assistance 3,534 3,670 _ 3.69% General Civil Liability and Carrier s Liability 8,090 9,865 _ 18.00% Financial Losses % Tendencies in premium income development according to the main types of insurance Motor Insurance Due to the negative financial results for 2010, the management of BULSTRAD VIENNA INSURANCE GROUP designed a set of measures for improving the Motor Insurance technical result in the short term. Most of them concern the tariff policy of the Company and amendments to the general conditions of the products. The measures are restrictive and aim at improving and restructuring the insurance portfolio. Due to these measures, in 2011 the premium income decreased by 27.81% which is the biggest factor for the overall decrease in the premium income of the Company. Motor Third Party Liability also reported a drop in 2011 compared to 2010 after improving the portfolio of specific kinds of motor vehicles, such as trucks, tractors, buses of especially high claims ratio and low market premium. Measures have been taken for adjustment of premiums paid by owners of motor vehicles in accordance with their age. The market share of the Company for this type of insurance is 9.30% _ fifth place on the non-life insurance market.

11 BULSTRAD VIG 9.30% MARKET Motor Insurance Property Insurance The premium income drop in Property Insurance section compared to the previous year is mainly due to narrowed insurance scope for the larger insurance objects, decline in construction sector, respectively CMR insurances, as well as reduced crediting from financial institutions and reduced purchasing capacity of the people. With a market share of 10.66%, BULSTRAD VIENNA INSURANCE GROUP ranked third at the insurance market in BULSTRAD VIG 10.66% MARKET Property Insurance Goods in Transit (Cargo) Insurance In 2011 Goods in Transit (Cargo) earned premium income at the amount of 11%. BULSTRAD VIENNA INSURANCE GROUP managed to keep its traditional first place with a market share of 30.88%. BULSTRAD VIG 30.88% MARKET Goods in Transit (Cargo) Insurance Aviation Insurance In 2011, the Company increased its premium income in aviation insurance and consolidated its third place at the market with a share of 20.35% thanks to keeping its traditional customers, as well as attracting new ones to the insurance portfolio. BULSTRAD VIG 20.35% MARKET Aviation Insurance

12 Marine Insurance Marine Insurance suffered a slight drop in 2011 in comparison with 2010, mainly because of the fact that ships got cheaper owing to the stagnation of the international market; this caused a decline in insurance sums and some ships were sold for scrap. The market share of the Company for this type of insurance is 33.41% which placed the Company second on the market. BULSTRAD VIG 33.41% MARKET Marine Insurance Personal Accident and Travel Assistance Insurances The main premium income for this insurance group is generated by Work Accident Insurance. The 3% drop is a result of the voluntary Personal Accident Insurance which is offered in addition to Motor Insurances. An increase of 6% is reported in the other Personal Accident Insurances. The premium income for Travel Assistance Insurance for 2011 remained at the level from The total market share of the Company for these two types of insurance is 9.79% _ fifth place at the market. BULSTRAD VIG 9.79% MARKET Personal Accident and Travel Assistance Insurances General Civil Liability and Carrier s Liability Insurances The insurances from the group General Civil Liability and Carrier s Liability are a specific type of insurances and the economic crisis affected their demand more seriously. Despite the 18% fall, the Company has kept its first place at the market with a share of 25.75%. BULSTRAD VIG 25.75% MARKET General Civil Liability and Carrier s Liability Insurances

13 YEARS ANNUAL REPORT 2011 PORTFOLIO PORTFOLIO BY LINE OF BUSINESS Insurance types 2011 Total % Motor Insurance 61.95% Casco 34.56% Motor Third Party Liability (Owning and Using a Motor Vehicle), including 27.39% _ Motor Third Party Liability 27.39% _ Green Card 0.00% Railway Vehicles 2.36% Property Insurance 18.98% Fire and Natural Perils 15.71% Property Damage 3.27% Cargo, Aviation and Marine Insurance 8.56% Cargo Insurance 3.22% Aviation Insurance 3.23% Marine Insurance 2.11% Others 8.15% Personal Accident and Travel Assistance 2.43% General Civil Liability and Carrier s Liability 5.57% Financial Losses 0.15% 8.56% 8.15% 34.56% Motor Insurance 61.95% Casco 34.56% Motor Third Party Liability (Owning and Using a Motor Vehicle) 27.39% 18.98% Railway Vehicles 2.36% Property Insurance 18.98% 2.36% 27.39% Cargo, Aviation and Marine Insurance 8.56% Others 8.15%

14 YEARS ANNUAL REPORT 2011 KEY FINANCIAL INDICATORS KEY FINANCIAL INDICATORS BGN December December 2010 Difference % Gross premium income 145, ,656 _ 20% Premium earned, net 109, ,166 _ 30% Claims incurred, net 66, ,543 _ 42% Gross insurance provisions 167, ,222 _ 12% Investment income 6,524 5,154 27% Total assets 276, ,910 1% Equity 66,302 38,893 70% Financial result for the period 381 _ 20,521 n/a (Loss)/earnings per share 0.15 _ 9.55

15 YEARS ANNUAL REPORT 2011 SEPARATE ANNUAL FINANCIAL STATEMENTS FOR 2011

16 YEARS ANNUAL REPORT 2011 MANAGEMENT REPORT MANAGEMENT REPORT (ANNUAL REPORT OF THE ACTIVITIES OF THE COMPANY) FOR THE PERIOD ENDED 31 DECEMBER ECONOMIC AND REGULATORY INDICATORS Performance result In 2011 BULSTRAD VIENNA INSURANCE GROUP generated profit of BGN 381 thousand. The financial result for 2010 were losses of BGN 20,521 thousand. The Company s net assets as at the end of the financial year amounted at BGN 66,302 thousand (BGN 38,893 thousand for 2010). The Company s assets as at 31 December 2011 amounted at BGN 276,353 thousand (BGN 272,910 thousand for 2010). Solvency margin As at 31 December 2011 and 2010 the solvency margin was calculated in compliance with regulatory requirements. The table below shows the regulatory indicator implementation. 31 December Own funds less intangible assets 42,738 16,413 Subscribed share capital 27,435 21,478 Reserves and funds 39,859 39,308 Retained earnings (losses) less expected payment of dividends and other payments (11,461) (31,980) Reductions Participations in subsidiaries 12,288 12,051 Intangible assets Solvency margin 27,000 33,365 Surplus/(deficit) 15,738 (16,952) As at the end of the reporting period, Regulation No 21 requirements from 16 March 2005 about own funds and solvency margin of insurance, reinsurance and health insurance companies, and the total amount of own funds less intangible assets surpasses solvency margin by BGN 15,738 thousand. The main reason for the positive cover is that the share capital increased in the reporting period, as well as the positive result for In addition to capital increase, Programme for steady financial result achievement was adopted. The Programme is directed mostly at: Gradual increase of Motor Third Party Liability Insurance tariffs through risk profile diversification and regional segmentation. Adequate management of non-material claims occurring outside the territory of the Republic of Bulgaria. Competent management of non-material claims filed in court. Direct sales motivation. Collection improvement and reduction of impairment allowances. Identification and management of risk clients in the Company s portfolio. Cost optimization related to payment of material claims under Casco Insurance. Increase in share of lines of businesses of lower loss ratio in insurance portfolio general structure.

17 Technical reserves and coverage Amendments to Ordinance No 27 of the Financial Supervision Commission, effective from 12 November 2010 require changes in the methods applied in calculation of technical reserves and building additional reserves. The net effect of these changes is increase of reserves by BGN 5,941 thousand for 2011 and BGN 10,087 thousand for 2010 calculated in compliance with regulatory requirements. The management of the Company considers that these changes lead to over-reserving and therefore, upon the assessment of the insurance liabilities, were applied methods consistent with the requirements of IFRS 4. According to the requirements of this standard, as at 31 December 2011 an adequacy test was performed which showed sufficiency of the reserves calculated in compliance with IFRS. The assets which secure coverage of gross insurance reserves in compliance with regulatory requirements of the Financial Supervision Commission are: deposits, shares, corporate debt instruments, government securities, etc. at the amount of BGN 99,792 thousand; deferred acquisition costs at the amount of BGN 11,229 thousand; receivables under insurance and reinsurance contracts at the amount of BGN 82,450 thousand and investment property at the amount of BGN 8,977 thousand. The table below summarizes the difference in the assessment of the insurance liabilities, performed in accordance with IFRS and Ordinance No 27 of the Financial Supervision Commission. Unearned premium reserve Unexpired risk reserve 31 December 2011 Outstanding risk reserve Other insuranse reserves Reserves calculated in compliance with regulatory methods, net 38, ,183 3, ,695 Reserves calculated in compliance with IFRS, net 38, ,286 _ 104,754 Difference _ (383) 2,897 3,427 5,941 Total Unearned premium reserve Unexpired risk reserve 31 December 2010 Outstanding risk reserve Other insuranse reserves Reserves calculated in compliance with regulatory methods, net 47,242 4,150 85,492 2, ,661 Reserves calculated in compliance with IFRS, net 47,242 2,277 80,055 _ 129,574 Difference _ 1,873 5,437 2,777 10,087 Total Indicators relating to the insurance activity In 2011, the Company realized gross premium income at the amount of BGN 145,161 thousand (BGN 180,656 thousand for 2010). The net earned premium for the same period is BGN 109,007 thousand (BGN 155,166 thousand for 2010). The net amount of paid claims in 2011 is BGN 79,892 thousand (BGN 105,246 thousand for 2010).

18 2. PERFORMANCE ANALYSIS As a result of the negative economic environment in the country (GDP decrease and credit decline), the demand for insurance services has dropped significantly. In order to optimize their expenses, many clients reviewed their insurance programs. The number of vehicles insured under leasing contracts also decreased. The market concentrated mostly on compulsory insurances like Motor Third Party Liability. Other essential negative consequences from the crisis affecting the insurance sector development are: Deterioration of premium collection. Continuous market pressure for commission increases. Deterioration of criminogenic conditions. Last but not least, regarding Motor Third Party Liability Insurance _ clear insufficiency of the amount of the insurance premium. In comparison with 2010, the Company reported a decrease in the gross premium income by BGN 35,495 thousand, or 20%. The chart below shows the movement of the premium income for the past five years. Gross premium income for 2007 _ 2011 Per line of business, the Motor Insurance has the highest relative share. The chart below shows the allocation of the premium income by main groups of business for the year 2011: Gross premium income per line of business for % 11% Million BGN 19% 62% Motor Insurance 62% Property Insurance 19% Cargo, Aviation and Marine Insurance 8% Others 11% The Motor business encompasses Casco, Motor Third Party Liability Insurance. The Motor Insurances constitute 62% of the premium income generated in Compared with 2010, the Casco Insurance fell by 25%. The main reason is the decrease of the sums insured owing to lack of sales of new automobiles. Motor Third Party Liability Insurance also reported a decrease by 31% compared to 2010 as a result of portfolio changes concerning non-insurance of certain motor vehicle types. The Company is constantly increasing the average premiums under this insurance and offers diversified tariff for different geographic areas of the country, drivers age groups and other adequate criteria.

19 The premium income of the Cargo, Marine and Aviation Insurance group for the year 2011 is BGN 12,413 thousand, marking a decrease by BGN 491 thousand compared with Traditionally in these lines of business, the Company is well known and it is a leader on the Bulgarian insurance market. The results within these lines of business are mostly affected by the fact that some clients insured their business abroad. The group of the Property Insurance includes the insurances of household property, industrial sites, hotels, restaurants, shops. In 2011 the Company suffered a drop of premium income under the Property Insurance by 6%. The decrease is mainly due to the effect of the reduced credit business of banks and the revision of insurance costs by most of our customers. The group of other insurance products includes accidents, liabilities, agriculture and railway tarsnport insurance policies. In 2011 there was premium income from railway transport amounting to BGN 3,426 thousand (for 2010 the Company did not earn any written premium income from this product). As for the rest of the products from this group, premium income fell by 14%. 3. SHARE CAPITAL AND TRANSACTIONS WITH SHARES OF BULSTRAD VIENNA INSURANCE GROUP Until the beginning of June 2010 the major direct shareholder with a share of 97.08% in the capital of BULSTRAD VIENNA INSURANCE GROUP was BIP Group EAD, subsidiary of TBI Bulgaria AD. During the same period, at a General Meeting of Shareholders of TBI Bulgaria AD a resolution was adopted for transformation through a merger of BIP Group EAD into TBI Bulgaria AD. As a result of this merger, TBI Bulgaria AD acquired 97.08% of the share capital of BULSTRAD VIENNA INSURANCE GROUP. Holding 100% of the capital of TBI Bulgaria AD, Vienna Insurance Group AD Wiener Versicherung Gruppe is indirect owner of 97.08% of the capital of BULSTRAD VIENNA INSURANCE GROUP. In June 2011, due to a rise in the capital share of BULSTRAD VIENNA INSURANCE GROUP, TBI Bulgaria AD increased its share participation in the company from 97.08% to 97.72%. As a result of this and holding 100% of the capital of TBI Bulgaria AD, Vienna Insurance Group AD Wiener Versicherung Gruppe became indirect owner of 97.72% of the capital of BULSTRAD VIENNA INSURANCE GROUP. As of 31 December 2011 the allocation of the share capital of the Company is as follows: Shareholder Share, % TBI Bulgaria AD 97.72% Other 2.28% On 21 March 2011, General Meeting of Shareholders took place where the resolution of the Company s capital increase was adopted. It rose from BGN 21,477,630 (twentyone million, four hundred seventy-seven thousand, six hundred and thirty) to 27,614,100 (twenty-seven million, six hundred fourteen thousand, one hundred) through the issue of 613,647 (six hundred thirteen thousand, six hundred forty-seven) ordinary registered voting shares each with a par value of BGN 10 (ten) and issue value BGN 49 (forty-nine). Under the conditions of initial public offering, 595,779 (five hundred ninety-five thousand, seven hundred seventy-nine) new ordinary registered voting shares, each with a par value of BGN 10 (ten) and issue value of BGN 49 (forty-nine) were distributed; as a result, the Company s capital increased to BGN 27,435,420 (twenty-seven million, four hundred thirty-five thousand, four hundred twenty). The capital at the end of the reporting period was distributed in 2,743,542 ordinary registered voting shares, each with a par value of BGN 10 (ten) and issue value of BGN 49 (forty-nine). The table below summarizes information on price movements of the Company s shares for 1 January 2011 _ 31 December 2011.

20 BGN Opening price Closing price Maximum price Minimum price INVESTMENT POLICY The major investment policy parameters of BULSTRAD VEINNA INSURANCE GROUP are as follows: 4.1. Requirements for return Achievement of a total return with an average level of at least 100 basis points (bp) over the basic interest rate Risk appetite Safety is a dominant consideration which influences the investment of the insurance reserves. Therefore, the admissible risk of loss of principal or income is comparatively low Investment limits A. Time horizon. In terms of the assets/liabilities management, because the liabilities of the Company are predominantly short-term, the time horizon of the portfolio is also short-term. B. Requirements for liquidity. Considering the uncertainty of the cash inflows and cash outflows from the insurance business, liquidity is of prime consideration. The short-term need of liquid funds can be met on a group level as to retain the return on the already invested funds and on more favorable conditions. C. Tax consideration. All revenues of the Company, including income and profit from investments are subject to taxation, pursuant to the Corporate Income Tax Act. D. Statutory and legal considerations. In compliance with the Insurance Code, any insurance company is required to invest its insurance reserves in: Government bonds. Securities issued and guaranteed by the Republic of Bulgaria or a member state. Qualified bonds issued by third countries. Qualified bonds issued by central banks of third countries. Qualified bonds issued by international organizations in which Bulgaria or a member state is a member. Securities traded on the Bulgarian Stock Exchange or exchanges in member states and qualified bonds traded on regulated markets in third countries. Shares or units of collective investment schemes, issued in Bulgaria or a member state. Bank deposits. Real estate without encumbrances. Derivatives, including options, futures and swaps.

