ANNUAL FINANCIAL REPORT

Transcription

1 EUROINS INSURANCE PLC Bulgaria, 1797 Sofia, 16 G. M. Dimitrov blvd. tel , fax office@euroins.bg, web: ANNUAL FINANCIAL REPORT 2007

2 C O N T E N T Auditors report as at Income statement as at Balance sheet as at Cash flow as at Statement of changes in equity as at Notes to the financial statements

3 INDEPENDENT AUDITORS' REPORT TO: THE GENERAL MEETING OF THE SHAREHOLDERS EUROINS INSURANCE plc SOFIA Report on the financial statements We carried out an audit of the attached financial statements of EUROINS INSURANCE plc, including the balance sheet as at 31 December, 2007 and an income statement, a statement of changes in equity, a cash flow statement for the year ending at this date, as well as the summarised disclosure of significant accounting policies and the other explanatory enclosures, and an annual activity report. Management s responsibility for the financial statements The responsibility for the preparation and the true presentation of these financial statements in line with the International Financial Reporting Standards as well as of the annual activity report is borne by the company s management. This responsibility covers: the development, introduction and maintenance of an internal control system related to the drafting and the true presentation of financial reports which should not contain material misrepresentations, deviations and discrepancies, irrespective of whether these result from fraud or error; selection and application of appropriate accounting policies; and making accounting estimates, which would be reasonable in the specific circumstances. Responsibility of the auditor Our responsibility is limited to expressing an auditor s opinion on this financial statement based on our audit. Our audit was carried out in compliance with the professional requirements of the International Auditing Standards. The standards stipulate for the observance of the ethical requirements so that the audit would be planned and carried out in such a manner that we would be convinced to a reasonable degree of certainty as to whether the financial statements are free of material misrepresentations, deviations and discrepancies. The audit includes the fulfilment of procedures for the purpose of obtaining auditing evidence regarding the amounts and disclosures presented in the financial statements. The selection of procedures depends on the assessment of the auditor, including the assessment of the risks of material misrepresentations, deviations and discrepancies in the financial statement, irrespective of whether these result from fraud or error. In carrying out these risk assessments, the auditor takes into account the internal control system related to the drafting and the true presentation of the financial statement on behalf of the business enterprise, in order to develop auditing procedures appropriate to these circumstances, but not for the purpose of expressing an opinion regarding the effectiveness of the internal control system of the company. The audit also includes an assessment of the appropriateness of the accounting policies applied and the reasonability of the accounting estimates made by the management, as well as an assessment of the overall presentation of financial statement. We find that our audit presents a sufficient and suitable basis for the auditor s opinion we hereby express. Opinion As a result of this, we hereby certify that the financial statements present truly, in all material aspects, the financial condition of EUROINS Insurance plc as at , as well as the financial results of its business activity and the cash flows for the year then ending, in compliance with the International Financial Reporting Standards. 3

4 Reports on other legal and regulatory requirements: an annual report on the company s activity, according to Article 33 of the Accountancy Act. Pursuant to the requirements of the Accountancy Act, Article 38, paragraph 4, we reviewed the attached Annual Report on the company s activity. The Annual Activity Report of the company, which was drawn by the management, is not a part of the financial statements. The historical financial information presented in the Annual Activity Report of the company, drawn by the management, corresponds in all material aspects with the financial information contained in the annual financial statements of the company as at 31 December, 2007, prepared pursuant to Bulgarian accounting law, which has transposed the International Financial Reporting Standards. The responsibility for the preparation of the Annual Activity Report of EUROINS INSURANCE plc is borne by the company's management. 31 March, 2008 Sofia Certified by: Radka Boevska No (sgd. Illegible and seal) Registered auditor Margarita Radeva No (sgd. Illegible and seal) Registered auditor Radka Marinova Boevska Sofia, 116 Maria Luisa Blvd. entrance B Margarita Tasheva Radeva Sofia, 25 Tzar Boris III Blvd. 4

