ANNUAL REPORT. Compensa. Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group

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1 ANNUAL REPORT Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group the art of insurance

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3 Table of contents Letter from the Chairman of the Supervisory Board 4 Letter from the CEO 5 Compensa Companies 7 Information about the Companies 8 Shareholder Structure 9 Compensa in Insurance products 14 Branch Offices 17 Results of Compensa TU S.A. 21 Financial results 22 Technical account 23 General profit and loss account 24 Cash flow statement 25 Balance sheet: assets 26 Balance sheet: liabilities 27 Expert auditor s opinion 28 Report of the Supervisory Board 30 Financial results of Compensa TU na Życie S.A. 35 Financial results 36 Technical account 38 General profit and loss account 40 Cash flow statement 41 Balance sheet: assets 42 Balance sheet: liabilities 43 Expert auditor s opinion 44 Report of the Supervisory Board 46 Vienna Insurance Group 51 Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report 2012 Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

4 Letter from the Chairman of the Supervisory Board Dear Madam / Sir, 2012 was another record-breaking year for Vienna Insurance Group, the majority shareholder of Compensa and owner of some 50 insurance companies in the CEE region. The Group achieved 9.7 bn euro gross premium written and substantially improved its profit to the level of more than 587 mio euro, again setting the benchmark as the leading regional insurance player specialized in the CEE area. Excellent results on Group level reflect the efforts of all VIG companies successfully outperforming their competitors on local markets, among which Poland and Compensa are playing an increasingly substantial role. Within VIG ranking in terms of premium written for 2012, Poland ranked third directly after Austria and Czech Republic. Thanks to its dynamic growth especially in life business, it moved up to the second position among the CEE countries, which altogether generated well over half of all premiums for Vienna Insurance Group in I am also glad to inform you that in appreciation of the sustainable management, excellent and continuous development of the last years and a clear vision of further expansion, the Supervisory Board unanimously decided to prolong the mandate of the Management Board in the current composition for next term. However, bearing in mind that Compensa has reached a considerable size as an insurer and that the company is experiencing constant development both in the core Polish market and in its foreign branch offices in Latvia and Lithuania, the increasing scale of operations requires even more management attention than before. Therefore the Supervisory Board also resolved to extend the Management Board of Compensa Nonlife as of 2013 with a new member to be responsible in particular for underwriting of nonlife risks. I am confident that expanding the team of management experts at this stage will create an optimal set-up for future expansion and will further foster Compensa s competitive advantage on the Polish market. Vienna Insurance Group is a family of successful insurance companies. In such a competitive environment Compensa does not only aspire but in fact is already one of VIG s top performers. Along with the growing importance of Compensa, its success on the Polish market becomes more and more essential to the Group. We are very satisfied seeing for the next consecutive year significant improvement of the profitability both in Compensa Life and Nonlife. Knowing both companies for many years and passion of the people working here I am deeply convinced that Compensa will realize its plans again in Once again I would like to warmly thank the Management Board, Employees, Agents, and particularly our Clients, whose trust and efforts have helped Compensa become so successful. We are proud to have Compensa in our family! Sincerely Yours, Dr Peter Hagen Chairman of the Supervisory Board Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report 2012 Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

5 Letter from the CEO Dear Ladies and Gentlemen, Compensa is a company with over 20 years of history and high aspirations; a company built on mutual relations with customers and intermediaries that fulfils commitments towards its stakeholders in the best possible manner. With the backing of a leading insurance specialist in the CEE Vienna Insurance Group the company has a track record of sustainable development over the years and excellent prospects for the future. Highly satisfactory 2012 performance reflects our solidity and gives a clear signal that Compensa is a reliable and trustworthy insurer ready to take on and fulfill its long term commitments towards its clients and business partners. In 2012 Compensa Nonlife broke the historical record of 1 bn PLN premium of 2011 by achieving premium of 1.1 bn PLN and growing clearly above the market. At the same time the company achieved its historically highest IFRS financial result of 88,7 mio PLN, which reaffirms our sustainability and our strong position on the Polish market. Sound financial basis and excellent results of Compensa Nonlife make the Management Board particularly proud and let the company seek new expansion possibilities. In November 2012 we established our foreign branch office in Latvia, thus increasing the scope of our operations to a second foreign market after a successful entry into Lithuania in This move did not only enhance our stability and future development prospects but also supports the strategy of Vienna Insurance Group, which has not been present on the nonlife Baltic market before. Compensa Life closed the year with 643 mio PLN premium and grew substantially compared to 500 mio PLN premium of the previous year. At the same time we outperformed the market twice in terms of growth with a 22% increase in gross premiums written. Not only results, however, are a measure of our success. In 2012 noted growing number of clients and over a million of active insurance contracts in life and nonlife. This excellent outcome is to a certain extent a result of our CRM efforts aimed increasing our understanding of the individual needs of our customers and providing them with tailored solutions, which eventually allow us to build long-lasting relationships based on reliability and trust. In addition, fully realizing that this development is connected with increasing responsibility for the best fulfillment of our commitments, we constantly excel our service to live up to the high expectations of our clients. On behalf of the Management Bard I wish to thank our Clients and all Intermediaries, be it tied Agents, Multiagents, Brokers, and other Sales Partners, for the trust they have shown us another year in a row. I also wish to extend my thanks to the main shareholder Vienna Insurance Group for the feeling of stability and consistent strategic support for our development. My special thanks also to all Employees, who do their best to build very good relations with our Clients and business Partners, as this is the foundation of our business philosophy and the key to the satisfaction of our Customers. Kind regards, Franz Fuchs CEO Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report 2012 Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