21 5. PARTICIPATIONS IN SUBSIDIARIES The table below summarizes the participations in subsidiaries: EIRB, London VIG Services Bulgaria Bulstrad Life VIG Bulstrad Health VIG Contact Center Bulgaria 31 December , ,546 % share 85% 100% 95% 10% 50% _ Capital contributions _ 27 _ 27 Purchase of shares _ 2,478 _ 2, December ,567 2, ,051 Capital contributions _ 237 _ December ,567 3, ,288 % share 85% 100% 95% 97% 50% Total In September 2010, BULSTRAD VIENNA INSURANCE GROUP and Bulstrad Life Vienna Insurance Group signed a contract about purchase by BULSTRAD VIENNA INSURANCE GROUP of 174,000 (one hundred seventy-four thousand) ordinary registered voting shares of Bulstard Health. The shares are with par value of BGN 10 (ten) each and constitute 87% of the capital of Bulstrad Health. As a result, the direct share of BULSTRAD VIENNA INSURANCE GROUP in the capital of Bulstrad Health rose to 97%. The transaction amounts to BGN 2,478 thousand. After the acquisition, the total value of the company s investment in Bulstrad Health rose to BGN 2,771 thousand. During the reporting period, at a Extraordinary General Meeting of Shareholders of Bulstrad Health, a resolution was adopted for forming Reserve fund with shareholders funds, and the share of BULSTRAD VIENNA INSURANCE GROUP determined proportionally to the shares owned by it amounts to BGN 237 thousand and as of the end of the period, the sum was paid in full. Thus, as of 31 December 2011, the investment of BULSTRAD VIENNA INSURANCE GROUP in Bulstrad Health is at the amount of BGN 3,008 thousand. 6. RISKS ASSOCIATED WITH THE ACTIVITY OF THE COMPANY 6.1. Insurance risk The insurance risk is related to the risk of occurrence of an insurance event, where the amount of the damage and respectively of the indemnity due exceeds the amount of formed insurance reserves. Major activities in insurance risk management are: Established rules and procedures for risk analysis for underwriting insurance contracts. Periodic analysis and improvement of the general terms and conditions of the insurance contracts. Regular review and analysis of the incurred claims under the different types of insurances for previous periods based on statistical observations. Defining the self-retention limit in risk covering. Applying a balanced reinsurance policy. Improvement of the processes of valuation and settlement of the insurance claims.

22 6.2. Market risks The markets risks are associated with the risk of unfavorable movements of the interest rates, the exchange rates between the different currencies and of the market price of securities and other financial instruments, the effect of which influences the Company s profitability. Activities in this direction are: Structuring of the currency assets and liabilities in a way which minimizes the effect of a sudden change in the exchange rates. Pursuance of moderate investment policy, etc Other risks Other risks identified and associated with the Company s activity are: Risks of amendments to the legal framework of the insurance market (increased limits of liability under obligatory insurances, setting high limits of different financial indicators, a change in the judicial practice, etc.). Risks of making mistakes in the assumptions made and models used. Risks of fluctuations in the operating data. For the management and control of the identified risks the Company applies various analytical models and uses a broad spectrum of information sources. 7. INTERNAL CONTROL SYSTEM The internal control system is the aggregate of rules and procedures aimed at: Monitoring of the management systems and the risk assessment methods, control of the various risks and their management. The adequacy and observance of the internal procedures in the performance of the insurance, investment and general administrative activity of the Company. The economic and efficient use of the resources. The control activities are assigned to the directors of the specialized departments, the officials exercising managerial functions as well as to the Head of the specialized Internal Control Office. The control over the activities is exercised in compliance with approved programs and adopted rules. 8. REMUNERATION OF THE MANAGEMENT BOARD For its services in 2011 the Management of the Company received total remuneration amounting to BGN 643 thousand (BGN 860 thousand for 2010). In 2011 the management members did not acquire or transfer Company s shares. 9. SIGNIFICANT TRANSACTIONS AND EVENTS IN 2011 In the reporting period, the share capital of the Company was increased. At a meeting held on 30 September 2011, the Management Board of BULSTARD VIENNA INSURANCE GROUP decided to start the merging process between BULSTARD VIENNA INSURANCE GROUP and Bulgarski Imoti, as well as to approve draft contract concerning merger of the two companies. In conformity with these resolutions, on the same day, 30 September 2011, BULSTARD VIENNA INSURANCE GROUP and Bulgarski Imoti signed a contract about merger in the form required by law. The necessary set of documents was submitted to the Financial Supervision Commission.

23 10. LOANS GRANTED The loans granted as at 31 December 2011 are summarized in the table below. Borrower Interest rate Currency Maturity Principal Accrued interest VIG Contact Center Bulgaria 6 m EURIBOR + 5% EUR 31 December VIG Contact Center Bulgaria 6 m EURIBOR + 5% EUR 31 December VIG Contact Center Bulgaria 6 m EURIBOR + 5% EUR 31 December TBI Info 8% EUR 31 December CREDIT RATING As at the end of November 2011, Bulgarian Credit Rating Agency awarded the Company with a long-term credit rating of ia-, with stable perspective. 12. INFORMATION ABOUT THE PROGRAMME FOR APPLICATION OF THE INTERNATIONALLY RECOGNIZED STANDARDS OF GOOD CORPORATE GOVERNANCE In consistence with the Standards of Good Corporate Governance, in 2011 the Company ensured compliance with some main practices shown below: 1. Observance of the ratio between independent and dependent members of the Supervisory Board. 2. Preserving the established practice the position of Chairman of the Management Board and Chief Executive to be occupied by one and same person, and the members of the Management Board to be directors of key departments in the Company. 3. The members of the management bodies submitted the required written statements about their participations in management and control bodies of other commercial companies. 4. The members of the Management Board are with regular mandate. 5. No changes occurred in the remuneration of the members of the management bodies. 6. The members of the management bodies fulfilled conscientiously their responsibilities; they treated fairly shareholders in decision-making; attended regularly the meetings, acquainted themselves in advance with the materials and impartially expressed their opinion; abided by the standards of business conduct and ethics; avoided actions, positions or interests which were in conflict with the interests of the Company or which create impression that such conflict existed. 7. The Chief Executive reported regularly of its activity to the Management Board. 8. The requirement the Management Board to have meetings at least once monthly was complied with. The directors were present regularly at the meetings. The established procedures of setting the date, place, time and agenda of the meetings, deliberation of the materials, decision-making and keeping the minutes for the meetings were complied with.

24 9. The members of the management body had a full access to the Company s management. 10. The Articles of Association of the Company provide for procedures for inspection and assessment for efficient protection of the shareholders rights, regulated in the Bulgarian legislation and in particular, in the Law on Public Offering of Securities. The necessary legal and factual actions have been taken for registration of all shares of the Company on Bulgarian Stock Exchange, which is to provide possibility for the shareholders to execute sale trades with shares. 11. A Code of Ethics of the officials of BULSTRAD VIENNA INSURANCE GROUP was adopted and approved by the Management Board. 12. A specialized Internal Control Office was set up. The rules for the operation of the Internal Control Office were established. 13. Changes in all major rules of the Company s operation were made, in order these rules to correspond to the changes in the business activity. 14. The Company s web page in Internet contains data about the Company and the telephones for communication with it; the quarterly and annual reports of the Company, the management reports and other information on the Company, which is of interest to the investors. 15. The Management Board of the Company controlled the fulfillment of the programme for good corporate governance. 13. INFORMATION ABOUT THE MANAGEMENT BODIES OF BULSTRAD VIENNA INSURANCE GROUP On 21 March 2011, an extraordinary General Meeting of Shareholders took place where, at their request, Mr. Franz Fuchs and Mr. Ronald Groll were discharged as Supervisory Board Members. Dr. Rudolf Ertl and Mr. Peter Hoefinger were elected to replace them for a five-year mandate. On 28 March 2011, at a Supervisory Board meeting Mr. Christoph Rath was elected Management Board Member and Executive Officer of the Company. Rumen Yanchev Klaus Muehleder Chairman of the Management Board Management Board Member and Chief Executive Officer and Executive Officer

25 YEARS ANNUAL REPORT 2011 AUDITORS REPORT KPMG Bulgaria OOD 45/À Bulgaria Boulevard Sofia 1404 Bulgaria Òålephone +359 (2) Telefax +359 (2) Å-mail Internet INDEPENDENT AUDITORS REPORT To the shareholders of ZAD BULSTRAD VIENNA INSURANCE GROUP Report on the Separate Financial Statements We have audited the accompanying Separate Financial Statements of ZAD BULSTRAD VIENNA INSURANCE GROUP (the Company), which comprise the Separate Statement of Financial Position as at 31 December 2011, the Separate Income Statement, the Separate Statements of Comprehensive Income, Changes in Equity and Cash Flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management s responsibility for the Separate Financial Statements Management is responsible for the preparation and fair presentation of these Separate Financial Statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as Management determines is necessary to enable the preparation of Separate Financial Statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these Separate Financial Statements based on our audit. We conducted our audit in accordance with 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 Separate Financial Statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Separate Financial Statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the Separate Financial Statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation and fair presentation of the Separate 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 principles used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the Separate Financial Statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the Separate Financial Statements give a true and fair view of the unconsolidated financial position of the Company as at 31 December 2011, and of its unconsolidated financial performance and its unconsolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

26 Report on other legal and regulatory requirements Annual Report of the activities of the Company prepared in accordance with the requirements of article 33 of the Accountancy Act As required under the Accountancy Act, we report that the historical financial information disclosed in the Separate Annual Report of the activities of the Company, prepared by Management as required under article 33 of the Accountancy Act, is consistent, in all material aspects, with the unconsolidated financial information disclosed in the audited Separate Financial Statements of the Company as of and for the year ended 31 December Management is responsible for the preparation of the Separate Annual Report of the activities of the Company which was approved by the Management Board of the Company on 16 March Tzvetelinka Koleva Margarita Goleva Manager Registered Auditor KPMG Bulgaria OOD Antoaneta Boycheva Sofia, 16 March 2012 Registered Auditor KPMG Bulgaria OOD, a Bulgarian 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. Registered with the Commercial Register at the Bulgarian Registry Agency Identity Code IBAN BG06 RZBB BIC RZBBBGSF RaiffeisenBank (Bulgaria) EAD

27 YEARS ANNUAL REPORT 2011 SEPARATE STATEMENT OF FINANCIAL POSITION SEPARATE STATEMENT OF FINANCIAL POSITION as of 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) Note 31 December December 2010 ASSETS Intangible assets Investments in subsidiaries 8 12,288 12,051 Other capital investments Investment property 10 8,977 9,081 Property, plant and equipment 11 20,553 23,561 Financial assets 93,090 77, 902 Bank deposits 12 47,107 47,014 Available-for-sale financial assets 13 45,404 30,351 Loans granted Reinsurer s share of 63,064 60,648 _ Unearned premium provision 21 17,742 18,733 _ Outstanding claims provision 22 45,322 41,915 Insurance and reinsurance receivables 36,185 34,234 Insurance receivables 15 34,000 32,334 Reinsurance receivables 16 2,185 1,900 Other receivables 17 22,787 20,399 Deferred acquisition costs 18 11,228 13,728 Cash and cash equivalents 19 7,281 20,871 TOTAL ASSETS 276, ,910

28 SEPARATE STATEMENT OF FINANCIAL POSITION as of 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) Continued Note 31 December December 2010 EQUITY AND LIABILITIES Equity 20 66,302 38,893 Gross insurance provisions 167, ,222 Unearned premiums provision, including 21 56,209 68,252 _ Unexpired risk provision 416 2,277 Outstanding claims provision , ,970 Deferred tax liabilities 23 1,744 1,900 Reinsurer s deposits 19,139 17,216 Insurance and reinsurance liabilities 9,855 11,085 Insurance liabilities 24 4,717 6,184 Reinsurance liabilities 25 5,138 4,901 Other liabilities 26 6,610 5,578 Prepaid premiums 27 4,886 8,016 TOTAL EQUITY AND LIABILITIES 276, ,910 The Separate Statement of Financial Position is authorized for issuing by the Management Board on 16 March Rumen Yanchev Chief Executive Officer Klaus Muehleder Executive Officer Theodore Iliev Financial Director Gilbert McCaul Manager KPMG Bulgaria Margarita Goleva Registered Auditor Antoaneta Boycheva Registered Auditor The accompanying notes from 1 to 41 are an integral part of these Separate Financial Statement.

29 YEARS ANNUAL REPORT 2011 SEPARATE INCOME STATEMENT SEPARATE INCOME STATEMENT as of 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) For the period ended 31 December Note Gross written premiums , ,656 Premiums ceded to reinsurers 28 (47,206) (52,398) Net written premiums 28 97, ,258 Change in gross unearned premium reserve, including 21 12,043 19,513 _ Change in unexpired risk reserve 1,861 (491) Change in reinsurer s share in unearned premium reserve 21 (991) 7,395 Net change in unearned premium reserve 11,052 26,908 Premiums earned, net of reinsurance 109, ,166 Reinsurance commissions 29 5,828 7,722 Investment yield, net 30 6,524 5,154 Other technical income, net of reinsurance 31 1,401 2,866 Other income TOTAL INCOME 122, ,409 Claims paid 33 (98,765) (122,184) Reinsurer share in claims paid 33 18,873 16,938 Net claims paid 33 (79,892) (105,246) Change in outstanding claims provision, net 13,769 (8,297) Change in gross outstanding claims provision 22 10,362 (28,542) Change in reinsurer s share in outstanding claims provision 22 3,407 20,245 Claims incurred, net of reinsurance (66,123) (113,543) Acquisition costs 34 (25,398) (37,223) Change in deferred acquisition costs, net 18 (2,500) (6,197) Administrative expenses 35 (17,077) (19,762) Other technical expenses, net of reinsurance 36 (11,395) (15,186) Other non-technical expenses 37 (26) (42) TOTAL EXPENSES (122,519) (191,953) (LOSS)/PROFIT BEFORE TAX 399 (20,544) Income tax 38 Deferred taxes 23, 38 (18) 23 LOSS/PROFIT FOR THE PERIOD 381 (20,521) (Loss)/earnings per share, BGN ( 9.55)

30 SEPARATE INCOME STATEMENT as of 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) Continued The Separate Income Statement is authorized for issuing by the Management Board on 16 March Rumen Yanchev Chief Executive Officer Klaus Muehleder Executive Officer Theodore Iliev Financial Director Gilbert McCaul Manager KPMG Bulgaria Margarita Goleva Registered Auditor Antoaneta Boycheva Registered Auditor The accompanying notes from 1 to 41 are an integral part of these Separate Financial Statement.

31 YEARS ANNUAL REPORT 2011 SEPARATE STATEMENT OF COMPREHENSIVE INCOME SEPARATE STATEMENT OF COMPREHENSIVE INCOME as of 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) For the period ended 31 December Financial result for the period 381 (20,521) Other comprehensive income Revaluation of property, plant and equipment, net (1,733) _ Tax, related to the other comprehensive income items 173 _ Revaluation of available-for-sale financial assets, net (553) 326 Total other comprehensive income (2,113) 326 Financial result for the period (1,732) (20,195) The Separate Statement of Comprehensive Income is authorized for issuing by the Management Board on 16 March Rumen Yanchev Chief Executive Officer Klaus Muehleder Executive Officer Theodore Iliev Financial Director Gilbert McCaul Manager KPMG Bulgaria Margarita Goleva Registered Auditor Antoaneta Boycheva Registered Auditor The accompanying notes from 1 to 41 are an integral part of these Separate Financial Statement.

32 YEARS ANNUAL REPORT 2011 SEPARATE STATEMENT OF CASH FLOWS SEPARATE STATEMENT OF CASH FLOWS for the period ended 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) For the period ended 31 December Note CASH FLOWS FROM OPERATING ACTIVITY Financial result for the period 381 (20,521) Adjustments for Depreciation and amortization 35 1,713 1,692 Investment property (gains)/losses _ Losses from transactions with financial assets 30 (130) 270 Impairment of financial investments 30 _ 30 Impairment of insurance receivables 36 2,599 4,289 Foreign currency (gains)/losses (15) (20) Interests on deposits and financial instruments and dividend income 30 (6,590) (5,456) Written off fixed assets Deferred tax (23) Total adjustments (1,849) 1,137 Change in assets and liabilities Insurance contract provisions, gross 21, 22 (22,405) 9,029 Reinsurer s share of insurance contract provisions 21, 22 (2,416) (27,640) Insurance receivables (4,255) 12,380 Reinsurance receivables (285) (2,623) Other receivables (2,398) (621) Deferred acquisition costs 18 2,500 6,197 Insurance liabilities (1,467) (4,771) Reinsurance liabilities ,829 Reinsurance deposits 1,923 17,216 Other liabilities 1,682 1,619 Prepaid premiums 27 (3,130) (1,894) Total change in assets and liabilities (30,014) 11,721 Net cash flows from operating activity (31,482) (7,663)

33 SEPARATE STATEMENT OF CASH FLOWS for the period ended 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) Continued For the period ended 31 December Note CASH FLOWS FROM OPERATING ACTIVITY (31,482) (7,663) CASH FLOWS FROM INVESTING ACTIVITY (Increase)/decrease in financial assets (16,239) (11,413) (Increase)/decrease in property, plant and equipment (1,356) (1,038) (Increase)/decrease in investment property 10 _ (57) (Increase)/decrease in investment in subsidiaries 8 (237) (2,505) Interest and dividends received 6,583 5,501 Net cash flows from investing activity (11,249) (9,512) CASH FLOWS FROM FINANCING ACTIVITY Proceeds from issue of share capital 5,957 _ Share premiums 23,184 _ Net cash flows from financing activity 29,141 _ Increase in cash and cash equivalents (13,590) (17,175) Cash and cash equivalents at the beginning of the period 19 20,871 38,046 Cash and cash equivalents at the end of the period 19 7,281 20,871 The Separate Statement of Cash Flows is authorized for issuing by the Management Board on 16 March Rumen Yanchev Chief Executive Officer Klaus Muehleder Executive Officer Theodore Iliev Financial Director Gilbert McCaul Manager KPMG Bulgaria Margarita Goleva Registered Auditor Antoaneta Boycheva Registered Auditor The accompanying notes from 1 to 41 are an integral part of these Separate Financial Statement.