5 EUROINS INSURANCE PLC INCOME STATEMENT FOR THE YEAR ENDING AS AT 31 DECEMBER 2007 TECHNICAL ACCOUNT GENERAL INSURANCE Notes Amount (in BGN 1000) Period Period Written premiums Premiums ceded to reinsurers Change in the gross unearned premium reserve (+/-) Changes in the reinsurers' share in the unearned premium reserve Earned premiums, net of reinsurance Allocated investment return transferred from the non-technical account Other technical income net of insurance Gross claims paid Reinsurers share in claims paid Change in the gross amount of the claims outstanding reserve Change of the reinsurers share in the claims outstanding reserve Claims incurred, net of reinsurance Acquisition costs Administrative costs Reinsurance commissions and profit participation Net operating costs Other technical costs, net of insurance Change in the reserve fund (+/-) -46 Balance on the technical account for general insurance NON-TECHNICAL ACCOUNT Net investment return Other financial income and costs Other income and costs Profit before tax Corporate tax Expenses/savings/ on deferred tax Net profit for the period The appended notes constitute an integral part of the financial statement. Prepared by: Vladimir Marinov (sgd. Illegible) Chief Accountant Radka Boevska (sgd. Illegible and seal) Registered auditor Representative: Kiril Boshov (sgd. Illegible and seal) Chairman of the Management Board Margarita Radeva (sgd. Illegible and seal) Registered auditor 5

6 EUROINS INSURANCE PLC BALANCE SHEET AS AT 31 DECEMBER 2007 ASSETS Notes Amount (in BGN 1000) Investments Buildings 9, Shares and other variable-yield securities Debt securities and other fixed-income securities Deposits with financial institutions Total investments Receivables and other current assets Machinery, plant and equipment Intangible assets Cash and cash equivalents Assets on deferred tax TOTAL ASSETS LIABILITY CAPITAL AND RESERVES Subscribed capital Reserves Profit, including Undistributed profit Profit for the period Total capital and reserves TECHNICAL PROVISIONS Unearned premium reserve gross amount reinsurers share Claims reserve gross amount reinsurers share Reserve fund Total technical provisions Payables and other liabilities Liabilities on deferred tax TOTAL LIABILITY The appended notes constitute an integral part of the financial statement. Prepared by: Vladimir Marinov (sgd. Illegible) Chief Accountant Radka Boevska (sgd. Illegible and seal) Registered auditor Representative: Kiril Boshov (sgd. Illegible and seal) Chairman of the Management Board Margarita Radeva (sgd. Illegible and seal) Registered auditor 6

7 EUROINS INSURANCE PLC CASH FLOW FOR THE YEAR ENDING AS AT 31 DECEMBER 2007 In BGN thousand Period Period CASH FLOWS FROM MAIN BUSINESS Premiums received Reinsurance premiums paid Paid claims and sums Amounts recovered from reinsurers Payments to suppliers and employees Acquisition costs paid Interest received 3 2 Income tax on proceeds from main business Other main business cash flows Net cash flows from main business (I) CASH FLOWS ON INVESTMENT ACTIVITY Proceeds from sales of shares 649 Proceeds from the issuance of capital Proceeds from fixed-yield securities 592 Shares purchase Fixed-yield securities purchase -875 Other cash flows on investment activities Net cash flows from investment activity (II) CASH FLOWS FROM FINANCIAL ACTIVITY Paid dividends Paid interest -4-1 Cash flows related to loans borrowed/repaid Other cash flows from financial activity 5-13 Net cash flows from financial activity (III) CASH MOVEMENT FOR THE PERIOD (І+ІІ+III) CASH AT THE BEGINNING OF THE PERIOD CASH AT THE END OF PERIOD The appended notes constitute an integral part of the financial statement. Prepared by: Vladimir Marinov (sgd. Illegible) Chief Accountant Representative: Kiril Boshov (sgd. Illegible and seal) Chairman of the Management Board Radka Boevska (sgd. Illegible and seal) Registered auditor Margarita Radeva (sgd. Illegible and seal) Registered auditor 7