6 Original painting: The Sunrise by Claude Monet Painting entitled The Sunrise painted by the Compensa Managers: PIOTR BRYŃSKI AGNIESZKA PAWŁOWSKA JACEK SMAKOSZ ŁUKASZ WOŹNY

7 THE COMPANY Compensa S.A.

8 Compensa TU S.A. Information about the Company as on 31 December 2012 Company Management Bodies Pursuant to the articles of association of Compensa TU S.A. Vienna Insurance Group, the Company Management Bodies are as follows: The General Assembly The Supervisory Board The Management Board The Management Board Franz Fuchs Ireneusz Arczewski Jarosław Szwajgier Wolfgang Stockmeyer President of the Management Board Deputy President of the Management Board Deputy President of the Management Board Member of the Management Board Pursuant to the resolution of the Supervisory Board of 5 December 2012, as of 1 January the Management Board was joined by Michał Gomowski. Supervisory Board Hans Peter Hagen Dieter Fröhlich Roland Goldsteiner Wolfgang Petschko Chairman of the Supervisory Board Deputy of the Chairman of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Date of establishing National Court Register (KRS) Number TIN (tax identification number) 12 February PLN paid in full Address of the Headquarters Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Al. Jerozolimskie Warszawa Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

9 Compensa TU na Życie S.A. Information about the Company as on 31 December 2012 Company Management Bodies Pursuant to the articles of association of Compensa TU na Życie S.A. Vienna Insurance Group, the Company Management Bodies are as follows: The General Assembly The Supervisory Board The Management Board The Management Board Franz Fuchs Ireneusz Arczewski Grzegorz Liszka Piotr Tański President of the Management Board Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Supervisory Board Hans Peter Hagen Dieter Fröhlich Roland Goldsteiner Wolfgang Petschko Chairman of the Supervisory Board Deputy of the Chairman of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Date of establishing National Court Register (KRS) Number TIN (tax identification number) 5 November PLN paid in full Address of the Headquarters Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Al. Jerozolimskie Warszawa Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

10 Compensa TU S.A. Shareholder structure as on 31 December 2012 Shareholders COMPENSA Holding GmbH Vienna Insurance Group AG Wiener Versicherung Gruppe Others Total Number Shara in share Number of shares capital of votes in pcs. in % in % % COMPENSA Holding GmbH 63.33% Vienna Insurance Group AG Wiener Versicherung Gruppe 0.11% Others Share capital: PLN fully paid in Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

11 Compensa TU na Życie S.A. Shareholder structure as on 31 December 2012 Shareholders COMPENSA Holding GmbH Vienna Insurance Group AG Wiener Versicherung Gruppe Total Number Shara in share Number of shares capital of votes in pcs. in % in % % 71.13% COMPENSA Holding GmbH Vienna Insurance Group AG Wiener Versicherung Gruppe Share capital: PLN fully paid in Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

12 Compensa TU S.A. in 2012 Employment full time employees EMPLOYMENT At the end of 2012, the Company had a total of 585 employees. As compared to 2011, the number of employees fell by 158. The reduction in the number of employed persons was primarily caused by the transfer of Regional Service Centres to the VIG Ekspert service centre year Gross premium written in PLN million GROSS PREMIUM WRITTEN The gross premium written reached the value of PLN 1 098m and was higher by 6.4% as compared to the preceding year. Similarly as in the previous years 819 the major part of the portfolio consisted of motor insurance (77.6%). The target segment of Compensa is the individual customer and small and medium enterprises, as well as the corporate client year Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

13 Compensa TU na Życie S.A. w 2012 roku EMPLOYMENT Employment full time employees Similarly as in the preceding years, the majority of the departments carried out their activities within the entire VIG group. As on 31 December 2012, there were 127 employees in the Company, of which 125 were in the Headquarters and 2 in local units. No change in the number of employees was recorded as compared to the end of the past year. year GROSS PREMIUM WRITTEN Gross premium written in PLN million At the end of 2012 the gross premium written reached the value of PLN and the net profit was PLN As compared to the preceding year, the premium written value increased by 22% year Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

14 Compensa TU S.A. Insurance products In 2012 Compensa TU S.A, offered insurance products addressed at individual and corporate customers. The offer included both individual risks coverage and insurance packages providing comprehensive coverage. Changes in the insurance offer arose from the need of an even better adaptation of the offered products to needs of particular customers, continuous development of the products, as well as the application of the best experience in their sale. Motor insurance Compensa Komunikacja MTPL Motor hull insurance Green Card Assistance Motor legal protection insurance Accident insurance Property insurance Household insurance Compensa Rodzina Compensa Mój Dom Twoja Inwestycja insurance of construction projects Agricultural insurance mandatory agricultural civil liability insurance compulsory farm buildings insurance farm property insurance Insurance for businesses Compensa Firma insurance package for medium enterprises Mój Biznes insurance package for small enterprises Property fire insurance and the insurance of other risks with BI option Property all risks insurance with BI option Property robbery and burglary insurance Machinery insurance extended by BI option All risks construction machinery and equipment insurance All risks electronic equipment insurance Construction all risks insurance Assembly all risks insurance National and international cargo insurance TPL insurance Carrier s TPL Forwarder s TPL Personal insurance Compensa Voyage tourist insurance Accident insurance Healthcare insurance Compensa Zdrowie Compensa MULTI Zdrowie Gross premium written structure 18.7% Property insurance 3.7% Personal insurance 77.6% Motor insurance Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