34 YEARS ANNUAL REPORT 2011 SEPARATE STATEMENT OF CHANGES IN EQUITY SEPARATE STATEMENT OF CHANGES IN EQUITY for the period ended 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) Share capital Share premium reserve General reserves Other reserves Reserves Revaluation reserve, property, plant and equipment Financial result Revaluation reserve, investments Profit (Loss) Total equity As of 1 January ,478 7,955 1,056 11,814 19,670 (1,186) 168 (22,062) 38,893 Total comprehensive income for the period Financial result for the period 381 _ 381 Other comprehensive income Net revaluation of property, plant and equipment (1,560) _ (1,560) Net revaluation of available-for-sale financial assets _ (553) (553) Total other comprehensive income (1,560) (553) 381 _ (1,732) Transactions with shareholders recorded directly in equity Share capital increase 5,957 _ 5,957 Share premium, net of share issue expenses _ 23,184 23,184 Allocation of loss from prior periods _ (7,651) (1,056) (11,814) _ (20,521) _ Total transactions with shareholders recorded directly in equity 5,957 15,533 (1,056) (11,814) _ 20,521 29,141 As of 31 December ,435 23,488 18,110 (1,739) 549 (1,541) 66,302

35 SEPARATE STATEMENT OF CHANGES IN EQUITY for the period ended 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) Continued Share capital Share premium reserve General reserves Reserves Revaluation reserve, Other property, plant reserves and equipment Financial result Revaluation reserve, investments Profit (Loss) Total equity As of 1 January ,478 7,955 1,046 11,729 19,670 (1,512) 263 (1,541) 59,088 Total comprehensive income for the period Financial result for the period _ (20,521) (20,521) Other comprehensive income Net revaluation of available-for-sale financial assets _ Total other comprehensive income _ 326 _ (20,521) (20,195) Transactions with shareholders recorded directly in equity Retained earnings distribution (95) Total transactions with shareholders recorded directly in equity (95) As of 31 December ,478 7,955 1,056 11,814 19,670 (1,186) 168 (22,062) 38,893

36 SEPARATE STATEMENT OF CHANGES IN EQUITY for the period ended 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) Continued The Separate Statement of Changes in Equity is authorized for issuing by the Management Board on 16 March Rumen Yanchev Chief Executive Officer Klaus Muehleder Executive Officer Theodore Iliev Financial Director Gilbert McCaul Manager KPMG Bulgaria Margarita Goleva Registered Auditor Antoaneta Boycheva Registered Auditor The accompanying notes from 1 to 41 are an integral part of these Separate Financial Statement.

37 YEARS ANNUAL REPORT 2011 NOTES NOTES TO THE SEPARATE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2011 (All amounts are in thousand of BGN, unless otherwise noted) 1. GENERAL INFORMATION BULSTRAD VIENNA INSURANCE GROUP (the Company) was incorporated in The registered office of the Company is 5 Pozitano Square, Sofia, Bulgaria. The Company is part of Vienna Insurance Group Wiener Versicherung Gruppe, Austria. As of 31 December 2011 the share capital is distributed among the shareholders as follows: Shareholder Participation, % TBI Bulgaria AD 97.72% Other 2.28% Until the beginning of June 2010 the major direct shareholder with a share of 97.08% in the capital of BULSTRAD VIENNA INSURANCE GROUP was BIP Group EAD, subsidiary of TBI Bulgaria AD. During the same period, at a General Meeting of Shareholders of TBI Bulgaria AD a resolution was adopted for transformation through a merger of BIP Group EAD into TBI Bulgaria AD. As a result of this merger TBI Bulgaria AD acquired 97.08% of the share capital of BULSTRAD VIENNA INSURANCE GROUP. Holding 100% of the capital of TBI Bulgaria AD, Vienna Insurance Group AD Wiener Versicherung Gruppe is indirect owner of 97.08% of the capital of BULSTRAD VIENNA INSURANCE GROUP. In June 2011, due to a rise in the capital of BULSTRAD VIENNA INSURANCE GROUP, TBI Bulgaria AD increased its share participation in the company from 97.08% to 97.72%. As a result of this and holding 100% of the capital of TBI Bulgaria AD, Vienna Insurance Group AD Wiener Versicherung Gruppe became indirect owner of 97.72% of the capital of BULSTRAD VIENNA INSURANCE GROUP. The Company was granted a license No. 11 from 16 July 1998 for insurance and reinsurance activities by the Bulgarian Financial Supervision Commission. BULSTRAD VIENNA INSURANCE GROUP has specialized in offereing the following insurances: motor, cargo, aviation, marine, property, liabilities, agriculture, as well as reinsurance. The Company has a two-tier management system: Supervisory Board and Management Board. The Company is represented jointly by Chief Executive Officer and Executive Officer, or by Chief Executive Officer and procurator, or by any two Executive Officers, or by Executive Officer and procurator. One person cannot be authorized for the whole activity. As of 31 December 2011 the Company employs 503 employees (424 employees in 2010). 2. BASIS OF PREPARATION OF THE SEPARATE ANNUAL FINANCIAL STATEMENTS 2.1. Applicable accounting standards The separate financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS), approved by the European Commission. They comprise of International Accounting Standarts (IAS), International Financial Reporting Standarts (IFRS) and SIC IFRIC interpretations. IFRS comprise also of the latest amendments and supplements to those standards and interpretations as well as future standards and interpretations approved by the International Accounting Standards Board (IASB). The Company has disclosed the effects from the application of the published International Financial Reporting Standards, which are not yet effective as of the date of Separate statement of financial position and might have an impact on the Company s activity (see Note 3.23).

38 BULSTRAD VIENNA INSURANCE GROUP also prepares Consolidated Financial Statements in accordance with IFRS and comprising of financial statements of the Company and its subsidiaries. In order to obtain overall notion of financial position, operations results and changes in financial position of the Group as a whole, users should read these Separate Financial Statements along with the Consolidated Financial Statements of the Group Basis of measurement The Company maintains its accounting records and registers in Bulgarian leva (BGN). The data in the financial statements are presented in thousands of BGN. The financial statements are prepared on the historical cost basis except for the financial assets and the investment property, land and buildings, which are stated at fair value. The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of income and expense for the period. Actual results may differ from these estimates. These estimates are reviewed on a regular basis and if a revision is required, it is recognized in the period in which estimates are revised. The estimates made by the management in applying IFRS, that have material effect on the financial statements and the accounting estimates with significant risk from material adjustment in the next year are presented in Note 4 _ Accounting Estimates Functional currency and foreign currency transactions The financial statements are presented in Bulgarian leva (BGN), which is the Company s functional and presentation currency. Monetary assets, receivables and liabilities in foreign currencies are initially recorded in the functional currency rate ruling at the date of the transaction and they are retranslated on a monthly basis at the official exchange rate published by Bulgarian National Bank on the last working day of the month. All exchange rate differences arising on retranslation are recognised as income or expense in the Income Statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction and are not subsequently restated. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Main foreign exchange rates to the Bulgarian lev are as follows: As of 31 December 2011 As of 31 December Euro BGN Euro BGN US dollar BGN US dollar BGN Reclassifications, accounting errors and changes in accounting policies The accounting policies applied are consistent with the ones adopted in the previous financial year. To facilitate presentation, comprehension and adequacy of disclosed information in the Company s financial statements, the management considered necessary to revise the presentation and disclosure for the comparative reporting period of the following: the Statement of Financial Position, Income Statement and Statement of Cash Flows; some positions have been reclassified without affecting reported financial position, performance results and cash flows. In the Income Statement for 2010, BGN 854 thousand presented as Investment income, net are presented in Other technical costs; BGN 9 thousand presented in Other income are presented in Investment income, net; BGN 691 thosand, presented as Investment yield, net are presented in Other technical income, net of reinsurance.

39 3. SIGNIFICANT ACCOUNTING POLICIES 3.1. Intangible assets Intangible assets acquired by the Company are initially recognized at cost, which comprises their purchase cost and any directly attributable expenditure. Internally generated intangible assets are recognized only when the Company can identify a separate asset to exist that will give rise to future economic benefits for the entity and whose value can be reliably measured. After initial recognition intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Subsequent costs are capitalized if they increase the future economic benefit of the asset. Any other costs are recognized in the Income Statement as incurred. Intangible assets are amortized on a straight-line basis over the expected useful life of the respective assets. The following annual amortization rates are applied: Intangible assets Useful life, years % Software 5 20% Licenses 5, 2 20%, 50% The useful live and amortization method of intangible assets are reviewed at the end of each reporting period. Changes in expected useful life or in expected model of consumption of economic benefits from the asset are reflected through a change in the useful life or amortization method, if appropriate, and are treated as changes in the accounting estimates. Intangible assets amortization costs are recognized as current expenses during the reporting period. Any gains or losses arising from derecognition of intangible assets, being the difference between the net proceeds and the carrying amount of the asset, are reported in the Income Statement once the asset is derecognized Investments in subsidiaries Subsidiary is an entity controlled by the Company. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The investments in subsidiaries are measured at acquisition method. The Company recognizes investment income to the extent of its share of the earnings of the subsidiary. Any amount over its share of the accumulated profits is recognized as a reduction of the original investment Investment property Property is classified as investment property when it is held to earn rental income, and not for administrative purposes or for sale in the ordinary course of business. An investment property is measured initially at cost which comprises it purchase price and any directly attributable expenditure, for example, property transfer taxes, professional fees for legal services etc. Subsequently investment property is carried at fair value, reflecting the market conditions as of the reporting date. Any gains or losses arising from changes in the fair value of investment property are directly recognized in profit or loss in the period in which they arise. Investment property is derecognized from the Statement of Financial Position when it is sold or leased under finance lease or when it is permanently withdrawn from use and no economic benefits are expected from its disposal. Gains or losses arising from the retirement or disposal of investment property (determined as the difference between the net disposal proceeds and the carrying amount of the asset) are recognized in the Income Statement in the period they occur.

40 3.4. Property, plant and equipment Property, plant and equipment are initially recognized at acquisition cost. Acquisition costs comprise of purchase price, import duties and other cost, directly attributable to bringing the asset to the condition necessary for it to be capable of operating. Attributable costs are mainly: costs of initial delivery and handling cost; costs arising from the construction of the asset; professional fees etc. Land and buildings are measured at revalued amount, which is their fair value at the date of the revaluation less the accumulated depreciation and any possible impairment losses. The fair value is estimated on the base of professionally qualified valuers appraisal. If the value of such assets is increased as a result of revaluation, the increase is directly recognized in other comprehensive income and accumulated in equity in Revaluation reserve item, except for of the cases when it reverses a revaluation decrease previously recognized in profit or loss. In such case the revaluation is recognized as income. When there is a decrease of the fair value of an asset for which there is a revaluation reserve formed, the decrease is recognized directly through equity, reducing the revaluation reserve, up to the amount of credit balance which exists in the revaluation reserve of this asset. If there is no revaluation reserve formed (or it is insufficient), the decrease is recognized as an expense during the current period and shall be presented in the Income Statement. Plant and equipment are carried at cost less any subsequent accumulated depreciation and impairment losses. Any subsequent expenditure relating to an item of property and plant is capitalized only when it increases the future economic benefits of the asset or its useful life. All other expenditure such as day-to-day servicing and maintenance costs are recognized in profit or loss as incurred. Depreciation is charged on a straight-line basis over the estimated useful lives of items of property, plant and equipment as follows: Property, plant and equipment Years % Buildings % Computers % Vehicles % Furniture and equipment % Land is not depreciated. The carrying amount, the useful life and the method of depreciation of the assets must be reviewed at each financial year-end, and if necessary they should be changed. At each reporting date the Company determines whether there is any objective evidence for impairment of property, plant and equipment. An asset must be impaired when its recoverable amount is less than its carrying amount in the Statement of Financial Position. Any impairment losses in respect of plant and machinery are expensed in the Income Statement as incurred. Impairment losses in respect of land and buildings are charged directly against any related revaluation surplus. The entity derecognizes the carrying amount of an item of property, plant and equipment from the Statement of Financial Position when the asset is sold or no future economic benefits are expects from its use. Gains and losses arising on disposal of property, plant and equipment (determined by comparing the proceeds from disposal with the carrying amount of the asset) are recognized in profit or loss in the period they occur. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings.

41 3.5. Financial assets The Company classifies its investments as financial assets at fair value through profit or loss, available-for-sale financial assets, financial assets held to maturity and loans and other receivables, other investments in equity instruments. Recognition and measurement The Company recognizes financial asset when it becomes a party under contractual relations. Any purchase or sale of financial assets is recognized on the trading day, i.e. the date on which the Company engages to buy or sell the asset. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include trading instruments which are held by the Company chiefly for the purpose of short-term profit taking as a result of changes in the asset s fair value. Such financial assets include treasury and corporate debt securities as well as investments in capital instruments of companies over which the Company does not have control or significant influence. Initially these financial assets are recognized at fair value which is equal to their cost. After initial recognition financial assets at fair value through profit or loss are remeasured at fair value, determined as of the reporting date. Any gains or losses arising as a result of the change in the fair value of these assets are recognised in the Income Statement. Any interest received during the time of possession of the financial asset are recognized in the Income Statement as interest income. Dividends from equity instruments are recognized in the Income Statement, when the right of the entity to receive payment is established. Loans and receivables Loans and receivables are non-derivative financial assets with fixed and determinabie payments that are not quoted in an active market. All loans and receivables are recognised upon the actual granting of the funds to the borrowers or upon establishment of the right to a receivable. These investments are initially recognised at cost. Subsequent to initial recognition, these investments are carried at amortised cost. The amortized cost is the amount at which the financial assets are measured at their initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest rate method of any difference between the initial amount and maturity amount and minus any reduction for impairment or uncollectability. Gains and losses from derecognition, impairment and amortization of loans and receivables are recognised in the Income Statement. The Company s right to recover from the insured or third party, liable for the damage, the payment made by the Company under an insurance contract is recognized as a recourse receivable on the day when this right is established. At each reporting date the Company assesses whether any objective evidence of impairment of loans and receivables exists. The amount of the impairment is measured as the difference between the asset s carrying value and the present value of the estimated future cash flows, discounted at the financial asset s original effective interest rate. The amount of the loss is recognized in the Income Statement. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. The reversal shall not result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal shall be recognised in the Income Statement.

