ÃÎÄÈØÅÍ ÎÒ ÅÒ 2015 ANNUAL REPORT 2015

Transcription

1 ÃÎÄÈØÅÍ ÎÒ ÅÒ 2015 ANNUAL REPORT 2015 BG EN

2 VIENNA INSURANCE GROUP The Group has operated in Central and Eastern Europe (CEE) for more than 25 years and is one of the leading listed insurance Groups in the region. VIG generated more than EUR 9 billion in premiums in 2015, making it number one in its core markets again. With close to 23,000 employees and around 50 Group companies in 25 countries, the Group offers an extensive customer-oriented portfolio of products and services across all lines of business (property and casualty, life and health insurance). Expansion into Central and Eastern Europe VIG s roots in Austria reach back to Since that time, the Company has developed from a locally based insurer to a leading international insurance Group. Wiener Staedtische set the course for the international expansion. In 1990, it became one of the first Western European insurance companies to recognise the growth potential of Central and Eastern Europe and to take a chance on entering the market in the former Czechoslovakia. The past 25 years saw a series of further expansions, including Hungary (1996), Poland (1998), Croatia (1999) and Romania (2001). After entering the market in Moldova in 2014, VIG now operates in a total of 25 countries. Number one in its core markets VIG s core markets are Austria, the Czech Republic, Slovakia, Poland, Romania, Bulgaria, Croatia, Hungary, Serbia and Ukraine. A market share of more than 18 % makes VIG the clear number one insurer in this group of countries. The strategic decision that was made in 1990 to expand into Central and Eastern Europe has proven to be very successful. In 2015, more than half of VIG s total premiums of more than EUR 9 billion were generated in CEE markets. VIG is convinced that the economic growth of the region as well as the demand for insurance there will continue to rise. The CEE region s importance as a growth market for VIG is also shown by the decision to locate the registered office of its reinsurance company VIG Re (established in 2008) in the Czech Republic. Customer proximity is VIG s trump card in 25 markets VIG s success is primarily based on local entrepreneurship and customer proximity. This is reflected in the regional ties, multi-brand strategy and wide variety of distribution channels used. The Group made a conscious decision to rely on regionally established brands united under the Vienna Insurance Group umbrella. VIG s success as a corporate Group is also due to the individual strengths of these brands and local expertise of around 50 Group companies. Its core business is the key of VIG s success VIG s activities are clearly focused on its core business, the insurance business. It operates as a progressive and highly risk-conscious insurer. Reliability, trustworthiness and solidarity are qualities that benefit the Group not only in its relationships with customers, but also with business partners, employees and shareholders. Values such as honesty, integrity, diversity, equal opportunity and customer-orientation form the basis for business decisions at VIG. The effects of this fundamental approach are shown in its strategy of continuous sustainable growth, as well as its excellent creditworthiness. VIG s development is confirmed by the international rating agency Standard & Poor s which has awarded the Group a rating of A+ with a stable outlook for years. As a result, VIG has the best rating of all companies in the ATX, the leading index of the Vienna Stock Exchange. VIG and Erste Group: a strong team Erste Group has strong ties to Austria and is one of the leading banking Groups in Central and Eastern Europe. VIG and Erste Group entered into a strategic partnership in 2008 that benefits both of them in the region: Erste Group branches distribute VIG insurance products, and in return VIG Group companies offer Erste Group bank products.

3 Stable dividend policy of the Group VIG has been listed since October 1994 and is now one of the top companies in the prime market segment of the Vienna Stock Exchange. The Company has an attractive dividend policy that offers shareholders a dividend of at least 30% of Group profit (after taxes and non-controlling interests). Its listing on the Prague Stock Exchange in February 2008 also emphasises the great importance of the Central and Eastern European economic area for VIG. As in Vienna, VIG is also one of the top companies in the Prague stock market. Around 70% of VIG s shares are held by its principal shareholder Wiener Staedtische Versicherungsverein. The remaining shares are in free float. An attractive employer in Austria and Central and Eastern Europe In addition to being number one for insurance products, VIG also wants to be the number one choice as an employer and attract the most talented and the smartest employees. Identifying and developing individual employee skills are a central priority in the Company s modern human resources management. Diversity is seen as an opportunity and is part of the dayto-day life at VIG. The Group also places great importance on creating an environment that promotes the development of its employees. This is because Vienna Insurance Group is aware that its success is based on the dedication of it s around 23,000 employees. Further information on Vienna Insurance Group is available at or in the VIG Group Annual Report.

4 THE LEADING INSURANCE SPECIALIST IN AUSTRIA AND CEE. January

5 MANAGEMENT BODIES ANNUAL REPORT 2015

6 ANNUAL REPORT 2015 SUPERVISORY AND MANAGEMENT BOARD SUPERVISORY AND MANAGEMENT BOARD SUPERVISORY BOARD Chairman Peter Hoefinger Members Werner Matula Josef Aigner Atanas Kanchev MANAGEMENT BOARD Chairman Rumen Yanchev _ Executive Director Members Christoph Rath _ Executive Director Nedyalko Chandarov _ Executive Director Ivan Ivanov Ivo Gruev AUDITORS KPMG Bulgaria OOD HEAD OFFICE 5 Pozitano Sq Sofia, Bulgaria

7 ANNUAL REPORT 2015 MEMBERSHIP AND SHAREHOLDERS MEMBERSHIP OF ZAD BULSTRAD VIENNA INSURANCE GROUP ZAD 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 ZAD BULSTRAD VIENNA INSURANCE GROUP TBI Bulgaria EAD 85.18% Vienna Insurance Group Wiener Versicherung Gruppe 14.20% Other 0.62%

8 FINANCIAL INFORMATION FOR 2015 ANNUAL REPORT 2015

9 ANNUAL REPORT 2015 GROSS PREMIUM INCOME AND MARKET SHARE GROSS PREMIUM INCOME AND MARKET SHARE OF ZAD BULSTRAD VIENNA INSURANCE GROUP FOR 2015 According to data from the Financial Supervision Commission, in 2015 ZAD BULSTRAD VIENNA INSURANCE GROUP has generated premium income of BGN 192,313 thousand which represents a growth rate of 12.4% compared to 2014 _ a result which places ZAD BULSTRAD VIENNA INSURANCE GROUP second on the Bulgarian insurance market. Part of this growth is the effect of a change in the accounting policy 1 of the Company, which led to the inclusion of premium amounting to BGN 5,775 thousand from insurance contracts which enter in force in The adjusted growth of the premium income without applying this change amounts to 9%. Even adjusted, the growth rate remains significant, and it is mainly due to the higher sales volume of motor insurance and more specifically motor Casco, where the written premium income has risen with 16%. Another major factor for this increase is the growth in property insurance which has reached 18% on annual basis. An increase is observed in almost all other insurance lines, except for Marine Insurance and Insurance for Various Financial Losses. The trend towards optimization of non-profitable insurance portfolios has been retained in 2015 and this together with the purposeful actions of the Company for stimulating the sales in the profitable segments has contributed to a large degree for the achievement of higher overall sales. The gross premium income of ZAD BULSTRAD VIENNA INSURANCE GROUP for 2015 and the growth rate per line of business are presented in the table below, whereas the distribution of the premium income according to product lines is presented in the Portfolio Structure section. 1 Following a recommendation from the insurance regulatory authorities, in 2015 the Management of the Company adopted a change in the accounting policy regarding the date of initial recognition of revenue from concluded insurance contracts. In line with this, premium income under insurance contracts which is charged for the entire period covered shall be recognized initially from the moment of conclusion of the insurance contract. In accordance with the requirements under the International Accounting Standard 8 _ Accounting Policies, Changes in Accounting Estimates and Errors, the Company has applied the change in the insurance policy retroactively (as of 1 January 2014).

10 GROSS PREMIUM INCOME OF ZAD BULSTRAD VIENNA INSURANCE GROUP BGN 000 Lines of business Change, % Total 192, , % Motor Insurance 116, , % Casco 69,805 59, % Motor Third-Party Liability Related to the Possession and Use of Motor Vehicles, including 47,097 42, % _ Motor Third-Party Liability 47,097 42, % _ Green Card _ 79.88% Railway Vehicles Insurance 4,471 4,681 _ 4.49% Property Insurance 40,763 34, % Fire and Natural Perils 34,563 29, % Property Damage 6,200 5, % Cargo, Aviation and Marine Insurance 14,363 15,960 _ 10.01% Cargo Insurance 5,709 4, % Aviation Insurance 6,546 3, % Marine Insurance 2,108 7,561 _ 72,12% Other 15,814 14, % Personal Accident and Medical Expenses 5,244 4, % Liabilities Insurance and Carrier s Liability 10,229 9, % Financial Losses _ 31.02% In order to highlight the factors for the generated growth/decrease in the premiums, and the changes in the structure of the insurance portfolio, below are considered the trends in the development of the main insurance products. Motor Casco Insurance sales have risen by over 18%, which shows that Company s Casco products have established themselves among the most demanded ones on the market. The increase is reported both for individual clients and legal entities, across all sales channels: agents, brokers and direct business. ZAD BULSTRAD VIENNA INSURANCE GROUP ranks third on the Motor Casco market in Bulgaria, with a market share of 14%. BULSTRAD VIG 14% MARKET Motor Casco Insurance

11 Motor Third Party Liability Insurance records a growth of the premium income (10.67%) compared to the previous year, and it is important to note that this growth has been achieved within the scope of the Company s policy of selecting the desired risk groups. The premium income of this insurance amounts to BGN 47,097 thousand. BULSTRAD VIG 8% MARKET Motor Third Party Liability Insurance Property Insurance (Fire and Natural Perils and Property Damage) reports a growth of 18.44%, as a result of newly attracted corporate clients and the successful work in the sales of insurance products for individual clients and SMEs. ZAD BULSTRAD VIENNA INSURANCE GROUP ranks third in this sector on the Bulgarian insurance market. BULSTRAD VIG 14% MARKET Property Insurance Liabilities Insurance and Carrier s Liability Insurance report a rise above 11%, which exceeds the growth rate of over 5% during This increase is both due to the attraction of new clients and the rise in the sales of insurance for Carrier s Liability, Product Liability, Employer s Liability and General Third-Party Liability. During the reporting year, the Company has expanded its market share and thus has reached the top position on the Bulgarian market in this segment. BULSTRAD VIG 27% MARKET Liabilities Insurance and Carrier s Liability Insurance

12 Goods in Transit Insurance has achieved a considerable increase of the premium income (15.30%) compared to 2014, which strengthens the leadership position of the Company in this insurance line, with a market share of 33%. BULSTRAD VIG 33% MARKET Goods in Transit Insurance The Company reports a rise of over 11% in the insurance of Personal Accident and Travel Assistance Abroad during the past year, which is largely the result of the higher sales of Labour Accident Insurance and products intended for coverage of medical expenses while travelling abroad and medical expenses of foreign citizens on the territory of Bulgaria. ZAD BULSTRAD VIENNA INSURANCE GROUP ranks fifth on the market, with a market share of 10.47%. BULSTRAD VIG 10.47% MARKET Personal Accident and Travel Assistance Abroad Regarding Aviation Insurance, we have achieved a growth compared to 2014, mostly due to covers for Aviation Hull and, more specifically, Hull War Risk and Hull Deductable. Another important factor is the fluctuation of the USD exchange rate with respect to the Bulgarian currency, since a large part of the aviation insurance portfolio provides coverage in USD. In the field of Aviation Insurance, ZAD BULSTRAD VIENNA INSURANCE GROUP holds the top position, with a share of 35.59%. BULSTRAD VIG 35.59% MARKET Aviation Insurance

13 The premium income in Marine Insurance has experienced a considerable decrease, which is due to the termination of active reinsurance of foreign vessels. With its market share of 26.47%, the Company occupies the second position on the market. BULSTRAD VIG 26.47% MARKET Marine Insurance The total amount of insurance indemnities paid by ZAD BULSTRAD VIENNA INSURANCE GROUP in 2015 is BGN 121,735 thousand. The Company reports a drop in the indemnities paid during They are mainly due to Motor Casco and the natural catastrophes in 2014, more specifically a hailstorm which took place on 8 July 2014, which resulted in the payment of large number of indemnities in The payment of insurance indemnities for this event also continued in 2015, but their number was significantly lower. These natural catastrophes fall in the scope of the reinsurance cover of the Company provided under a catastrophe reinsurance agreement.

14 ANNUAL REPORT 2015 PORTFOLIO STRUCTURE PORTFOLIO STRUCTURE PER PRODUCT LINE IN 2015 Lines of business 2015 Total % Motor Insurance 60.79% Casco 36.30% Motor Third-Party Liability Related to the Possession and Use of Motor Vehicles, including 24.49% _ Motor Third Party Liability 24.49% _ Green Card 0.00% Railway Vehicles Insurance 2.33% Property Insurance 21.19% Fire and Natural Perils 17.97% Property Damage 3.22% Cargo, Aviation and Marine Insurance 7.47% Cargo Insurance 2.97% Aviation Insurance 3.40% Marine Insurance 1.10% Other 8.22% Personal Accident and Medical Expenses 2.72% Liabilities Insurance and Carrier s Liability 5.32% Financial Losses 0.18% 7.47% 2.33% 8.22% 36.30% Motor Insurance 60.79% Casco 36.30% Motor Third-Party Liability Related to the Possession and Use of Motor Vehicles 24.49% Property Insurance 21.19% 21.19% Cargo, Aviation and Marine Insurance 7.47% Railway Vehicles Insurance 2.33% 24.49% Other 8.22%

15 ANNUAL REPORT 2015 KEY FINANCIAL INDICATORS KEY FINANCIAL INDICATORS ACCORDING TO DATA FROM THE ANNUAL FINANCIAL STATEMENT FOR 2015 BGN December December 2014 Restated* Change, % Gross premium income 185, ,485 8% Earned premium, net 118, ,328 8% Incurred claims, net 74,776 67,942 10% Gross insurance reserves 201, ,654 _ 3% Investment income 3,665 3,999 _ 8% Total assets 317, ,606 _ 4% Shareholder s equity 55,919 70,728 _ 21% Financial result during the period* _ 14,609 _ 5, % Earnings per share _ 4.64 _ % Technical results** _ 18,159 _ 5, % * Following a recommendation from the insurance regulatory authorities, in 2015 the Management of the Company adopted a change in the accounting policy regarding the date of initial recognition of revenue from concluded insurance contracts. In line with this, premium income under insurance contracts which is charged for the entire period covered shall be recognized initially from the moment of conclusion of the insurance contract. In accordance with the requirements under the International Accounting Standard 8 _ Accounting Policies, Changes in Accounting Estimates and Errors, the Company has applied the change in the insurance policy retroactively (as of 1 January 2014). ** As at 31 December 2015 the Management has reviewed the collection of amounts receivable under recourse claims. A change has been adopted regarding the method used in assessing the collection rate. As a result of a comparative test, an additional impairment was applied amounting to BGN 12,800 thousand. This additional impairment has been applied with respect to all recourse claims older than one year.

16 ANNUAL REPORT 2015 SEPARATE ANNUAL FINANCIAL STATEMENTS FOR 2015

17 ANNUAL REPORT 2015 SEPARATE MANAGEMENT REPORT SEPARATE MANAGEMENT REPORT AS ON 31 DECEMBER ECONOMIC AND REGULATORY INDICATORS Performance result In 2015 ZAD BULSTRAD VIENNA INSURANCE GROUP generated a loss of BGN 14,609 thousand. The financial result for the same period of 2014, restated* was a loss of BGN 5,477 thousand. The Company s net assets as on the end of the financial year amount at BGN 55,919 thousand (BGN 70,728 thousand for 2014, restated*). The Company s assets as at 31 December 2015 amount at BGN 317,902 thousand (BGN 331,606 thousand for 2014, restated*). *See Note 2.4., Separate Annual Financial Statements. Solvency margin As on 31 December 2015 and 2014 the solvency margin was calculated in compliance with regulatory requirements. The table below summarizes the regulatory indicator implementation. 31 December Own funds less intangible assets 28,801 44,356 Subscribed share capital 31,475 31,475 Reserves 47,600 53,256 Subordinated loan 6,259 _ Retained earnings (losses) less expected payment of dividends and other payments (38,664) (27,494) Reductions Participations in subsidiaries 17,542 12,745 Intangible assets Solvency margin 21,675 22,409 Surplus/(deficit) 7,126 21,947 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 are fulfilled, and the total amount of own funds less intangible assets surpasses the solvency margin by BGN 7,126 thousand. The Programme for Achievement of a Steady Financial Result adopted in 2011 is still being implemented. 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. Improvement of the General Terms and Conditions and the manner of settling claims under Motor Hull Insurance. Identification and management of risk clients in the Company s portfolio. Cost optimization related to payment of material claims under Motor Hull Insurance. Increasing the share of lines of businesses of lower loss ratio in the insurance portfolio general structure.