15 Compensa TU na Życie S.A. Insurance products The Company is licensed to provide insurance services in groups 1-5 as specified by Appendix I to the Act on Insurance Activity (life insurance, dowry insurance, children insurance, unit-linked insurance, cash value annuity life insurance, accident and healthcare insurance, whenever they complete coverage specified in groups 1-4). Indywidualne ubezpieczenia na życie Gwarancja Ochrona individual term life insurance Gwarancja Profit individual endowment insurance with profit sharing Nokturn individual whole life insurance with profit sharing Flexi Plus individual unit-linked insurance TopFundusz individual unit-linked insurance Fundusz 21 Krajów single premium individual unit-linked insurance SuperFundusz, SuperFundusz Plus individual unit-linked insurance MegaFundusz regular premium individual unit-linked insurance Compensa IKZE individual unit-linked insurance Gwarancja Renta individual life endowment insurance Gwarancja Renta Premium single premium individual annuity insurance Bezpieczna Strategia Plus individual term life insurance Group life insurance Bezpieczna Grupa group life insurance Bancassurance borrower s life insurance debtor s life insurance leaseholder s life insurance checking and saving account owners life insurance credit card owners life insurance life endowment insurance Gross premium written structure 27.0% Individual insurance 12.4% Group insurance 60.6% Bancassurance and STE Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

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17 BRANCH OFFICES Compensa S.A. Original painting: Avatar by Franz Fuchs Painting entitled Avatar painted by Compensa managers: MAREK KULA PIOTR KRYCIA IRENA ROSOWSKA

18 Compensa TU S.A. Branch Offices Address Area code Phone No. Białystok, ul. Mazowiecka Bydgoszcz, ul. Matejki 1A Częstochowa, ul. Kawia 4/ Gdańsk, ul. Rzemieślnicza 33, Sopot Katowice, ul. Krasińskiego Kraków, ul. Kordylewskiego Lublin, ul. Tomasza Zana Łódź, Al. Marszałka E. Śmigłego-Rydza Opole, ul. Luboszycka Olsztyn, ul. K. S. Wyszyńskiego Płock, ul. Miodowa Poznań, ul. Rataje Rzeszów, ul. Bernardyńska 2/ Radom, ul. Ferdynanda Focha Suwałki, ul. Noniewicza 85C Szczecin, ul. Mieszka I 82/ Wrocław, ul. Grabiszyńska Warszawa, Al. Jerozolimskie Warszawa II, ul. Mickiewicza Zielona Góra, ul. Wiśniowa 19A Compensa Compensa Address of the Headquarters Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Al. Jerozolimskie 162, Warszawa Compensa Contact: Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

19 Compensa TU na Życie S.A. Branch Offices Individual insurance representations Address Bydgoszcz, ul. Kujawska 6 Katowice, ul. Czerwińskiego 6 Kraków, ul. Kordylewskiego 1 Lublin, ul. Zana 32 Łódź, Al. Marszałka E. Śmigłego-Rydza 20 Rzeszów, ul. Bernardyńska 2/7 Sopot, ul. Rzemieślnicza 33 Stargard Szcz., ul. Reja 7 Szczecin, ul. Mieszka I Tarnów, ul. Krakowska 26/3 Warszawa, ul. Mickiewicza 63 Wrocław u. Grabiszyńska 208 Poznań ul. Poznańska 62/74 Area code Phone No do Group insurance representations Address Bydgoszcz, ul. Kujawska 6 Częstochowa, ul. Kawia 4/16 p. 110 Katowice, ul. Krasińskiego 29 Koszalin, ul. Zwycięstwa 40 box 70 Kraków, ul. Kordylewskiego 1 Łódź, Al. Marszałka E. Śmigłego-Rydza 20 Rzeszów, ul. Bernardyńska 2/2 Sopot, ul. Rzemieślnicza 33 Warszawa, Al. Jerozolimskie 162 Wrocław, ul. Grabiszyńska 208 Area code Phone No Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

20 Original painting: Water Lilies by Claude Monet Painting entitled Water Lilies painted by the Compensa Managers: ALICJA BEYM ANNA BURGHART DANIEL KRUSZEWSKI ANDRZEJ PADUSZYŃSKI

21 RESULTS Compensa TU S.A.

22 Compensa TU S.A. Financial results The year 2012 was closed with net profit of PLN thous. This signifies an increase in the result by PLN thous. as compared to the previous year. The below table presents the Company s results in detail. Gross written premiums Investment revenue (net.) Gross claims and benefits paid Change in gross technical provisions Acquisition and administrative costs Technical result Net financial result ( 000 PLN) ( 000 PLN) Solvency indexes and parameters Solvency margin Own funds to cover solvency margin Coverage of solvency margin by own assets ( 000 PLN) % Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