42 Held-to-maturity financial assets Financial assets held to maturity are assets with fixed or determinable payments and fixed maturity, which the Company has the positive intent and ability to hold to maturity. These instruments are initially measured at fair value plus any expenses, directly attributable to the acquisition transaction. Subsequent to initial recognition, these investments are carried at amortized cost. Gains and losses are recognized in the Income Statement when the investments are derecognized or impaired, as well as through the amortization process. At each reporting date the Company assesses whether any objective evidence of impairment of loans and receivables exists. The amount of the impairment is measured as the difference between the asset s carrying value and the present value of the estimated future cash flows, discounted at the financial asset s original effective interest rate. The amount of the loss is recognized in the Income Statement. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. The reversal shall not result in a carrying amount of the financial asset that exceeds what the amortized cost would have been had the impairment not been recognized at the date the impairment is reversed. The amount of the reversal shall be recognized in the Income Statement. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are not classified as loans and receivables; held-to-maturity assets or financial assets at fair value through profit and loss. They include treasury and corporate debt securities as well as investments in capital instruments of companies over which the Company does not have control or significant influence. These investments are initially recorded at fair value, which is equal to cost plus transactions costs that are directly attributable to the acquisition. The subsequent measurement of financial assets available-for-sale is also at fair value as at the reporting date. Any gains and losses arising from change in the fair value of these financial assets are recognized as a separate component of other comprehensive income, except for impairment losses, which are recognized in the Income Statement. Upon derecognition of a financial asset any accumulated gain or loss previously recognized in equity is recognized in profit and loss. Any interest received during the time of possession of the financial asset are recognized in the Income Statement as interest income. Dividends from equity instruments available-for-sale are recognized in the Income Statement, when the right of the entity to receive payment is established. At each reporting date the Company assesses whether any objective evidence exist for impairment of a financial asset or a group of financial assets. The Company has adopted that a financial asset classified as available-for-sale must be impaired when its fair value decreases by more than 50% in six months or the decrease in its fair value since the purchase till the reporting date is more than 80%. When the decrease in the fair value of an available-for-sale asset is recognized directly in equity and objective evidence exists that the asset is impaired, the accumulated loss is deducted from equity and recognized through profit or loss. The amount of the accumulated loss deducted from equity and recognized in the profit or loss is the difference between the acquisition cost (net of repayments of the principal and amortization) and the current fair value, less the impairment loss recognized previously in the profit or loss. Impairment losses, recognized in profit or loss, for an investment in an equity instrument classified as available-for-sale shall not be reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale

43 increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognized in profit or loss. Other capital investments As other investments in equity instruments the Company classifies investments in capital instruments that do not have a quoted market price in an active market. Investments in such financial instruments whose fair value cannot be reliably measured are recognized in the Statement of Financial Position at cost. Derecognition of financial assets The Company derecognizes a financial asset (or part of financial asset, if applicable), when: Contractual rights to the cash flows from the asset have expired. The Company has retained the right to receive the cash flows from the asset, but has undertaken a contractual obligation to pay all cash flows collected, without considerable delay, to a third party under a transfer transaction. The Company has transferred the contractual rights to receive cash flows form the asset, whereupon: _ the Company has transferred all or substantially all risks and rewards from the owning of the financial asset or _ the Company has neither transferred, not retained all or substantially all risks and rewards related to the asset, but has lost control over it. Upon derecognition of an available-for-sale financial asset, the accumulated revaluation reserve is derecognized from equity and recognized in the Income Statement Fair value of financial instruments Fair value is the amount at which a financial instrument may be exchanged or settled in an arm s length transaction and the best proof of fair value is a market value on an active market. When available, the Company measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm s length basis. If a market for a financial instrument is not active, the Company establishes fair value using valuation methods or discounted cash flow techniques. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Company, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. The valuation methods are described in detail in Note 4 herein Bank deposits Bank deposits represent cash with banks with original maturity of more than 90 days. Bank deposits are carried at cost plus any accumulated interest Cash and cash equivalents For the purposes of preparation of the Statement of Financial Positions and the Statement of Cash Flows, the Company recognizes as cash and cash equivalents all highly liquid and freely available financial assets, in cash form, funds in current and deposit accounts with original maturities of up to 90 days Impairment of non-financial assets The carrying amounts of the Company s non-financial assets at fair value are reviewed

44 at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset s recoverable amount is estimated. The recoverable amount of non-material assets still at hand for use is determined at the reporting date. An impairment loss is recognized if the carrying amount of an asset exceeds its recoverable amount. Impairment loses are recognized in profit or loss Insurance contracts IFRS still do not contain specific requirements for recognition and measurement of insurance contracts. The accounting bases for measurement of insurance contracts the Company applies comply with the general IFRS frame and the requirements of Bulgarian legislation. Insurance contracts are those that transfer significant insurance risk over the Company. The Company defines significant insurance risk as the possibility of having to pay benefits on the occurrence of an insurance event are at least 10% more than the benefits payable if the insurance event had not occurred. Once classified as insurance contracts at the date of inception, the Company continues to recognize them as insurance contracts over the period of their duration, even if the insurance risk reduces significantly during this period, unless all rights and obligations, arising from the insurance contract have expired or have been canceled. Unearned premium provision (UPR) The unearned premium provision is formed for covering the claims and administrative expenses, which are expected to arise on the respective type of insurance contract after the end of the reporting period. The basis for calculation of the unearned premium reserve corresponds to the base for recognition of the Company s premium income. The amount of the reserve is calculated under the precise day method. Unexpired risk provision Unexpired risk provision is formed to cover risks for the period between the end of reporting period and the date on which the insurance contract expires in order to cover the payments and expenses related to these risks which are expected to exceed the UPR formed. The Company forms unexpired risk reserve when the gross technical result of certain line of business has been negative for the last three years, including the current reporting period. Outstanding claims provision Outstanding claims provision (OCR) is set to cover losses on claims for which insurance events have occurred before the reporting period, whether reported or not, and have not been paid as of the period end. The outstanding claims reserve comprises of: reported but not paid claims and incurred but not reported claims (IBNR), along with claims handling expenses. The amount of the reserve for reported but not paid claims is calculated using the claimby-claim method, according to which the expected amount of the claim payment for any reported but not settled claim is determined. The amount of the reserve for incurred but not reported claims is estimated by applying the chain ladder method. For the estimation of this reserve the Management considers the experience for the current period and the past four years. The Company reviews the claims development process, the period of occurrence and reporting of insurance events. It assumed that the delay for reporting the claims is not subject to change in time and there is a correlation between the adjacent periods claims payments developments. Deferred acquisition costs Any direct and indirect costs made for the purpose of renewal of existing and the conclusion of new insurance contracts shall be deferred for the time of the contract s term. Such costs represent mostly costs for commissions and advertisement expenses.

45 3.11. Reinsurance contracts The Company cedes part of the insurance risk it bears under insurance contracts to reinsurers. The estimated benefits for the Company from reinsurance contracts regarding outstanding claims are recognized as assets in the Statement of Financial Position when incurred. Management periodically performs an impairment test of receivables from reinsurers. A reinsurance receivable is considered impaired when objective evidence exists about an event that occurred after initial recognition of the receivable and the company may not receive entire amount due as agreed in contract as a result of this event and this event has direct impact on the amount that the company will receive from the reinsurer that could be reliably measured. If objective evidence for impairment exists, the reinsurance receivables are written down to their recoverable amount. The difference is recognised as change in the reinsurer s share in the outstanding claims reserve and as an expense in the Income Statement. The premiums ceded to reinsurers are recognized as expense when incurred Lease liabilities Leases in terms of which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of liability. Finance expenses are recorded in Profit and Loss in the period incurred. Any initial direct costs are added to the amount recognised as an asset. The depreciation policy for depreciable leased assets is consistent with that for depreciable owned assets. If there is reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated for a period equal to its useful life. Otherwise the asset is depreciated over the shorter of the lease term and its useful life. Leases in terms of which the Company does not assume substantially all the risks and rewards of ownership are classified as operating leases. Payments made under operating leases are recognised in Profit or Loss on a straight-line basis over the term of the lease Liabilities Borrowings and other payables are initially recognised at fair value. Subsequently they are presented at amortised cost using the effective interest rate method. Costs are recognised in the Income Statement for the period they were incurred Provisions A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The interest of the discounted amount is recognized as a finance cost Income recognition The income from insurance contracts is recognized at the time, in which the insurance coverage becomes effective, i.e. the Company is exposed to significant insurance risk (underwriting year). The income from insurance contracts with deferred payments is accrued up to the full amount of the premium and the instalments due are recorded in the statement of financial position as insurance receivables. The premiums are reported gross of paid commissions to intermediaries. Premiums accured under cancelled contracts are derecognized. Derecognized premiums for the current reporting period

46 which correspond to insurance policies issued during the current period are recognized as a decrease of gross premium income. Derecognized premiums in the current reporting period which reflect an adjustment of premium income that was recognized in previous periods are recognized as an expense for written-off premiums. Receivables arising from liabilities of third parties liable for damage inflicted, is recognized as recourse on the date on which right of recourse is established Paid claims Paid claims expenses are recognized in the period when they occur (insurance event year). They include claims paid expenses and claim handling expenses Expenses for remuneration of agents and brokers (commission expenses) The expenses for remuneration of agents and brokers are accrued for the period which the respective premium income is related to Administrative expenses Administrative expenses comprise of personnel expenses, depreciation charges for property, plant and equipment, and amortisation charges for intangible assets, advertising costs, offices maintenance etc., to the extent that they are not reported as net commission expenses, claims incurred and investment expenses. Administrative expenses are recognized in the Income Statement in the reporting period they occurred Net investment income Net investment income comprises the Company s gains and losses from managing its assets for covering the insurance contract provisons. Investment income consist of interest income on bank deposits and assets available-for-sale; rental income of investment properties; change of fair value of financial instruments recognized at fair value through profit or loss; change in the fair value of investment properties, impairment losses of assets available-for-sale as well as income from reversal of such impairment losses; gains realized through sales of investments; foreign currency revaluations and others, net of asset management fees Employee benefits Employee benefits are all forms of considerations given by the Company in exchange for service rendered by employees. Employee benefits include wages, salaries, additional pay determined according to the applied remuneration schemes, additional pay for years served, overtime, internal replacement and others, social security contributions, including paid sick leaves, maternity leaves and others, paid annual leaves and other paid leaves. Accumulating paid annual leaves are those that are carried forward and can be used in the future if the current period s entitlement is not used in full. The Company also accrues retirement provisions which are related to legal requirements for defined post-employment benefits plans. Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. The Company recognises as a liability the undiscounted amount of the estimated costs related to annual leave expected to be paid in exchange for the employee s service for the period completed. Termination benefits are recognised as an expense when the Company is committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Company has made an offer

47 of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value Income tax Income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss, except to the extent that it relates to items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustments to tax payable in respect of previous years. The deferred tax is calculated through application of the liability method, in respect of any temporary differences as of the reporting date, existing between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for temporary differences from initial recognition of assets and liabilities upon transactions that do not concern profit or loss, for neither accounting nor taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities against current tax assets or the deferred tax assets and liabilities will be settled simultaneously. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which carry forward tax loses and tax credits can be utilized Deferred tax assets are reviewed as of each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realized Earnings per share The Company calculates basic earnings per share for profit or loss, allocated between the holders of ordinary shares. The basic earnings per share are calculated by dividing the profit or loss for the period, which is to be allocated between the holders of ordinary shares, by the average number of ordinary shares for the period. The Company has not issued financial instruments that give their holder the right to purchase ordinary shares (potential ordinary shares), because of which the diluted earnings per shares equal the basic earnings per share International Financial Reporting Standards (IFRS) and interpretations (IFRIC) approved by the International Accounting Standards Board (IASB), which are not yet effective as of the date of the Statement of Financial Position A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2011, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Company. Standards, interpretations and amendments to published standards that are not yet effective and have not been early adopted _ endorsed by the European Commission: Amendments to IFRS 7 Disclosures _ Transfers of Financial Assets (issued October 2010) _ effective from the first financial year that starts after 1 July Improvements to IFRSs 2010 (issued May 2010), various effective dates, generally 1 January IASB/IFRIC documents not yet endorsed by the European Commission Management believes that it is appropriate to disclose that the following new or revised standards, new interpretations and amendments to current standards, which are already

48 issued by the International Accounting Standards Board (IASB), are not yet endorsed for adoption by the European Commission, and therefore are not taken into account in preparing these financial statements. The actual effective dates for them will depend on the endorsement decision by the European Commission. IFRS 9 Financial Instruments (issued November 2009) and Additions to IFRS 9 (issued October 2010) has an effective date 1 January 2015 and could change the classification and measurement of financial instruments. In May 2011 the IASB issued IFRS 10 Consolidated Financial Statements, IFRS 11 Joint arrangements, IFRS 12 Disclosures of Interests in Other Entities and IFRS 13 Fair Value Measurement, which all have an effective date of 1 January The IASB also issued IAS 27 Separate Financial Statements (2011) which supersedes IAS 27 (2008) and IAS 28 Investments in Associates and Joint Ventures (2011) which supersedes IAS 28 (2008). All of these standards have an effective date of 1 January Amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets (issued December 2010) has an effective date 1 January Amendments to IFRS 1 Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (issued December 2010) has an effective date 1 July In June 2011 the IASB issued Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) with an effective date of 1 July In June 2011 the IASB issued an amended IAS 19 Employee Benefits with an effective date of 1 January In December 2011 the IASB issued amendments to IFRS 7 Disclosures _ Offsetting Financial Assets and Financial Liabilities with an effective date of 1 January In December 2011 the IASB issued amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities with an effective date of 1 January IFRIC Interpretation 20: Stripping Costs in the Production Phase of a Surface Mine with an effective date of 1 January ACCOUNTING ESTIMATES Main sources of valuation uncertainty Determination of the fair value of financial instruments The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements: Tier 1. Quoted market price (unadjusted) in an active market for an identical instrument. Tier 2. Valuation techniques based on observable inputs different from the quoted prices included in Tier 1, available for the asset or liability whether directly (i.e. as prices) or indirectly (i.e. derived from prices). Tier 3. Valuation techniques using significant unobservable inputs. The table below shows analysis of financial instruments, booked at fair value, classified according the revaluation methods used.

49 Tier 1 Tier 1 Tier 3 Total As of 31 December 2011 Shares 2,686 2,686 Government securities 37,686 37,686 Corporate bonds 3,671 1,361 _ 5,032 Total 44,043 1,361 _ 45,404 As of 31 December 2010 Shares 2,215 _ 61 2,276 Government securities 21,929 21,929 Corporate bonds 2,274 3,872 _ 6,146 Total 26,418 3, ,351 There is no difference between the values of the financial assets in the Statement of Financial Position and their fair values as of 31 December 2011 and Uncertainty assessment related to technical reserves The most important estimates in the Company s financial statements are related to the technical reserves. The Company applies reasonably prudent approach to the provisioning and complies with the legal regulations. The chief actuary is licensed by the Financial Supervision Commission. The Management considers that the current level of the technical reserves is sufficient enough. The insurance risk management is described in the following attachment, and information about the provisions is provided in Notes 21 and 22. Segment reporting The Company does not report information by operating segments because the main source of risk and return is the non-life insurance business, where there is no a single internal client whose revenues exceed 10% and the Company operates on the territory of the country. If this changes in the future and the Company presents its financial statements by operating segments, then they shall be formed and presented in compliance with the requirements of IFRS 8 Operating Segments and shall be announced in Note INSURANCE RISK MANAGEMENT 5.1. Insurance risk management objectives and policies Insurance risk is the risk of occurrence of an insurance event, where the amount of damage and respectively of due indemnity exceeds the amount of the insurance reserves formed. To manage this risk the Company performs a detailed analysis of various insurance risks and reflects this in the general terms and conditions of the insurance policies. In addition, the Company transfers some of its risks to reinsurers. When choosing the type of the reinsurance treaties, the Company considers the retention levels, the specifics of the insurance products, etc. Regardless of the fact that the Company has reinsurance contracts, any possible income from the reinsurer s share in indemnities is not transferred to the insured persons. In this case the Company is exposed to credit risk of up to the liabilities that the insurer must pay according to the reinsurance treaty. The Company has adopted strict rules for selection of reinsurers. Selection is focused on reinsurers that have been awarded high credit ratings. The Company manages its insurance risk through insurance underwriting limits, procedures for approval of transactions, which involve new products or which exceed certain limits, pricing methods and centralised reinsurance management. The Company applies several methods for assessment and monitoring of insurance risk exposures, for both individual types of risks and overall risk exposure.