18 Technical reserves and coverage Amendments to Regulation No 27 of Financial Supervision Commission (FSC), effective from 12 November 2010, required changes in the methods applied in the calculation of technical reserves and building additional reserves. The net effect of these changes is an increase of reserves by BGN 17,429 thousand for 2015 and BGN 8,208 thousand for 2014, 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 on 31 December 2015 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 the regulatory requirements of FSC are: financial assets (deposits, shares, corporate debt instruments, government securities, etc.) at the amount of BGN 105,709 thousand; deferred acquisition costs at the amount of BGN 16,233 thousand; receivables under insurance and reinsurance contracts at the amount of BGN 119,605 thousand, investment properties at the amount of BGN 9,036 thousand and land at the amount of BGN 2,400 thousand. The table below summarizes the difference in the assessment of the insurance liabilities, performed in accordance with IFRS and Regulation No 27 of FSC. Unearned premium reserve Unexpired risk reserve 31 December 2015 Outstanding claims reserve Other insuranse reserves Total Reserves calculated in compliance with regulatory methods, net 57,527 1,337 74,295 6, ,769 Reserves calculated in compliance with IFRS, net 57, ,537 _ 122,340 Difference _ 1,061 9,758 6,610 17,429 Unearned premium reserve 31 December 2014, restated* Unexpired risk reserve Outstanding claims reserve Other insuranse reserves Reserves calculated in compliance with regulatory methods, net 49,651 _ 77,386 6, ,742 Reserves calculated in compliance with IFRS, restated*, net 56,624 _ 68,910 _ 125,534 Difference (6,973) _ 8,476 6,705 8,208 In 2012, as a result of the merger, ZAD BULSTRAD VIENNA INSURANCE GROUP acquired equalisation reserve amounting to BGN 9 thousand which is a technical reserve for the purposes of FSC but in compliance with the requirements of IRFS it is part of the equity. Indicators relating to the insurance activity In 2015, the Company realized gross premium income at the amount of BGN 185,340 thousand (BGN 171,485 thousand for 2014, restated*). The net earned premium for the same period is BGN 118,658 thousand (BGN 110,328 thousand for 2014, restated*). The net amount of paid claims in 2015 is BGN 79,149 thousand (BGN 64,695 thousand for 2014, restated*). *See Note 2.4. Total

19 2. PERFORMANCE ANALYSIS As a result of the ongoing negative developments in the Bulgarian economy _ credit decline, destabilization in the banking sector, withdrawal of foreign investors from the country, the demand for insurance services continues to be low. 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. Additional factors affecting the development of the insurance sector include: Continuous market pressure for commission increases. With respect to Motor Third Party Liability Insurance _ clear insufficiency of the amount of the insurance premium. The year 2014 was adverse with respect to insurance events during the year. Achieved yield from investments was lower due to events in the banking sector and a decrease in the yield of issued securities (government and corporate) in the euro zone. In comparison to 2014, restated*, the premium income has increased by BGN 13,856 thousand or 8%. The chart below shows the movement of the premium income for the past five years. Gross written premium for 2011 _ 2015 BGN million Per lines of business, Motor Insurance has the highest relative share. The chart below shows the allocation of the premium income by main lines of business for Premium income per business line in % 11% 61% 21% Motor Insurance 61% Property Insurance 21% Cargo, Aviation and Marine Insurance 7% Other 11% The Motor business encompasses Motor Hull and Motor Third Party Liability Insurance. Motor Insurances constitute 61% of the premium income generated in Compared to 2014, restated* Motor Hull Insurances show an increase by 16%. The main reason for this could be the redistribution of insured entities among the major motor insurance companies. It is important to note that the specific restrictions introduced during recent years continued to be in force during 2015 and that this growth was achieved without using lessening the restrictions on issuance activity. Motor Third Party Liability Insurance has decreased by 3% compared to 2014, restated*. This is due to the highly competitive environment, both at the

20 level of the commissions and as well as the tariffs. 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. The premium income from the group of Cargo, Marine and Aviation Insurance for 2015 is at the amount of BGN 13,605 thousand, marking a decrease by BGN 3,061 thousand compared to 2014, restated*. Traditionally in these lines of business, the Company is well known and it is a market leader for these specific insurance services. The Company managed to attract back some of its main clients, as well as take advantage of its participation in international insurance programs. The group of Property Insurance includes the insurance of household property, industrial sites, hotels, restaurants, shops. In 2015 the premium income under Property Insurance increase by 17% compared to 2014, restated*. The group of other insurance products includes accidents, liabilities, agriculture and railway hull. In 2015 the premium written under this group increased with BGN 402 thousand compared to 2014, restated*. It is important to note the catastrophic events which characterized the development of insurance risk during During the period of May _ August, as a result of weather-related events, the country was affected by multiple floods, overflowing of natural and artificial water reservoirs, as well as hailstorms. Property and assets of persons and households, as well as industrial assets of considerable value on the territory of Bulgaria were seriously damaged or fully destroyed. As a result, the Company conducted a detailed analysis of the incurred damages and subsequently increased considerably the amount of the reserve held for pending payments in order to provide adequate compensation for the incurred damages to the clients affected. Along with handling the financial dimensions of these events, the Company implemented a series of measures aimed at provision of useful and adequate service for the affected clients. Also, new methods were introduced for repairing faults in cars damaged by hailstorms. A considerable portion of the compensations were paid during the first days after the filing of the claims and the evaluations of the material damages. Moreover, the Company approached this situation as an opportunity to review and update its own procedures for responding to crisis situations, as well as the general rules for risk management. *See Note SHARE CAPITAL AND TRANSACTIONS WITH SHARES OF ZAD BULSTRAD VIENNA INSURANCE GROUP As of 31 December 2015 the allocation of the share capital of the Company is as follows: Shareholder Share, % TBI Bulgaria EAD 85.18% Vienna Insurance Group Wiener Versicherung Gruppe 14.20% Other 0.62% During the reporting period, Vienna Insurance Group Wiener Versicherung Gruppe, Austria, acquired 5,276 shares and its shareholding interest increased from 14.03% to 14.20%. The interest share of TBI Bulgaria remained the same at 85.18%, while the interest share of the other shareholders decreased from 0.79% to 0.62%. During 2014, Vienna Insurance Group Wiener Versicherung Gruppe, Austria, acquired 38,045 shares and its shareholding interest increased from 12.82% to 14.03%. The interest share of TBI Bulgaria remained the same at 85.18%, while the interest share of the other shareholders decreased from 2% to 0.79%. The table below summarizes information on price movements of the shares of ZAD BULSTRAD

21 VIENNA INSURANCE GROUP for the period 1 January 2015 _ 31 December BGN Opening price Closing price Maximum price Minimum price INVESTMENT POLICY AND YIELD The major investment policy parameters of ZAD 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 À. Time horizon. In terms of the assets/liabilities management, as 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. As a result of the turbulent processes in the banking sector in Bulgaria, the Company undertook steps to limit its exposure to deposits in commercial banks. As a result of this the Company achieved a yield lower than the planned one.

22 5. INVESTMENTS IN SUBSIDIARIES The table below summarizes the investments in subsidiaries: EIRB London VIG Services Bulgaria Bulstrad Life VIG Global Services Bulgaria 31 December , ,745 % share 85.00% % 95.53% 50.00% _ Purchase shares/ participation _ 31 December , ,745 Capital contributions 4,500 _ 4,500 Shares/participation transactions 487 (190) December , ,542 % share 85.00% % % 25.00% Total With a resolution of the Extraordinary General Meeting of shareholders of Vienna Insurance Group Contact Center Bulgaria AD from 25 February 2015, the name of the Company was changed from Vienna Insurance Group Contact Center Bulgaria AD to Global Services Bulgaria AD.With a decision of the Extraordinary General Meeting of shareholders of Global Services Bulgaria AD from 24 July 2015, the General Meeting of shareholders of the Company adopted a decision for a change in the management system of the Company, namely a transition from a single-tier management system to a two-tier management system, with a Supervisory and a Management Board. In line with the decision to introduce a two-tier management system, the meeting released Mr. Theodore Iliev, Mr. Ivan Ivanov, Mr. Plamen Shinov, Mr. Martin Naydenov and Mrs. Mariana Georgieva from their functions as members of the Board of Directors, discharging them from liability for their activity during the period of performing their functions as members of the Board of Directors and terminating the powers of the Board of Directors of the Company. The General Meeting of shareholders elected the new members of the Supervisory Board, namely: Mr. Rumen Ivanov Yanchev, Mr. Svetla Nestorova-Asenova, Mr. Markus Maurer and Mr. Simeon Sotirov Vasilev, for a term of three years starting from the date of announcement of the decision in the Commercial Register. Based on Art. 241, par. 2 of the Commercial Law, the Supervisory Board elected the Management Board of the Company composed of: Mrs. Mariana Georgieva, Mr. Martin Naydenov, Mr. Plamen Shinov and Mr. Diyan Stanev, for a term of three years starting from the date of announcement of the decision in the Commercial Register. With a decision of the Extraordinary General Meeting of shareholders of Bulstrad Life Vienna Insurance Group AD from 28 September 2015, the capital of the Company was increased with BGN 4,500,000, through the issuance of 4,500,000 ordinary registered dematerialized shares with a nominal value of BGN 1 (one) each. The General Meeting of shareholders also decided to increase the capital of ZAD Bulstrad Life Vienna Insurance Group AD at the condition that the new shares are to be registered by ZAD BULSTRAD VIENNA INSURANCE GROUP and the issue price of the registered shares is to equal the nominal value. ZAD BULSTRAD VIENNA INSURANCE GROUP deposited 100% of the nominal value of the shares registered by it to the bank account of ZAD Bulstrad Life Vienna Insurance Group AD on 28 September With a decision of the Extraordinary General Meeting of shareholders of ZAD BULSTRAD VIENNA INSURANCE GROUP from 20 November 2015, it was agreed to conclude a contract for sale and acquisition of shares with ZAD Bulstrad Life Vienna Insurance Group AD. ZAD BULSTRAD VIENNA INSURANCE GROUP sold and transferred to ZAD Bulstrad Life Vienna Insurance Group AD 13,000 shares with nominal value of BGN 1 (one) each from the capital

23 of Global Services Bulgaria AD, UIC , for the sales price of BGN per share, as determined by an independent licensed evaluator. In this manner, the direct shareholding of ZAD BULSTRAD VIENNA INSURANCE GROUP in the capital of Global Services Bulgaria AD has changed from 50% to 25%. On the grounds of a contract for sale and acquisition of shares concluded with Hannover Rueck SE, a joint stock company established and operating according to the laws of the Federal Republic of Germany, with seat and registered office at Karl-Wiechert-Allee 50, Hannover, registered in the Commercial Register of the Hannover District Court under No HRB 6778, ZAD BULSTRAD VIENNA INSURANCE GROUP acquired 386,356 registered dematerialized shares with a right to vote, representing 2.94% of the share capital of ZAD Bulstrad Life Vienna Insurance Group AD. In this manner, as on 31 December 2015 ZAD BULSTRAD VIENNA INSURANCE GROUP has increased its participation from 97.06% to 100% of the capital of ZAD Bulstrad Life Vienna Insurance Group AD. No changes in the investments in subsidiaries occurred in 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 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.

24 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 2015 the Management of the Company received total remuneration amounting to BGN 1,287 thousand (BGN 1,061 thousand for 2014). In 2015 the management members did not acquire or transfer Company s shares. 9. SIGNIFICANT TRANSACTIONS AND EVENTS IN 2015 On 15 May 2015, the Supervisory Board of ZAD BULSTRAD VIENNA INSURANCE GROUP adopted a resolution, in compliance with Art. 35, par. 2, letter a of the Statutes of the Company, providing a preliminary approval that the Management Board of the insurance company may adopt a decision to purchase the entire stock of 5,000,000 (five million) ordinary dematerialized shares of the capital of UBB _ AIG Insurance Company AD, UIC , with seat and registered office: Sofia, Izgrev Area, Iztok Residential District, 3B Nikolay Haytov St., bl. 7, for the total purchase price of EUR 3,200,000. On 15 May 2015, after receiving the preliminary approval of the Supervisory Board, the Management Board adopted a decision for acquisition of the shares described above and assigned to the executive directors of the Company to conclude a contract for the acquisition of the shares on behalf of and for the account of ZAD BULSTRAD VIENNA INSURANCE GROUP, according to terms and conditions negotiated by them. Pursuant to the decisions of the Supervisory Board and the Management Board, the Company concluded the contract on 18 May The shares will be transferred after receiving permission for this by the respective regulators, the Insurance Supervision Department of the Financial Supervision Commission and the Commission on Protection of Competition. With Decision No 643 from 29 July 2015, the Commission on Protection of Competition gave permission for the concentration between undertakings which will arise with the acquisition by ZAD BULSTRAD VIENNA INSURANCE GROUP of the sole control over UBB _ AIG Insurance Company AD. On 10 July 2016 Extraordinary General Meeting of the shareholders of ZAD BULSTRAD VIENNA INSURANCE GROUP was held, on which decision was made for the release of Mr. Gerhard Lenar as a member of the Supervisory Board. The new appointed member of the Supervisory Board is Werner Matula with a mandate for five years. As at 31 December 2015 ZAD BULSTRAD VIENNA INSURANCE GROUP has liabilities under a subordinated loan borrowed from Vienna Insurance Group AG Wiener Versicherung Gruppe, for an amount of BGN 6,262 thousand, including a principal of BGN 6,259 thousand and interest of BGN 3 thousand. The loan has a maturity date on 28 December 2025 and an annual interest of 5%. No other significant transaction during the current period. Please, refer to 5. Investment in Subsidiaries for other significant transaction during the period.

25 10. LOANS GRANTED As to 31 December 2015 ZAD BULSTRAD VIENNA INSURANCE GROUP has receivables under a loan provided to the related entity Bulgarski Imoti Assistance EOOD at the amount of BGN 5,487 thousand, including a principal of BGN 2,868 thousand and interest of BGN 2,619 thousand. The loan matures on 31 December 2015, with an annual interest rate of 3.75% (4.5% for the period from 1 January 2014 to 12 December 2014, whereas the interest changes to 3.75% after this period). As on 31 December 2015 Bulgarski Imoti Assistance EOOD has repaid BGN 250 thousand of the principal under the loan. The loan does not exceed 10% of the assets of the Company, therefore it is not considered a transaction of material significance for the activity. As to 31 December 2015 the Company has not granted any other loans. 11. CREDIT RATING As on the end of July 2012, the Bulgarian Credit Rating Agency awarded the Company with a long-term credit rating of ia-, with stable perspective. 12. INFORMATION ABOUT THE PROGRAM 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. 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.

26 11. A Code of Ethics of the officials of ZAD 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 10 July 2015 an Extraordinary General Meeting of the shareholders of ZAD BULSTRAD VIENNA INSURANCE GROUP was held which adopted a decision to release Mr. Gerhard Lahner as member of the Supervisory Board and to elect as new member of the Supervisory Board Mr. Werner Matula for a term of five years. As to 31 December 2015 the Supervisory Board of ZAD BULSTRAD VIENNA INSURANCE GROUP has the following members: Peter Hoefinger, Werner Matula, Dr. Josef Aigner and Atanas Tsvetanov Kanchev. On 25 June 2015 the Supervisory Board of the Company released at her request Mrs. Rumyana Milanova as member of Management Board and elected Mr. Nedyalko Dimchev Chandarov as member of the Management Board with a term of three years. On the grounds of Art. 235, par. 2 of the Commercial Law, the Supervisory Board unanimously approved that the Management Board of the Company may appoint Mr. Nedyalko Chandarov as Executive Director of the Company. The changes have been approved by the Financial Supervision Commission and subsequently registered in the Commercial Register on 7 July As to 31 December 2015 the Management Board of ZAD BULSTRAD VIENNA INSURANCE GROUP has the following members: Rumen Yanchev, Nedyalko Chandarov, Ivan Ivanov, Christoph Rath and Ivo Gruev. Any participation of the members of the Management Board of ZAD BULSTRAD VIENNA INSURANCE GROUP AD as partners with unlimited liability, ownership of more than 25 per cent of the capital of the Company and their participation in other companies or cooperatives as procurators, managers or board members is as follows: Rumen Ivanov Yanchev 1992 _ present _ Executive Director and Member of the Management Board of ZAD BUL- STRAD VIENNA INSURANCE GROUP _ present _ Member of the Supervisory Board of POK Doverie AD _ present _ Member of the Board of Directors of Yuteks Holding AD (former name Privatization fund Bulstrad) _ 23 November 2015 _ Member of the Supervisory Board of Yuta AD _ present _ Member of the Board of Directors of European Insurance & Reinsurance Brokers Ltd, London _ present _ shareholder in PFK Akademik Svishtov AD _ present _ Member of the Supervisory Board of VIG Properties AD _ present _ Optimum Best EOOD _ Owner and Manager.

27 2010 _ present _ ZAD Bulstrad Life Vienna Insurance Group AD _ Member of the Supervisory Board _ 7 July 2015 _ Member of the Board of Directors of Obedinen Kapital AD _ present _ Member of the Supervisory Board of Makedonija Osiguruvanje (company in Macedonia) _ present _ Member of the Supervisory Board of Winner Vienna Insurance Group (company in Macedonia) _ present _ Member of the Supervisory Board of Global Services Bulgaria AD _ present _ Manager of DZZD Obedinenie Bulstrad. Christoph Rath 2011 _ present _ Executive Director and Member of the Management Board of ZAD BUL- STRAD VIENNA INSURANCE GROUP _ present _ Executive Director of ZAD Bulstrad Life Vienna Insurance Group _ present _ Member of the Supervisory Board of VIG Properties Bulgaria AD _ present _ Executive Director and Management Board Member of TBI Bulgaria EAD _ present _ Manager of DZZD Obedinenie Bulstrad. Nedyalko Dimchev Chandarov 7 July 2015 _ present _ Executive Director and Member of the Management Board of ZAD BULSTRAD VIENNA INSURANCE GROUP _ present _ Owner and Manager of NED Group EOOD. Ivo Ivov Gruev 2012 _ present _ Member of the Management Board of ZAD BULSTRAD VIENNA INSU- RANCE GROUP _ present _ Member of the Management Board of ZAD Bulstrad Life Vienna Insurance Group AD _ present _ Manager of VIG Services Bulgaria EOOD. Ivan Vasilev Ivanov 2005 _ present _ Member of the Management Board of ZAD BULSTRAD VIENNA INSU- RANCE GROUP _ 3 August 2015 _ Member of the Board of Directors of Global Services Bulgaria AD. Rumyana Gencheva Milanova 2002 _ 7 July 2015 _ Member of the Management Board of ZAD BULSTRAD VIENNA IN- SURANCE GROUP _ present _ Member of the Management Board of European Insurance & Reinsurance Brokers Ltd, London. As to 31 December 2015 the members of the Supervisory Board of ZAD BULSTRAD VI- ENNA INSURANCE GROUP are Peter Hoefinger, Werner Matula, Dr. Josef Aigner and Atanas Tsvetanov Kanchev. Rumen Yanchev Chairman of the Management Board and Executive Director Christoph Rath Member of the Management Board and Executive Director

28 ANNUAL REPORT 2015 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 BUL- STRAD VIENNA INSURANCE GROUP (the Company) as set out on pages 20 to 96, which comprise the Separate Statement of Financial Position as at 31 December 2015, the Separate Statements of Profit or Loss, 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 2015, 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.