8 EUROINS INSURANCE PLC STATEMENT OF CHANGES IN EQUITY OF EUROINS INSURANCE PLC FOR THE YEAR ENDING AS AT 31 DECEMBER 2007 In BGN thousand Equity premium capital Share Provisions Accumulated profit Total Balance as at 31 December Allocation for reserves Asset revaluation reserves Allocation to increase registered capital Cash contributions by shareholders Net profit for the year Balance as at 31 December Profit distribution Assets revaluation reserve Allocation for dividends Distribution from share issue Effect from deferred taxes Other changes Profit for the period Balance as at 31 December Profit distribution Assets revaluation reserve Allocation for dividends Effect from deferred taxes Profit for the financial period Balance as at 31 December The appended notes constitute an integral part of the financial statement. Prepared by: Vladimir Marinov (sgd. Illegible) Chief Accountant Representative: Kiril Boshov (sgd. Illegible and seal) Chairman of the Management Board Radka Boevska (sgd. Illegible and seal) Registered auditor Margarita Radeva (sgd. Illegible and seal) Registered auditor 8

9 NOTES TO THE FINANCIAL STATEMENTS OF EUROINS INSURANCE PLC FOR THE YEAR ENDING AS AT 31 DECEMBER, General EUROINS INSURANCE PLC was incorporated in Bulgaria in 1996 as a public limited company. By decision of the National Insurance Council, the company was issued with Permission No.8/1998 for the performance of insurance business. General insurance refers to products providing indemnity for property damages or casualties. General insurance policies usually have a one-year term and have no surrender value. The insurer is entitled to changes in the amount of premiums after the expiry of the policy period. 2. Basis of preparation of the financial statements 2.1. Applicable accounting law and standards General framework of financial reporting The financial statement of EUROINS INSURANCE PLC is drawn in compliance with the requirements of the International Financial Reporting Standards (IFRS), published by the International Accounting Standards Board (IASB) and the interpretations published by the Standing Interpretations Committee at the IASB, and with the requirements of Bulgarian legislation in line with the principles of: documentary proof of the business transactions; current accrual; comparability between income and expenses; providing the necessary information to the management and external institutions. The financial statement was drawn in BGN thousand. According to the provisions of the Accountancy Act, financial institutions in Bulgaria draw their annual financial statements in compliance with the IAS. According to the Insurance Code, insurers are required to establish and maintain insurance reserves following a procedure and method devised by the Financial Supervision Commission and affected by virtue of an Ordinance. The accrued reserves are an element of the accounting expenses List of the IFRS applicable in Bulgaria IFRS 1 First-time Adoption of International Financial Reporting Standards IFRS 2 Share-based Payment IFRS 3 Business Combinations IFRS 4 Insurance Contracts IFRS 5 Non-current Assets Held for Sale and Discontinued Operations IFRS 6 Exploration for and evaluation of Mineral Resources IFRS 7 Financial Instruments IAS 1 Presentation of Financial Statements IAS 2 Inventories IAS 7 Cash Flow Statements IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors IAS 10 Events After the Balance Sheet Date IAS 11 Construction Contracts IAS 12 Income Taxes IAS 14 Segment Reporting IAS 16 Property, Plant and Equipment IAS 17 Leases IAS 18 Revenue IAS 19 Employee Benefits IAS 20 Accounting for Government Grants and Disclosure of Government Assistance 9