50 5.2. Underwriting strategy The Company s underwriting strategy seeks product diversity to ensure a balanced portfolio. At present the company offers over 80 insurance products Every year the full range of products offered is analyzed, adapted and complemented and for that purpose, both the Company s results and the insurance needs of the market are considered. A major share of the Company s insurance portfolio is taken by Motor Insurance, followed by Property Insurance. The company has also been a leader in the field of Aviation, Marine and Cargo insurance for many years Product characteristics The Company offers a list of insurance products approved by the Financial Supervision Commission. Motor Insurance The Motor line of business includes Casco, Third Party Liability Related to the Possession and Use of Motor Vehicles, Accident Insurance of Motor Vehicle Seats and Travel Assistance in Bulgaria and abroad. The risks covered completely meet the insurance coverage needs of owners, users and holders of motor vehicles. The territorial scope of these insurance policies covers all of Europe. A flexible premium tariff policy has been developed, which allows for the calculation of different policy premiums for the different insurance risks The terms and conditions of insurance contracts and the deadlines for reporting and settlement of claims are entirely consistent with the legal requirements. Property Insurance The Property Insurance group includes the insurances of household property against fire, natural perils, burglary and other usual risks. The terms and conditions of insurance contracts reflect to the utmost customers needs and they comply with the legal and regulatory requirements. When evaluating the risk associated with these insurance contracts, the Company stresses on the adequate evaluation of the insured sum and periodically surveys the insured objects. Aviation, Marine and Cargo Insurance The terms and conditions of these insurance contracts are entirely consistent with the international insurance markets. Third Party Liability Insurance The Company offers a wide range of products of General Third Party Liability policies and Professional Liability policies (including professional liability of notaries, lawyers, medical staff etc.), most of which are obligatory by virtue of a normative act. Personal Accident and Travel Assistance Personal Accident insurances cover the risk of death, permanent or temporary disability as a result of an accident Concentration of insurance risk With regards to risk concentration, Management believes that efforts were made to achieve a relatively uniform allocation of insured objects. Risk is assessed on a systematic basis by the Company experts and accumulation of insurance sums is monitored both by groups of clients and by regions Basic assumptions for calculation of the insurance provisions The process used to determine the assumptions is intended to result in neutral estimates of the most likely or expected outcome of insurance events. The sources of information used as inputs for the assumptions are internal and they are based on detailed studies carried out annually. The assumptions are reviewed to ensure that they are consistent with observable market prices or other published information. There is stronger emphasis on

51 current trends, and if there is insufficient information to make a reliable best estimate of claims development, prudent assumptions are used. Each reported claim is assessed with due regard to the claim circumstances, information available from loss adjusters and historical evidence of the size of similar claims. Case estimates are reviewed regularly and are updated as and when new information becomes available. The provisions are based on information currently available. The key methods used for the estimation of the insurance contract provisions remain unchanged from prior years and are based on expected loss ratios and on the Company s estimation of the expected loss ratios by classes of business. The assumptions that have the greatest effect on the estimation of insurance contract provisions are the expected loss ratios for the most recent accident years for the different classes of business. When assessing the incurred but not reported claims reserve (IBNR), it is assumed that the tendency for development of delays in claims reporting shall remain unchanged in the next few years. This assumption is set in the method used for calculation of the provision. In regards to the unearned premium reserve for all insurance policies with fixed insurance periods, an assumption is made that risk allocation during the period will remain uniform. For insurance policies without fixed insurance periods, an average insurance period is set, which is determined on the basis of statistical data for past period. Again, an assumption is made that risk allocation during the period will remain uniform Sensitivity analysis The table below shows ten simulations for analysis of the factors affecting Company s solvency. The analysis uses the capital position of the Company as of the reporting date as a starting point. The capital required represents the solvency margin set according to national legislation. The cover ratio represents the coverage of the required capital with own funds and is calculated as a ratio of equity to required capital. Equity funds Required capital Cover ratio Basic capital position as of 31 December ,738 27, % Change in cover ratio Increase in interest rates by 50 bp 42,160 27, % (0.02) Decrease in interest rates by 50 bp 43,365 27, % 0.02 Increase in the market value of equity instruments by 15% 43,138 27, % 0.01 Decrease in the market value of equity instruments by 15% 42,339 27, % (0.01) Increase in the market value of real estates by 10% 43,613 27, % 0.03 Decrease in the market value of real estates by 10% 41,863 27, % (0.03) Increase in bad debts by 1% 42,398 27, % (0.01) Decrease in bad debts by 1% 43,078 27, % 0.01 *Increase in claims ratio (outstanding claims reserve) by 1% 41,532 27, % (0.07) Decrease in claims ratio (outstanding claims reserve) by 1% 43,944 26, % 0.07 The results from all scenarios demonstrate a stable solvency margin. The table clearly shows that the change in the claims ratio has the strongest effect on the Company s capital base as the indicator affects both equity and required capital.

52 5.7. Liability adequacy test The chief actuary periodically performs a liability adequacy test to ensure that the reserves, less the deferred acquisition costs are sufficient to cover potential future claims payments. In the assessment of the adequacy of the insurance reserves, the Company takes into account all expected cash flows from insurance contracts, such as claim payments, claims handling expenses, etc. The unearned premium reserve adequacy test is limited to the unexpired part of the active portfolio of insurance contracts and represents a comparison between earned premiums and all costs incurred, including those for occurred claims, acquisition and administrative expenses. For the insurance products where the occurred claims and the incurred costs for the last three years, including the current year, are higher than the earned premiums, an additional unexpired risk reserve is formed. The calculations of unearned premium reserve adequacy test are presented in the table below: Type of Insurance Accident Insurance 1, Including Accident of Public Transport Passengers Illness Insurance _ 3. Motor Hull 4,917 (2,920) 6, Railroad Vehicles Insurance Aircraft Insurance 3,650 3,955 3, Marine Hull 50 (677) (866) 7. Cargo in Transit 726 (1,552) Fire and Natural Perils Insurance 12,873 8,000 9, Property Damage 2,939 (5,139) 4, Third Party Liability Related to the Possession and Use of Motor Vehicles (3,952) (16,875) (4,196) Including Motor Third Party Liability (2,886) (13,683) (2,323) Including Green Card Insurance (1,066) (3,192) (1,874) Including Border Motor Third Party Liability _ 11. Aircraft Third Party Liability 1, Marine Third Party Liability (408) General Third Party Liability 4,567 2,006 1, Credit Insurance _ 15. Guarantee Insurance _ 16. Miscellaneous Financial Losses (361) 17. Legal Expenses Insurance _ 18. Travel Assistance Total 28,779 (11,266) 21,418 The table clearly shows that during the last three years the premiums earned under MTPL insurance are lower than all costs incurred. This requires the formation of additional reserve for unexpired risks, which is a percentage from the unearned premium reserve for this insurance. The calculations for forming this reserve are presented in the following table:

53 Indicators Amount Written premiums 39,760 Unearned premium reserve at the beginning of the period 17,823 Unearned premium reserve at the end of the period 13,388 Paid claims 41,776 Outstanding claims reserve at the beginning of the period 73,091 Outstanding claims reserve at the end of the period 69,127 Expenses, including 8,670 Acquisition 5,388 Administrative 1,585 Differed acquisition costs at the beginning of the period 4,107 Differed acquisition costs at the end of the period 2,410 Gross technical result (2,287) Correction coefficient of the unearned premium reserve 1.05 Unexpired risk reserve, gross 693 Reinsurer s share (277) Unexpired risk reserve, net 416 The adequacy test of the outstanding claims reserve is verification whether the reserve formed is sufficient to cover any expected future cash flows relating to the incurred but not reported as at the end of the financial year claims. The value of expected future payments of outstanding claims is calculated on the basis of the statistics for the claims paid during the last nine years, applying the chain-ladder method. The result is increased by an additional factor (tail factor) for expected payments after the ninth year after the event. The test results are presented in a table and show that the reserves formed by the Company are sufficient to cover any future payments of outstanding claims.

54 Type of insurance Reserve as of 31 December 2011 Current approximate estimate of expected payments Difference Accident Insurance Motor Hull 11,727 11, Aircraft Insurance _ Marine Hull 1,651 1,651 _ Cargo in Transit _ Fire and Natural Perils Insurance 4,313 2,098 2,215 Property Damage Third Party Liability Related to the Possession and Use of Motor Vehicles 88,571 81,179 7,392 Aircraft Third Party Liability _ General Third Party Liability 3,117 3,117 _ Credit Insurance _ Guarantee Insurance _ Miscellaneous Financial Losses _ Legal Expenses Insurance _ Travel Assistance _ 111, ,251 10, FINANCIAL RISKS Financial risks relate to adverse changes in interest rates, foreign currency exchange rates between the different currencies and the market price of securities and other financial instruments. Such movements affect the Company s profitability Interest rate risk At all times the Company has exposure to market interest rate fluctuations, which have an effect on its financial position and cash flows. Interest rate margins may vary as a result of changes in market conditions. Interest rates on assets and liabilities denominated in Bulgarian leva are set on the basis of the fluctuations in the base interest rate determined by the Bulgarian National Bank (BNB), whose fluctuations are predictable to a certain extent. The Company continuously monitors the fluctuations of foreign currencies, differences in the interest rates and maturity structure of its assets and liabilities. The Company also currently monitors the changes in the prices and yield of government securities traded. The market risk is actively monitored in order to ensure compliance with the market risk restrictions. The table below summarises the interest rate risk of the Company as of 31 December 2011 and 31 December The assets and liabilities are stated at their book values, grouped according to their interest risk exposure.

55 2011 Effective interest rate, % Three months Six months One year Fixed interest rate Noninterest bearing ASSETS Deposits in financial institutions 5.33% _ 47,107 _ 47,107 Available-for-sale government securities 37,686 _ 37,686 Available-for-sale corporate bonds 4.90% _ 1,794 _ 3,238 _ 5,032 Available-for-sale equity instruments _ 2,686 2,686 Investments in subsidiaries _ 12,288 12,288 Investments in related companies _ Loans granted _ _ 579 Cash 0.1% _ 1, ,342 Cash equivalents 0.9% _ 5,939 _ 5,939 Property, plant and equipment _ 20,553 20,553 Investment properties _ 8,977 8,977 Intangible assets _ Reinsurer s share in insurance contract provision _ 63,064 63,064 Receivables and other assets _ 70,200 70,200 TOTAL ASSETS 1, , , ,353 LIABILITIES Insurance contract provisions _ 167, ,817 Insurance liabilities _ 4,717 4,717 Reinsurance liabilities _ 5,138 5,138 Reinsurer deposits 2%, 3.49% 11,676 7,463 _ 19,139 Deffered tax liabilities _ 1,744 1,744 Prepaid premiums _ 4,886 4,886 Other liabilities _ 6,610 6,610 Equity and reserves _ 66,302 66,302 TOTAL LIABILITIES _ 11,676 7, , ,353 Total

56 2010 Effective interest rate, % Six months One year Fixed interest rate Noninterest bearing ASSETS Deposits in financial institutions 6.96% 47,014 _ 47,014 Available-for-sale government securities _ 21,929 _ 21,929 Available-for-sale corporate bonds _ 1,478 _ 4,668 _ 6,146 Available-for-sale equity instruments 4.82% _ 2,276 2,276 Investments in subsidiaries 12,051 12,051 Investments in related companies Loans granted _ 537 Cash 0.10% 4,755 1,341 6,096 Cash equivalents 6.96% 14,775 _ 14,775 Property, plant and equipment 23,561 23,561 Investment properties 9,081 9,081 Intangible assets Reinsurer s share in insurance contract provisions 60,648 60,648 Receivables and other assets 68,361 68,361 TOTAL ASSETS _ 1, , , ,910 LIABILITIES Insurance contract provisions 190, ,222 Insurance liabilities 6,184 6,184 Reinsurance liabilities 4,901 4,901 Reinsurer deposits 2% 17,216 _ 17,216 Deffered tax liabilities 1,900 1,900 Prepaid premiums 8,016 8,016 Other liabilities 5,578 5,578 Equity and reserves 38,893 38,893 TOTAL LIABILITIES _ 17, , ,910 Total 6.2. Currency risk Currency risk is the risk of adverse effects from fluctuation of the prevailing currency exchange rates on the financial position and cash flows of the Company. The management of BULSTRAD VIENNA INSURANCE GROUP has adopted a conservative policy regarding currency risk management and as of 31 December 2011 most of the Company s assets and liabilities are denominated in BGN and EUR. The table below summarises the Company s currency risk exposure as at 31 December 2011 and 31 December It includes the Company s assets and liabilities at book value, by foreign currency category.

57 31 December 2011 BGN and EUR USD Other Total ASSETS Intangible assets Investments in subsidiaries 12,288 12,288 Other investments Investment property 8,977 8,977 Property, plant and equipment 20,553 20,553 Bank deposits with original maturity more than 90 days 47,107 47,107 Available-for-sale financial assets 45,404 45,404 Loans granted Reinsurer s share of unearned premium reserve 17, _ 17,742 Reinsurer s share of outstanding claims reserve 39,401 5,921 _ 45,322 Insurance receivables 26,448 5,595 1,957 34,000 Reinsurance receivables 2, _ 2,185 Other receivables 22,787 22,787 Deferred acquisition costs 10, _ 11,228 Cash and cash equivalent 7, ,281 TOTAL ASSETS 261,687 12,706 1, ,353 LIABILITIES Deferred tax liabilities 1,744 1,744 Unearned premium reserve 54,311 1, ,209 Outstanding claims provision 108,454 2, ,608 Insurance liabilities 3,492 1,225 _ 4,717 Reinsurance liabilities 3,745 1,393 _ 5,138 Reinsurer s deposits 19,139 19,139 Other liabilities 6,610 6,610 Prepaid premiums 2,849 _ 2,037 4,886 TOTAL LIABILITIES 200,344 6,759 2, ,051 Net currency exposure 61,343 5,947 (988)

58 31 December 2010 BGN and EUR USD Other Total ASSETS Intangible assets Investments in subsidiaries 12,051 12,051 Other investments Investment property 9,081 9,081 Property, plant and equipment 23,561 23,561 Bank deposits with original maturity more than 90 days 47,014 47,014 Available-for-sale financial assets 30,351 30,351 Loans granted Reinsurer s share of unearned premium reserve 18, ,733 Reinsurer s share of outstanding claims reserve 37,046 4, ,915 Insurance receivables 31, ,334 Reinsurance receivables 1, _ 1,900 Other receivables 20,399 20,399 Deferred acquisition costs 13, ,728 Cash and cash equivalents 18,194 2, ,871 TOTAL ASSETS 263,463 9, ,910 LIABILITIES Deferred tax liabilities 1,900 1,900 Unearned premium reserve 66,510 1, ,252 Outstanding claims provision 118,909 1,200 1, ,970 Insurance liabilities 6, ,184 Reinsurance liabilities 4, ,901 Reinsurer s deposits 16, ,216 Other liabilities 5,578 5,578 Prepaid premiums 7, ,016 TOTAL LIABILITIES 228,270 3,754 1, ,017 Net currency exposure 35,193 5,665 (1,965) 6.3. Liquidity risk The liquidity risk is the risk of the Company s failure to meet its current and potential obligations as payments become due without incurring losses. The discrepancy in the maturity structure potentially increases profitability, but at the same time it increases the risk of losses. In order to manage the liquidity risk the Company maintains highly liquid assets at any time. The table below provides an analysis of the Company s assets and liabilities as at 31 December 2011 and 31 December 2010, grouped by remaining maturity.

59 2011 Up to one month 1-3 months 3-12 months 1-5 years Over five years Nondefined maturity ASSETS Intangible assets _ Investments in subsidiaries _ 12,288 12,288 Other investments _ Investment properties _ 8,977 8,977 Property, plant and equipment _ 20,553 20,553 Bank deposits with original maturity more than 90 days 2,830 44,277 47,107 Available-for-sale financial assets 45,404 _ 45,404 Loans granted 579 _ 579 Reinsurer s share of unearned premium reserve , ,742 Reinsurer s share of outstanding claims reserve 21,867 4,600 4,523 8,887 5,445 _ 45,322 Insurance receivables 402 1,744 30, ,000 Reinsurance receivables 1, _ 2,185 Other receivables 472 5,375 16,940 _ 22,787 Deferred acquisition costs , ,228 Cash and cash equivalents 1,343 5,938 7,281 TOTAL ASSETS 70,884 19,360 82,380 55,304 5,707 42, ,353 Total

60 2011 Up to one month 1-3 months 3-12 months 1-5 years Over five years Nondefined maturity LIABILITIES Deferred tax liabilities _ 1,744 1,744 Unearned premium reserve, including unexpired risk provision 663 2,884 51,131 1,531 56,209 Outstanding claims provision 53,323 11,429 11,241 22,082 13,533 _ 111,608 Reinsurer s deposits 4,993 1,490 9,208 2,232 1,216 _ 19,139 Insurance liabilities 2, _ 4,717 Reinsurance liabilities , ,138 Other liabilities 1,075 1,025 1,463 3,047 6,610 Prepaid premiums 4, ,886 TOTAL LIABILITES 67,152 17,676 78,192 31,711 15,320 _ 210,051 Maturity mismatching 3,732 1,684 4,188 23,593 (9,613) 42,718 Total 2010 Up to one month 1-3 months 3-12 months 1-5 years Over five years Nondefined maturity ASSETS Intangible assets _ Investments in subsidiaries _ 12,051 12,051 Other investments _ Investment property _ 9,081 9,081 Property, plant and equipment _ 23,561 23,561 Bank deposits with original maturity more than 90 days 30,235 16,779 47,014 Available-for-sale financial assets 30,351 _ 30,351 Loans granted 537 _ 537 Reinsurer s share of unearned premium reserve , ,733 Reinsurer s share of outstanding claims reserve 20,224 4,254 4,182 8,219 5,036 _ 41,915 Insurance receivables 382 1,659 29, ,334 Reinsurance receivables _ 1,900 Other receivables 423 4,812 15,164 _ 20,399 Deferred acquisition costs , ,728 Cash and cash equivalents 20, ,871 TOTAL ASSETS 73,435 12, ,258 27,132 5,264 45, ,910 Total

61 2010 Up to one month 1-3 months 3-12 months 1-5 years Over five years Nondefined maturity LIABILITIES Deferred tax liabilities _ 1,900 1,900 Unearned premium reserve, including unexpired risk provision 805 3,502 62,087 1,858 68,252 Outstanding claims provision 58,274 12,491 12,284 24,133 14,788 _ 121,970 Reinsurer s deposits 4,491 1,340 8,283 2,008 1,094 _ 17,216 Insurance liabilities 2, , _ 6,184 Reinsurance liabilities , ,901 Other liabilities ,235 2,570 5,578 Prepaid premiums 7, ,016 TOTAL LIABILITIES 75,339 19,250 88,969 33,827 16,632 _ 234,017 Maturity mismatching (1,904) (6,557) 20,289 (6,695) (11,368) 45,128 Total 6.4. Credit risk Credit risk is the risk that the customers may not be able to fully repay the amounts owed to the Company when they become due. The Company might not be able to collect all its receivables on already underwritten insurance contracts for which it bears the risk from occurrence of an insured event. In this case the Company undertakes actions for voluntary collection of receivables. Unless the receivables could be collected in a certain period of time, the insurance contract is unilaterally terminated by the Company. The table below summarises the Company s assets according to the credit ratings of the counterparties where the financial assets are marketed/invested/placed as of 31 December 2011 and 31 December 2010.