29 Report on other legal and regulatory requirements Annual Management Report of the Company prepared in accordance with the requirements of 10, para 1 of the Accountancy Act in relation to article 33 of the Accountancy Act (Repealed, SG No 95/8 December 2015) As required under article 38, para 4 of the Accountancy Act (Repealed), we read the content of the Separate Annual Management Report of the Company. In our opinion, the historical financial information disclosed in the Separate Annual Management Report of the Company, prepared by Management as required under article 33 of the Accountancy Act (Repealed), is consistent, in all material aspects, with the unconsolidated financial information disclosed in the audited Separate Annual Financial Statements of the Company as of and for the year ended 31 December Management is responsible for the preparation of the Separate Annual Management Report, which was approved by the Management Board of the Company on 31 March Ivan Andonov Authorised Representative Maria Peneva Registered Auditor KPMG Bulgaria OOD Sofia, 13 April 2016 Dobrina Kaloyanova 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

30 ANNUAL REPORT 2015 SEPARATE STATEMENT OF FINANCIAL POSITION SEPARATE STATEMENT OF FINANCIAL POSITION as of 31 December 2015 (All amounts are in thousand of BGN, unless otherwise noted) 31 December December 2014 Restated* 1 January 2014 Restated* Note ASSETS Intangible assets Investments in subsidiaries 8 17,542 12,745 12,745 Other equity investments Investment property 10 9,036 9,036 9,041 Property, plant and equipment 11 17,125 17, ,661 Financial assets 103,202 97, ,167 Bank deposits 12 5,113 6,335 52,013 Held-to-maturity financial assets 14 4,962 4,959 _ Available-for-sale financial assets 13 87,640 80,424 52,670 Loans granted 15 5,487 5,623 5,484 Reinsurer s share of 79,284 82,120 84,842 _ Unearned premium reserve, including 22 25,190 22,436 24,515 _ Unexpired risk reserve 276 Outstanding claims reserve 23 54,094 59,684 60,327 Insurance and reinsurance receivables 42,758 58,094 48,868 Insurance receivables 16 38,324 38,507 39,367 Reinsurance receivables 17 4,434 19,587 9,501 Other receivables 18 24,309 31,882 32,058 Deferred acquisition costs 19 16,233 15,292 15,011 Cash and cash equivalents 20 7,993 7,044 5,395 TOTAL ASSETS 317, , ,012 *See Note 2.4.

31 SEPARATE STATEMENT OF FINANCIAL POSITION as of 31 December 2015 (All amounts are in thousand of BGN, unless otherwise noted) Continued 31 December December 2014 Restated* 1 January 2014 Restated* Note EQUITY AND LIABILITIES Equity 21 55,919 70,728 76,168 Share capital 31,475 31,475 31,475 Share premium 29,544 34,617 34,617 Accumulated losses (23,316) (14,036) (6,942) Reserves 18,216 18,672 17,018 Gross insurance reserves 201, , ,514 Unearned premium reserve, including 22 82,993 79,060 79,524 _ Unexpired risk reserve 552 _ 186 Outstanding claims reserve , , ,990 Deferred tax liabilities 24 1,516 1,556 1,557 Reinsurers deposits ,167 26,083 34,992 Insurance and reinsurance liabilities 19,766 17,305 11,333 Insurance liabilities 25 13,451 12,661 4,182 Reinsurance liabilities 26 6,315 4,644 7,151 Subordinated loan 27 6,262 Other liabilities 28 8,493 6,623 6,678 Prepaid premiums 29 1,155 1, TOTAL LIABILITIES 261, , ,844 TOTAL EQUITY AND LIABILITIES 317, , ,012 *See Note 2.4.

32 SEPARATE STATEMENT OF FINANCIAL POSITION as of 31 December 2015 (All amounts are in thousand of BGN, unless otherwise noted) Continued Rumen Yanchev Executive Director Christoph Rath Executive Director Theodore Iliev Financial Director In accordance with an Independent Auditors Report: Ivan Andonov Authorized Representative KPMG Bulgaria OOD Maria Peneva Registered Auditor Dobrina Kaloyanova Registered Auditor *See Note 2.4. The accompanying notes from notes 1 to 45 are an integral part of these Separate Financial Statements.

33 ANNUAL REPORT 2015 SEPARATE STATEMENT OF PROFIT OR LOSS SEPARATE STATEMENT OF PROFIT OR LOSS for the year ended 31 December 2015 (All amounts are in thousand of BGN, unless otherwise noted) Note 2015 Restated* Gross written premiums , ,485 Premiums ceded to reinsurers 30 (65,503) (59,542) Net written premiums , ,943 Change in gross unearned premium reserve, including 22 (3,933) 464 _ Change in unexpired risk reserve (552) 186 Reinsurer s share in change in unearned premium reserve, including 22 2,754 (2,079) _ Reinsurer`s share in change in unexpired risk reserve 276 _ Net change in unearned premium reserve (1,179) (1,615) Premiums earned, net of reinsurance 118, ,328 Reinsurance commissions and profit sharing 31 10,291 10,733 Net investment income 32 3,665 3,999 Other technical income 33 1,443 2,124 Other income TOTAL INCOME 134, ,321 Claims paid 35 (121,478) (127,166) Reinsurers share of claims paid 35 42,329 62,471 Net claims paid 35 (79,149) (64,695) Change in gross outstanding claims reserve 23 9,963 (2,604) Change in reinsurer s share of outstanding claims reserve 23 (5,590) (643) Change in outstanding claims reserve, net 4,373 (3,247) Claims incurred, net of reinsurance (74,776) (67,942) Acquisition costs 36 (36,826) (34,682) Change in deferred acquisition costs, net Administrative expenses 37 (17,747) (17,506) Other technical expenses 38 (20,169) (9,088) Other non-technical expenses 39 (458) (3,861) TOTAL EXPENSES (149,035) (132,799) OPERATING LOSS (14,635) (5,478) Income tax LOSS FOR THE YEAR (14,609) (5,477) Earnings per share, BGN 41 (4.64) (1.74) 2014

34 SEPARATE STATEMENT OF PROFIT OR LOSS for the year ended 31 December 2015 (All amounts are in thousand of BGN, unless otherwise noted) Continued Rumen Yanchev Executive Director Christoph Rath Executive Director Theodore Iliev Financial Director In accordance with an Independent Auditors Report: Ivan Andonov Authorized Representative KPMG Bulgaria OOD Maria Peneva Registered Auditor Dobrina Kaloyanova Registered Auditor *See Note 2.4. The accompanying notes from notes 1 to 45 are an integral part of these Separate Financial Statements.

35 ANNUAL REPORT 2015 SEPARATE STATEMENT OF COMPREHENSIVE INCOME SEPARATE STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2015 (All amounts are in thousand of BGN, unless otherwise noted) Note , restated* Loss for the year (14,609) (5,477) Other comprehensive income Items which are or may be reclassified subsequently to profit or loss Change in fair value reserve of available-forsale financial assets (72) _ Net amount transferred to profit or loss (1,008) (1,286) _ Net change in fair value 936 2,697 Items which will not be reclassified to profit or loss Remeasurement of defined benefit liability 28 (142) _ Tax related to these items _ Total other comprehensive income after taxes (200) 1,411 Total comprehensive income for the year (14,809) (4,066) Rumen Yanchev Executive Director Christoph Rath Executive Director Theodore Iliev Financial Director In accordance with an Independent Auditors Report: Ivan Andonov Authorized Representative KPMG Bulgaria OOD Maria Peneva Registered Auditor Dobrina Kaloyanova Registered Auditor *See Note 2.4. The accompanying notes from notes 1 to 45 are an integral part of these Separate Financial Statements.

36 ANNUAL REPORT 2015 SEPARATE STATEMENT OF CASH FLOWS SEPARATE STATEMENT OF CASH FLOWS for the year ended 31 December 2015 (All amounts are in thousand of BGN, unless otherwise noted) Note , restated* CASH FLOWS FROM OPERATING ACTIVITIES Loss for the financial year (14,609) (5,477) Adjustments for Depreciation and amortization 37 1,124 1,168 (Gains) from financial assets transactions 32 (1,696) (424) Change in insurance contract provisions, gross 22, 23 (6,030) 2,140 Change in reinsurer s share of insurance contract provisions 22, 23 2,836 2,722 Deferred acquisition costs, net 19 (941) (280) (Reversal of impairment)/impairment of financial assets 32 1, Impairment of insurance and other receivables 38, 39 19,821 11,928 Net (gain)/loss from foreign currency revaluation of investments 32 (115) (7) Net (gain)/loss from foreign currency revaluation of receivables/payables 33 (632) (1,124) Interest income on deposits and financial assets 32 (2,756) (2,873) Dividend income 32 (510) (1,108) Carrying value of written-off fixed assets 7, 10, 11 _ 126 Net (gain)/loss on disposal of property, plant and equipment 11, 34 (10) _ Income tax 40 (26) (1) Total adjustments 12,153 12,559 Change in Insurance receivables (5,953) (6,778) Reinsurance receivables 17 15,153 (10,086) Other receivables (574) (4,749) Insurance liabilities 25 2,145 10,239 Reinsurance liabilities 26 1,671 (2,507) Reinsurance deposits 23.1 (2,916) (8,909) Other liabilities 1, Prepaid premiums 28 (502) 887 Total change in assets and liabilities 10,752 (21,856) Net cash flows from operating activities 8,296 (14,774)

37 SEPARATE STATEMENT OF CASH FLOWS for the year ended 31 December 2015 (All amounts are in thousand of BGN, unless otherwise noted) Continued For the year ended 31 December Note 2015 Restated* CASH FLOWS FROM OPERATING ACTIVITIES 8,296 (14,774) CASH FLOWS FROM INVESTING ACTIVITIES (Increase)/decrease in financial assets (5,848) 12,948 Acquisition of tangible and intangible assets 7, 11 (641) (446) Proceeds from sale of tangible and intangible assets 7, 11, _ (Acquisition) of investment property 10 _ (10) (Increase) in investments in subsidiaries 8 (4,797) _ Prepayment to intermediary for acquisition of a subsidiary company 18 (6,259) _ Loans repaid 250 _ Interest received 3,032 4,104 Dividends received 510 1,108 Net cash flows from investing activity (13,719) 17,704 CASH FLOWS FROM FINANCING ACTIVITY Dividends paid _ (1,374) Loans borrowed/(repaid) 6,259 _ Net cash flows from financing activities 6,259 (1,374) (Decrease)/increase in cash and cash equivalents 836 1,556 Cash and cash equivalents at the beginning of the year 20 7,044 5,395 Effect of exchange rate fluctuations on cash and cash equivalents held Cash and cash equivalents at the end of the year 20 7,993 7,

38 SEPARATE STATEMENT OF CASH FLOWS for the year ended 31 December 2015 (All amounts are in thousand of BGN, unless otherwise noted) Continued Rumen Yanchev Executive Director Christoph Rath Executive Director Theodore Iliev Financial Director In accordance with an Independent Auditors Report: Ivan Andonov Authorized Representative KPMG Bulgaria OOD Maria Peneva Registered Auditor Dobrina Kaloyanova Registered Auditor *See Note 2.4. The accompanying notes from notes 1 to 45 are an integral part of these Separate Financial Statements.

39 ANNUAL REPORT 2015 SEPARATE STATEMENT OF CHANGES IN EQUITY SEPARATE STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2015 (All amounts are in thousand of BGN, unless otherwise noted) Share capital Share premium General reserves Reserves Revaluation reserve, PPE 1 Retained earnings Fair value reserve of AFS 2 Profit (Loss) Total equity On 1 January 2014, as previously reported 31,475 34, ,110 (1,242) 2,128 (9,320) 75,918 Impact of change in accounting policy _ 250 _ 250 On 1 January 2014, restated* 31,475 34, ,110 (1,242) 2,378 (9,320) 76,168 Total comprehensive income for the year Financial result for the year, restated* (5,477) (5,477) Other comprehensive income Revaluation of available-for-sale financial assets 1,411 1,411 Total other comprehensive 1,411 income 1,411 Total comprehensive income for 1,411 _ the year (5,477) (4,066) Transactions with shareholders recorded directly in equity Retained earnings distribution _ dividends payments _ (1,374) _ (1,374) Total transactions with shareholders recorded directly in equity _ (1,374) _ (1,374) Retained earnings distribution _ allocation of statutory reserves 243 (243) On 31 December 2014, restated* 31,475 34, , (14,797) 70,728

40 SEPARATE STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2015 (All amounts are in thousand of BGN, unless otherwise noted) Continued Reserves Retained earnings Share capital Share premium General reserves Revaluation reserve, PPE 1 Fair value reserve of AFS 2 Profit (Loss) Total equity On 31 December 2014, restated* 31,475 34, , (14,797) 70,728 Total comprehensive income for the year Financial result for the year (14,609) (14,609) Other comprehensive income Remeasurement of defined benefit liability, net of tax (128) (128) Revaluation of available-for-sale financial assets (72) (72) Total other comprehensive (72) _ income (128) (200) Total comprehensive income for (72) _ the year (14,737) (14,809) Cover of accumulated losses _ (5,073) (384) _ (5,457) _ On 31 December ,475 29, , (24,077) 55,919 PPE 1 _ Property, Plant and Equipment AFS 2 _ Available for Sale Financial Assets

41 SEPARATE STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2015 (All amounts are in thousand of BGN, unless otherwise noted) Continued Rumen Yanchev Executive Director Christoph Rath Executive Director Theodore Iliev Financial Director In accordance with an Independent Auditors Report: Ivan Andonov Authorized Representative KPMG Bulgaria OOD Maria Peneva Registered Auditor Dobrina Kaloyanova Registered Auditor *See Note 2.4. The accompanying notes from notes 1 to 45 are an integral part of these Separate Financial Statements.

42 ANNUAL REPORT 2015 NOTES NOTES TO THE SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 (All amounts are in thousand of BGN, unless otherwise noted) 1. GENERAL INFORMATION ZAD 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 2015 the share capital of the Company is distributed among the shareholders as follows: Shareholder Participation, % TBI Bulgaria EAD 85.18% Vienna Insurance Group Wiener Versicherung Gruppe 14.20% Other 0.62% During the reporting period, Vienna Insurance Group Wiener Versicherung Gruppe, Austria, acquired 5,276 shares and its shareholding interest increased from 14.03% to 14.20%. The shareholding interest of TBI Bulgaria remained the same at 85.18%, while the interest of the other shareholders decreased from 0.79% to 0.62%. During 2014, Vienna Insurance Group Wiener Versicherung Gruppe, Austria, acquired 38,045 shares and its shareholding interest increased from 12.82% to 14.03%. The shareholding interest of TBI Bulgaria remained the same at 85.18%, while the interest of the other shareholders decreased from 2% to 0.79%. The Company was granted license No 11 from 16 July 1998 for insurance and reinsurance activities by the Bulgarian Financial Supervision Commission. ZAD BULSTRAD VIENNA INSURANCE GROUP has specialized in offering the following insurance: 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 a Chief Executive Officer and Executive Officer, or by Chief Executive Officer and Procurator, or by any two Executive Officers, or by an Executive Officer and Procurator. One person cannot be authorized for the whole activity. As of 31 December 2015 the Company employs 449 employees (451 employees in 2014). 2. BASIS OF PREPARATION OF THE ANNUAL SEPARATE FINANCIAL STATEMENTS 2.1. Basis accounting The Separate Financial Statements are prepared in accordance with the International Financial Reporting Standards (IFRS), approved by the European Commission. In accordance with paragraph 13 of International Financial Reporting Standard 4 Insurance Contracts (IFRS 4), the Company applies the regulatory requirements contained in the Bulgarian Insurance Code and Ordinances issued by the Financial Supervision Commission, which are reflected in the accounting policies for insurance-specific items described in Note 3. These financial statements were approved by the Management Board for issue on 31 March ZAD BULSTRAD VIENNA INSURANCE GROUP also prepares consolidated financial statements in accordance with IFRS as adopted by EU 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

43 the Group. Consolidated Financial Statements will prepared in the deadlines defined in the Bulgarian legislation 2.2. 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. These financial statements are prepared on the historical cost basis except that the following assets and liabilities are presented at their fair value: financial assets available for sale, investment property and property. Obligations for defined employee benefits are measured at net present value of the obligation 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 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 on 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. The main foreign exchange rates to the Bulgarian leva are as follows: As to 31 December 2015 As to 31 December 2014 EUR 1 BGN EUR 1 BGN USD 1 BGN USD 1 BGN Changes in accounting policies In 2015 the Management, following a recommendation of the Insurance regulator, reviewed the accounting policies with regards to revenue recognition, arising from the premiums written. Change to the date of initial recognition has been adopted. Accordingly, premiums written for the full period of insurance cover are initially recognized at the date of contracting the insurance contract (see Note 3.15). In accordance with International Accounting Standard 8 _ Accounting Policies, Changes in Accounting Estimates and Errors, the Company has applied the change in accounting policy retrospectively. The following tables summarise the impacts on the Company s Separate Financial Statements.