23 Compensa TU S.A. Technical Account Earned premiums Gross written premiums Outward reinsurance premiums Change in gross provision for unearned premiums and provision for unexpired risk Reinsurers share in change of provision for unearned premiums Revenues of net investments transferred from P&L account Other technical income net of reinsurance Claims incurred Claims paid net of reinsurance Gross claims paid Reinsurers share in gross claims paid Change in provision for claims outstanding net of reinsurance Movement in gross claims reserves Reinsurers share in movement of claims reserves Change in other technical provisions net of reinsurance Bonuses and discounts including discounts and bonuses reserve change Net operating expenses Acquisition costs Administrative expenses Reinsurance commissions and profit participation Other technical charges net of reinsurance Equalisation reserve change Balance on technical account non-life insurance ( 000 PLN) ( 000 PLN) Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

24 Compensa TU S.A. General profit and loss account Technical account non-life insurance Investment income Unrealized gains on investments ( 000 PLN) ( 000 PLN) Net return on investments including costs, transferred from the technical non-life insurance account Investment charges Unrealized losses on investments Net return on investments including costs, transferred to the technical non-life insurance account Other operating income Other operating expenses Profit (loss) on operation activity Extraordinary profits Extraordinary losses Gross profit (loss) Income tax Other mandatory profit reductions (increase of losses) Net profit (loss) Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

25 Compensa TU S.A. Cash flow statement Cash flow from operating activities Proceeds Proceeds for direct activities and reinsurance accepted Outwards reinsurance proceeds Proceeds on other operating activities Expenses Expenses for direct activities and reinsurance accepted Outwards reinsurance expenses Expenses on other operating activities Cash flow from investment activities Proceeds Expenses Cash flow from financial activities Total net cash flow Change in cash on balance sheet Cash at the beginning of period Cash at the end of period ( 000 PLN) ( 000 PLN) Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

26 Compensa TU S.A. Balance sheet: assets Intangible assets Investments Land and buildings Investments in subordinated undertakings Other financial investments Deposit debtors from creding undertakings ( 000 PLN) ( 000 PLN) Net life insurance assets where the investment risk is borne by the policyholders Debtors Direct insurance debtors Debtors arising from reinsurance operations Other debtors Other asset components Tangible assets Cash and funds Other assets Prepayments and accrued income Assets from deferred income tax Deferred acquisition costs Accrued interest and rent Other prepayments and accrued income TOTAL ASSETS Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

27 Compensa TU S.A. Balance sheet: liabilities Capital and reserves Subscribed capital Reserve capital (fund) Revaluation capital (fund) Other reserve capital Profit (loss) from previous years Net profit (loss) Subordinated liabilities Technical provisions Provision for unearned premiums and provision for unexpired risk Life insurance provision Provision for claims outstanding Provision for bonuses and rebates Equalization provision Provision for life assurance policies where the investment risk is borne by the policyholders Reinsurers share in technical provisions (negative value) Reinsurers share in provision for unearned premiums and provision for unexpired risks Reinsurers share in life insurance provision Reinsurers share in provision for claims outstanding Reinsurers share in provision for life assurance policies where the investment risk is borne by the policyholders Estimated recourses and claims returns (negative value) Estimated gross recourses and claims returns Reinsurers share in estimated recourses and claims returns Other provisions Provisions for pensions and other obligatory similar obligations Provisions for deferred income tax Other provisions Creditors arising out of reinsurers deposits Creditors and special funds Creditors arising out of direct insurance Creditors arising out of reinsurance operations Other creditors Accruals and deferred income TOTAL LIABILITIES ( 000 PLN) ( 000 PLN) Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

28 Compensa TU S.A. Registered Auditor s Opinion Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

29 Compensa TU S.A. Registered Auditor s Opinion Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

30 Compensa TU S.A. Report of the Supervisory Board on its activity in 2012 and assessment of the Financial Statements for the financial year ended 31 December 2012, evaluation of the Management Board 2012 Report and the Management Board motion on distribution of net profit for the financial year ended 31 December Composition of the Supervisory Board in 2012 On 31 December 2012 the composition of the Supervisory Board was as follows and was the same throughout 2012: Hans Peter Hagen Chairman of the Supervisory Board Dieter Fröhlich Deputy of the Chairman of the Supervisory Board Roland Goldsteiner Member of the Supervisory Board Wolfgang Petschko Member of the Supervisory Board Background Information In 2012 the Supervisory Board took decisions at its meetings and by circulation. Supervisory Board meetings were held four times. Over the reporting period the Supervisory Board adopted 20 resolutions concerning important issues regarding the functioning of the Company, including but not limited to: approval of Management Board Report on Company activities for the year 2011 and financial statement of the Company for the year 2011, audited by the statutory auditor, approval of the Management s Board motion regarding distribution of the profit for the financial year 2011, approval and submission to the Shareholders Meeting the Supervisory Board Report from the activity in 2011, granting permission for giving a cash loan by the Company in order to finance setting up of a limited company and commencing its activity in Latvia, empowering Mr. Peter Hagen and Mr. Dieter Froehlich to sign agreements and amendments to agreements and documents regulating bonuses with Management Board Members, approval of new text of By-Laws of the Management Board, agreement to conclude by the Company the new lease agreement for the office space in Mistral and Passat buildings, approval of the Management s Board motion to allocate the net profit for the year 2011 for the reserve capital in case of completion of formal procedure of covering the losses of previous years, granting permission for contribution by the Company as in-kind contribution to be owned by Spółdzielnia Usługowa VIG Ekspert the organized part of the enterprise including claims handling sector of the Company, selection of auditor to audit financial statements for the business year 2012, approval of purchase the ownership right to the commercial premises in Białystok, agreement to purchase of VIG FUND uzavreny investicni fond a.s. shares, approval of purchase the ownership right to the commercial premises in Katowice, approval of the reinsurance plan for the year 2013, approval of the Investment and Risk Strategy for the year 2013, which assumes conservative and safe investment policy, approval of the financial plan for the year 2013, appointment to the Management Board Mr. Franz Fuchs, Mr. Ireneusz Arczewski and Mr. Jarosław Szwajgier for next three years cadency, appointment of the new Deputy President of the Management Board Mr. Michał Gomowski. Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

