OJSC "RUSSIAN REINSURANCE COMPANY"

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2 Alexander III receiving Heads of Provinces at Petrovsky Palace courtyard in Moscow Ilya Efimofich Repin Oil on canvas. 294 х 490,5 The State Tretyakov gallery. Moscow. The painting depicts the Emperor Alexander III and his family surrounded by courtiers and ministers immediately after the coronation on May 5th 1883 delivering the speech before the Heads of all Russian Provinces. On the background is the Family of the Emperor: the Empress Maria Feodorovna and children - Prince Nikolai, Georgy, Ksenia, Mikhail, Olga. The Painting was commissioned to Ilya Repin in summer 1884 by the Ministry of the Imperial Court. The cartouche of the painting frame contains the extract of the speech of the Emperor.

3 Introduction Last year Russian Reinsurance Company celebrated its 20th anniversary. It is a relatively small period, in the scales of international business, but it has a completely different duration in the specific historic context. Having begun to work in the emerging market, in two decades the Company went all the way from primitive means to advanced technologies, from local risks to transcontinental operations. From the very beginning of its activity Russian Reinsurance Company adhered to the conservative policy and placed a stake on establishing long-term partnership relations and professionalism. Today, two decades later, a glance back is enough to make sure that the strategy was chosen correctly. A focus on business profitability based on strict control in respect of the portfolio formation, underwriting, retrocessional protection and investments determines stable financial results under the conditions of reduction of premium rates and strengthening of competition. Russian Reinsurance Company is a national reinsurer with a wide international participation. This idea, formulated as early as in the middle 90s, is now put into life and allows to combine extensive international experience with the specifics of the promising Russian market. Strict underwriting is one of the most important principles of the Company s operation. It has contributed to multiple increases of the Company s capital performed mainly through profit capitalization. For the twenty years of its operations Russian Reinsurance Company has demonstrated the ability to systematically and sustainably develop under challenging conditions. The last year was not an exception. Despite the extremely unfavorable market conditions, the volume of the reinsurance premiums collected by the Company in 2012 increased by 5.7% and exceeded 580 million rubles. Premium increst was achieved through the expansion of the existing reinsurance programs and exploration of new territories. The permanent efforts aimed at maintaining the financial stability of the Company resulted in A.M.Best reaffirming the financial strength rating of В+ (Good) and the issuer credit rating of bbb-.

4 History 1992 Russian Reinsurance Company was established in Moscow as an initiative by the Russian Union of Insurers 2003 Michael Handler was elected Chairman of the Board of Directors of Russian Reinsurance Company Eduard Ryabinin was appointed Chairman of the Board of Directors Alte Leipziger Europa Beteiligungsgesellschaft AG (Germany) became the Company s first foreign shareholder American International Group Inc. and Marsh&McLennan Risk Capital Holdings (USA) acquired shares of Russian Reinsurance Company A representative office was opened in Vladivostok ACE Group (Great Britain) acquired 15,8% of shares in Russian Reinsurance Company from ERGO Group (Germany) International rating agency A.M. Best assigned Russian Reinsurance Company a financial strength rating of B+ (Good) and an issuer credit rating of bbb- for the first time American International Underwriters (USA) and ACE Group acquired a 15% shares of Russian Reinsurance Company from Marsh&McLennan Risk Capital Holdings 2001 Alte Leipziger Europa Beteiligungsgesellschaft AG transferred its shares in Russian Reinsurance Company to ERGO Europa Beteiligungsgesellschaft AG (Munich Re Group) 2011 The Share Capital increased from 120 up to 480 million rubles A representative office was opened in Kiev (Ukraine)

5 Shareholders The Company s key shareholders are ACE Russia Investments Limited and Chartis International LLC holding 23,3 and 22,5 percent of shares respectively and 54,2 percent of shares are held by Russian corporations and individuals. The participation of the leading western companies in Russian Reinsurance Company s operations is not limited to capital investments. The intellectual support from our foreign directors, who are professionals of the highest level, represents a considerable contribution to the development of the Company. ACE Russia Investments Limited 23.3% Chartis International LLC 22.5% Management 48.2% Others 6.0%