44 Statement of Financial Position In BGN January 2014 As previously reported Impact of change Restated Insurance receivables 35,910 3,457 39,367 Deferred acquisition costs 13,656 1,355 15,011 Unearned premium reserve (72,963) (6,561) (79,524) Insurance liabilities (3,077) (1,105) (4,182) Prepaid premiums (3,874) 3,104 (770) Accumulated losses 7,192 (250) December 2014 Insurance receivables 33,394 5,113 38,507 Deferred acquisition costs 14,000 1,292 15,292 Unearned premium reserve (72,087) (6,973) (79,060) Insurance liabilities (11,599) (1,062) (12,661) Prepaid premiums (3,517) 1,860 (1,657) Accumulated losses 14,266 (230) 14,036 Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2014 In BGN 000 Decrease/(increase) in As previously reported Impact of change Restated Gross written premiums 171, ,485 Change in UPR 876 (412) 464 Acquisition costs (34,726) 44 (34,682) Net change in DAC 344 (64) 280 Result for the period (5,457) (20) (5,477) Statement of Cash Flows In BGN 000 Technical provisions, gross Insurance receivables Deferred acquisition costs, net Insurance payables Prepaid premiums Balances at 31 December 2014, as previously reported 1,728 (5,121) (344) 10,195 (357) Adjustments 412 (1,656) 64 (44) 1,244 Restated balances at 31 December ,140 (6,777) (280) 10, 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.

45 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 have limited useful life and 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, 4 20%, 25% Licenses 5, 2 20%, 50% The useful life and amortization method of intangible assets are reviewed at least 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. Initially at acquisition, the investments in subsidiaries are recognized at cost that equals to the agreed cash consideration, transferred to the seller. Costs incurred with relation to the acquisitions (legal fees, consultancy fees, etc.) are expensed directly in the Statement of Profits and Losses. Control over subsidiary is considered when the parent company directly or indirectly holds over 50% of the voting rights, and/or has the power to appoint over 50% of the Members of the Board, as well as to åxercise control over the operating and financial decisions of the companies. Subsequently, investments in subsidiaries are measured at cost method. The Company recognizes investment income to the extent of its share of the earnings of the subsidiary 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 profit or loss in the period they occur.

46 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 any subsequent accumulated depreciation and subsequent accumulated impairment losses. The fair value is estimated on the base of professionally qualified valuers appraisal as on the date of the preparation of the report on financial position. 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 5.0, %, 25% Vehicles 6.6, %, 20% Furniture and equipment 6.8, % 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 profit or loss 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.

47 3.5. Financial instruments 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. The Company classifies non-derivative financial liabilities into the other financial liabilities category. 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 determinable 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 profit or loss.

48 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 profit or loss. 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 profit or loss. 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 on 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 profit and loss. 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-forsale 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 significantly below cost and in prolonged period. 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 increases and

49 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. The Company classifies investments in capital instruments that do not have a quoted market price on an active market as other investments in equity instruments. Investments in such financial instruments whose fair value cannot be reliably measured are recognized in the Statement of Financial Position at original cost. Non-derivative financial liabilities _ recognition and measurement A financial liability is classified as at fair value through profit or loss if it is classified as heldfor-trading or is designated as such on initial recognition. Directly attributable transaction costs are recognized in profit or loss as incurred. Financial liabilities at fair value through profit or loss are measured at fair value and changes therein, including any interest expense, are recognized in profit or loss. Non-derivative financial liabilities are classified as other financial liabilities and are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method. Derecognition of financial instruments 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 from 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 profit and loss. The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire Fair value of financial instruments Fair value is the price that would be obtained at the sale of an asset or paid for a transfer of liability in a standard transaction between market participants on the date of the assessment and on the core market for the Company, or in the absence of such market, on the most profitable market which the Company can access to this date. The fair value of a liability reflects the risk of defaulting on the obligation. When possible, the Company measures the fair value of a financial instrument using the stock prices on the active market for this instrument. A market is considered active when the transactions in this asset or liability are carried out with sufficient frequency and volume, ensuring continuous information on the price. If no stock price is available on the active markets, the company uses assessment techniques, by maximizing the reliance on appropriate observable inputs and minimizing the use of unobservable inputs. The selected measurement technique covers all factors potentially taken into account by market participants in determining the price of the transaction. Commonly, the best evidence of a financial instrument s fair value is the price of the transaction, i.e. the fair value of the transferred or received remuneration. If the Company determines that the fair value at initial recognition differs from the transaction price, and if the stock price of a similar asset or liability does not constitute evidence of fair value, nor is it based

50 on a valuation technique using data from market observables, then the financial instrument is initially assessed at fair value adjusted with deferring the difference between the fair value under the initial recognition and the price of the transaction. Subsequently, this difference is recognized in profit or loss, deferred for an appropriate period based on the life cycle of the instrument, but not later than the time when the measurement can be fully supported by observable market data or when the transaction is finalized. If an asset or liability measured at fair value has a ask and bid price, then the Company shall measure the assets and long positions at the ask price, and the liabilities and short positions at the bid price. The fair value of a demand deposit shall not be less than the amount payable on demand, discounted from the original date on the deposit becomes potentially payable. The Company recognizes transfers between the levels of the fair value hierarchy at the end of the reporting period in which the respective change has occurred 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 in the Statement of Financial Position 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 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. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized Insurance contracts 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 reserve (UPR) The unearned premium reserve 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.

51 Unexpired risk reserve (URR) Unexpired risk reserve 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 reserve (OCR) Outstanding claims reserve (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 and are deferred proportionately to the unearned premium reserve. Deferred acquisition costs are reported as a separate item in the asset side of the balance sheet, net of any reinsurance share 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

52 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 gross premiums written shall include the premiums that have been recognised as income under insurance contracts of direct insurance and inward reinsurance on the basis of the amount owed by the insured/(insuring) person during the whole covered period; this is the amount which the insurer is entitled to receive on the grounds of insurance contracts executed during the reporting period, including in the event where the period covered includes fully or partially a subsequent reporting period (See Note 2.4). 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 accrued under cancelled contracts are derecognized. Derecognized premiums for the current reporting period 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, as well as accrued subrogation income where the Company has the right to recognize such 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.

53 3.19. Net investment income Net investment income comprises the Company s gains and losses from managing its assets for covering the insurance contract provisions. 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 availablefor-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 Short-term employee benefits Short-term employee benefits include salaries, bonuses and benefits in kind and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid 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. Defined contribution plans Obligations for contributions to defined contribution plans comprise contributions to stateowned institutions and to obligatory pension funds managed by privately-owned management companies, in accordance with legal requirements or individual choice. Obligations for contributions to defined contribution plans are expensed as the related service is provided. Defined benefits The Company s obligation in respect of defined benefits is restricted to the statutory requirement to pay employees an amount equivalent to two or six monthly salaries upon retirement, depending on length of service in the Company. The amount of future benefits that employees have earned in the current and prior periods is estimated and that amount is discounted at an appropriate discount rate, based on the yield at the reporting date on bonds of acceptable credit rating that have maturity dates approximating the terms of the Company s obligations and that are denominated in the currency in which the benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method. The Company determines the net interest expense on the net defined benefit liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability. Remeasurements of net defined benefit liability which comprise actuarial gains and losses and are recognized immediately in other comprehensive income. Net interest expense and other expenses related to defined benefits, including costs for past service, are recognized in profit or loss 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 settle-

54 ment 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 New standards and interpretations not yet adopted New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations, endorsed by the EC, are available for early adoption in the annual period ended 31 December 2015, although they are not yet mandatory until a later period. These changes to IFRS have not been applied in preparing these financial statements. The Company does not plan to adopt these standards early. Standards, interpretations and amendments to published standards that have not been early adopted _ endorsed by the European Commission Annual improvements in IFRSs, and cycles. The improvements introduce eleven amendments in nine standards and related amendments in other standards and interpretations. These changes are not expected to have any material impact on the Financial Statements of the Group. Amendments in IAS 19 _ Defined Benefit Plans: Employee Contributions. These amendments are not expected to have any material impact on the financial statements, since there are no defined benefits plans which include contributions from employees or third parties. Standards, interpretations and amendments to published by IASB/IFRIC document, not yet endorsed by European Commission The 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 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 on 24 July 2014). IFRS 14: Regulatory Deferral Accounts (issued on 30 January 2014). IFRS 15: Revenue from Contracts with Customers (issued on 28 May 2014). Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception (issued on 18 December 2014). Amendments to IAS 1: Disclosure Initiative (issued on 18 December 2014). Annual improvements in IFRS Cycle (issued on 25 September 2014).

55 Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (issued on 11 September 2014). Amendments to IAS 27: Equity Method in Separate Financial Statements (issued on 12 August 2014). Amendments to IAS 16 and IAS 41: Agriculture: Bearer Plants (issued on 30 June 2014). Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation (issued on 12 May 2014). Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations (issued on 6 May 2014). 4. ACCOUNTING ESTIMATES 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 below. Main sources of valuation uncertainty 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 in note 5, and information about the provisions is provided in Notes 22 and 23. 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: Level 1. Quoted market price (unadjusted) in an active market for an identical instrument. Level 2. Valuation techniques based on observable inputs different from the quoted prices included in Level 1, available for the asset or liability whether directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3. Valuation techniques using significant unobservable inputs. The fair value of investments in subsidiaries and affiliated entities, booked according to their acquisition value, cannot be estimated reliably since the shares of these companies are not publicly traded and there is no market-based data for them. The Company does not intend to sell these investments. The tables below show the book value and fair value of the financial assets and financial liabilities, including their levels in the hierarchy of fair values. No information on fair values is included where the book value is a reasonable approximation of the fair value.

56 31 December 2015 Book value Fair value In BGN thousand Note Loans and receivables Available for sale Held to maturity Financial liabilities Other Total Level 1 Level 2 Level 3 Total Financial assets assessed at fair value Bulgarian government securities _ 56,444 _ 56,444 56,444 56,444 Foreign government securities _ 17,371 _ 17,371 17,371 17,371 Corporate bonds _ 9,895 _ 9,895 9, _ 9,895 Shares in contractual funds _ 2,495 _ 2,495 2,495 2,495 Shares of commercial enterprises _ 1,435 _ 1, _ 1,435 Municipal bonds 13 _ 87,640 _ 87,640 Financial assets not assessed at fair value Held to maturity 14 4,962 4,962 _ 5,508 _ 5,508 Loans granted 15 5,487 5,487 _ 5,454 _ 5,454 Receivables under insurance and reinsurance operations 16, 17 42,758 42,758 Other receivables 18 24,309 24,309 Bank deposits 12 5,113 5,113 _ 5,210 _ 5,210 Cash and cash equivalents 20 7,993 7,993 Investments in subsidiaries 8 17,542 17,542 Other equity investments ,660 _ 4,962 _ 17, ,257 Financial liabilities not assessed at fair value Deposits of reinsurers 23.1 _ 23,167 _ 23,167 Liabilities under insurance operations 25 _ 13,451 _ 13,451 Liabilities under reinsurance 26 _ 6,315 _ 6,315 Loans borrowed 27 _ 6,262 _ 6,262 Other liabilities 28 _ 8,493 _ 8,493 Prepaid premiums 29 _ 1,155 _ 1,155 _ 58,843 _ 58,843

57 31 December 2014, restated* Book value Fair value In BGN thousand Note Loans and receivables Available for sale Held to maturity Other financial liabilities Other Total Level 1 Level 2 Level 3 Total Financial assets assessed at fair value Bulgarian government securities _ 33,959 _ 33,959 33,959 33,959 Foreign government securities _ 29,433 _ 29,433 29,433 29,433 Corporate bonds _ 13,754 _ 13,754 13,754 13,754 Shares in contractual funds _ 1,701 _ 1,701 1,701 1,701 Shares of commercial enterprises _ 1,510 _ 1,510 1,510 1,510 Municipal bonds _ 67 _ 67 _ 67 _ _ 80,424 _ 80,424 Financial assets not assessed at fair value Held to maturity 14 4,959 4,959 _ 5,605 _ 5,605 Loans granted 15 5,623 5,623 _ 5,690 _ 5,690 Receivables under insurance and reinsurance operations 16, 17 58,094 58,094 Other receivables 18 31,882 31,882 Bank deposits 12 6,335 6,335 _ 6,372 _ 6,372 Cash and cash equivalents 20 7,044 7,044 Investments in subsidiaries 8 12,745 12,745 Other equity investments ,978 _ 4,959 _ 12, ,775 Financial liabilities not assessed at fair value Deposits of reinsurers 23.1 _ 26,083 _ 26,083 Liabilities under insurance operations 25 _ 12,661 _ 12,661 Liabilities under reinsurance 26 _ 4,644 _ 4,644 Loans borrowed 27 Other liabilities 28 _ 6,623 _ 6,623 Pre-paid premiums 29 _ 1,657 _ 1,657 _ 51,668 _ 51,668 *See Note 2.4.

58 As of 31 of December 2015 the Company has reclassified available for sale financial instruments from Level 1 to Level 2 for two asset classes _ shares in commercial enterprises with carrying amount at BGN 976 thousand and corporate bonds with carrying amount at BGN 148 thousand. This reclassification is driven by Management s belief that stock exchange markets where these securities are listed are not effective and quotations for these listings do not provide their fair value. Bid and ask spreads for these items are significant when there is no active market for them. This is the reason why Management decided to reclassify these securities to Level 2 of the fair value hierarchy. To determine the fair value of those financial assets, the Management has applied a valuation technique in which all significant inputs were based on observable market data, such as financial information and any other relevant business information. There were no transfers from Level 2 to Level 1 in 2015 and no transfers in either direction in Valuation techniques and significant unobservable inputs The following table represents valuation techniques, used when determining the fair value of Level 2, as well as significant unobservable inputs used.

59 Type Equity securities Valuation technique Market comparison technique: The valuation technique is based on market multipliers, derived from quoted prices of comparable company, compared with the company, in which the investment is made. The comparable company is the company that provides good base for comparison in relation to the investment characteristics of the assessed entity. The comparable company choice is based on comparative analysis, valuation of technical characteristics and the degree of similarity with the characteristics of the assessed company. Significant unobservable inputs Price _ profit ratio is calculated. The weighted average stock price as at 30 December 2015 is used. Based on the financial statements of comparable companies as at 30 December 2014, 21 December 2014, and 30 September 2015, the profit for the closest period covering twelve months is calculated, i.e. 30 September 2014 _ 30 September 2015, as at the moment of the assessment, comparable companies have not published their financial statements for No corrections to the market multiplier is made due to the similarity between the company in which is invested and comparable companies. Interrelationship between significant unobservable inputs and the estimated fair value The fair value will increase (decrease) if: as at 31 December 2015, comparable companies have lower (higher) earnings per share, compared to 30 September 2014 and due to which there is an increase in the market multiplier; as at 31 December 2015, the valuated company has higher (lower) earnings per share compared to 30 September 2014; the market multiplier is corrected with higher (lower). Proportional relationship between the fair value of the Company and the return on capital is observed. Debt securities Method of discounted cash flows The cash flows are discounted, with a discount rate calculated based on comparable companies. Risk premium for credit risk at the amount of 200 basis points is added, reflecting the higher risk profile of the company in which the investment is made. The fair value will increase (decrease) if: as at 31 December 2015, higher (lower) discount rate is used; the added risk premium at the amount of 200 b.p. decreases (increases). Segment reporting Management of the Company monitors the non-life insurance activities and their results as a whole. As a result Management defines that there is only one segment reporting. The Company has no single internal client whose revenues exceed 10% and the Company operates on the territory of the country. 5. 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

60 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 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 Motor Hull, Third Party Liability Related to the Possession and Use of Motor Vehicles, Accident Insurance for Passengers in Motor Vehicle 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 disasters, 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.

61 5.5. Basic assumptions for calculation of the insurance contract 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 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 (unaudited) Starting 1 January 2016 Solvency II framework is in force for insurance and reinsurance undertakings operating on the Bulgarian market. The new regulatory requirements relate to in practice all operating areas, with an emphasis on capital adequacy and different risk categories which insurance companies are exposed to. 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.

62 Equity funds Required capital Cover ratio Change in cover ratio Basic capital position as of 31 December % Increase in interest rates by 50 bp % (14.9%) Decrease in interest rates by 50 bp % 14.1% Increase in the market value of equity instruments by 15% % 2.6% Decrease in the market value of equity instruments by 15% % (2.6%) Increase in the market value of real estates by 10% % 11.6% Decrease in the market value of real estates by 10% % (11.6%) Increase in uncollectable insurance receivables by 1% % (1.8%) Decrease in uncollectable insurance receivables by 1% % 1.8% Increase in the outstanding claims reserve by 1% % (5.5%) Decrease in the outstanding claims reserve by 1% % 5.5% The table clearly shows that the change in interest rates has the strongest effect on the Company s capital base. This is chiefly due to the increasing share of interest-sensitive investments in the Company s portfolio. Other items with relatively strong impact on the capital bases are: the value of real estates and the outstanding claims reserve. The results from all scenarios demonstrate a stable solvency margin and capacity to take even more unfavourable scenarios. As a joint stock company ZAD BULSTRAD VIENNA INSURANCE GROUP is required to maintain equity which above the registered capital 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.