62 2011 Assets with credit risk AA+ AA-BBB Less than BBB Not rated Total Bank deposits with original maturity more than 90 days _ 34,678 12,429 _ 47,107 Debt securities 7,163 30,757 4,797 _ 42,717 Loans granted _ Insurance receivables _ 34,000 34,000 Reinsurance receivables, including reinsurer s share in technical reserves _ 63, ,249 Other receivables _ 22,787 22,787 Cash and cash equivalents _ 4,749 2,302 _ 7,051 Total assets with credit risk 7, ,072 20,278 57, ,490 Assets without credit risk 56,863 TOTAL ASSETS 7, ,072 20,278 57, , Assets with credit risk AA+ AA-BBB Less than BBB Not rated Total Bank deposits with original maturity more than 90 days _ 28,964 18,050 _ 47,014 Debt securities , ,194 28,075 Loans granted _ Insurance receivables _ 32,334 32,334 Reinsurance receivables, including reinsurer s share in insurance contract provisions _ 61, ,548 Other receivables _ 20,399 20,399 Cash and cash equivalents _ 3,044 16,486 _ 19,530 Total assets with credit risk ,747 35,655 59, ,437 Assets without credit risk 62,473 TOTAL ASSETS ,747 35,655 59, ,910 Exposure to government debt In the year ended 31 December 2011, there was uncertainty as to the credit risk related to government debt in the eurozone states. The Company carefully managed this risk in 2011 and as a result, the overall quality of government debt portfolio is considered at minimum risk. The table below shows the book value of government debt portfolio with regards to state exposure. The assets are presented without any potential impairment. The Company have not recognized impairment concerning exposure classified as available for sale as of 31 December 2011 and 31 December 2010.

63 2011 Up to one month From one to three months From three to one year From one to three years From three to five years Above five years Issuing state Bulgaria _ 5,074 18,272 6,849 30,195 Germany _ 3,749 3,749 France _ 409 _ 603 1,012 Poland _ 1,259 1,259 Romania 259 _ 259 Croatia 248 _ 248 Total _ 9,232 18,779 8,711 36,722 Total 2010 Up to one month From one to three months From three to one year From one to three years From three to five years Above five years Issuing state Bulgaria _ 17,821 17,821 Poland _ 1,317 1,317 Italy _ Spain _ Portugal _ Total _ 20,945 20,945 Total

64 7. INTANGIBLE ASSETS Software Licenses Total Cost As at 1 January , ,971 Additions _ Disposals _ Balance as at 31 December , ,008 Cost As at 1 January , ,008 Additions Disposals (21) _ (21) Balance as at 31 December , ,740 Accumulated amortization As at 1 January , ,450 Additions Disposals _ Balance as at 31 December , ,666 Accumulated amortization As at 1 January , ,666 Additions Disposals (20) _ (20) Balance as at 31 December , ,933 Carrying amount as at 31 December December INVESTMENTS IN SUBSIDIARIES EIRB, London VIG Services Bulgaria Bulstrad Life VIG Bulstrad Health VIG Contact Center Bulgaria 31 December , ,546 Percentage of participation 85% 100% 95% 10% 50% Capital contributions _ 27 _ 27 Purchase of shares _ 2,478 _ 2, December ,567 2, ,051 Capital contributions _ 237 _ December ,567 3, ,288 Percentage of participation 85% 100% 95% 97% 50% Total

65 In September 2010, BULSTRAD VIENNA INSURANCE GROUP acquired from Bulstard Life Vienna Insurance Group 174,000 (one hundred seventy-four thousand) ordinary registered voting shares of Bulstrad Health. The shares are with a par value of BGN 10 (ten) and constitute 87% of the capital of Bulstrad Health. The transaction amounts to BGN 2,478 thousand. As a result, as of 31 December 2010, the amount of investment of BULSTRAD VIENNA INSURANCE GROUP in the capital of Bulstrad Health rose to BGN 2,771 thousand. During the reporting period, an extraordinary General Meeting of Shareholders was held where the resolution of forming Reserve fund with shareholders funds was adopted; the participation of BULSTRAD VIENNA INSURANCE GROUP, proportionate to its shares, is at the amount of 237 thousand. As of the end of the period, the sum is paid in full. As a result, as of 31 December 2011, the investment of BULSTRAD VIENNA INSURANCE GROUP in Bulstrad Health amounts to BGN 3,008 thousand. 9. OTHER CAPITAL INVESTMENTS 31 December Other investments INVESTMENT PROPERTY December As of 1 January 9,081 9,024 Additions _ 57 Change in fair value (104) _ As of 31 December 8,977 9,081 As of 31 December 2011, independent appraisor carried out market valuation of investment property owned by the Company. Three standard valuation approaches were applied: the cost approach, market analogue approach and revenue generating approach. When determining fair market values all three approaches were considered. As a result of revaluation, based on valuation report from the licensed appraisor impairment has been accounted for the negative change in fair value of investment property owned by the Company at the amount of BGN 104 thousand, directly in the Income Statement.

66 11. PROPERTY, PLANT AND EQUIPMENT Land and buildings Vehicles Computers Furniture and equipment Total Cost As at 1 January ,307 1,529 1,065 3,291 9,192 Additions _ ,001 Disposals _ (488) (397) (257) (1,142) Balance as at 31 December ,307 1, ,458 9,051 Cost As at 1 January ,307 1, ,458 9,051 Additions _ Disposals (2,693) (258) (123) (197) (3,271) Balance as at 31 December ,138 1,151 3,480 6,383 Accumulated amortization As at 1 January , ,204 4,799 Additions ,476 Disposals _ (385) (258) (144) (787) Balance as at 31 December , ,397 5,488 Accumulated amortization As at 1 January , ,397 5,488 Additions ,426 Disposals (2,693) (87) (3) (37) (2,820) Balance as at 31 December 2011 _ ,653 4,094 Revaluation reserve As at 1 January ,998 _ 19,998 Additions _ Disposals _ Balance as at 31 December ,998 _ 19,998 Revaluation reserve As at 1 January ,998 _ 19,998 Additions (1,734) _ (1,734) Disposals _ Balance as at 31 December ,264 _ 18,264 Carrying amount 31 December , ,061 23, December , ,553 As of 31 December 2011, independent appraisor carried out market valuation of land and buildings owned by the Company. Three standard valuation approaches were applied: the cost approach, market analogue approach and revenue generating approach. When

67 determining fair market values all three approaches were considered. As a result of revaluation, based on valuation report from the licensed appraisor impairment has been accounted for the negative change in fair value of land and buildings owned by the company at the amount of BGN 1,734 thousand, directly in the equity. During the current reporting period the Company used fixed assets, fully depreciated as at the reporting date, with a carrying amount and accumulated depreciation of BGN 2,548 thousand (BGN 311 thousand for 2010). The Company has no assets that are under pledge or are with burdens on them. 12. BANK DEPOSITS 31 December In BGN 44,277 34,057 In foreign currency 2,830 12,957 47,107 47,014 Deposits amount includes accrued interest of BGN 1,189 thousand. (BGN 1,828 thousand for 2010). 13. AVAILABLE-FOR-SALE FINANCIAL ASSETS 31 December Bulgarian treasury bonds 28,756 17,821 Foreign treasury bonds 7,966 3,124 Municipal bonds Corporate bonds 5,032 6,146 Shares 2,686 2,276 45,404 30, LOANS GRANTED Borrower As at 31 December 2011 VIG Contact Center Bulgaria AD VIG Contact Center Bulgaria AD VIG Contact Center Bulgaria AD TBI Info EOOD Interest rate Currency Maturity Principal 6 m EURIBOR + 5% EUR 6 m EURIBOR + 5% EUR 6 m EURIBOR + 5% EUR Accrued interest Book value 31 December December December December % EUR Total

68 Borrower As of 31 December 2010 VIG Contact Center Bulgaria AD VIG Contact Center Bulgaria AD VIG Contact Center Bulgaria AD TBI Info EOOD Interest rate Currency Maturity Principal 6 m EURIBOR + 5% EUR 6 m EURIBOR + 5% EUR 6 m EURIBOR + 5% EUR Accured interest Book value 31 December December December December % EUR Total INSURANCE RECEIVABLES 31 December Insurance receivables 38,886 35,748 Impairment (4,886) (3,414) 34,000 32,334 As at 31 December 2011 there are no burdens over receivables and no pledged receivables. 16. REINSURANCE RECEIVABLES 31 December Receivables from reinsurer s share in claims Receivables from insurance premiums 1,833 1,177 2,185 1, OTHER RECEIVABLES 31 December Recourse receivables 19,377 16,653 Prepaid expenses 1, Guarantees 2,846 2,756 Receivables from intermediaries Court receivables Advances to suppliers Receivables from customers Trade receivables Other 2,139 1,448 Impairment of recourse receivables (4,202) (3,084) 22,787 20,399

69 As at 31 December 2011 the Company states as guarantees receivables the sums related to the participation in public procurements as well as a blocked deposit in Unicredit Bulbank AD, granted as security on a guarantee issued in favour of the National Bureau of Bulgarian Motor Insurers. 18. DEFERRED ACQUISITION COSTS À) As at 31 December December 2010 Gross Reinsurer s share Net Gross Reinsurer s share Net Motor Insurance 8, ,318 12, ,268 Cargo, Aviation and Marine Insurance Property Insurance 2,745 1,200 1,545 2,636 1,048 1,588 Other 1, , Total 12,572 1,344 11,228 15,618 1,890 13,728 B) Change in deferred acquisition costs Gross Reinsurer s share Net Gross Reinsurer s share Net Balance as at 1 January 15,618 1,890 13,728 21,047 1, Accrued for the period 12,572 1,344 11,228 15,618 1,890 13,728 Released for the period (15,618) (1,890) (13,728) (21,047) (1,122) (19,925) Change, net (3,046) (546) (2,500) (5,429) 768 (6,197) Balance as at 31 December 12,572 1,344 11,228 15,618 1,890 13, CASH AND CASH EQUIVALENTS 31 December Cash on hand and bank accounts 1,342 6,096 Bank deposits up to 90 days 5,939 14,775 7,281 20,871 In foreign currency 714 7,575 In BGN 6,567 13,296 7,281 20,871 The amount of deposits includes BGN 1 thousand of accrued interest (BGN 12 thousand for 2010).

70 20. EQUITY The table below shows the structure of share capital as at 31 December Shareholder Percentage of participation TBI Bulgaria AD 97.72% Other 2.28% Until the beginning of June 2010 the major direct shareholder with a share of 97.08% in the capital of BULSTRAD VIENNA INSURANCE GROUP was BIP Group EAD, property of TBI Bulgaria AD. During the reporting period, at a General Meeting of Shareholders of TBI Bulgaria AD a resolution was adopted for transformation through a merger of BIP Group EAD into TBI Bulgaria AD. As a result of this merger, TBI Bulgaria AD acquired 97.08% of the share capital of BULSTRAD VIENNA INSURANCE GROUP. Holding 100% of the capital of TBI Bulgaria AD, Vienna Insurance Group AD Wiener Versicherung Gruppe is indirect owner of 97.08% of the capital of BULSTRAD VIENNA INSURANCE GROUP. In June 2011, as a result of a rise in share capital of BULSTRAD VIENNA INSURANCE GROUP, TBI Bulgaria AD increased its share participation in the company from 97.08% to 97.72%. As a result of this and holding 100% of the capital of TBI Bulgaria AD, Vienna Insurance Group AD Wiener Versicherung Gruppe became indirect owner of 97.72% of the capital of BULSTRAD VIENNA INSURANCE GROUP. 21. UNEARNED PREMIUM PROVISION À) As at 31 December December 2010 Gross Reinsurer s share Net Gross Reinsurer s share Net Motor Insurance 37,039 7,440 29,599 51,142 9,751 41,391 Cargo, Aviation and Marine Insurance 2,176 1, ,581 1, Property Insurance 10,950 6,587 4,363 10,764 6,625 4,139 Other 6,044 2,219 3,825 3, ,075 Total 56,209 17,742 38,467 68,252 18,733 49,519 The gross amount of unearned provision for Motor Insurance includes BGN 416 thousand (BGN 2,277 thousand for 2010) for unexpired risk provision. B) Change in the unearned premium provision Gross Reinsurer s share Net Gross Reinsurer s share Net As at 1 January 68,252 18,733 49,519 87,765 11,338 76,427 Accrued for the period 56,209 17,742 38,467 68,252 18,733 49,519 Released for the period (68,252) (18,733) (49,519) (87,765) (11,338) (76,427) Change, net (12,043) (991) (11,052) (19,513) 7,395 (26,908) As at 31 December 56,209 17,742 38,467 68,252 18,733 49,519

71 22. OUTSTANDING CLAIMS PROVISION À) As at Gross 31 December December 2010 Reinsurer s share Net Gross Reinsurer s share Provisions for reported, but not settled claims (RBNS) 83,979 28,208 55,771 94,977 29,083 65,894 Provisions for incurred, but not reported claims (IBNR) 27,629 17,114 10,515 26,993 12,832 14,161 Total 111,608 45,322 66, ,970 41,915 80,055 Net B) Change Gross Reinsurer s share Net Gross Reinsurer s share Net As at 1 January 121,970 41,915 80,055 93,428 21,669 71,759 Accrued for the period 111,608 45,322 66, ,970 41,915 80,055 Released for the period (121,970) (41,915) (80,055) (93,428) (21,669) (71,759) Change, net (10,362) 3,407 (13,769) 28,542 20,246 8,296 As at 31 December 111,608 45,322 66, ,970 41,915 80, DEFERRED TAX À) As at Assets Liabilities Net assets/(liabilities) Available-for-sale financial assets (174) (119) Investment property (557) (568) Land and buildings 1,417 1,591 (1,417) (1,591) Fixed assets impairment Fixed assets depreciation Unused leaves and pension provisions Civil contracts payables Net tax (assets)/liabilities ,148 2,278 (1,744) (1,900)

72 B) Change in deferred tax Change 2010 in other comprehensive income Change in the Income Statement 2011 Available-for-sale financial assets (119) _ (55) (174) Investment property (568) _ 11 (557) Land and buildings (1,591) 173 _ (1,417) Fixed assets impairment Fixed assets depreciation 113 _ Unused leaves and pension provisions 20 _ 1 21 Civil contracts payables 196 _ (14) 182 Net tax (assets)/liabilities (1,900) 173 (18) (1 744) 24. INSURANCE LIABILITIES 31 December Insurance payables 1,559 2,174 Commissions payables 3,158 4,010 4,717 6, REINSURANCE LIABILITIES 31 December Ceded premium payables 4,552 4,379 Commissions payables ,138 4, OTHER LIABILITIES 31 December Guarantee fund payables 679 1,109 Liabilities related to the acquisition of subsidiaries 1,828 2,478 Personnel and related payables Provisions for pensions and paid leaves Liabilities to suppliers Tax liabilities 1, Social security liabilities Liabilities under finance lease Other liabilities 1, ,610 5,578

73 As of 31 December 2011 the Company has entered into six financial lease contracts. The main characteristics of the contracts are as follows: Lessor TBI Leasing EAD TBI Leasing EAD TBI Leasing EAD TBI Leasing EAD TBI Leasing EAD TBI Leasing EAD Maturity Effective interest rate Present value of lease payments Minimum lease payments 20 December % Leased asset Computers and other technical equipment 20 June % Computers 20 February % 5 5 Computers 25 June % Computers 25 September % Computers 20 April % Computers The maturity structure of the liabilities under finance lease is as follows: Present value of lease payments Minimum lease payments Within one year Between one and five years The Management believes that there is reasonable certainty that the Company will obtain ownership of the leased assets by the end of the lease terms, therefore the leased assets are depreciated over their useful lives. The depreciation policy for depreciable leased assets is consistent with that for own depreciable assets. 27. PREPAID PREMIUMS 31 December Prepaid premiums (including Motor Third Party Liability) 4,886 8,016 4,886 8,016

74 28. WRITTEN PREMIUMS Gross written premium Ceded premium Net written premium Gross written premium Ceded premium Net written premium Motor Insurance 89,924 (22,332) 67, ,561 (27,834) 96,727 Cargo, Aviation and Marine Insurance 12,413 (7,593) 4,820 12,904 (8,069) 4,835 Property Insurance 27,560 (13,142) 14,418 29,469 (14,232) 15,237 Other 15,264 (4,139) 11,125 13,722 (2,263) 11,459 Total 145,161 (47,206) 97, ,656 (52,398) 128, REINSURANCE COMMISSIONS Participation in result 67 _ Reinsurance commissions 5,761 7,722 5,828 7, INVESTMENT YIELD, NET Interest income on bank deposits and cash equivalents 2,813 4,161 Interests and dividend income on available-for-sale financial assets 2,286 1,295 Income from subsidiary dividends and other share participation 1,491 _ Realized gains/losses from transactions with available-for-sale financial assets 130 (270) Net effect from investment propertygains/(losses) according to fair value (104) _ Impairment of available-for-sale financial assets _ (30) Foreign exchange gains/(losses) Assets management fees (261) (287) Rental income from investment property ,524 5,154 Income from subsidiary dividends and other share participations include income from subsidiaries at the amount of BGN 1,442 thousand.