6 Board of Directors Management Board Chairman of the Board of Directors Michael Handler Managing Director and Chairman, Continental Europe, Guy Carpenter, Inc., Zurich Directors: Andrey Polyakov Managing Director of Russian Reinsurance Company, PhD in Economics, Moscow Andrey Polyakov Managing Director, PhD in Economics Teymuraz Batiashvili Executive Director, PhD in Economics Maria Morozova Business Development and Client Management Department Manager Mikhail Koulzhik Chief Underwriting Officer Yuri Golubovsky Moscow Andrew Kendrick Chairman and Chief Executive Officer (CEO) of ACE European Group, London Christos Adamantiadis General Manager, Arabia, Middle East and North Africa, Chartis Insurance

7 International Advisory Board The International Advisory Board of the Company was established in It includes the world s leading reinsurance experts who provide comprehensive assistance to the Company management in solving strategic and tactical tasks related to the Company s operations. Possessing a profound knowledge and extensive work experience in the developing markets, the IAB members watch the Company s activities and on a regular basis consult the board on a wide range of theoretical and practical issues, which include cyclic processes in reinsurance and the peculiarities of portfolio management to counter catastrophic events. Hans-Dieter Knuettel Managing Director, I.C.A.C., Germany Bengt Westergren Board Director, Senior Advisor of the East West Institute, New York, Brussels, Moscow Serge Osouf Senior Advisor, ACE Group

8 Partners ОThe client policy of Russian Reinsurance Company relies on building trust-based long-term relationships with partners. Developing such cooperation and developing relationship with new clients whose business approaches are compatible with the strategic vision of the Company is the most important goal of the Company s management and employees. At present over 130 insurers use the financial capacities of Russian Reinsurance Company and its services in risk management and claims settlement. Using the deep knowledge of the partners business, the employees of Russian Reinsurance Company develop the optimal reinsurance program for each of them, based on the considerations of reliability and expedience. Good understanding of the current situation in the market and its dynamics allows the Company to offer adequate terms of reinsurance. Russian Reinsurance Company has an extensive base of risks at its disposal practically for all types of industrial facilities and construction and installation projects, which allows the Company to make unique offers. Having direct access to the advanced international practices, Russian Reinsurance Company deems it its duty to extend the international experience to the Russian market. For this purpose the employees of the Company organize conferences and seminars for their clients in relation to urgent issues in the insurance and reinsurance business. Regional premium portfolio structure Regions Russia 58.0% 67.9% Former Soviet Union 13.1% 13.9% Middle East and Northern Africa 15.3% 13.1% Europe 4.3% 2.8% Asia Pacific 8.8% 2.1% Other Regions 0.5% 0.2%

9 Geography As part of its portfolio diversification program Russian Reinsurance Company continues systematically to explore overseas markets. In 2012 the share of Russian Reinsurance Company s Asian region operations increased by 6,7% in comparison with 2011, the premium written in Europe grew by 2% and that in the Middle East grew in the same way. Despite the expansion of the geographical borders of the Company s operations, Russia and CIS countries represent its key market, they accounted for 71.1% of the premium portfolio. The effective system of risk management, using the latest technologies, allows the Company to promptly analyze regional portfolios and, thus, exercise permanent control over the balance and stability of the expanding business. Building relations with new clients, Russian Reinsurance Company strives not for obtaining here-and-now benefits, but for building long-term, promising partnerships. By focusing on profitability as the most important feature of the portfolio rather than its sheer volume, Russian Reinsurance Company tracks the quality of accepted risks with great deliberation. For this purpose all underwriting is carried out centrally in the head office in Moscow. The versatility of Russian Reinsurance Company s team of professionals and centralized underwriting reinforced by the marketing activity of the representative offices in Kiev and Vladivostok, allows the Company to position itself as a reliable partner in the key and international markets.