31 Compensa TU S.A. Report of the Supervisory Board on its activity in 2012 During its meetings the Supervisory Board analysed detailed Management Board information about results recorded within the reporting period, in particular financial, sales and investment management results in comparison to the results from previous year and plans approved by previous Supervisory Board resolutions and their influence on the Company s current financial standing. The Supervisory Board also monitored in the quarterly manner the Management Board reports of financial results including esp. detailed information regarding gross premium written, gross premium earned, and claims, separately for motor insurance, administration costs, acquisition costs, technical result, financial result, investment income, technical reserves, Company s activity in Baltic countries in the area of premium, loss ratio and technical result. The Supervisory Board assessed financial statement and acknowledged auditor s remarks concerning IT computer control area, where the auditor suggested that formal documentation of changes made to IT systems and administrative access to IT systems could be improved, confirmed that Company s financial statement is in line with the Polish accounting law, that no fraud or illegal acts were identified. Auditor also confirmed that all items were eventually reconciled. Moreover, the Supervisory Board in close cooperation with relevant departments of the Shareholder supervised the correctness of financial statements, all important transactions and Company s investment policy, as well as monitored the state of Company s preparations to implement the requirements connected with the implementation of Solvency II. Additionally the Supervisory Board acknowledged the Management Board information on the strategic corporate and SME business plan for year , information regarding Company s internal audit plan for 2013 and information regarding registration process of the new Statues of the Company, to which the Supervisory Board issued a positive opinion. In this way the Supervisory Board exercised constant monitoring of the Company s operations, thus executing its statutory duty. The Supervisory Board also assessed the Company s operations from the standpoint of financial security standards prescribed by the Insurance Activity Act. The Supervisory Board fulfilled also the obligations of Audit Committee imposed by resolution no. 11/2009 of among others: monitoring process of financial reporting; monitoring effectiveness of internal control systems, internal audit and risk management; monitoring realization of financial revision monitoring independence of chartered accountant and entity authorized to approve financial statement, in that case rendering of the following services: bookkeeping for accounting and tax purposes, tax consulting, running bankruptcy and winding up procedures, publishing and training activities in the scope of accounting, financial revision and taxes, preparing expertise or economic-financial opinions, rendering attesting services, consulting or management requiring knowledge on accounting and financial revision, rendering services provided in the standards of financial revision and other services provided in other laws as restricted to be rendered by chartered accountants. Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

32 Compensa TU S.A. Report of the Supervisory Board on its activity in 2012 Assessment of the Company s Financial Statements, Management Board s Activity Report and Motion on Distribution of Profit Following the provisions of art. 382 of the Commercial Company Code and bearing in mind the functions of the Audit Committee realized by the Supervisory Board, the Supervisory Board assessed: Financial Statements for the financial year ended 31 December 2012, comprising: introduction to the financial statements, balance sheet, technical insurance account, profit and loss account, cash flow statement, statement of changes in equity, Management Board 2012 Activity Report, Management Board motion on allocating the net profit for the year ended 31 December Having familiarized itself with the presented documents and the auditor s opinion on the audited Company s financial statements for the financial year ended 31 December 2012 the Supervisory Board concluded that the Financial Statements and the Management Board Report are fully in line with the accounting ledgers and documents as well as with the actual state of affairs, and in particular: give a fair view of any information relevant to assessment of the Company s activities in 2012, in particular profitability, financial result of its operations, and its financial and asset value position as at 31 December 2012, are compliant, with regard to form and content, with applicable provisions of law and the Company s Articles of Association, the financial statements were drawn up in compliance with the prevailing accounting principles and on the basis of duly kept accounting ledgers, the financial statements and the audit carried out by chartered auditors, were in line with the provisions of the Accounting Act of 29 September 1994 and the applicable audit standards as defined by the National Audit Board in Poland. Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

33 Compensa TU S.A. Report of the Supervisory Board on its activity in 2012 Assessment of the motion on distribution of profit The Supervisory Board believe that the allocation of the 75% of 2012 net profit to pay dividend for 2012 and 25% of 2012 net profit to increase the spare capital as proposed by the Management Board is fully in line with the Company s current needs and fulfill statutory requirements and the criteria of Recommendation issued by the Financial Supervisory Commission KNF. The Supervisory Board recommends that the Ordinary Shareholders Meeting of the Company resolves on the approval of the financial statements for the financial year ended 31 December 2012 and the Management Board Activity Report for 2012 and on allocating the 75% of net profit generated in 2012 to pay dividend for 2012 and 25% of net profit generated in 2012 to increase the spare capital. Hans Peter Hagen Dieter Fröhlich Roland Goldsteiner Wolfgang Petschko Chairman Deputy Chairman Member Member of the Supervisory Board of the Supervisory Board of the Supervisory Board of the Supervisory Board Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