10 IAS 21 The Effects of Changes in Foreign Exchange Rates IAS 23 Borrowing Costs IAS 24 Related Party Disclosures IAS 26 Accounting and Reporting by Retirement Benefit Plans IAS 27 Consolidated Financial Statements IAS 28 Investments in Associates IAS 29 Financial Reporting in Hyperinflationary Economies IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions IAS 31 Interests In Joint Ventures IAS 32 Financial Instruments: Presentation, Disclosure IAS 33 Earnings Per Share IAS 34 Interim Financial Reporting IAS 36 Impairment of Assets IAS 37 Reserves, Contingent Liabilities and Contingent Assets IAS 38 Intangible Assets IAS 39 Financial Instruments: Recognition and Measurement IAS 40 Investment Property IAS 41 Agriculture IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments IFRIC 4 Determining Whether an Arrangement Contains a Lease IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds IFRIC 6 Liabilities arising from Participating in a Specific Market Waste Electrical and Electronic Equipment IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies. IFRIC 8 Scope of IFRS 2 IFRIC 9 Reassessment of Embedded Derivatives IFRIC 10 Interim Financial Reporting and Impairment IFRIC 11 IFRS 2: Group and Treasury Share Transactions SIC 7 Introduction of the Euro SIC 10 Government Assistance No Specific Relation to Operating Activities SIC 12 Consolidation Special Purpose Entities SIC 13 Jointly Controlled Entities Non-Monetary Contributions by Venturers SIC 15 Operating Leases Incentives SIC 21 Income Taxes Recovery of Revalued Non-Depreciable Assets SIC 25 Income Taxes Changes in the Tax Status of an Enterprise or its Shareholders SIC 27 Evaluating the Substance of Transactions in the Legal Form of a Lease SIC 29 Disclosure Service Concession Arrangements SIC 31 Revenue Barter Transactions Involving Advertising Services SIC 32 Intangible Assets Website Costs Accounting Convention The financial statement was drawn in line with the historical cost convention, except for the investment properties and the financial assets available for sale and held for trading, which are presented at fair value, as the notes hereinafter state Accounting assumptions and accounting estimates The management has made the best estimates and assumptions about the circumstances exerting influence on the values of recognised assets and liabilities, as well as of the contingent assets and liabilities as at the date of the financial statement. These estimates 10

11 and assumptions are based on the information available as at date of the drafting of the financial statement Reporting currency According to the requirements of Bulgarian legislation the company draws its financial reports in the national currency the Bulgarian lev. Since 1999, the BGN/EUR exchange rate has been pegged at BGN per 1 EURO Transactions in foreign currency Transactions in foreign currency are reported in BGN at the official exchange rate of the BNB as at the date of the transaction. The differences in the exchange rates from operations and from the revaluation of assets and liabilities, denominated in foreign currency, are included in the income statement for the period of their occurrence. Important exchange rates at the beginning and at the end of the reporting period: As at As at USD 1= BGN BGN EUR 1 = BGN BGN Comparative data The company presents comparative information in the financial statements for one preceding year /period/. Where necessary, comparative data are reclassified, so as to attain comparability with the changes in presenting the current year. 3. Financial /market/ risks 3.1. Liquidity risk Maturity risk is related to the incompatibility in the maturity structures of assets and liabilities. The insurance business is related to the daily payment of claims under insurance contracts, as well as other liabilities arising in the normal course of business. On a daily basis, the company keeps track and controls its needs of cash inflows and outflows. In order to ensure its liquidity, the company invests and maintains the required amount of short-term investments, mostly through short-term deposits with banks and other short-term financial instruments. The company is trying to maintain a balance between the timing of the inflows and flexibility in using instruments of varying maturity structure. Moreover, the company carries out current assessment of the liquidity risk Currency risk The currency risk is related to the risk that the value of financial assets and liabilities would change with the fluctuations of the exchange rate. The company does not possess a significant portfolio of financial assets denominated in U.S. dollars. The amount of the liabilities under contracts in U.S. dollars is insignificant Interests risk The interest risk is related to the effects of the fluctuation of market interest rates levels over the company s financial condition and its cash flows. The fair value of the debenture instruments with affixed coupon payments can change as a result of the changes in interest rates. The interest yields of instruments with a floating interest rate can change as a result of changes in interest rates. The interests risk is being observed and managed by the appropriate selection of instruments with flat and floating interest rates, as well as through comparing the maturity of assets and liabilities. 11