63 Type of insurance Accident (173) Including Accident of Public Transport Passengers Illness _ 3. Motor Hull 5,948 (28,675) 6, Railroad Vehicles 1,890 1, Aircraft Hull 2,406 1,558 3, Marine Hull (2,812) (4,728) (5,461) 7. Cargo in Transit Fire and Natural Disasters 15,797 6,353 7, Property 4,814 3,875 3, Third Party Liability Related to the Possession and Use of Motor Vehicles (1,246) 223 (2,573) Including Motor Third Party Liability (366) 260 (1,984) Including Green Card (878) (37) (589) Including Border Motor Third Party Liability _ Including Motor Third Party Liability of the Carrier (2) 11. Aviation Third Party Liability 1,467 1,884 1, Marine Third Party Liability General Third Party Liability 2,641 2,272 2, Credit Insurance _ 15. Guarantee Insurance _ 16. Miscellaneous Financial Losses (160) Legal Expenses Insurance _ 18. Travel Assistance Total 32,386 (13,590) 17,363 The table above demonstrates that Marine Hull Insurance line of business is the only LoB which indicates losses in three consecutive years. However, there is no unexpired risk period for the active portfolio, thus building additional unexpired risk reserve (URR) is considered not necessary. 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 on 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.

64 Type of insurance Reserve as of 31 December 2015 Current approximate estimate of expected payments Difference Accident 1,336 1, Motor Hull 19,871 17,177 2,694 Railroad Vehicles 1,827 1,827 _ Aircraft Hull _ Marine Hull 8,618 8,618 _ Cargo in Transit _ Fire and Natural Perils 11,656 9,746 1,910 Property Damage Third Party Liability Related to the Possession and Use of Motor Vehicles 66,530 66, Aviation Third Party Liability _ Marine Third Party Liability _ General Third Party Liability 6,533 6,533 _ Credit Insurance _ Guarantee Insurance _ Miscellaneous Financial Losses _ Legal Expenses Insurance _ Travel Assistance _ 118, ,594 5, 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 2015 and 31 December 2014, restated*. The assets and liabilities are stated at their book values, grouped according to their interest risk exposure.

65 2015 Effective interest rate, % Three months Six months One year Fixed interest rate Non-interest bearing ASSETS Deposits in financial institutions 2.10% _ 5,113 _ 5,113 Available-for-sale government securities 2.35% _ 73,815 _ 73,815 Available-for-sale corporate bonds 3.66% _ 9,895 _ 9,895 Available-for-sale equity instruments _ 3,930 3,930 Corporate bonds, held to maturity 4.14% _ 4,962 _ 4,962 Loans granted 3.75% _ 5,487* _ 5,487 Cash 0.1% _ 3, ,380 Cash equivalents 0.8% _ 4,613 _ 4,613 Reinsurer s share in insurance contract provisions _ 79,284 79,284 Receivables and other assets _ 67,067 67,067 TOTAL 107, , ,546 LIABILITIES Insurance contract provisions _ 201, ,624 Insurance liabilities _ 13,451 13,451 Reinsurance liabilities _ 6,315 6,315 Reinsurer deposits 0.87% _ 2% 21,903 1,264 _ 23,167 Loans borrowed 5% _ 6,262 _ 6,262 Prepaid premiums _ 1,155 1,155 Other liabilities _ 8,493 8,493 TOTAL _ 21,903 7, , ,467 * Carrying amount of loans granted is presented including accrued interest for the amount of BGN 2,619 thousand, non-interest bearing. Total

66 2014, restated* Effective interest rate, % Three months Six months One year Fixed interest rate Non-interest bearing ASSETS Deposits in financial institutions 2.06% _ 6,335 _ 6,335 Available-for-sale government securities 2.58% _ 63,459 _ 63,459 Available-for-sale corporate bonds 3.81% _ 13,754 _ 13,754 Available-for-sale equity instruments _ 3,211 3,211 Corporate bonds, held to maturity 3.81% _ 4,959 _ 4,959 Loans granted 5,623* _ 5,623 Cash 0.1% _ 4, ,151 Cash equivalents 0.7% _ 2,893 _ 2,893 Reinsurer s share in insurance contract provisions _ 82,120 82,120 Receivables and other assets _ 89,976 89,976 TOTAL 101, , ,481 LIABILITIES Insurance contract provisions _ 207, ,654 Insurance liabilities _ 12,661 12,661 Reinsurance liabilities _ 4,644 4,644 Reinsurer deposits 0.92% _ 2% 22,923 3,160 _ 26,083 Prepaid premiums _ 1,657 1,657 Other liabilities _ 6,623 6,623 TOTAL _ 22,923 3, , ,322 * Carrying amount of loans granted is presented including accrued interest for the amount of BGN 2,505 thousand, non-interest bearing. *See Note 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 ZAD BULSTRAD VIENNA INSURANCE GROUP has adopted a conservative policy regarding currency risk management and as of 31 December 2015 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 to 31 December 2015 and 31 December 2014, restated*. It includes the Company s assets and liabilities at book value, depending on whether they are exposed to foreign currency risk. Total

67 31 December 2015 BGN and EUR USD Other Total ASSETS Bank deposits with original maturity more than 90 days 5,113 5,113 Available-for-sale financial assets 81,109 6,531 _ 87,640 Held to maturity financial assets 4,962 4,962 Loans granted 5,487 5,487 Reinsurer s share of unearned premium reserve, including reinsurer`s share of unexpired risk reserve 24, ,190 Reinsurer s share of outstanding claims reserve 49,043 5,051 _ 54,094 Insurance receivables 32,130 6, ,324 Reinsurance receivables 4, ,434 Other receivables 24,309 24,309 Cash and cash equivalents 6,918 1, ,993 TOTAL ASSETS 237,505 19, ,546 LIABILITIES Unearned premium reserve, including unexpired risk reserve 80,239 2, ,993 Outstanding claims reserve 116,327 1, ,631 Insurance liabilities 13, ,451 Reinsurance liabilities 4,298 1, ,315 Reinsurer s deposits 23,167 23,167 Loans borrowed 6,262 6,262 Other liabilities 8,493 8,493 Prepaid premiums 1,155 1,155 TOTAL LIABILITIES 253,312 6, ,467 Net currency position (15,807) 13,549 (663)

68 31 December 2014, restated* BGN and EUR USD Other Total ASSETS Bank deposits with original maturity more than 90 days 6, _ 6,335 Available-for-sale financial assets 58,583 21,841 _ 80,424 Held to maturity financial assets 4,959 4,959 Loans granted 5,623 5,623 Reinsurer s share of unearned premium reserve 21, ,436 Reinsurer s share of outstanding claims reserve 55,778 3,906 _ 59,684 Insurance receivables 32,530 5, ,507 Reinsurance receivables 16,594 2, ,587 Other receivables 31,882 31,882 Cash and cash equivalents 5,099 1, ,044 TOTAL ASSETS 239,091 37, ,481 LIABILITIES Unearned premium reserve 77,014 2, ,060 Outstanding claims reserve 126,842 1, ,594 Insurance liabilities 12, ,661 Reinsurance liabilities 2,437 2, ,644 Reinsurer s deposits 26,083 26,083 Other liabilities 6,623 6,623 Prepaid premiums 1,657 1,657 TOTAL LIABILITIES 253,204 5, ,322 Net currency position (14,113) 31,688 (416) *See Note Liquidity risk The liquidity risk is the risk that the Company will encounter difficulty 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 to 31 December 2015 and 31 December 2014, restated*, grouped by remaining maturity.

69 2015 Up to one month 1-3 months 3-12 months 1-5 years Over five years Nondefined maturity ASSETS Bank deposits with original maturity more than 90 days _ 5,113 5,113 Available-for-sale financial assets _ 13,980 69,730 3,930 87,640 Held to maturity financial assets 4,962 _ 4,962 Loans granted 5,487 _ 5,487 Reinsurer s share of unearned premium reserve, including reinsurer`s share of unearned premium reserve 821 1,642 7,389 12,841 2,497 _ 25,190 Reinsurer s share of outstanding claims reserve 1,888 3,775 16,988 26,606 4,837 _ 54,094 Insurance receivables 11,642 10,149 16, ,324 Reinsurance receivables 4,434 _ 4,434 Other receivables 5,816 18,493 24,309 Cash and cash equivalents 7,993 _ 7,993 TOTAL ASSETS 32,594 15,566 46,339 58,598 82,026 22, ,546 LIABILITIES Unearned premium reserve, including unexpired risk reserve 2,705 5,410 24,346 42,306 8,226 _ 82,993 Outstanding claims reserve 4,140 8,279 37,257 58,348 10,607 _ 118,631 Reinsurer s deposits 23,167 _ 23,167 Insurance liabilities 6,861 2,507 4, ,451 Reinsurance liabilities 6,315 _ 6,315 Loans borrowed 3 _ 6,259 _ 6,262 Other liabilities 3,890 _ 2,598 2,005 8,493 Prepaid premiums 1,155 _ 1,155 TOTAL LIABILITES 25,066 16,196 91, ,668 25,092 2, ,467 Maturity mismatching 7,528 (630) (45,101) (42,070) 56,934 20,418 Total

70 2014, restated* Up to one month 1-3 months 3-12 months 1-5 years Over five years Nondefined maturity ASSETS Bank deposits with original maturity more than 90 days _ 6,335 6,335 Available-for-sale financial assets 1,221 14,604 61,388 3,211 80,424 Held to maturity financial assets 4,959 _ 4,959 Loans granted 5,623 _ 5,623 Reinsurer s share of unearned premium reserve 731 1,463 6,581 11,437 2,224 _ 22,436 Reinsurer s share of outstanding claims reserve 2,083 4,166 18,747 29,360 5,328 _ 59,684 Insurance receivables 14,616 8,581 15, ,507 Reinsurance receivables 19,587 _ 19,587 Other receivables 19,582 12,300 31,882 Cash and cash equivalents 7,044 _ 7,044 TOTAL ASSETS 63,643 14,210 47,378 61,840 73,899 15, ,481 LIABILITIES Unearned premium reserve, including unexpired risk reserve 2,578 5,154 23,191 40,300 7,837 _ 79,060 Outstanding claims reserve 4,487 8,975 40,385 63,248 11,499 _ 128,594 Reinsurer s deposits 26,083 _ 26,083 Insurance liabilities 7,450 1,920 3, ,661 Reinsurance liabilities 4,644 _ 4,644 Other liabilities 2,695 _ 2,392 1,536 6,623 Prepaid premiums 1,657 _ 1,657 TOTAL LIABILITES 23,511 16,049 95, ,566 19,336 1, ,322 Maturity mismatching 40,132 (1,839) (47,946) (41,726) 54,563 13,975 *See Note 2.4. 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 placed as of 31 December 2015 and 31 December 2014, restated*. The presentation of this information is based on BCRA _ Credit Rating Agency AD.

71 2015 Assets with credit risk AA+ AA-BBB Less than BBB Not rated Total Bank deposits with original maturity more than 90 days _ 5,113 5,113 Available-for-sale debt securities 8,458 74, ,710 Held to maturity debt securities _ 4,962 4,962 Loans granted _ 5,487 5,487 Insurance receivables _ 38,324 38,324 Reinsurance receivables, including reinsurer s share in insurance contract provisions 1,065 75, ,165 83,718 Other receivables _ 24,309 24,309 Cash and cash equivalents in banks _ 6,328 1,625 _ 7,953 TOTAL ASSETS WITH CREDIT RISK 9, ,370 2,624 80, , , restated* Assets with credit risk AA+ AA-BBB Less than BBB Not rated Total Bank deposits with original maturity more than 90 days _ 5, _ 6,335 Available-for-sale debt securities 5,822 69, ,292 77,213 Held to maturity debt securities _ 4,959 4,959 Loans granted _ 5,623 5,623 Insurance receivables _ 38,507 38,507 Reinsurance receivables, including reinsurer s share in insurance contract provisions , , ,707 Other receivables _ 31,882 31,882 Cash and cash equivalents in banks _ 4,809 2,156 _ 6,965 TOTAL ASSETS WITH CREDIT RISK 6, ,905 4,357 89, ,191 *See Note 2.4. Exposure to government debt This note sums up the Company s exposure to Eurozone countries with increased risk. The Company considers a Eurozone country to be a country with high risk when this country is characterized by higher volatility and economic and political uncertainty compared to the other members of the Eurozone. The specific factors taken into account in the preparation of this evaluation include the ratio of government debt to GDP, demand for international financial aid, credit ratings, levels of market yield on public debt and concentrations in respect to maturities of public debt. The Company carefully managed this risk during the year and as a result, the overall quality of government debt portfolio is considered positive. The table below shows the book value of the state debt portfolio per country. The assets are

72 presented without accounting for any possible impairments. The Company has not recognized impairment concerning exposure classified as available for sale as of 31 December 2015 and 31 December Up to one month From one to three months From three months to one year From one to three years From three to five years Above five years Issuing state Bulgaria _ 2,436 2,090 51,918 56,444 Poland _ 6,130 6,130 France 1,149 _ 1,149 Slovakia _ 1,145 1,145 Germany _ 1,427 _ 3,543 4,970 Austria _ 1,176 1,176 Belgium 1,160 _ 1,160 The Netherlands _ 1,163 1,163 The Czech Republic _ Total _ 3,863 4,399 65,553 73,815 Total 2014 Up to one month From one to three months From three months to one year From one to three years From three to five years Above five years Issuing state Bulgaria 1,154 _ 3,892 29,603 34,649 Poland _ 14,255 14,255 France 2,006 1,313 3,319 Slovakia _ 2,775 2,775 Germany 2,002 _ 2,002 Finland _ 1,917 1,917 Austria 1,903 _ 1,903 Belgium _ 1,591 1,591 Lithuania _ The Czech Republic _ Total 1,154 _ 9,803 52,435 63,392 Total

73 7. INTANGIBLE ASSETS Software Licenses Total Cost As on 1 January , ,891 Additions Disposals _ Balance as to 31 December , ,957 Cost As on 1 January , ,957 Additions Disposals _ Balance as to 31 December ,126 1,101 3,227 Accumulated amortization As on 1 January , ,760 Additions Disposals _ Balance as to 31 December , ,821 Accumulated amortization As on 1 January , ,821 Additions Disposals _ Balance as to 31 December , ,900 Carrying amount as on 31 December December During the current reporting period the Company used written off, fully depreciated intangible assets, with a carrying amount and accumulated depreciation of BGN 2,685 thousand at the time of derecognition (BGN 2,653 thousand for 2014). 8. INVESTMENTS IN SUBSIDIARIES EIRB, London VIG Services Bulgaria Bulstrad Life VIG Global Services Bulgaria 31 December , ,745 Percentage of share 85.00% 100% 95.53% 50.00% Purchase shares/participation _ 31 December , ,745 Capital contributions 4,500 _ 4,500 Shares/participation transactions 487 (190) December , ,542 Percentage of share 85% 100% 100% 25% With a resolution of the Extraordinary General Meeting of shareholders of Vienna Insurance Group Contact Center Bulgaria AD from 25 February 2015, the name of the Company was changed from Vienna Insurance Group Contact Center Bulgaria AD to Global Services Bulgaria AD. Total

74 With a decision of the Extraordinary General Meeting of shareholders of Global Services Bulgaria AD from 24 July 2015, the General Meeting of shareholders of the Company adopted a decision for a change in the management system of the Company, namely a transition from a single-tier management system to a two-tier management system, with a Supervisory and a Management Board. In line with the decision to introduce a two-tier management system, the meeting released Mr. Theodore Iliev, Mr. Ivan Ivanov, Mr. Plamen Shinov, Mr. Martin Naydenov and Mrs. Mariana Georgieva from their functions as members of the Board of Directors, discharging them from liability for their activity during the period of performing their functions as members of the Board of Directors and terminating the powers of the Board of Directors of the Company. The General Meeting of shareholders elected the new members of the Supervisory Board, namely: Mr. Rumen Ivanov Yanchev, Mr. Svetla Nestorova-Asenova, Mr. Markus Maurer and Mr. Simeon Sotirov Vasilev, for a term of three years starting from the date of announcement of the decision in the Commercial Register. Based on Art. 241, Par. 2 of the Commercial Law, the Supervisory Board elected the Management Board of the Company composed of Mrs. Mariana Georgieva, Mr. Martin Naydenov, Mr. Plamen Shinov and Mr. Diyan Stanev, for a term of three years starting from the date of announcement of the decision in the Commercial Register. With a decision of the Extraordinary General Meeting of shareholders of Bulstrad Life Vienna Insurance Group AD from 28 September 2015, the capital of the Company was increased with BGN 4,500,000, through the issuance of 4,500,000 ordinary registered dematerialized shares with a nominal value of BGN 1 each. The General Meeting of shareholders also decided to increase the capital of ZAD Bulstrad Life Vienna Insurance Group AD at the condition that the new shares are to be registered by ZAD BULSTRAD VIENNA INSURANCE GROUP and the issue price of the registered shares is to equal the nominal value. ZAD BULSTRAD VIENNA INSURANCE GROUP deposited 100% of the nominal value of the shares registered by it to the bank account of ZAD Bulstrad Life Vienna Insurance Group AD on 28 September With a decision of the Extraordinary General Meeting of shareholders of ZAD BULSTRAD VI- ENNA INSURANCE GROUP from 20 November 2015, it was agreed to conclude a contract for sale and acquisition of shares with ZAD Bulstrad Life Vienna Insurance Group AD. ZAD BUL- STRAD VIENNA INSURANCE GROUP sold and transferred to Bulstrad Life Vienna Insurance Group AD 13,000 shares with nominal value of BGN 1 (one) each from the capital of Global Services Bulgaria AD, UIC , for the sales price of BGN per share, as determined by an independent licensed evaluator. In this manner, the direct shareholding of ZAD BULSTRAD VIENNA INSURANCE GROUP in the capital of Global Services Bulgaria AD has changed from 50% to 25%. On the grounds of a contract for sale and acquisition of shares concluded with Hannover Rueck SE, a joint stock company established and operating according to the laws of the Federal Republic of Germany, with seat and registered office at Karl-Wiechert-Allee 50, Hannover, registered in the Commercial Register of the Hannover District Court under No HRB 6778, ZAD BULSTRAD VIENNA INSURANCE GROUP acquired 386,356 registered dematerialized shares with a right to vote, representing 2.94% of the share capital of ZAD Bulstrad Life Vienna Insurance Group AD. In this manner, as on 31 December 2015 ZAD BULSTRAD VIENNA INSURANCE GROUP has increased its participation from 97.06% to 100% of the capital of ZAD Bulstrad Life Vienna Insurance Group AD. 9. OTHER EQUITY INVESTMENTS 31 December Other investments