34 Original painting: Spring meadow by Franz Fuchs Picture entitled Spring meadow painted by Compensa Managers: DOROTA CZERWIŃSKA-RYBSKA PAWEŁ DRZEWIECKI MIKOŁAJ GŁOWACKI PIOTR KACZANOWSKI GABRIELA WOJNAROWSKA

35 RESULTS Compensa TU na Życie S.A.

36 Compensa TU na Życie S.A. Financial results The year 2012 has been finalized with gross premium written value at the level of PLN thous. and net profit of PLN thous. As compared to the previous year the premium written has grown by 22%. The below table presents the Company s main items of profits and loss account in detail. Gross written premiums Investment revenue (net.) Gross claims and benefits paid Change in gross technical provisions Acquisition and administrative costs Technical result Net financial result ( 000 PLN) ( 000 PLN) Solvency indexes and parameters Solvency margin Own funds to cover solvency margin Coverage of solvency margin by own assets ( 000 PLN) % Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

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38 Compensa TU na Życie S.A. Technical account Earned premiums Gross written premiums Outward reinsurance premiums Change in gross provisions for unearned premiums and provision for unexpired risk Investment income Income from other financial investments from shares, other variableyield securities, units and investment funds participating interests and investment certificates from debt securities and other fixed income securities from deposits with credit institutions from other investments Gains on the realization of investments Unrealized gains on investments Other technical income net of reinsurance Claims incurred Claims paid net of reinsurance gross claims paid reinsurers share in gross claims paid Change in provisions for claims outstanding net of reinsurance gross provisions reinsurers share Change in other technical provisions net of reinsurance Change in life assurance provision net of reinsurance Change in technical provisions for life assurance policies where the investment risk is borne by policyholders ( 000 PLN) ( 000 PLN) Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

39 Compensa TU na Życie S.A. Technical account Bonuses and rebates including change in provisions net of reinsurance Net operating expenses Acquisition costs including the activated sales costs change Administrative expenses Reinsurance commissions and profit participation Investments charges Other investment charges Losses on re-adjustments on investments Losses on the realization of investments Unrealized losses on investments Other technical charges net of reinsurance Net returns on investment including costs, transferred to the profit and loss account Balance on technical life insurance account ( 000 PLN) ( 000 PLN) Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

40 Compensa TU na Życie S.A. General profit and loss account Technical account life insurance Other operating income Other operating expenses Profit (loss) on operation activity Extraordinary profits Extraordinary losses Gross profit (loss) Income tax Other mandatory profit reductions (increase of losses) Net profit (loss) ( 000 PLN) ( 000 PLN) Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

41 Compensa TU na Życie S.A. Cash flow statement Cash flow from operating activities Proceeds Proceeds for direct activities and reinsurance accepted Outwards reinsurance proceeds Proceeds from other operating activities Expenses Expenses for direct activities and reinsurance accepted Outward reinsurance expenses Expenses on other operating expenses Cash flow from investment activities Proceeds Expenses Cash flows from financial activities Proceeds Expenses Total net cash flow Change in cash on balance sheet Cash at the beginning of period Cash at the end of period ( 000 PLN) ( 000 PLN) Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

42 Compensa TU na Życie S.A. Balance sheet: assets Intangible assets Investments Land and buildings Investments in subordinated undertakings Other financial investments Deposit debtors from ceding undertakings Net assets for life assurance when the investment risk is borne by the policyholders Debtors Direct insurance debtors Debtors arising out of reinsurance operations Other debtors Other assets Tangible assets Cash Other assets Prepayments and accrued income Assets from deferred income tax Deferred acquisition costs Accrued interest and rent Other prepayments and accrued income TOTAL ASSETS ( 000 PLN) ( 000 PLN) Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

43 Compensa TU na Życie S.A. Balance sheet: liabilities Capital and reserves Subscribed capital Reserve capital (fund) Revaluation capital (fund) Other reserve capitals Profit (loss) from previous years Net profit (loss) Subordinated liabilities Technical provisions Provision for unearned premiums and provision for unexpired risk Life assurance provision Provisions for claims outstanding Provisions for bonuses and rebates Provision for life assurance policies where the investment risk is borne by the policyholders Reinsurers share in technical provisions (negative value) Reinsurers share in provisions for claims outstanding Estimated recourses and claims returns (negative value) Other provisions Provisions for pensions and other obligatory similar obligations Provision for deferred income tax Other reserves Credits arising out of reinsurers deposits Credits and special funds Creditors arising out of direct insurance Creditors arising out of reinsurance operations Other credits Special funds Accruals and deferred income TOTAL LIABILITIES ( 000 PLN) ( 000 PLN) Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