12 3.4. Credit risk The credit risk is associated with the potential incapacity of the issuer of a bond or of the borrower to repay their obligations within the term respectively agreed. The company manages credit risk by measuring each exposure separately and assessing the individual capacity of the issuer to service the payments stipulated in the financial instrument, as well as the quality of the securities accepted under credit facilities, if any. 4. Significant accounting policies 4.1 Written insurance premiums and claims paid Insurance premiums are accounted for as income on the bases of premiums accrued throughout the reporting year under the insurance contracts, irrespective of the fact that the risk refers to subsequent reporting periods. When premiums are paid by instalments all future instalments are reported as receivables by customers. The accrued premiums include the commission fees payable to insurance intermediaries, but do not include taxes, charges, etc. The insurance premiums on obligatory insurances are recognised as incomes for the reporting period of their conclusion Incomes from passive reinsurance and coinsurance The incomes from passive reinsurance are reported based on the reinsurance agreements. With coinsurance agreements only the company s share in the total amount of insurance premiums is recognised as income. The incomes from commission fees from reinsurance and coinsurance are recognised in accordance with the agreements at the time of their occurrence Incurred claims The incurred claims net from reinsurance, include all payments made during the current financial year, decreased by the refunded amounts from reinsurers, increased with reserve claims reserve in the current year and decreased by the reserve claims reserve for the preceding reporting period. The gross amount of the claims paid includes the claims actually paid, including the costs incurred for settling claims, whereas the amounts received and accrued receivables on recourse and abandons are deducted Technical reserves Pursuant to the IC insurers are required to create and maintain insurance reserves under a procedure and methodology determined by the Financial Supervision Commission through an Ordinance. The allocated reserves are an element of accounting expenses. The insurance reserves formed by the company at the end of the reporting period: Reserve for unearned premiums; Claims outstanding reserve; incurred but not reported claims reserve, Reserve fund on credit insurance, are formed according to the Ordinance on the procedure and methodology for forming insurance reserves. The reserve for unearned premiums is the share of the premiums accrued allocated by the company to cover liabilities on insurance contracts concluded but not expired by the end of the reporting period, net from reinsurance. The method used in calculating the reserve for unearned premiums is the Exact Date Method. The reserve for outstanding claims is the amount allocated designated to cover the insurer s payments on insurance claims incurred before the end of the reporting period, but not yet settled at its end. The reserve was allocated based on the claim by claim method according to the data for registered claims and the amount of insurance claims from the claims ledger. The reserve for incurred but not reported claims is a fund allocated to cover claims stemming from events having occurred at the end of the period covered by the statement but not reported to the insurer. The reserve is calculated according to the Loss-Development Triangle Method. 12

13 The reserve fund on credit insurance is an obligatory reserve to allocate and is calculated on an annual basis in order to cover unexpected adverse developments of risk over the year. It is allocated from the positive balance of the credit insurance Acquisition costs The acquisition costs are the costs incurred at the signing of the insurance contracts. They include both direct costs as acquisition commission fees and the costs of administering documents at the signing of insurance contracts, as well as the costs relevant to policies sales such as advertising, marketing, processing of proposals, etc Net operating costs The net operating costs include the costs arising in relation to collecting the insurance premiums, portfolio administration, passive reinsurance Property, plant and equipment The property, plant and equipment constitute noncurrent assets having an acquisition cost over BGN 500. Property, plant and equipment are reported at the acquisition cost reduced with the accumulated depreciation and impairment loss, except for the buildings which are revaluated at their fair value at the date of the balance sheet, determined by a licensed appraiser. Where the value is increased after revaluation, the increase is carried over to the equity - "Reserve from assets revaluation". Property, plant and equipment are depreciated by the linear method for their service life, whereby their reporting value or revaluated amount is decreased to the carrying amount by the following annual depreciation rates: Buildings 4% Computers and peripheral devices 50% Vehicles 25% Fixtures and fittings 15% Depreciation begins to be accumulated at the date of placing the depreciable asset into service Intangible assets The intangible assets reported in the balance sheet comprise licenses and software. Initially, intangible assets are valued at their acquisition cost, which includes the purchase price (including customs duties and non-refundable taxes) and all direct costs for the preparation of the asset for design use. Intangible assets are written off the balance sheet upon their sale or when the asset is decommissioned and no further economic benefits are expected whatsoever. Intangible assets are depreciated by the linear method at an annual depreciation rate of 20%, whereby depreciation begins to accumulate at the date of placing the asset into service Taxation IAS 12 Income Taxes The profit tax for the year includes current and deferred taxes. The profit tax is recognised in the Income Statement, except where it is related to items transferable directly to equity, in this case the tax is also reported in equity. Current taxes are the anticipated tax payments on taxable profits for the year and are calculated on the base of tax rates effective at that date of drafting the balance sheet. For the reporting period according to Bulgarian tax law, the company owes a corporate tax to the amount of 10% of its taxable profit. Deferred tax is accrued by using the liability method in the balance sheet and refers to temporary differences between the carrying amount of assets and liabilities for the purposes 13