10 Rating In 2012 A. M. Best agency affirmed once again the international ratings of Russian Reinsurance Company, i.e. the financial strength rating of В+ (Good) and the issuer credit rating of bbb-. The outlook for both ratings is stable. The ratings reflect the excellent operation results and good risk-adjusted capitalization. The last year s reaffirmation of the ratings is the result of Russian Reinsurance Company using its weighted conservative policy, which ensures stable work and high financial stability even under unfavorable market conditions.

11 Reinsurance protection The principle of long-term mutually beneficial cooperation, to which the Company adheres in relations with its clients, is to the full extent applicable to the creation of the retrocession protection. Russian Reinsurance Company places risks with the companies of the highest reliability category, with most of which it has been cooperating for over 15 years. In 2012 the parameters of Russian Reinsurance Company s reinsurance program remained unchanged. The maximum coverage for Middle East and Southeast Asia for property, energy and engineering risks makes US$ 3 million. Coverage for Russia and CIS countries for property, power industry energy and engineering risks, including machinery breakdown and electronic equipment and business interruption, amounts to up to US$ 50 million. A US$ 3 million cargo reinsurance contract covers cargo risks transported by any means of transport. Special purpose plant and machinery and rolling stock risks coverage makes US$ 2 million. The maximum retention for personal types per one insured person makes US$ 500 thousand, the Company offers a capacity of up to US$ 2.5 million for event programs to its clients.

12 Premium income and losses Gross written premium Net written premium Claims incurried, net of reinsurance

13 Equity and Share Capital In 2012 Russian Reinsurance Company s equity grew by 4.65% for the year and reached million rubles. The Company s net profit for the reporting year amounted to 11.1 million rubles. Authorized capital and equity growth (thousand RUB) , , , , ,690

14 Company structure The current structure of Russian Reinsurance Company is optimal from the point of view of communication between business units and operational effectiveness. The activity of all departments is closely interrelated and is controlled directly by the Company s Board of Management. All underwriting of Russian Reinsurance Company is concentrated in one subdivision. The interchangeability of specialists and absence of division by business lines, type of reinsurance or regional criteria allows the Company to manage the portfolio flexibly under the conditions of the «soft» market and ensure profitability, developing territorial diversification. The activity of the Underwriting Department is aimed at creating a balanced and profitable portfolio through thorough selection of risks with account of the approaches and principles formulated for the period of the Company s work. The area of responsibility of the Department s employees includes permanent monitoring of the market situation, tariff rates in the target sectors of business, dynamic analysis of the loss ratio of the Company portfolio and portfolios of partners. Besides, close attention is paid to qualitative processing of the incoming information and replenishment of the information arrays of the Company, used in processing each new request for reinsurance. The Business Development and Client Management Department is responsible for strategic planning and development of new business areas. In conjunction with the underwriting department it participates in the development of tailor-made reinsurance solutions by coordinating relations with the Company s partners. Its tasks include monitoring of the current state and development trends of the markets and control of representative offices activities. The department is engaged in preparing and holding lectures and seminars for the different lines of insurance and specifics of claims settlement. It holds work classes and training for representatives of Russian Reinsurance Company s partners. The Technical Accounting and Information Technologies Departments are responsible for all types of accounting, research and implementation of software solutions and optimization of the Company s operations, financial and economic analyses and portfolio.