44 Compensa TU na Życie S.A. Registered Auditor s Opinion Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

45 Compensa TU na Życie S.A. Registered Auditor s Opinion Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

46 Compensa TU na Życie S.A. Report of the Supervisory Board on its activity in 2012 and assessment of the Financial Statements for the financial year ended 31 December 2012, evaluation of the Management Board 2012 Report and the Management Board motion on distribution of net profit for the financial year ended 31 December Composition of the Supervisory Board in 2012 On 31 December 2012 the composition of the Supervisory Board was as follows and was the same throughout 2012: Hans Peter Hagen Chairman of the Supervisory Board Dieter Fröhlich Deputy of the Chairman of the Supervisory Board Roland Goldsteiner Member of the Supervisory Board Wolfgang Petschko Member of the Supervisory Board Background Information In 2012 the Supervisory Board took decisions at its meetings and by circulation. Supervisory Board meetings were held four times. Over the reporting period the Supervisory Board adopted 14 resolutions concerning important issues regarding functioning of the Company, as. approval of Management Board Report on Company activities for the year 2011 and financial statement of the Company for the year 2011, audited by the statutory auditor, approval of the Management s Board motion regarding distribution of the profit for the financial year 2011, approval and submission to the Shareholders Meeting the Supervisory Board Report from the activity in 2011, approval for undertaking activities aiming at covering the cumulated losses of the previous years and allowing the Company to pay dividend, empowering Mr. Peter Hagen and Mr. Dieter Froehlich to sign agreements and amendments to agreements and documents regulating bonuses with Management Board Members, approval of new text of By- Laws of Management Board, agreement to conclude by the Company the new lease agreement for the office space in Mistral and Passat buildings, approval of the Management s Board motion to allocate the net profit for the year 2011 for the reserve capital in case of completion formal procedure of covering the losses of previous years, selection of auditor to audit financial statements for the business year 2012, approval of the Investment and Risk Strategy for the year 2013, approval of the financial plan for the year 2013, appointment to the Management Board Mr. Franz Fuchs, Mr. Ireneusz Arczewski and Mr. Grzegorz Liszka for next three years cadency. Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

47 Compensa TU na Życie S.A. Report of the Supervisory Board on its activity in 2012 At the Supervisory Board meeting detailed Management Board information about the recorded results was analyzed incl. the influence of those results on the Company s current financial standing. i.a. information about financial, sales and investment management results in comparison to the results from previous year and plans approved by respective previous Supervisory Board resolutions. The Supervisory Board also assessed financial statement and acknowledges auditor s remarks on the IT computer control area, where auditor suggested that formal documentation of changes made to IT systems and administrative access to IT systems could be improved, actuarial area more frequent checks of reconciliation of actuarial data with the source system are recommended, and that documentation of actuarial methodology as well as improvements in the reconciliation between the general ledger and the IT system. Auditor also confirmed that Company s financial statement is in line with Polish accounting law, that no fraud or illegal acts were identified the same confirming that all items were eventually reconciled. Moreover, the Supervisory Board in close cooperation with relevant Shareholder s departments supervised the correctness of financial statements, all important transactions and Company s investment policy, as well as monitored state of Company s preparations to implement requirement connected with implementation of Solvency II. Moreover, the Supervisory Board also monitored in the quarterly manner the Management s Board reports from financial results including data regarding gross premium written (in it regular premium, single premium, insurances from bancassurance channel, claims, administration costs, acquisition costs, technical result, financial result, portfolio in range of individual and group products, Company s financial investment, unit-linked investments, DAC, technical reserves, coverage of reserves and coverage of solvency margin by own funds. Additionally the Supervisory Board acknowledged Management Board information on the state of proceedings before the implementation of the SAP project, information regarding Company s internal audit plan for 2013 and information regarding registration process of the new Statues of the Company, concerning which the Supervisory Board issued a positive opinion. In this way the Supervisory Board exercised constant monitoring of the Company s operations, thus executing its statutory duty. The Supervisory Board also assessed the Company s operations from the standpoint of financial security standards prescribed by the Insurance Activity Act. Supervisory Board fulfilled also the obligations of Audit Committee imposed by resolution no. 10/2009 of by among others. monitoring process of financial reporting; monitoring effectiveness of internal control systems, internal audit and risk management; monitoring realization of financial revision monitoring independence of chartered accountant and entity authorized to approve financial statement, in that case rendering of the following services: bookkeeping for accounting and tax purposes, tax consulting, running bankruptcy and winding up procedures, publishing and training activities in the scope of accounting, financial revision and taxes, preparing expertise or economic-financial opinions, rendering attesting services, consulting or management requiring knowledge on accounting and financial revision, rendering services provided in the standards of financial revision and other services provided in other laws as restricted to be rendered by chartered accountants. Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

48 Compensa TU na Życie S.A. Report of the Supervisory Board on its activity in 2012 Assessment of the Company s Financial Statements, Management Board s Activity Report and Motion on Distribution of Net Profit Following the provisions of art. 382 of the Commercial Company Code and bearing in mind the functions of the Audit Committee realized by the Supervisory Board, the Supervisory Board assessed: Financial Statements for the financial year ended 31 December 2012, comprising: introduction to the financial statements, balance sheet, technical insurance account, profit and loss account, cash flow statement, statement of changes in equity, Management Board 2012 Activity Report, Management Board motion on allocating the profit for the year ended 31 December Having familiarized itself with the presented documents and the auditor s opinion on the audited Company s financial statements for the financial year ended 31 December 2012 the Supervisory Board concludes that the Financial Statements and the Management Board s Report are fully in line with the accounting ledgers and documents as well as with the actual state of affairs, and in particular: give a fair view of any information relevant to assessment of the Company s activities in 2012, in particular profitability, financial result of its operations, and its financial and asset value position as at 31 December 2012, are compliant, with regard to form and content, with applicable provisions of law and the Company s Articles of Association, the financial statements were drawn up in compliance with the prevailing accounting principles and on the basis of duly kept accounting ledgers, the financial statements and the audit carried out by chartered auditors, were in line with the provisions of the Accounting Act of 29 September 1994 and the applicable audit standards as defined by the National Audit Board in Poland. Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