75 31. OTHER TECHNICAL INCOME, NET OF REINSURANCE Income from written off liabilities under canceled insurance contracts FX gains/(losses) from revaluation of insurance receivables/payables 942 2,381 Income from coinsurance intermediary services 89 _ Interest income from insurance operations Reversed impairment losses 7 5 Salvage income ,401 2, OTHER INCOME Income from sale of fixed assets 10 _ Income from asset rental 139 _ Income from penalties received _ 465 Other Income from asset rental includes intangible assets let to ZK Bulgarski Imoti at the amount of BGN 138 thousand and assets rented by VIG Services Bulgaria EOOD at the amount of BGN 1 thousand. 33. CLAIMS PAID Gross claims paid Reinsurer s share Net claims paid Gross claims paid Reinsurer s share Net claims paid Motor Insurance (85,396) 15,827 (69,569) (97,356) 4,980 (92,376) Cargo, Aviation and Marine Insurance (2,369) 496 (1,873) (5,980) 2,755 (3,225) Property Insurance (5,983) 464 (5,519) (12,538) 8,992 (3,546) Other (5,017) 2,086 (2,931) (6,310) 211 (6,099) Total (98,765) 18,873 (79,892) (122,184) 16,938 (105,246) 34. ACQUISITION COSTS Commissions paid (22,392) (34,574) Other acquisition costs (3,006) (2,649) (25,398) (37,223)

76 35. ADMINISTRATIVE EXPENSES Salaries and related payables (8,288) (9,078) Office maintenance (4,202) (4,801) Advertising (848) (1,116) Depreciation (1,713) (1,692) External professional services, including audit fees (244) (262) Bank charges (340) (364) Witten-off receivables (1) (896) Other (1,441) (1,553) (17,077) (19,762) In 2011 the Company s Management received remunerations at the amount of BGN 643 thousand (BGN 860 thousand in 2010), which are included in the item Salaries and related expenses. The item External professional services includes BGN 146 thousand (BGN 120 thousand in 2010) for consultancy services. 36. OTHER TECHNICAL EXPENSES, NET OF REINSURANCE Written-off insurance receivables (7,178) (8,662) Impairment of insurance receivables (2,599) (4,289) Guarantee fund fees and other taxes and charges (133) (88) Currency revaluation of insurance receivables/payables (1,025) (2,011) Other technical expenses (460) (136) (11,395) (15,186) 37. OTHER NON-TECHNICAL EXPENSES The item Other non-technical expenses includes expenses for accrued interests under financial lease amounting to BGN 26 thousand (BGN 42 thousand in 2010). 38. INCOME TAX Profit before taxation 399 (20,544) Conversion of the balance due for tax purposes, including (1,156) 2,009 Additions 4,653 10,058 Deductions (5,809) (8,049) Taxable profit (757) (18,535) Tax rate 10% 10% Income tax Deferred tax (18) 23 Profit after taxation 381 (20,521) Effective tax rate 4.5% 0.1%

77 39. EARNINGS PER SHARE Number of shares at the beginning of the period 2,147,763 2,147,763 Number of shares at the end of the period 2,743,542 2,147,763 Average number of shares for the period 2,487,274 2,147,763 Profit/(loss) for the period 381 (20,521) Earnings per share, BGN 0.15 (9.55) 40. RELATED PARTIES Related party Receivables Payables Income Expenses Type of transaction Bulstrad Health Additional health insurance _ 7 21 _ 51 personnel 237 _ Share VIG Services Bulgaria EOOD 130 _ Office rent _ 20 _ 7 Commissions paid Reinvoicing of expenses _ 5 _ utilities _ Acquisition services under 40 _ 309 contract _ 2,368 Under agreement for claims handling services _ 160 Administrative costs 15 _ Under insurance contracts Bulstrad Life VIG Bulgarski Imoti VIG Contact Centre Bulgaria AD Payables under share _ acquisition of Bulstrad 1,828 Health capital _ Expenses for Life insurance _ 23 _ 59 personnel 29 _ Under insurance contracts 651 _ Income from dividend _ 21 Co-insurance contarcts 34 _ Under insurance contracts 138 _ Intangible asset rental _ Acquiring programme product 386 license _ 57 Administrative costs Under contract for providing _ 150 services for claim liquidation _ Loan granted and income from loan interest

78 Related party Receivables Payables Income Expenses Type of transaction TBI Asset Management Doverie TBI Info AD Vienna Insurance Group Wiener Staedtische Versicherung VIG RE Bulstrad Labour Medicine EIRB Key personnel _ 17 _ 168 Asset management 3 _ Under insurance contracts 50 _ Under insurance contracts _ 211 Software maintenance _ 239 _ 239 _ 43 _ 43 _ 19,139 _ 460 Services under contract _ administrative Services under contract _ technical Reinsurance contract (depots and interests) Reinsurance contract Revoicing of expenses _ 232 _ reforming of Company s brand Reinsurance contract Reinsurance contract _ 2 _ 10 Contract for labour medicine 791 _ Dividend income _ 2,123 _ 1,170 Reinsurance contract _ 643 _ 21 _ 11 Total 1,108 24,712 1,867 6, SUBSEQUENT EVENTS Remuneration for personnel under management contracts Social securities for personnel under management contracts Additional pension insurance for personnel under management contracts From date of writing to date of annual financial statements approval no significant events concerning the report and subject to disclosure have occurred.

79 YEARS ANNUAL REPORT 2011 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR 2011

80 YEARS ANNUAL REPORT 2011 STRUCTURE OF THE GROUP STRUCTURE OF THE GROUP BULSTRAD VIENNA INSURANCE GROUP As of 31 December 2011 BULSTRAD VIENNA INSURANCE GROUP (the mother company) controls directly or indirectly through other companies the following subsidiaries: Voting rights, % Share in result, % Relations EIRB London OOD Direct control VIG Services Bulgaria EOOD Direct control Bulstrad Life Vienna Insurance Group AD Direct control Bulstrad Health AD Direct control Bulstrad Health OOD Indirect control Bulstrad Labour Medicine EOOD Indirect control Vienna Insurance Group Contact Centre Bulgaria AD Direct control The mother company and its subsidiaries form BULSTRAD VIENNA INSURANCE GROUP (the Group). The subsidiaries Bulstrad Life Vienna Insurance Group AD and Bulstrad Health AD hold licences respectively for life insurance and health insurance.

81 YEARS ANNUAL REPORT 2011 AUDITORS REPORT KPMG Bulgaria OOD 45/À Bulgaria Boulevard Sofia 1404 Bulgaria Òålephone +359 (2) Telefax +359 (2) Å-mail Internet INDEPENDENT AUDITORS REPORT To the shareholders of ZAD BULSTRAD VIENNA INSURANCE GROUP Report on the Consolidated Financial Statements We have audited the accompanying Consolidated Financial Statements of ZAD BULSTRAD VIENNA INSURANCE GROUP (the Company), which comprise the Consolidated Statement of Financial Position as at 31 December 2011, the Consolidated Income Statement, the Consolidated Statements of Comprehensive Income, Changes in Equity and Cash Flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management s responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these Consolidated Financial Statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as Management determines is necessary to enable the preparation of Consolidated Financial Statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we coply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Consolidated Financial Statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Consolidated Financial Statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the Consolidated Financial Statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation and fair presentation of the Consolidated 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 principles used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the Consolidated Financial Statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the Consolidated Financial Statements give a true and fair view of the consolidated financial position of the Company as at 31 December 2011,

82 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Report on other legal and regulatory requirements Annual Report of the activities of the Company prepared in accordance with the requirements of article 33 of the Accountancy Act As required under the Accountancy Act, we report that the historical financial information disclosed in the Consolidated Annual Report of the activities of the Company, prepared by Management as required under article 33 of the Accountancy Act, is consistent, in all material aspects, with the consolidated financial information disclosed in the audited Consolidated Financial Statements of the Company as of and for the year ended 31 December Management is responsible for the preparation of the Consolidated Annual Report of the activities of the Company which was approved by the Management Board of the Company on 16 March Gilbert McCaul Margarita Goleva Authorised Representative Registered Auditor KPMG Bulgaria OOD Sofia, 20 March 2012 Translation from Bulgarian KPMG Bulgaria OOD, a Bulgarian 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. Registered with the Commercial Register at the Bulgarian Registry Agency Identity Code IBAN BG06 RZBB BIC RZBBBGSF RaiffeisenBank (Bulgaria) EAD

83 YEARS ANNUAL REPORT 2011 CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF FINANCIAL POSITION as of 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) Note 31 December December 2010 ASSETS Intangible assets 8 1, Goodwill Other capital investments Investment property 11 9,751 9,919 Property, plant and equipment 12 26,128 30,030 Financial assets 134, ,783 Bank deposits with original maturity over 90 days 13 61,122 58,044 Available-for-sale financial assets 14 70,895 47,351 Loans granted 15 2, Reinsurer s share of 64,128 60,995 _ Unearned premium provision 22 17,981 18,829 _ Outstanding claims provision 23 45,989 42,037 _ Mathematical provision Insurance and reinsurance receivables 46,687 48,214 Insurance and health insurance receivables 16 41,615 38,530 Reinsurance receivables 17 5,072 9,684 Other receivables 18 23,947 21,195 Deferred acquisition costs 19 18,279 20,720 Cash and cash equivalents 20 11,178 31,538 TOTAL ASSETS 335, ,362

84 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as of 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) Continued Note 31 December December 2010 EQUITY AND LIABILITIES Equity 21 65,599 38,703 Minority interest Gross insurance provisions 221, ,336 Unearned premiums provision, including 22 58,511 70,633 _ Unexpired risk provision 433 2,284 Outstanding claims provision , ,735 Mathematical provisions 24 41,579 39,089 Other provisions 25 3,280 1,879 Deferred tax liabilities 26 1,816 2,057 Reinsurer s deposits 19,139 17,216 Insurance and reinsurance liabilities 15,432 20,595 Insurance liabilities 27 5,713 6,355 Reinsurance liabilities 28 9,719 14,240 Other liabilities 29 6,871 4,578 Prepaid premiums 30 5,362 8,434 TOTAL EQUITY AND LIABILITIES 335, ,362 The Consolidated Statement of Financial Position is authorized for issuing by the Management Board on 16 March Rumen Yanchev Chief Executive Officer Klaus Muehleder Executive Officer Theodore Iliev Financial Director Gilbert McCaul Manager KPMG Bulgaria Margarita Goleva Registered Auditor

85 YEARS ANNUAL REPORT 2011 CONSOLIDATED INCOME STATEMENT CONSOLIDATED INCOME STATEMENT for the period ended 31 December (All amounts are in thousand of BGN, unless otherwise noted) For the period ended 31 December Note Gross written premiums , ,927 Premiums ceded to reinsurers 31 (48,404) (54,064) Net written premiums , ,863 Change in gross unearned premium reserve, including 22 12,122 19,114 _ Change in unexpired risk reserve 1, Reinsurer s share in change in unearned premium reserve 22 (848) 7,472 Net change in unearned premium reserve 11,274 26,586 Premiums earned, net of reinsurance 137, ,449 Reinsurance commissions and profit participation 32 8,374 10,097 Investment yield, net 33 6,794 6,721 Other technical income, net of reinsurance 34 1,524 2,888 Other income 35 1,475 1,202 TOTAL INCOME 155, ,357 Claims paid 36 (100,022) (123,915) Reinsurer share in claims paid 36 19,305 17,245 Surrenders and maturities 36 (10,024) (6,741) Net claims paid (90,741) (113,411) Change in outstanding claims provision, net 11,888 (8,962) Change in gross outstanding claims provision 23 7,936 (29,191) Change in reinsurer s share in outstanding claims provision 23 3,952 20,229 Claims incurred, net of reinsurance (78,853) (122,373) Change in life insurance provision, net (3,862) (5,966) Change in gross life insurance provision (3,891) (5,981) Change in reinsurer s share in life insurance provision Acquisition costs 37 (28,056) (40,257) Change in deferred acquisition costs, net 19 (2,441) (6,706) Administrative expenses 38 (27,648) (29,267) Other technical expenses, net of reinsurance 39 (14,032) (16,889) Other non-technical expenses 40 (185) (77) TOTAL EXPENSES (155,077) (221,535)

86 CONSOLIDATED INCOME STATEMENT for the period ended 31 December (All amounts are in thousand of BGN, unless otherwise noted) Continued For the period ended 31 December Note (LOSS)/PROFIT BEFORE TAX 338 (20,178) Income tax 38 (335) (177) Deferred taxes 23, LOSS/PROFIT FOR THE PERIOD 36 (20,305) For shareholders (58) (20,078) For minority interest 94 (227) (Loss)/earnings per share, BGN 41 (0.02) (9.35) The Consolidated Income Statement is authorized for issuing by the Management Board on 16 March Rumen Yanchev Chief Executive Officer Klaus Muehleder Executive Officer Theodore Iliev Financial Director Gilbert McCaul Manager KPMG Bulgaria Margarita Goleva Registered Auditor

87 YEARS ANNUAL REPORT 2011 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the period ended 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) For the period ended 31 December Financial result for the period 36 (20,305) Other comprehensive income Revaluation of property, plant and equipment (2,071) (717) Tax, related to the other comprehensive income items Revaluation of foreign activities Revaluation of available-for-sale financial assets, net (345) 328 Total other comprehensive income (2,181) (268) Financial result for the period, including (2,145) (20,573) For shareholders (2,238) (20,322) For minority interest 93 (251) The Consolidated Statement of Comprehensive Income is authorized for issuing by the Management Board on 16 March Rumen Yanchev Chief Executive Officer Klaus Muehleder Executive Officer Theodore Iliev Financial Director Gilbert McCaul Manager KPMG Bulgaria Margarita Goleva Registered Auditor

88 YEARS ANNUAL REPORT 2011 CONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED STATEMENT OF CASH FLOWS for the period ended 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) For the period ended 31 December CASH FLOWS FROM OPERATING ACTIVITY Financial result for the period 36 (20,305) Adjustments for Depreciation and amortization 2,470 2,747 Investment property (gains)/losses 168 (103) Impairment of land and buildings 111 _ Revaluation of foreign activities Losses from transactions with financial assets (153) 404 Impairment of financial investments _ 43 Impairment of insurance receivables 2,939 3,798 Foreign currency (gains)/losses (147) (157) Interests on deposits and financial instruments and dividend income (7,097) (7,157) Written off fixed assets 455 4,658 Taxes Other _ 4 Total adjustment (1,138) 4,413 Change in assets and liabilities Insurance contract provisions, gross (16,167) 16,058 Reinsurer s share of insurance contract provisions (3,133) (27,717) Insurance and health insurance receivables (6,371) 8,022 Reinsurance receivables 2,489 (593) Other receivables (1,412) (666) Deferred acquisition costs 2,441 6,706 Insurance and health insurance liabilities (642) (5,451) Reinsurance liabilities (2,398) 4,896 Reinsurance deposits 1,923 17,216 Other liabilities 898 (1,322) Prepaid premiums (3,072) (1,831) Total change in assets and liabilities (25,444) 15,318 Net cash flows from operating activity (26,546) (574)