15 Company structure (scheme) 1.BOARD OF MАNAGEMENT 2. BUSINESS DEVELOPMENT AND CLIENT MANAGEMENT DEPARTMENT VLADIVOSTOK [REPRESENTATIVE OFFICE] KIEV, UKRAINE [REPRESENTATIVE OFFICE] RISK ASSESSMENT & LOSS SETTLEMENT 4. TECHNICAL ACCOUNTING & IT DEPATMENTS 3. UNDERWRITING DEPARTMENT ENERGY ENGINEERING, MB, BI INDUSTRIAL AND PERSONAL PROPERTY CARGO SPECIAL PLANT & MACHINERY MOTOR (CASCO, TPL, PA) LIABILITY PERSONAL ACCIDENT TERM LIFE TRAVELLERS 5. GENERAL ACCOUNTING

16 Personnel In modern business, success and professionalism are synonyms. Hence, the qualification of the Company personnel and its on-going improvement are the matter of consistent concern for the Company Management. All Russian Reinsurance Company s employees are highly educated specialists with extensive experience and fundamental knowledge in insurance and reinsurance. Many have expert knowledge in the spheres corresponding to the major lines of the Company s portfolio, i.e. machine building, energy, construction and medicine. The integral part of our personnel policy is the systematic training of our employees at the world leading insurance and reinsurance companies. Their introduction to the international reinsurance experience allows Russian Reinsurance Company to go the most effective way and to use advanced technologies in its business.

17 Portfolio structure and loss ratio In 2012 the Russian market conditions remained extremely unfavorable, however, the balanced underwriting policy and mastering of new regions allowed Russian Reinsurance Company to achieve positive results even in this difficult situation. The Company s gross premium increased by 5.7% for the year and reached million rubles. The net premium grew by 8.6% to million rubles. There were no substantial changes in the structure of the Company s portfolio in the reporting period. Following the Company s initial decision to specialize in Property, Energy and Engineering, Russian Reinsurance Company consistently strengthens its position as a recognized underwriter in this sphere. The overall share in this area remained at its former level in 2012 and made about 77%. Last year, property line of business accounted for 65.3% of premiums (62.62% in 2011), and engineering risks 11.71% (14.95%). The share of personal accident and health line of business decreased for the year from 5.03% to 3.49%, liability reinsurance from 0.76% to 0.74%. The share of cargo reinsurance increased from 3.04% to 3.76%, special purpose plant and machinery from 1.88% to 3.13%. At the same time the share of motor reinsurance did not change in comparison with 2011, having made 11.88%. Since the underwriting policy of Russian Reinsurance Company is oriented first of all to profitability, the portfolio average loss ratio remained significantly lower than the market average in 2012 and amounted to 56.5%.

18 Portfolio structure and loss ratio (Diagramm) Property 65.30% 62.62% Engineering 11.71% 14.95% Motor 11.88% 11.72% Cargo 3.76% 3.04% Travellers/Personal Accident 3.49% 5.03% Special purpose plant & machinery 3.13% 1.88% Liability 0.74% 0.76%

19 Investments The main principles of Russian Reinsurance Company s investment policy are reliability and liquidity. Based on this, the Company invests money into deposits with the most reliable banks and into real estate. In 2012 the Company s investment income grew by 96.5% and exceeded 33.9 million rubles. This considerable growth was provided by the most effective real estate management.

20 Audit report (Extract) We, ZAO BDO have audited the financial statements of OJSC Russian Reinsurance Company which comprise the statement of financial position as at 31 December 2012, the profit and loss statement, the statement of changes in equity, the statement of cash flows for the year then ended, summary of enclosures to the statement of financial position and profit and loss statement and explanatory information for In our opinion, the financial statements present fairly, in all material respects, the financial position of OJSC Russian Reinsurance Company as at 31 December 2012, and its financial performance and its cash flows for the year then ended in accordance with the requirements of the legislation of Russian Federation in part of accounting reports submission. Partner Larisa V. Efremova March 29, 2013

21 KEY FINANCIAL FIGURES (thousand RUR) Gross written premium 580, , , , ,130 Net written premium 425, , , , ,940 Claims incurred, net of reinsurance 244, , , , ,031 Investment income 33,788 7,111 12,740 19,755 34,529 Reinsurance operations result 103,413 81, , ,926 70,116 Profit after taxation 11,098 10,537 32,522 42,471 25,095 CAPITAL and RESERVES (thousand RUR) Share capital 480, , , , ,000 Other shareholders equity 196, , , , ,690 Technical reserves 462, , , , ,013