49 Compensa TU na Życie S.A. Report of the Supervisory Board on its activity in 2012 Assessment of the motion on distribution of net profit The Supervisory Board believe that the allocation of the 100% of 2012 net profit to pay dividend for 2012 as proposed by the Management Board is fully in line with the Company s current needs and fulfill statutory requirements and the criteria of Recommendation issued by the Financial Supervisory Commission KNF. The Supervisory Board recommends that the Ordinary Shareholder Meeting of the Company takes resolutions on the approval of financial statements for the financial year ended 31 December 2012 and the Management Board Activity Report for 202 and the allocation of entire net profit generated in 2012 for dividend for Hans Peter Hagen Dieter Fröhlich Roland Goldsteiner Wolfgang Petschko Chairman Deputy Chairman Member Member of the Supervisory Board of the Supervisory Board of the Supervisory Board of the Supervisory Board Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report

50 Original painting: I can see you by Franz Fuchs Picture entitled I can see you painted by Compensa Managers: GRZEGORZ GIERSZEWSKI JOANNA GŁADYŚ MONIKA LEWANDOWICZ MACIEJ WUJEC

51 VIG Vienna Insurance Group

52 Vienna Insurance Group Vienna Insurance Group is one of the leading listed insurance companies in Austria and the Central and Eastern European region, with around 24,000 employees generating a premium volume of approximately EUR 9.7 billion. Around 50 companies in 24 countries form a group with a long tradition, strong brands and high customer-orientation. The Company is a clear market leader in its core markets, offering an extensive range of products and services in both the life and non-life insurance segments. Progressive insurer conservative investor Vienna Insurance Group (VIG) is a progressive insurer that consciously focuses on its core competence: the insurance business. In large part due to its risk-conscious, conservative investment policy, VIG stands for security and financial stability as an insurer, employer, business partner and issuer in the capital markets. This was also underlined by the Standard & Poor s rating agency, which renewed its A+ rating with stable outlook for This makes Vienna Insurance Group the best-rated company in the ATX leading index of the Vienna Stock Exchange. The Company s listing on the Prague Stock Exchange in 2008 highlights VIG s strategic orientation towards the Central and Eastern European economic area (CEE). Vienna Insurance Group also has the aim of creating and promoting socially responsible and sustainable conditions for a society worth living in. VIG therefore feels obligated to involve itself in cultural and social concerns in order to remain true to its fundamental goal of value-oriented growth. Focus on Austria and Central and Central and Eastern Europe Vienna Insurance Group, whose roots reach back to 1824, was quick to identify the many growth opportunities offered by Central and Eastern Europe. Starting from its base in Austria, the Company was one of the first Western European insurance companies to enter the CEE region and has been expanding there for more than 20 years. In the process, VIG has developed from a successful local insurance company to a leading international insurance group with around 50 insurance companies in 24 European countries. More than 50% of Group premiums and earnings now come from the CEE region. VIG is a clear overall market leader in its core markets, and in the life and non-life insurance segments, placing it in an excellent position to take advantage of the long-term opportunities offered by Central and Eastern Europe. With establishment of VIG RE, the Group has also had its own reinsurance company since 2008, and the location of its registered office in the Czech Republic underscores the importance of the CEE region as a growth market for VIG. Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report 2012 Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report

53 Vienna Insurance Group Trust in local entrepreneurship The Austrian VIG companies have offered an extensive product portfolio in both the life and non-life areas for many years. The low insurance density and large populations of many Central and Eastern European countries offer enormous potential for further growth over the medium and long term. In order to be a successful insurer in this region, one has to understand customer needs. This is the reason that VIG places its trust in the sound market knowledge of local management and the experience of its local employees. The combination of local market expertise and product know-how puts Vienna Insurance Group in an optimal position to continue consolidating its market position in Austria whilst at the same time benefiting from the rising standard of living in the CEE region, with the associated increase in the need for insurance. Close customer relationships based on a multi-brand strategy and multi-channel distribution All customers are unique in terms of their personal living circumstances, need for security and retirement provisions, and the way they like to receive advice. This requires considerable flexibility in insurance products, as well as foresight and prudence. Vienna Insurance Group is aware of this and is represented by more than one company or brand and a broad distribution network in most of its markets. Even though every one of the approximately 50 insurance companies has its own identity and individual strengths, they all follow a common goal: to maintain a closer relationship with customers than others do. Partnership with Erste Group The strategic partnership established with Erste Bank in 2008 facilitates long-term cooperation between the two leading financial services providers in the region, which are both firmly anchored in Central and Eastern Europe. Both companies benefit equally from this collaboration. Erste Group branches distribute VIG insurance products and, in return, VIG companies offer Erste Group bank products. People behind every number The approximately 24,000 employees of the 50 insurance companies in the Group are a key success factor. In addition to the commitment, professional advisory services and excellent service they provide, these VIG employees stand out for the diversity of the individual countries they represent. The ongoing development of their employees is of key importance, since only a combination of local market understanding with the personal and professional qualifications of each employee can lead to the best product solutions. To enable women to reach their full potential, VIG also has the goal of creating the conditions necessary to make entry and promotion within the Group more attractive to female employees. THE LEADING INSURANCE SPECIALIST IN THE CEE REGION. Compensa Towarzystwo Ubezpieczeń S.A. Vienna Insurance Group Annual Report 2012 Compensa Towarzystwo Ubezpieczeń na Życie S.A. Vienna Insurance Group Annual Report