89 CONSOLIDATED STATEMENT OF CASH FLOWS for the period ended 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) Continued For the period ended 31 December CASH FLOWS FROM OPERATING ACTIVITY (26,546) (574) CASH FLOWS FROM INVESTING ACTIVITY (Increase)/decrease in financial assets (28,607) (17,681) (Increase)/decrease in property, plant and equipment (1,583) (5,278) (Increase)/decrease in investment property _ (792) Interest and dividends received 7,235 7,194 Net cash flows from investing activity (22,955) (16,557) CASH FLOWS FROM FINANCING ACTIVITY Proceeds from issue of share capital 5,957 _ Share premiums 23,184 _ Net cash flows from financing activity 29,141 _ Increase in cash and cash equivalents (20,360) (17,131) Cash and cash equivalents at the beginning of the period 31,538 48,669 Cash and cash equivalents at the end of the period 11,178 31,538 The Consolidated Statement of Cash Flows is authorized for issuing by the Management Board on 16 March Rumen Yanchev Chief Executive Officer Klaus Muehleder Executive Officer Theodore Iliev Financial Director Gilbert McCaul Manager KPMG Bulgaria Margarita Goleva Registered Auditor

90 YEARS ANNUAL REPORT 2011 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period ended 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) Share capital Share premium reserve General reserves Reserves Revaluation reserve Financial result Equity Minority interest Total equity As of 1 January ,478 7,955 12,728 19,896 (3,043) 59, ,716 Comprehensive income for the period Financial result for the period (20,078) (20,078) (227) (20,305) Other comprehensive income _ (613) _ (613) (32) (645) Revaluation of foreign activities _ 49 _ 49 _ 49 Net revaluation of available-for-sale financial assets _ 328 _ 328 _ 328 Total other comprehensive income _ (236) (20,078) (20,314) (259) (20,573) Transactions with shareholders recorded directly in equity Retained earnings distribution (172) _ 172 _ Change in equalization fund 3 3 _ 3 Total transactions with shareholders recorded directly in equity (169) _ _ 3 As of 31 December ,478 7,955 12,559 19,660 (22,949) 38, ,146

91 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period ended 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) Continued Share capital Share premium reserve General reserves Reserves Revaluation reserve Financial result Equity Minority interest Total equity As of 1 January ,478 7,955 12,559 19,660 (22,949) 38, ,146 Comprehensive income for the period Financial result for the period (58) (58) Other comprehensive income Net revaluation of property, plant and equipment _ (1,849) _ (1,849) (15) (1,864) Revaluation of foreign activities _ 24 _ Net revaluation of available-for-sale financial assets _ (355) _ (355) 10 (345) Total other comprehensive income _ (2,180) (58) (2,238) 93 (2,145) Transactions with shareholders recorded directly in equity Paid dividends (170) (170) Loss allocation from previous periods _ (7,651) (12,559) _ 20,210 _ Share capital increase 5,957 5,957 _ 5,957 Share premium, net of share issue expenses _ 23,184 _ 23,184 _ 23,184 Other (7) (7) 7 _ Total transactions with shareholders recorded directly in equity 5,957 15,533 (12,559) _ 20,203 29,134 (163) 28,971 As of 31 December ,435 23,488 _ 17,480 (2,804) 65, ,972

92 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period ended 31 December 2011 (All amounts are in thousand of BGN, unless otherwise noted) Continued The Consolidated Statement of Changes in Equity is authorized for issuing by the Management Board on 16 March Rumen Yanchev Chief Executive Officer Klaus Muehleder Executive Officer Theodore Iliev Financial Director Gilbert McCaul Manager KPMG Bulgaria Margarita Goleva Registered Auditor

93 YEARS ANNUAL REPORT 2011 SIGNIFICANT EVENTS IN 2011

94 YEARS ANNUAL REPORT 2011 SIGNIFICANT EVENTS SIGNIFICANT EVENTS IN 2011 The Company celebrated the 50th anniversary of BULSTRAD trademark In 2011 the Company celebrated 50 years since the establishment of the trade mark BULSTRAD under the motto 50 years BULSTRAD _ 50 years of guarantee. On 11 July 2011, staff from all over the country commemorated the event in the splendid Riu Pravets Hotel, with the Balkan Mountains in the background, enjoying the extraordinary music show of the Big Band of the Bulgarian National Radio, and the performance of pop singers and fireworks. The Executive Director Rumen Yanchev and Representative of the major shareholder Peter Hoefinger greeted the guests. All employees who have been working for the Company for more than 20 years were presented with a special jubilee coin as a keepsake. The President of the Republic of Bulgaria sent a greeting letter for the anniversary. On 31 July 2011, the Company gave an official dinner for business partners and clients of the Company, diplomats, media representatives, business associations and universities. Organizational restructuring for better efficiency At a meeting held on 30 September 2011, the Management Board of BULSTRAD VIENNA INSURANCE GROUP adopted a resolution for initiation of a merger procedure between ZK Bulgarski Imoti and BULSTRAD VIENNA INSURANCE GROUP, and approved the draft contract for merger of the two companies. Pursuant to these resolutions, on the same date, BULSTRAD VIENNA INSURANCE GROUP and ZK Bulgarski Imoti signed a merger contract corresponding to the statutory form. The merger of the two companies and/or the conditions under which it shall be implemented (stipulated in the merger contract) are subject to the approval of the deputy chairperson of the Financial Supervision Commission who is in charge of Investment Supervision, of the general meetings of the two companies, as well as of the deputy chairperson of the Financial Supervision Commission in charge of Insurance Supervision. Successful start of a training project of BULSTRAD VIENNA INSURANCE GROUP under Development of Human Resources Operational Programme On 20 October 2010, a contract was signed by BULSTRAD VIENNA INSURANCE GROUP, National Employment Agency, Directorate of Regional Office of Employment _ Sofia _ a coordinating body of Human Resources Operational Programme. This marked the beginning of Development and improvement of key competences _ symbol of the strive for professional success in BULSTRAD VIENNA INSURANCE GROUP project. 264 employees of BULSTRAD VIENNA INSURANCE GROUP are going to be trained in the project. The project lasts for 12 months and costs a total of BGN 104,278.90, 70% funded by the European Union, European Social Fund and Bulgarian Employment Agency. The project is part of the overall system of BULSTRAD VIENNA INSURANCE GROUP for staff development and is a natural result of the age-old policy of the Company to develop each person in the structure of the organization considering his personal needs. Insurers took part in Voluntary Day In October 2011, about 80 employees of BULSTRAD VIENNA INSURANCE GROUP and BULSTRAD LIFE VIENNA INSURANCE GROUP participated in Voluntary Day organized by the companies of VIENNA INSURANCE GROUP in Bulgaria assisted by the foundation Bulgarian Charities Aid Foundation. In Sofia the insurers worked in day centre for children with disabilities St Mina and centre for social support St Sofia. The campaign encompassed also Karin Dom (Karin s Home) in Varna, Bulgarian association for persons with intellectual problems (BALIZ) in Pleven and Equilibrium association in Ruse. Participation in social initiatives has become a tradition not only for BULSTRAD VIENNA INSURANCE GROUP, but for all companies from VIENNA INSURANCE GROUP as well.

95 YEARS ANNUAL REPORT 2011 KEY PEOPLE

96 YEARS ANNUAL REPORT 2011 KEY PEOPLE KEY PEOPLE RUMEN YANCHEV Chairman of the Management Board and Executive Director tel: 359 2/ , KLAUS MUEHLEDER Vice-Chairman of the Management Board and Executive Director tel: 359 2/ , CHRISTOPH RATH Member of the Management Board and Executive Director tel: 359 2/ RUMYANA MILANOVA Member of the Management Board and Director Reinsurance Department tel: 359 2/ DIANA EVSTATIEVA Member of the Management Board and Manager of VIG Services Bulgaria tel: 359 2/ IVAN IVANOV Member of the Management Board and Deputy Executive Director tel: 359 2/ GEORGI VASILEV Deputy Executive Director tel: 359 2/ , IVO GRUEV Deputy Executive Director tel: 359 2/ THEODORE ILIEV Financial Director tel: 359 2/

97 EVGENIA KALO-KOLOVA Director Legal Department tel: 359 2/ NIKOLA PAMUKOV Director Actuary Department tel: 359 2/ INSURANCE DEPARTMENTS IVAYLO PARVANOV Director Aviation Insurance and Reinsurance tel: 359 2/ IVAYLO AXENTIEV Director Marine Insurance tel: 359 2/ PLAMEN ZAHARIEV Director Property and PA Insurance tel/fax: 359 2/ PLAMEN SHINOV Director Motor Insurance tel: 359 2/ ALICIA MINKOVA Director Cargo and Carrier s Liability tel: 359 2/ alicia_minkova@bulstrad.bg RALITSA TABAKOVA Director Liability Insurance tel: 359 2/ liability@bulstrad.bg ATANAS SIMEONOV Director Engineering Insurance tel: 359 2/ a_simeonov@bulstrad.bg

98 NEDELCHO ILCHEV Chief Expert Agricultural Insurance tel: 359 2/ HRISTO KALCHEV Chief Expert Agricultural Insurance tel: 359 2/ FUNCTIONAL DEPARTMENTS PETAR MANOVSKI Director Marketing and CRM tel: 359 2/ å-mail: DIMITAR TANCHEV Director Sales tel: / BLAGOY ANKOV Director Investors Relations tel: 359 2/ KONSTANTIN IVANOV Director General Insurance Claims tel: 359 2/ ANGEL SHINOV Director Analysis, Coordination and Control of Claims tel: 359 2/ STANIMIR GRIGOROV Director Auto Service Network tel: 359 2/ PLAMEN MOMCHEV Director Auto Service Network tel: 359 2/

99 TSVETAN KADIYSKI Director Subrogation tel: 359 2/ VESSELIN VASSILEV Director Portfolio Analysis, Control and Management Department tel: 359 2/ ANYUTA DENKOVA Public Relations Deputy Director Marketing and CRM tel: 359 2/ ANNIE MIHAILOVA Director Administrative Department tel: 359 2/ ROSITSA BACHVAROVA Director Human Resources tel: 359 2/ KIRIL PETKOV Director Information Technologies tel: 359 2/ MILKA VELEVA Head of Internal Control Office tel: 359 2/ ALEXANDER VLADOV Head of Risk Management Unit tel: 359 2/

100 REGIONAL STRUCTURES VESELKA YANCHEVA Director SOFIA General Agency tel: 359 2/ GEORGI NENOV Director PLOVDIV General Agency tel: / GALIN GEORGIEV Director VARNA General Agency tel: /612275, ILIYA DIMITROV Director RUSE General Agency tel: / KRASIMIR SABEV Director BURGAS General Agency tel: /877007, SVETOZAR GANCHEV Director PLEVEN General Agency tel: / ANDON STANKOV Director SOUTH-WESTERN BULGARIA General Agency tel: / NIKOLAY DONCHEV Director STARA ZAGORA General Agency tel: /622591,

101 IVAN IVANOV Director SLIVEN General Agency tel: / NIKOLAY KARAKASHEV Director SHUMEN General Agency tel: / VALERI DILOV Director VRATSA General Agency tel: / DIMITAR PAPAZOV Director VELIKO TARNOVO General Agency tel: /625980, ZEHRA ALISH Director PAZARDZHIK General Agency tel: /403811, GEORGI DIMOV Director HASKOVO General Agency tel: /588948, RAYKO GEORGIEV Director MONTANA General Agency tel: /300667,

102 YEARS ANNUAL REPORT 2011 VIG SERVICES BULGARIA

103 YEARS ANNUAL REPORT 2011 VIG SERVICES BULGARIA VIG SERVICES BULGARIA VIG Services Bulgaria is an authorized representative to receive and handle material damages claims under motor insurances of the VIENNA INSURANCE GROUP companies in Bulgaria _ BULSTRAD VIENNA INSURANCE GROUP and Bulgarski Imoti AD. CLAIMS HANDLING CENTERS GORUBLYANE 1138 Sofia, Gorublyane Quarter, 4 Eng. Georgi Belov St. tel: 359 2/ , mobile: / kasko_claims@bulstrad.bg HASHOVE 1330 Sofia, Krasna Polyana Quarter, 1A Hashove St. tel: 359 2/ , mobile: / kasko_claims@bulstrad.bg VARNA 9000 Varna, Vazrazhdane Quarter tel: / Anna Feliksova St. mobiles: /304014, / varna@vig-sb.bg PLOVDIV 4000 Plovdiv, Naycho Tsanov Blvd. tel: / (under Rodopi Overpass) mobiles: /004129, / plovdiv@vig-sb.bg BURGAS 8000 Burgas, Izgrev Quarter, Transportna St. tel: / (Autohouses area) mobiles: /304993, / burgas@vig-sb.bg VELIKO TARNOVO 5000 Veliko Tarnovo, 7A Nish St. tel: / mobiles: /004131, / veliko_tarnovo@vig-sb.bg RUSE 7000 Ruse, Iztok Quarter, 12 Kotovsk St. tel: / mobiles: /301124, / ruse@vig-sb.bg PLEVEN 5800 Pleven, 81 Storgoziya Quarter tel: / mobiles: /301223, / pleven@vig-sb.bg SLIVEN 8800 Sliven, 55 Burgasko Shose Blvd. tel: / (next to Billa Supermarket) mobile: / sliven@vig-sb.bg STARA ZAGORA 6000 Stara Zagora, 22 Slavyanski Blvd. tel: / Business Center Praktis mobile: / st_zagora@vig-sb.bg SHUMEN 9700 Shumen, Dobrudzhanski Quarter, 39 Saedinenie St. tel: / mobile: / shumen@vig-sb.bg

104 CLAIMS HANDLING OFFICES BLAGOEVGRAD 2700 Blagoevgrad, 18À Vasil Levski Blvd. tel: / mobile: / RAZGRAD 7200 Razgrad, 14 Nikola Vaptsarov St. tel: / mobile: / HASKOVO 6300 Haskovo, 4 Stefan Stambolov Blvd. tel: / mobile: / haskovo@vig-sb.bg DUPNITSA 2600 Dupnitsa, 5 Ivan Vazov St. tel: /51145 mobile: / dupnica@vig-sb.bg PAZARDZHIK 4400 Pazardzhik, 7À Tsar Shishman St. tel: / mobile: / pazardzhik@vig-sb.bg VRATSA 3000 Vratsa, 6 Stoyan Kalachev St. tel: / mobile: / vratsa@vig-sb.bg MONTANA 3400 Montana, 23 Alexander Stamboliyski St. tel: / mobile: / montana@vig-sb.bg PERNIK 2300 Pernik, 20 Krakra St. tel: / mobile: / pernik@vig-sb.bg

105 YEARS ANNUAL REPORT 2011 OFFICES The QR code is of BULSTRAD VIENNA INSURANCE GROUP

106 YEARS ANNUAL REPORT 2011 OFFICES OFFICES OF BULSTRAD VIENNA INSURANCE GROUP * RUSE MONTANA PLEVEN SOFIA VRATSA HEAD OFFICE VELIKO TARNOVO SHUMEN VARNA STARA ZAGORA SLIVEN BURGAS PAZARDZHIK PLOVDIV HASKOVO PETRICH Head Office General Agencies _ 15 Offices _ 61 HEAD OFFICE 1000 Sofia, 5 Pozitano Sq. tel: 359 2/ , fax: 359 2/ OFFICES 1000 Sofia, 6 Tsar Osvoboditel Blvd. (General Agency) tel: 359 2/ , fax: 359 2/ Sofia, 136 Vasil Levski Blvd. tel: 359 2/ , fax: 359 2/ Sofia, 44 Venelin St. tel: 359 2/ , fax: 359 2/ Sofia, Mladost 4, Business Park Sofia, bl. 10 tel: 359 2/ , 6, 8, 9 fax: 359 2/ Sofia, 5 Pozitano Sq. tel: 359 2/ , , fax: 359 2/ Sofia, Sofia Airport, Terminal 1, Departures tel: 359 2/ fax: 359 2/ Sofia, Botunets Quarter, 1 Balkan St., Bitov Kombinat, fl. 2 tel: 359 2/ mîbile: / Sofia, 32G Cherni Vrach Blvd. tel: 359 2/ , mîbile: / Sofia, 103 Gotse Delchev Blvd., fl. 5, office 12 tel/fax: 359 2/ mobile: / Kyustendil, 10 Lyuben Karavelov St. tel/fax: / Dupnitsa, 5 Ivan Vazov St. tel/fax: / Pernik, 20 Krakra St. tel/fax: /600274, Samokov, 2 Han Kubrat St. tel/fax: /66375, mobile: / *At the end of 2011 was launched a project for development of an additional sales channel being a chain of exclusive representatives of the Company which operate under a franchise model and have the status of branch offices. Such have already been established in the cities of Sofia, Varna, Razgrad, Targovishte, Lovech, Vidin, Botevgrad and Silistra.