75 10. INVESTMENT PROPERTY As of 1 January 9,036 9,041 Change in fair value Change in value, other than from revaluation _ (5) As of 31 December 9,036 9,036 As at 31 December 2015, an independent appraiser carried out market valuation of investment property owned by the Company. As a result of revaluation, based on valuation report from the licensed appraiser, it was found that there is no need for making any significant change in the fair value of the investment property as to 31 December Valuation approach When assessing revaluation the following valuation methods have been used when determining the fair value of the different groups of tangible assets. Market approach using method comparison method The approach includes methods in which prices and other relevant information is used, generated from market transactions with identical or comparable assets or group of assets. In this approach, the value is estimated through analysis of recent sales of similar property, recently sold or offered for sale on the market, which is analyzed and compared to the assessed property, and if necessary corrections are made for differences for such factors as time of sale, place of sale, type, life cycle, volume of assets, revenue and etc. Income approach through capitalized income method or method of discounted cash flows This approach covers a wide range of valuation methods, which transform future amounts (such as cash flows or income and expenses) into current (discounted) amounts. The income based approach establishes the discounting or capitalization base of net cash flows, which can be generated, if the property is rented for a time period equal to the residual useful life. Fair value is estimated based on the value of current market expectations for these amounts. The present value of the forecasted revenue, based on time value of money, could be estimated through applying appropriate discount or capitalization rate. Cost approach through method of depreciated replacement cost For buildings for which real market and comparable sales of similar assets is absent. The cost approach estimates the value based on the cost of construction or replacement of the property less impairment, due to physical wear and tear and functional (technical) and economic obsolescence, if such exists and can be measured. Physical impairment is a form of impairment, which is loss in the value as a result of normal use of facilities and their exposure to environmental impact. Functional (technical) obsolescence is loss in the value, caused by factors, inherent to the asset, such as changes in materials and technology, which lead to unnecessary capital expenditures in existing facilities, lack of full utilization and inability to expand or modernize the property. Fair value hierarchy Fair value estimation of groups of investment properties are categorized as fair values of Level 3 based on the inputs, used in the valuation technique. Valuation technique and significant unobservable inputs The table below presents summary of the valuation techniques, used in the determination and confirmation of the fair value of investment property together with the significant unobservable inputs, which are used and their potential impact on the fair values.

76 Valuation techniques Land Market approach Method of market analogues Significant unobservable inputs 1. Limitations in the availability of actual transaction data or stock prices for similar assets in the active market. 2. A limited number of comparable properties (less than 5 for each property). 3. Estimated value for sale of land. 4. Adjustments of analogues, as per coefficients for: _ location _ up to 10%; _ infrastructure _ 5%; _ economic situation _ 10%. Interrelationship between significant unobservable inputs and the estimated fair value The fair value will change if: a larger or smaller number of analogues are used; more or less coefficient adjust ments are applied; adjustment coefficients for size, location, accessability and etc. are higher or lower. Additionally, fair value estimated will be more reliable to the extent that comparable transactions rather than offered process are used. Buildings Income approach Method of capitalized cash flows 1. Estimated monthly income _ from BGN/sq. m, depending on the property. 2. Estimated costs _ 15% of income. 3. Capitalization rate _ 6.5% _ 8.5%. The fair value will change if: higher or lower monthly income is used; higher or lower forecasted cost rate is applied; different capitalization rate. Cost approach Method based on expenses for production or replacement _ amortized recoverable amount Adjusted prices for building identical items 1. New replacement cost. 2. Physical wear _ from 6% to 38%. 3. Functional impairment _ up to 5%. 4. Economic obsolescence _ up to 10%. The fair value will change if: the recoverable amount of identical items decreases; there is a change in the used rates for physical wear, functional and economic impairment.

77 11. PROPERTY, PLANT AND EQUIPMENT Land and buildings Vehicles Computers Furniture and equipment Total Cost As on 1 January ,878 1,024 1,867 3,643 25,412 Additions _ Disposals _ (383) _ (120) (503) Balance as on 31 December , ,078 3,673 25,289 Cost As on 1 January , ,078 3,673 25,289 Additions _ Disposals _ (90) (5) (24) (119) Balance as on 31 December , ,270 3,775 25,541 Accumulated depreciation As on 1 January , ,429 3,134 6,751 Additions ,107 Disposals _ (272) _ (120) (392) Balance as on 31 December , ,606 3,206 7,466 Accumulated depreciation As on 1 January , ,606 3,206 7,466 Additions ,045 Disposals _ (69) (1) (25) (95) Balance as on 31 December , ,784 3,333 8,416 Book value As on 31 December , ,823 As on 31 December , ,125 As to 31 December 2015, a market valuation of the real estate, property of the Company, was performed by a specialized entity (independent appraiser). As a result of the assessment based on the valuation report from the licensed independent appraiser, it is established that there is no substantial difference between the fair value of the real estate and its value in the Annual Financial Report. The fair value of the buildings is determined by external, independent property appraisers, with recognized professional qualifications and recent experience in appraisal of properties with location and category similar to the ones under the valuation. The buildings fair value is classified as fair value under Level 3, on the basis of the input data for the used valuation technique. Applied valuation techniques and significant unobservable inputs in determining the fair value are disclosed in Note 10. If land and buildings were measured under the cost model, the carrying amounts would be as follows:

78 In BGN thousand Purchase cost 5,184 5,184 Depreciation and impairment (2,428) (2,275) Carrying amount 2,756 2,909 During the current reporting period the Company used written off, fully depreciated tangible assets, with a carrying amount and accumulated depreciation of BGN 4,714 thousand at the time of derecognition (BGN 4,434 thousand for 2014). The Company has no assets that are under pledge or are with burdens on them. 12. BANK DEPOSITS 31 December In BGN 5,113 5,056 In foreign currency _ 1,279 5,113 6,335 Deposits amount includes accrued interest of BGN 113 thousand (BGN 67 thousand for 2014). 13. AVAILABLE-FOR-SALE FINANCIAL ASSETS 31 December Bulgarian government securities 56,444 34,649 Foreign government securities 17,371 28,743 Municipal bonds _ 67 Available-for-sale corporate bonds 9,895 13,754 Shares and investment funds 3,930 3,211 87,640 80, HELD-TO-MATURITY FINANCIAL ASSETS 31 December Held-to-maturity corporate bonds 4,962 4,959 4,962 4, LOANS GRANTED As to 31 December 2015 ZAD BULSTRAD VIENNA INSURANCE GROUP has receivables under a loan provided to the related entity Bulgarski Imoti Assistance EOOD at the amount of BGN 5,487 thousand, including a principal of BGN 2,868 thousand and interest of BGN 2,619 thousand. The loan matures on 31 December 2015, with an annual interest rate of 3.75% (4.5% for the period from 1 January 2014 to 12 December 2014, whereas the interest changes to 3.75% after this period). As on 31 December 2015 Bulgarski Imoti Assistance EOOD has repaid BGN 250 thousand of the principal under the loan. Bulgarski Imoti Assistance EOOD is currently being refinanced by TBIH Financial Services Group NV for the amount of EUR 4,900 thousand the funds of which will be used for the sole

79 purpose of repaying liabilities to ZAD BULSTRAD VIENNA INSURANCE GROUP AD related to granted loans, along with accumulated interest. 16. INSURANCE RECEIVABLES 31 December , restated* Insurance receivables 39,384 40,827 Impairment (1,060) (2,320) 38,324 38,507 As to 31 December 2015 there are no encumbrances on receivables and no pledged receivables. *See Note REINSURANCE RECEIVABLES 31 December Receivables from reinsurer s share in claims 1,988 15,492 Receivables from insurance premiums 2,446 4,095 4,434 19, OTHER RECEIVABLES* 31 December Recourse receivables 30,964 31,051 Prepaid expenses 1, Guarantees 3,273 3,326 Receivables from intermediary services Court receivables Advances to suppliers Receivables from customers 3 4 Receivables from securities 2,085 2,085 Prepayments for acquisition of subsidiaries 6,259 _ Other 5,229* 5,765 Impairment of recourse receivables (25,148) (11,469) Impairment of receivables from securities (552) (552) 24,309 31,882 As of the end of 31 December 2015 the Management carried out a review of the recoverability of recourse receivables. Change in the approach of estimating recoverability has been adopted and as a result of this impairment test, addiotinal allowance of BGN 12,800 thousands has been accounted for. The impairment allowance has been carried towards all recourse receivables overdue by one year or more. The item Other receivables includes dividend from the related party Bulgarski Imoti Assistance EOOD at the amount of BGN 3,577 thousand (BGN 3,577 for 2014). Bulgarski Imoti Assistance EOOD is currently being refinanced by TBIH Financial Services Group NV for the amount of EUR 4,900 thousand the funds of which will be used for the

80 sole purpose of repaying liabilities to ZAD BULSTRAD VIENNA INSURANCE GROUP related to dividend liabilities. As to 31 December 2015 the Company classifies as receivables from guarantees the sums related to participation in public procurements as well as a blocked deposit in UniCredit Bulbank AD, placed as collateral to a guarantee issued in favour of the National Bureau of Bulgarian Motor Insurers amounting to BGN 1,204 thousand. 19. DEFERRED ACQUISITION COSTS À) As at 31 December December 2014, restated* Gross Reinsurer s share Net Gross Reinsurer s share Net Motor Insurance 13, ,196 12, ,049 Cargo, Aviation and Marine IInsurance Property Insurance 3,779 1,719 2,060 3,198 1,444 1,754 Other 1, , ,286 Total 18,975 2,742 16,233 17,454 2,162 15,292 B) Change in deferred acquisition costs Gross 2015 Reinsurer s share Net Gross 2014 Restated* Reinsurer s share Balance as on 1 January 17,454 2,162 15,292 17,285 2,274 15,011 Accrued for the period 18,975 2,742 16,233 17,454 2,162 15,292 Released for the period (17,454) (2,162) (15,292) (17,285) (2,274) (15,011) Change, net 1, (112) 281 Balance on 31 December 18,975 2,742 16,233 17,454 2,162 15,292 *See Note CASH AND CASH EQUIVALENTS 31 December Cash on hand and current accounts 3,380 4,151 Bank deposits under 90 days 4,613 2,893 7,993 7,044 In foreign currency 4,777 2,975 In BGN 3,216 4,069 7,993 7,044 The amount of deposits under 90 days does not include interest accrued for 2015 and Net

81 21. EQUITY Share capital As on 31 December 2015 the share capital of ZAD BULSTRAD VIENNA INSURANCE GROUP amounts to BGN 31,474,580, distributed into 3,147,458 ordinary registered dematerialized voting shares with a nominal value of BGN 10 (ten). The table below shows the structure of share capital as on 31 December Percentage Shareholder of participation TBI Bulgaria AD 85.18% Vienna Insurance Group Wiener Versicherung Gruppe 14.20% Other 0.62% During the reporting period, Vienna Insurance Group Wiener Versicherung Gruppe, Austria, acquired 5,276 shares and its shareholding interest increased from 14.03% to 14.20%. The shareholding interest of TBI Bulgaria remained the same at %, while the interest of the other shareholders decreased from 0.79% to 0.62%. During 2014, Vienna Insurance Group Wiener Versicherung Gruppe, Austria, acquired 38,045 shares and its shareholding interest increased from 12.82% to 14.03%. The shareholding interest of TBI Bulgaria remained the same at 85.18%, while the interest of the other shareholders decreased from 2% to 0.79%. Share premium As on 31 December 2015 the share premium amounts to BGN 29,544 thousand (BGN 34,617 for 2014). Share premium is the difference reported by the Company between the nominal value of the issued shares and their issue price. General reserves and retained earnings/accumulated losses General reserves comprise of statutory reserves established pursuant to the requirements of the Commercial Act whereby the Company is required to build a reserve by setting aside a minimum of 10% of the profit for the year until it reaches 10% of share capital or higher depending on the Articles of Association of the Company, profit and losses accrued in previous periods, additional reserves determined by the General Meeting of Shareholders. As on 31 December 2015 the reserves include an Equalisation Reserve amounting to BGN 9 thousand (BGN 9 thousand for 2014). Revaluation reserve The revaluation reserve relates to the revaluation of property, plant and equipment less deferred tax liability arising from revaluation, as well as to the revaluation of property, plant and equipment immediately prior to its reclassification as investment property. Fair value reserve The fair value reserve comprises the cumulative net change in the fair value of available-forsale financial assets, until the assets are derecognised or impaired.

82 22. UNEARNED PREMIUM RESERVE À) As at 31 December December 2014 Restated* Gross Reinsurer s share Net Gross Reinsurer s share Net Motor Insurance 58,910 9,772 49,138 54,052 8,987 45,065 Cargo, Aviation and Marine Insurance 2,284 1, ,392 1,244 2,148 Property Insurance 13,403 10,357 3,046 12,846 8,719 4,127 Other 8,396 3,079 5,317 8,770 3,486 5,284 Total 82,993 25,190 57,803 79,060 22,436 56,624 The gross amount of unearned premium reserve for Motor Insurance includes BGN 552 thousand for unexpired risk reserve and the reinsurer`s share of unearned premium reserve for Motor Insurance includes BGN 276 thousand for unexpired risk reserve for In 2014 there was no need for allocation of unexpired risk reserve. *See Note 2.4. B) Change in the unearned premium reserve Restated* Gross Reinsurer s share Net Gross Reinsurer s share Net As at 1 January 79,060 22,436 56,624 79,524 24,515 55,009 Accrued 82,993 25,190 57,803 79,060 22,436 56,624 Released (79,060) (22,436) (56,624) (79,524) (24,515) (55,009) Change, net 3,933 2,754 1,179 (464) (2,079) 1,615 As at 31 December 82,993 25,190 57,803 79,060 22,436 56,624 *See Note OUTSTANDING CLAIMS RESERVE À) As at Gross 31 December December 2014 Reinsurer s share Net Gross Reinsurer s share Reserve for reported, but not settled claims (RBNS) 96,090 39,998 56, ,450 44,973 60,477 Reserve for incurred, but not reported claims (IBNR) 22,541 14,096 8,445 23,144 14,711 8,433 Total 118,631 54,094 64, ,594 59,684 68,910 Net

83 B) Change Gross Reinsurer s share Net Gross Reinsurer s share Net As at 1 January 128,594 59,684 68, ,990 60,327 65,663 Accrued 118,631 54,094 64, ,594 59,684 68,910 Released (128,594) (59,684) (68,910) (125,990) (60,327) (65,663) Change (9,963) (5,590) (4,373) 2,604 (643) 3,247 As at 31 December 118,631 54,094 64, ,594 59,684 68,910 The tables below is an exhibit that shows the development of claims over a period of time on a gross basis. Claims payment noncumulated, excluding claims handling costs and subrogation income (gross) Accounting period Accident year and earlier 83,550 40,589 15,890 10,450 9,106 5,592 4,544 5,805 2,939 2, ,209 45,261 8,365 6,911 5,776 6,582 6,249 1,650 1, ,850 45,307 9,868 8,679 8,158 6,030 6,487 1, ,102 55,683 17,279 13,724 8,176 6,049 2, ,300 46,405 11,133 15,907 8,203 4, ,306 32,115 11,849 9,053 6, ,255 20,461 7,327 5, ,643 24,183 8, ,425 38, ,971 Total 83, , , , , , , , , ,512

84 Claims reserve as per particular date of balance (gross) * Including RBNS, reserve Accounting period Accident year and earlier 59,217 39,254 31,925 22,569 27,491 19,107 15,558 12,508 9,607 6, ,224 15,252 15,177 17,121 12,983 9,955 5,550 4,266 2, ,792 19,829 19,355 15,330 13,339 11,327 5,530 4, ,563 31,915 20,196 14,932 11,120 9,414 6, ,220 23,772 18,895 13,706 9,612 7, ,989 16,629 14,524 10,752 7, ,125 11,083 8,537 5, ,543 12,232 8, ,499 14, ,181 Total 59,217 70,478 80,969 93, , , ,433 98, ,449 96, REINSURANCE DEPOSITS As of 31 December 2015 reinsurance deposits comprise of balances related to quota share reinsurance treaties in Motor Third Party Liability and Accident Insurance, placed with VIG Holding as counterparty. 24. DEFERRED TAX DEFERRED TAX AS AT 31 DECEMBER 2015 À) As at Assets Liabilities Net assets/ (liabilities) Investment property (557) (557) Land and buildings 1,417 1,417 (1,417) (1,417) Fixed assets impairment Fixed assets depreciation Unused leaves and retirement provisions Civil contracts payables Net tax (assets)/liabilities ,974 1,974 (1,516) (1,556)