22 FINANCIAL RESULT REPORT JSC «Russian Reinsurance Company» for the Year ended 31 December 2012 (in thousand rubles) Insurance other than life insurance Earned insurance premiums - net of reinsurance 432, ,463 Insurance premiums of insurance, co-insurance and reinsurance, gross 580, ,928 Insurance premiums ceded (154,890) (157,149) Change in provision for unearned premiums, gross 8,771 (26,428) Change of provision for unearned premiums, reinsurer's share (2,039) 4,112 Claims incurred, net of reinsurance (244,681) (206,953) Claims on of insurance, co-insurance and reinsurance, gross (240,547) (283,074) Claims handling expenses (2,939) (3,298) Claims ceded to reinsurer's ,671 Change in claims provision, gross (35,513) 126,132 Change in claims provisions, reinsurer's share 34,251 (173,384) Change in other provision (121) 1,594 Insurance operations expences - net of reinsurance (83,910) (72,913) Acquisition expenses (77,576) (68,114) Insurance operations other expenses (6,334) (4,799) Investment income 9,365 7,111

23 Expenses on investments - (812) Other income on insurance other than life insurance 1, Other expenses on insurance other than life insurance (10,375) (15,927) Result from operations on insurance other than life insurance 103,413 81,579 Income and expenses, not related to insurance operations Administration expenses (84,355) (81,441) Other income 149, ,694 Other expenses (151,986) (127,679) Profit (loss) before taxation 16,950 15,153 Current profit tax (5,597) (5,195) including: FINANCIAL RESULT REPORT JSC «Russian Reinsurance Company» for the Year ended 31 December 2012 (in thousand rubles) permanent tax liabilities (assets) (2,462) 1,585 Change of deferred tax assets (255) 579 Net profit (loss) 11,098 10,537 * The form and content of the financial statements reflect the reporting requirements applicable under the Russian legislation **Zero index positions are not indicated

24 BALANCE SHEET OJSC «Russian Reinsurance Company» as at 31 December 2012 (in thousand rubles) ASSETS I. Assets Intangible assets Fixed assets 142, , ,550 Investment property 412, , ,996 Financial investments (excluding cash equivalents) 230, , ,231 Deferred tax assets 2,431 2,686 2,107 Inventory 1,540 1,464 2,720 Insurance reserves, other than life insurance, Reinsurers' share 53,428 21, ,488 Receivables 167, , ,767 Premium deposits with reinsureds Cash ad cash equivalents 344,854 77, ,328 TOTAL FOR SECTION I 676, , ,304 BALANCE 1,355,670 1,210,987 1,216,251

25 BALANCE SHEET OJSC «Russian Reinsurance Company» as at 31 December 2012 (in thousand rubles) LIABILITIES II. Capital and reserves Share capital 480, , ,000 Revaluation reserve for premises and equipment 117,976 92, ,168 Reserve capital 19,693 18,000 18,000 Retained earnings 59,078 49, ,136 TOTAL FOR SECTION II 676, , ,304 III. Liabilities Insurance reserves on other insurance than life insurance 462, , ,213 External borrowing 100,385 50,668 63,105 Estimated liabilities 7,961 9,771 10,300 Payables 107,799 74,107 45,329 TOTAL FOR SECTION III 678, , ,947 BALANCE 1,355,670 1,210,987 1,216,251

26 HEAD OFFICE Russian Re Business Centre Building 1, 19, Lyalin Pereulok Moscow, , Russia tel: fax: REPRESENTATIVE OFFICES Vladivostok 3a Sukhanova St., P.O. Box , Vladivostok, , Russia tel.: Kiev, Ukraine 2a Konstantinovskaya St., Kiev, Ukraine, tel.: Russian Re Business Centre. Building 1, 19 Lyalin Pereulok