85 B) Change in deferred tax Change in other comprehensive 2014 income Change in profit or loss 2015 Investment property (557) (557) Land and buildings (1,417) (1,417) Fixed assets impairment Fixed assets depreciation 212 _ Unused leaves and retirement provisions Civil contracts payables 92 _ Net tax (assets)/liabilities (1,556) (1,516) DEFERRED TAX AS AT 31 DECEMBER 2014 À) As at Assets Liabilities Net assets/ (liabilities) Investment property (557) (557) Land and buildings 1,417 1,417 (1,417) (1,417) Fixed assets impairment Fixed assets depreciation Unused leaves and retirement provisions Civil contracts payables Net tax (assets)/liabilities ,974 1,974 (1,556) (1,557) B) Change in deferred tax Change in 2013 other comprehensive income Change in the Income Statement 2014 Investment property (557) (557) Land and buildings (1,417) (1,417) Fixed assets impairment Fixed assets depreciation 207 _ Unused leaves and retirement provisions 60 _ 5 65 Civil contracts payables 101 _ (9) 92 Net tax (assets)/liabilities (1,557) _ 1 (1,556)

86 25. INSURANCE LIABILITIES 31 December , restated* Insurance payables 3,985 5,150 Commissions payables 9,466 7,511 13,451 12,661 *See Note REINSURANCE LIABILITIES 31 December Ceded premium payables 5,594 3,975 Commissions payables ,315 4, SUBORDINATED LOAN As on 31 December 2015 ZAD BULSTRAD VIENNA INSURANCE GROUP has liabilities under a subordinated loan borrowed from Vienna Insurance Group AG Wiener Versicherung Gruppe, for an amount of BGN 6,262 thousand, including a principal of BGN 6,259 thousand and interest of BGN 3 thousand. The loan has a maturity date on 28 December 2025 and an annual interest of 5%. The liabilities under this agreement rank behind the liabilities of all other lenders of the Company. 28. OTHER LIABILITIES 31 December Guarantee fund payables 1, Personnel payables Provisions for pensions and paid leaves Liabilities to suppliers Tax liabilities, different from corporate income tax 1,817 1,289 Social security liabilities Other liabilities 3,197 2,988 8,493 6,623 Other liabilities include a liability to the related party VIG Properties at the amount of BGN 1,755 thousand. As at 31 December 2015 and 31 December 2014 the Company has no corporate income tax liabilities. Liabilities under defined benefit pension plans The Company has an obligation to pay benefits in case when its employees retire in accordance with the requirements of Art. 222, 3 of the Bulgarian Labor Code (LC). According to these provisions of LC, at the termination of the employment contract of an employee who has reached the right to a pension, the employer shall pay to him/her benefits at the amount of two monthly gross salaries. In case the employee or officer has gained employment ex-

87 perience of 10 years or more to the date of retirement, these benefits shall amount to six monthly gross salaries. The approximate amount of the liabilities for defined benefit pension plans for each reporting period and the costs recognized in profit and losses are based on actuarial reports (the information on the applied parameters and assumptions is provided below). The defined benefit plan (liability for payment of benefits at retirement) is not financed Current value of the liabilities as on 1 January Paid amounts (14) (65) Costs for current services Interest costs 19 7 Actuarial (profit)/loss from changes to demographic assumptions 42 _ Actuarial (profit)/loss from changes to financial assumptions 43 _ Experience adjustments 83 _ Current amount of the liabilities as on 31 December Actuarial assumptions The main actuarial assumptions as on the date of the report (presented as average values) are presented as follows: Growth of gross labor remuneration 1% 0% Interest rate 3.00% 3.65% Discount rate 2.80% 2.86% 29. PREPAID PREMIUMS 31 December , restated* Prepaid premiums (including Motor Third Party Liability) 1,155 1,657 1,155 1,657 *See Note 2.4.

88 30. WRITTEN PREMIUMS Gross written premium , restated* Ceded premium Net written premium Gross written premium Ceded premium Net written premium Motor Insurance 111,948 (23,380) 88, ,282 (24,729) 76,553 Cargo, Aviation and Marine Insurance 13,605 (9,693) 3,912 16,666 (7,467) 9,199 Property Insurance 40,135 (25,764) 14,371 34,286 (21,107) 13,179 Other 19,652 (6,666) 12,986 19,251 (6,239) 13,012 Total 185,340 (65,503) 119, ,485 (59,542) 111,943 *See Note REINSURANCE COMMISSIONS AND PROFIT SHARING Profit sharing (1,419) (127) Reinsurance commissions 11,710 10,860 10,291 10, NET INVESTMENT INCOME Interest income on bank deposits and cash equivalents Interest income on available-for-sale, held to maturity financial assets and loans granted 2,506 2,282 Dividend income from available for sale investments Dividend income from subsidiaries and associates 487 1,080 Realized gains/(losses) from transactions with financial assets 1, Impairment of financial assets available for sale (1,088) (292) Foreign exchange gains/(losses) Asset management fees (386) (177) Rental income from investment property ,665 3,999 Dividend income from subsidiaries and other share participations include dividend income from the subsidiary EIRB London at the amount of BGN 455 thousand.

89 33. OTHER TECHNICAL INCOME Income from written-off liabilities under terminated insurance contracts FX gains/(losses) from revaluation of insurance receivables/payables 632 1,124 Income from coinsurance intermediary services Interest income from insurance operations Reversed impairment losses 2 1 Salvage income ,443 2, OTHER INCOME Income from rendering of services Net gain/(loss) on disposal and write off of non-current assets 10 (1) Rental income 7 7 Other In 2015 there was a reported income from assets rented out to VIG Service Bulgaria EOOD at the amount of BGN 5 thousand (BGN 4 thousand for 2014). 35. CLAIMS PAID Gross claims paid Reinsurer s share Net claims paid Gross claims paid Reinsurer s share Net claims paid Motor Insurance (95,294) 33,207 (62,087) (105,816) 51,370 (54,446) Cargo, Aviation and Marine Insurance (8,087) 944 (7,143) (4,595) 969 (3,626) Property Insurance (11,105) 6,276 (4,829) (11,649) 8,711 (2,938) Other (6,992) 1,902 (5,090) (5,106) 1,421 (3,685) Total (121,478) 42,329 (79,149) (127,166) 62,471 (64,695) 36. ACQUISITION COSTS , restated* Commissions paid (32,961) (29,958) Other acquisition costs (3,865) (4,724) (36,826) (34,682) *See Note 2.4.

90 37. ADMINISTRATIVE EXPENSES Salaries expense (9,497) (9,329) Office maintenance (4,727) (4,358) Advertising (525) (524) Depreciation (1,124) (1,168) External professional services, including audit fees (555) (902) Bank charges (327) (278) Written-off receivables (8) (2) Other (984) (945) (17,747) (17,506) In 2015 the reported cost of the remuneration of the Company s Management is at the amount of BGN 1,287 thousand (BGN 1,061 thousand in 2014), included under item Salaries expense. The item External professional services includes BGN 281 thousand (BGN 177 thousand in 2014) for consultancy services. 38. OTHER TECHNICAL EXPENSES Written-off insurance receivables (7,226) (8,137) (Impairment)/reversal of impairment on insurance receivables (12,612) (501) Îther taxes and charges (100) (84) Other technical expenses (231) (366) (20,169) (9,088) 39. OTHER NON-TECHNICAL EXPENSES Expenses on written-off guarantees (294) (1) Expenses on written-off assets (309) (5) Reversal of impairment/(impairment) on receivables 148 (3,853) Interest expenses under finance leases _ (2) Interest expenses under loans borrowed (3) _ (458) (3,861)

91 40. INCOME TAX , restated* Loss before taxes (14,635) (5,478) Conversion of the loss for tax purposes, including Changes pursuant to Art. 95 of CITA (2,248) (4,752) Increases 3,945 5,797 Decreases (4,251) (5,266) Loss after conversion for tax purposes (17,189) (9,699) Tax rate 10% 10% Income tax Deferred tax 26 1 Loss after taxes (14,609) (5,477) Effective tax rate 0.0% 0.0% *See Note 2.4. Unrecognized deferred tax assets In 2010 a tax loss amounting to BGN 28,622 thousand was reported, and the Company deducted thereof the amounts of BGN 3,202 thousand in 2011 and BGN 276 thousand in In 2013 a new tax loss amounting to BGN 1,954 thousand was reported. The tax result of the Company in 2014 was a tax loss amounting to BGN 9,699 thousand. The tax result of the Company in 2015 is a tax loss amounting to BGN 17,189 thousand. Deferred tax assets are recognized in respect to the occurred tax loss, to the extent to which it is likely that there will be future taxable profit against which the Company will be able to use these assets. Deferred tax assets have not been recognised in respect of these items. 41. BASIC EARNINGS PER SHARE , restated* Number of shares at the beginning of the year 3,147,458 3,147,458 Number of shares at the end of the year 3,147,458 3,147,458 Average number of shares for the year 3,147,458 3,147,458 Financial result for the year (14,609) (5,477) Basic earnings per share, BGN (4.64) (1.74) *See Note OPERATING LEASES The Company has concluded operational lease contracts for renting vehicles and renting office space. In 2015 the expenses under operational leases amounted to a total of BGN 1,034 thousand (BGN 1,004 thousand in 2014). Rent installments under operational leases are payable as follows: Up to one year Between one and five years 928 1,084 Over five years 4 _ 1,719 1,864

92 As at 31 December 2015 the annual premises rent commitments on contracts with no maturity defined amounts to BGN 139 thousand (BGN 157 thousand for 2014). 43. CONTINGENT LIABILITIES The Company has no contingent liabilities. 44. TRANSACTIONS WITH RELATED PARTIES PARENT COMPANY AND ULTIMATE CONTROLLING ENTITY As on 31 December 2015 the allocation of the share capital of ZAD BULSTRAD VIENNA INSU- RANCE GROUP is as follows: Shareholder Share, % TBI Bulgaria EAD 85.18% Vienna Insurance Group Wiener Versicherung Gruppe 14.20% Other 0.62% During the reporting period, Vienna Insurance Group Wiener Versicherung Gruppe, Austria, acquired 5,276 shares and its shareholding interest increased from 14.03% to 14.20%. The interest share of TBI Bulgaria remained the same at 85.18%, while the interest share of the other shareholders decreased from 0.79% to 0.62%. During 2014, Vienna Insurance Group Wiener Versicherung Gruppe, Austria, acquired 38,045 shares and its shareholding interest increased from 12.82% to 14.03%. The shareholding interest of TBI Bulgaria remained the same at 85.18%, while the shareholding interest of the other shareholders decreased from 2% to 0.79%. Through the ownership by Vienna Insurance Group Wiener Versicherung Gruppe of 100% of the capital of TBI Bulgaria EAD, at at the end of 2015 the indirect participation of Vienna Insurance Group Wiener Versicherung Gruppe in the capital of ZAD BULSTRAD VIENNA INSURANCE GROUP is 85.18%. In this way, the total participation (direct and indirect) of Vienna Insurance Group Wiener Versicherung Gruppe in ZAD BULSTRAD VIENNA INSURANCE GROUP is 99.38%. The transactions with TBI Bulgaria EAD and Vienna Insurance Group Wiener Versicherung Gruppe in 2015 are described in Note TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL According to the VIG Group Rules, the Company defines as a key personnel only people hired under management contracts, along with close family members of key management personnel, and companies and unincorporated businesses controlled or jointly controlled by key management personnel and/or their close family members. As on the end of 2015, members of the management and control bodies of the Company do not own shares of its capital. They are entitled only to receive remuneration for their management services. Related party Asset Liability Income Expenses Type of transaction Key personnel _ 1,287 _ 45 _ 11 Remuneration of the Company s Management Social securities of the Company s Management Additional pension of the Company s Management ZAD BULSTRAD VIENNA INSURANCE GROUP has provided insurance coverage to its key management personnel related to non-life insurance risk in particular property and accident insurance. Insurance coverage is in accordance the general terms of these products. The total amount of recognised gross written premiums is BGN 2 thousand (BGN 2 thousand for 2014).

93 44.3. TRANSACTIONS WITH RELATED PARTIES, OTHER Related party Asset Liability Income Expenses Type of transaction VIG Services Bulgaria EOOD Bulstrad Life VIG Bulgarski Imoti Assistance EOOD Global Services Bulgaria AD DV Asset Management TBI Info AD PAKO Vienna Insurance Group Wiener Staedtische Versicherung 12 _ Office rent _ Commissions for insurance 6 intermediation _ Acquisition services under 46 _ 459 contract _ Under agreement for claims 84 _ 1,075 handling services 1 _ 7 52 Administrative expenses/income Under insurance contracts _ 32 Salvages 120 _ Consulting services _ Expenses for Life insurance _ 98 _ 233 personnel 5 _ Under insurance contracts Dividend income 4,500 _ Capital contribution Loan granted and interest 5,487 _ 114 _ income _ 86 Office rent 3,577 _ Dividend receivables 2 _ Administrative expenses Under agreement for claims _ 5 _ 124 handling services 25 _ Income from rent _ 10 _ 122 Asset management _ 211 Software maintenance 1 _ Under insurance contracts 31 _ Dividend income Services under contract _ _ 552 technical and administrative Reinsurance contract (reinsurance reserves, reinsurer s 31,480 23,167 _ 231 deposits and interest) ,666 21,184 Reinsurance contract Loan borrowed and interest _ 6,262 _ 3 expenses under the loan 2, Reinsurance contract

94 Continued Related party Asset Liability Income Expenses Type of transaction Donau Versicherung Reinsurance contract EIRB, London 208 1,148 6,531 12,102 Reinsurance contract 455 _ Dividend income VIG RE Bulstrad Labour Medicine VIG Properties POK Doverie 19, ,577 6,941 Reinsurance contract _ 8 Contract for labour medicine _ 1,755 Liability 6 _ Premium income _ 23 Paid claim Total 68,249 33,999 46,621 43,592 As on the end of 2014, members of the management and control bodies of the Company do not own shares of its capital. TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL Related party Asset Liability Income Expenses Type of transaction Key personnel _ 1,061 _ 41 _ 11 Remuneration of the Company s Management Social securities of the Company s Management Additional pension of the Company s Management

95 TRANSACTIONS WITH RELATED PARTIES, OTHER Related party Asset Liability Income Expenses Type of transaction VIG Services Bulgaria EOOD Bulstrad Life VIG Bulgarski Imoti Assistance EOOD VIG Contact Centre Bulgaria AD DV Asset Management TBI Info AD TBI Bulgaria EAD PAKO Vienna Insurance Group 12 _ Office rent _ Commissions for insurance 1 _ 1 intermediation _ Acquisition services under 63 _ 393 contract _ Under agreement for claims 72 _ 1,131 handling services Administrative expenses/ 2 _ 6 62 income 4 17 Under insurance contracts _ 63 Salvages 120 _ Consulting services _ Expenses for Life insurance _ 100 _ 219 personnel 2 _ Under insurance contracts 708 _ Dividend income Loan granted and interest 5,623 _ 139 _ income _ 50 Office rent 3,577 _ Dividend receivables 2 _ Administrative expenses Under agreement for claims _ 18 _ 267 handling services 25 _ Income from rent _ 10 _ 107 Asset management 1 _ Under insurance contracts _ 211 Software maintenance 2 8 Under insurance contracts _ 1,171 Dividend paid 32 _ Dividend income Services under contract _ _ 630 technical and administrative Reinsurance contract (reinsurance reserves and interest) 26,543 26,083 _ 364 7, ,080 21,536 Reinsurance contract

96 Continued Related party Asset Liability Income Expenses Type of transaction Wiener Staedtische Versicherung Donau Versicherung EIRB, London VIG RE Bulstrad Labour Medicine VIG Properties 4, , Reinsurance contract 4 14 Reinsurance contract 1,246 1,486 6,687 12,281 Reinsurance contract 338 _ Dividend income 26, ,101 7,155 Reinsurance contract _ 11 Contract for labour medicine _ 1,755 Liability Total 75,654 31,341 67,843 45, SUBSEQUENT EVENTS On 15 May 2015, the Supervisory Board of ZAD BULSTRAD VIENNA INSURANCE GROUP adopted a resolution, in compliance with Art. 35, par. 2, letter a of the Statutes of the Company, providing a preliminary approval that the Management Board of the insurance company may adopt a decision to purchase the entire stock of 5,000,000 (five million) ordinary dematerialized shares of the capital of UBB _ AIG Insurance Company AD, UIC , with seat and registered office: Sofia, Izgrev area, Iztok Residential District, 3B Nikolay Haytov St., bl. 7, for the total purchase price of EUR 3,200,000. On 15 May 2015, after receiving the preliminary approval of the Supervisory Board, the Management Board adopted a decision for acquisition of the shares described above and assigned to the Executive Directors of the Company to conclude a contract for the acquisition of the shares on behalf of and for the account of ZAD BULSTRAD VIENNA INSURANCE GROUP, according to terms and conditions negotiated by them. Pursuant to the decisions of the Supervisory Board and the Management Board, the Company concluded the contract on 18 May The shares will be transferred after receiving permission for this by the respective regulators, the Insurance Supervision Department at the Financial Supervision Commission and the Commission on Protection of Competition. With Decision No 643 from 29 July 2015, the Commission on Protection of Competition gave permission for the concentration between undertakings, which will arise with the acquisition by ZAD BULSTRAD VIENNA INSURANCE GROUP of the sole control over UBB _ AIG Insurance Company AD. On 4 January 2016 ZAD BULSTRAD VIENNA INSURANCE GROUP, with seat and registered office Sofia, 5 Pozitano Sq., registered in the Commercial Register with UIC , on the grounds of a contract for sale and acquisition of shares concluded with AIG Central Europe & CIS Insurance Holdings Corporation, the Greek General Insurance Joint-Stock Company Ethniki and United Bulgarian Bank AD, acquired 5,000,000 ordinary dematerialized shared with a right to vote, which represent 100% of the share capital of UBB _ AIG Insurance Company AD. As a result of the acquisition ZAD BULSTRAD VIENNA INSURANCE GROUP is the sole owner of the capital, holding 100% of the shares of UBB _ AIG Insurance Company AD. By a decision of the sole owner of the capital dated 4 January 2016, UBB _ AIG Insurance Company AD has changes its name to Insurance Company Nova Ins EAD. From the preparation date till the approval date of the Annual Financial Statements no other significant events have occurred which require adjustments or disclosure in the financial statements.

97 SIGNIFICANT EVENTS IN 2015 ANNUAL REPORT 2015

98 ANNUAL REPORT 2015 SIGNIFICANT EVENTS SIGNIFICANT EVENTS IN 2015 ZAD BULSTRAD VIENNA INSURANCE GROUP _ official insurer of the First Motorcycle Show in Sofia Between 18 and 22 February 2015, the Association of Car Manufacturers and their authorized representatives for Bulgaria organized for the first time a motorcycle show at Inter Expo Centre in Sofia. The exhibition featured the latest motorcycle models, as well as a large selection of the newest products, accessories and everything in the motorcycle world currently available on the market. The exhibiting companies, such as Honda, Harley Davidson, Peugeot, BMW, ÌV Agusta, Kymco, Suzuki and others, presented many newly released models, as well as the full range of machines they bring to the Bulgarian market. ZAD BULSTRAD VIENNA INSURANCE GROUP, official insurer of the motorcycle show, had provided special offers for the visitors: The first client who acquired a motorcycle at the event received as a gift insurance for Motor Third-Party Liability. Each purchase made during the event was accompanied with an attractively priced Casco Standard Insurance. International modern art competition ESSL ART AWARD CEE 2015 On 28 May 2015 the National Academy of Art opened its doors for an exhibition featuring Bulgarian artists, nominees and winners in the international modern art competition ESSL ART AWARD CEE The ESSL ART AWARD CEE recognizes the artistic achievements of artists at the outset of their careers and is held in eight countries in Central and Eastern Europe (CEE). Initiated in 2005, the award is conferred every two years by the Essl Museum in Austria and the main sponsor, Wiener Staedtische Versicherungsverein, majority shareholder of Vienna Insurance Group. In each country, an exhibition showcases the work of ten nominated artists for this country, selected by an international jury. Art and support for artists are values deeply rooted in the philosophy of Vienna Insurance Group, of which ZAD BULSTRAD VIENNA INSURANCE GROUP and ZAD BULSTRAD LIFE VIENNA INSURANCE GROUP are members. We are aware that a rich cultural environment is important for the sustainable development of society, just as much as a dedication to social concerns, Ivo Gruev, Member of the Management Boards of ZAD BULSTRAD VIENNA INSURANCE GROUP and ZAD BULSTRAD LIFE VIENNA INSURANCE GROUP, shared with the young artists and numerous guests at the opening. The awards, which included a grant and invitation to take part in a group exhibition at the Essl Museum in Klosterneuburg, were presented to the winners, Angel Chobanov and Miglena Yoncheva-Nikolova, by Ms. Eva Wirlitsch-Essl (Essl Museum). Angel Chobanov also received the special invitation of Wiener Staedtische Versicherungsverein to participate in a group exhibition at Vienna Ringturm, the headquarters of VIG Group. For the first time in Bulgaria the ceremony also included the so-called collectors award, with an offer to participate in the group show of awarded artists and be featured in the exhibition catalogue. The recipient of the award was Kalina Mavrodieva. ZAD BULSTRAD VIENNA INSURANCE GROUP awarded its St. Bernard Prizes for a third year During an official ceremony held on 4 June 2015, ZAD BULSTRAD VIENNA INSURANCE GROUP presented its annual awards for insurance brokers. This was the third year for the Night of the St. Bernard Dog awards (named so after the famous mountain rescue dog which is an emblem of the company). The awards were divided into categories according

99 to insurance line: best partnership for Cargo, Carrier s Liability, Casco, Agricultural Crops, Travel Assistance, Personal Accident, Construction and Erection Works, Liabilities, and Property Insurance; best partnership for Property Insurance outside Sofia; highest sales for ; best premium collection results. Sixteen brokers received the award for top results in the respective field. The award for sales of all products of ZAD BULSTRAD VIENNA INSURANCE GROUP was presented personally by Rumen Yanchev, Chairman of the Management Board and CEO of the Company. The recipient of the top distinction in this particularly tough category was Broker Ins OOD. The special award for most original joint product was presented to SDI Group by Christoph Rath, Executive Director and Deputy Chair the Management Board of ZAD BULSTRAD VIENNA INSURANCE GROUP. The award included an exquisite statuette crafted by the distinguished sculptor Georgi Chapkanov _ Chapa and team-building activities for the broker. It was accepted by Yasen Hristov, Manager of SDI Group OOD. Each awarded graphic painting of a St. Bernard dog, symbol of excellence in the respective category, gave the winner an opportunity to draw a bonus from exciting additional prizes, such as a flight with a two-seat plane, flight with a hot air balloon, jump with a paraglider, etc. A newly opened sports hall was named Bulstrad Arena A week prior its official opening, the newly built hall for international, national and regional sports, cultural and entertainment events in Bulgaria, Arena Ruse, was renamed as Bulstrad Arena, after the insurance company which is a general sponsor of the hall. As a leader on the Bulgarian insurance market, ZAD BULSTRAD VIENNA INSURANCE GROUP is a well established trademark and a company with 55 years of history. BULSTRAD has been present in Ruse for 41 years already. This is why I consider it a wonderful idea to give our name to this beautiful and modern facility, Rumen Yanchev, the CEO of the Company, stated before the media and the guests of the event. Bulstrad Arena opened doors officially on 23 July 2015, in the presence of many government officials, businessmen and representatives of sports federations. During the same year, the multifunctional hall Bulstrad Arena won the national competition for Building of the year 2015 in the category Sports infrastructure buildings. New Executive Director On 7 July 2015, Nedyalko Dimchev Chandarov was registered in the Commercial Register at the Registry Agency as an Executive Director and Member of the Management Board of ZAD BULSTRAD VIENNA INSURANCE GROUP. Changes in the Supervisory Board of ZAD BULSTRAD VIENNA INSURANCE GROUP Following a resolution of the General Meeting of shareholders of ZAD BULSTRAD VIENNA INSURANCE GROUP from 17 July 2015, the Commercial Register at the Registry Agency registered the following changes in the Supervisory Board of the Company: the release of Gerhard Lahner as a Member of the Board and the election of Werner Matula as a new Member of the Supervisory Board. ZAD BULSTRAD VIENNA INSURANCE GROUP _ official insurer of the SOFIA MOTOR SHOW, October 2015 Following a brief interruption, the Sofia International Motor Show launched its 22-nd edition at Inter Expo Centre on 17 October The numerous car aficionados who had come from across the country and all those with a business related to the automotive industry had the opportunity to check the innovations implemented by cars designers and manufacturers during the last two years. The show, which has always attracted thousands of visitors,

100 featured almost all vehicle brands present on the Bulgarian market. This most prestigious automotive forum in the country, which has been included for eight years already in the calendar of the International Organization of Motor Vehicle Manufacturers, was organized by the Association of Car Manufacturers and their authorized representatives for Bulgaria, whose membership includes more than 50 global brands. The show also featured manufacturers and dealers of auto repair equipment, spare parts, tires, fuel and lubricants, navigation and security systems, lease companies, banks, and others. As an official insurer of the event, ZAD BULSTRAD VIENNA INSURANCE GROUP had the opportunity to offer its quality insurance products to the participants and visitors at special prices for the duration of this prestigious motor show. ZAD BULSTRAD VIENNA INSURANCE GROUP and ZAD BULSTRAD LIFE VIENNA INSURANCE GROUP are Superbrands for Bulgaria for At the official ceremony of Superbrands Bulgaria held on 27 October 2015, the two companies were awarded special certificates as two Superbrands chosen with the support and votes of the independent jury in the competition and the consumers. Additionally, the history and achievements of ZAD BULSTRAD VIENNA INSURANCE GROUP and ZAD BULSTRAD LIFE VIENNA INSURANCE GROUP were featured in the official publication of the fifth print edition of Superbrands Bulgaria for The two companies also received a special license allowing them to use the official Superbrands symbol for The Superbrands distinction is a testimony to the exceptional reputation of the brand among present and potential customers, investors and the media. Based on an official online vote of consumers in Bulgaria, these certificates are granted to the strongest consumer and corporate brands on the national market. ZAD BULSTRAD VIENNA INSURANCE GROUP and ZAD BULSTRAD LIFE VIENNA INSURANCE GROUP won their certificates after a selection made by an independent jury of volunteers on the basis on the following criteria: Quality: Does the brand represent quality products and services. Reliability: Can the brand be trusted to deliver consistently against its promises and maintain product and service standards. Distinction: Is the brand not only well known in its sector but suitably differentiated from its competitors. Does it have a personality and values that make it unique within its market place. The positive answers given to these questions made our companies recipients of the prestigious certificate during the fifth anniversary of Superbrands in Bulgaria. The global Superbrands program was established in the UK in Since then the organization has expanded its presence in more than 88 countries, consolidating its authority as an independent brands arbiter and working actively with more than 5,000 leading global brands and with the most prominent figures in the field of marketing, business and public life. In Bulgaria the program was launched at the end of Social active day _ ZAD BULSTRAD VIENNA INSURANCE GROUP and ZAD BULSTRAD LIFE VIENNA INSURANCE GROUP On 16 October 2016, when the World Food Day is celebrated, 80 volunteers from the two companies took part for a fifth consecutive year in the Social Activity Day, organized in the cities of Burgas, Varna, Pleven, Plovdiv, Ruse, Sofia and Stara Zagora. More than one and half tons of food were donated and distributed as part of the initiative in 2015, and the efforts of the volunteers have reached over 300 persons in need. In Sofia two shifts of volunteers helped at the warehouse of the Bulgarian Food Bank, where they sorted fruits and vegetables donated for social kitchens and organizations of persons with disabilities. In Burgas, Varna, Pleven, Plovdiv, Ruse and Stara Zagora the volunteers joined the centers for

101 social support, part of the network of the Bulgarian Association for Persons with Intellectual Disabilities (BAPID). There, the employees of ZAD BULSTRAD VIENNA INSURANCE GROUP and ZAD BULSTRAD LIFE VIENNA INSURANCE GROUP prepared packages with essential food items and took part in the crafting of souvenirs for charity events such as exhibitions, bazaars and fund raising campaigns. During the last five years, volunteers from the two companies, with the assistance of the Bulgarian Charities Aid Foundation (BCAF), have contributed over 1,000 hours of volunteer work towards fifteen NGOs and institutions supporting persons in need. Competition among the insurance agents of ZAD BULSTRAD VIENNA INSURANCE GROUP In 2015 an annual comprehensive competition was organized for the first time for the insurance agents of ZAD BULSTRAD VIENNA INSURANCE GROUP, for all insurance lines. Each of the more than 1,100 agents was given individual targets related to the main product lines: Motor Third-Party Liability, Motor Own Damage and non-motor business. The competition ended very successfully, with an overall achievement of 102% of the set goals, including performance of 122% of the target under MOD and 108% of the target in the non-motor business. The total effect of the competition amounts to over BGN 480,000. In April 2016 meetings were held across all general agencies of the company in order to report the results from the competition and present material and non-material rewards to more than 470 agents who were the regional top performers in the competition. In May 2016 the National Trade Conference took place in Haskovo, with prizes for the national winners in the competition.

102 ÊEY PEOPLE ANNUAL REPORT 2015

103 ANNUAL REPORT 2015 KEY PEOPLE KEY PEOPLE RUMEN YANCHEV Chairman of the Management Board and Chief Executive Director tel: 359 2/ , CHRISTOPH RATH Deputy Chairman of the Management Board and Executive Director tel: 359 2/ NEDYALKO CHANDAROV Member of the Management Board and Executive Director tel: 359 2/ IVAN IVANOV Member of the Management Board tel: 359 2/ IVO GRUEV Member of the Management Board Manager of VIG Services Bulgaria tel: 359 2/ DIANA EVSTATIEVA Company Management Counselor tel: 359 2/ RUMYANA MILANOVA Director Reinsurance Department tel: 359 2/ IVAYLO PARVANOV Director Aviation Insurance and Reinsurance Department tel: 359 2/ IVAYLO AXENTIEV Director Marine Insurance Department tel: 359 2/

104 HRISTO IVANOV Director Motor Insurance Department tel: 359 2/ PLAMEN ZAHARIEV Director Property and PA Insurance Department tel/fax: 359 2/ ALITSIA MINKOVA Director Cargo and Carrier s Liability Department tel: 359 2/ alicia_minkova@bulstrad.bg RALITSA TABAKOVA Director Liability Insurance Department tel: 359 2/ liability@bulstrad.bg ATANAS SIMEONOV Director Engineering Insurance Department tel: 359 2/ a_simeonov@bulstrad.bg PLAMEN SHINOV Director Sales and Marketing Department tel: 359 2/ plamen_shinov@bulstrad.bg NIKOLA PAMUKOV Director Actuarial Department tel: 359 2/ nikola_pamukov@bulstrad.bg EVGENIA KALO-KOLOVA Director Legal Department tel: 359 2/ evgenia_kalo@bulstrad.bg THEODORE ILIEV Director Finances, Accounting and Analyses Department tel: 359 2/ teodor_iliev@bulstrad.bg

105 RUMYANA MARKOVA Director of Receivables Management Department tel: 359 2/ å-mail: ALEXANDER VLADOV Director Risk Analysis and Assessment Department tel: 359 2/ ANNIE MIHAYLOVA Director Administrative Department tel: 359 2/ KIRIL PETKOV Director Information Technologies Department tel: 359 2/ ANETA BENOVSKA Director Investors Relations Department òåë. 02/ KONSTANTIN IVANOV Director General Insurance Claims tel: 359 2/ ANGEL SHINOV Director Customer Relations and Handling of Specific Claims Department tel: 359 2/ STANIMIR GRIGOROV Director Handling of MOD Claims Related with Garages Department tel: 359 2/ KALOYAN MONOV Director Evaluation and Claims Abroad Department tel: 359 2/

106 MILKA VELEVA Head of Internal Control Office tel: 359 2/ ANYUTA DENKOVA Public Relations Manager tel: 359 2/ VESELKA YANCHEVA Director SOFIA General Agency tel: 359 2/ v_yancheva_bulstrad.bg 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: /

107 NIKOLAY DONCHEV Director STARA ZAGORA General Agency tel: /622591, 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, ZLATKA JIVKOVA Director PAZARDZHIK General Agency tel: / GEORGI DIMOV Director HASKOVO General Agency tel: /588948, RAYKO GEORGIEV Director MONTANA General Agency tel: /300667,

108 VIG SERVICES BULGARIA ANNUAL REPORT 2015

109 ANNUAL REPORT 2015 VIG SERVICES BULGARIA VIG SERVICES BULGARIA VIG Services Bulgaria is an authorized representative to receive and handle material damages claims under motor insurances of ZAD BULSTRAD VIENNA INSURANCE GROUP. CLAIMS HANDLING CENTERS GORUBLYANE 1138 Sofia, Gorublyane District tel: 359 2/ , Eng. Georgi Belov St. kasko_claims@bulstrad.bg HASHOVE 1330 Sofia, Krasna Polyana District tel: 359 2/ , A Hashove St. kasko_claims@bulstrad.bg VARNA 9000 Varna, Vazrazhdane Residential District tel: / Anna Feliksova St. mobiles: /304014, / (next to Billa Supermarket) varna@vig-sb.bg PLOVDIV 4000 Plovdiv, Naycho Tsanov Blvd. tel: / (under Rodopi Overpass) mobiles: / plovdiv@vig-sb.bg BURGAS 8000 Burgas, Izgrev Residential District tel: / Transportna St. (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 Residential District tel: / Kotovsk St. mobiles: /301124, / ruse@vig-sb.bg PLEVEN 5800 Pleven tel: / Storgoziya Residential District 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 tel: / Dobrudzhanski Residential District mobile: / Saedinenie St. shumen@vig-sb.bg

110 OFFICES ANNUAL REPORT 2015

111 ANNUAL REPORT 2015 OFFICES OFFICES OF ZAD 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 _ 56 HEAD OFFICE 1000 Sofia, 5 Pozitano Sq. tel: 359 2/ , fax: 359 2/ General Insurance Claims Department Sofia, 1A Hashove St. tel: 359 2/ , , , fax: 359 2/ OFFICES 1000 Sofia, 6 Tsar Osvoboditel Blvd. (General Agency) tel: 359 2/ fax: 359 2/ Sofia, 5 Pozitano Sq. tel: 359 2/ , , fax: 359 2/ Sofia, 136 Vasil Levski Blvd. tel: 359 2/ , fax: 359 2/ Sofia, Balsha St., bl. 8 tel: 359 2/ , , fax: 359 2/ Sofia, 44 Venelin St. tel: 359 2/ , fax: 359 2/ Sofia, 1À Hashove St. tel: 359 2/ , Sofia, Gorublyane, 4 Eng. Georgi Belov St. tel: 359 2/ Sofia, 32G Cherni Vrach Blvd. tel: 359 2/ Dupnitsa, 5 Ivan Vazov St. tel/fax: / Kyustendil, 10 Lyuben Karavelov St. tel/fax: / Pernik, 20 Krakra St. tel/fax: / *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, Silistra, etc.