14 of financial reporting and for tax purposes. No recognition is made of temporary differences relevant to: non-taxable goodwill; initial recognition of assets or liabilities having no effect on accounting or tax profit, and the differences related to investments in subsidiaries provided their return is not expected in the near future. The amount of the deferred tax is based on the expected manner of realising the carrying amount of assets and liabilities, by applying the tax rates effective for the period in which the incurrence of deferred taxes is expected Investment of insurance reserves and own funds The company invests insurance reserves in debt securities, including securities issued or guaranteed by the Republic of Bulgaria or by another member-state, shares, interest participation in investment companies and contractual funds, deposits with financial institutions and real estate free of encumbrances. The investments of own funds include coparticipation of the company in the equity of associates and other entities, deposits with financial institutions. The reporting of financial assets is in line with IAS 28, 39. At initial acquisition, financial assets are reported at their acquisition cost, which includes their fair value and all costs for settling the transaction. The subsequent evaluation is made by the method of fair value for the financial assets held for trading and financial assets available for sale. Financial assets are revaluated on a monthly basis at fair prices, whereby the difference between the acquisition cost and the fair value is transferred to the Income Statement. Investment properties are reported at their fair value assessed by a licensed appraiser. The fair value is determined on the basis of the current prices at an active market for similar properties. A profit or loss arising from a change in fair value is recognised in the Income Statement. The rent incomes from investment properties are recognised on the current accrual basis, as Income from investments in investment properties Fair value financial assets and liabilities According to IAS 32 Financial Instruments: Presentation, Disclosure, as well as in the provisions for disclosure provided for in IFRS 7- Financial Instruments: Disclosures it is necessary to disclose the reliable market information on the fair value of the financial assets and liabilities held by the company. The value is defined as the value at which an asset can the exchanged or a liability can be settled in a fair transaction between knowledgeable parties willing to carry out such a transaction. Associates Associates are such companies in which the Company exercises significant influence but not control over their financial and operational policy. Investments in associates are reported by the equity method, as at the date of the last financial report drawn, according to the reserves of IAS 28 Investments in Associates" Inventories Inventories are valued at their cost of purchase, which includes all costs for their purchasing as well as other costs incurred in reference to their delivery at the current location and condition. Inventory is written off using the method of the specific purchase cost Insurance receivables The insurance receivables reflect the accrued insurance premiums recognised as income, arising in the current or proceeding reporting periods. They are reported at their expected marketable value. At the end of the reporting period all receivables are reviewed identifying the hard-to-collect and the uncollectible ones. Uncollectible receivables are written off within the period in which they are defined as such. Receivables are depreciated according to IAS 36. According to the Insurance Code, in the cases of deferred payment the instalment on the insurance premium is paid within the term settled in the insurance contract. Pursuant to article 202, para 2, the insurer is entitled to terminate the contract where a deferred 14

15 instalment is not paid. In the company, the termination of insurance contracts becomes effective 15 days after the maturity date of the deferred instalment. The uncollected receivables for instalments under insurance contracts are written off entirely after contract termination Receivables and liabilities of reinsurance The receivables and liabilities of reinsurance business reflect the accrued reinsurance incomes and expenses of passive reinsurance arising over the current or proceeding reporting periods Employee benefits The company recognises as liability the undiscounted amount of the estimated costs on paid annual leave and accruals for the National Security Institute, expected to be paid to employees for the preceding reporting period. According to the requirements of IAS 19 Employee benefits, the costs are recognised in the Income Statement Solvency Margin According to the Ordinance on own funds and solvency margin for insurance and healthinsurance companies, the solvency margin is calculated by the following methods: - calculations against premiums, - calculations against the average annual amount of claims The solvency margin is equal to the higher of the two returns. The solvency margin of the company as at equals BGN thousand. As at , the solvency margin was BGN thousand. 5. Written premiums Accident 1,533 1,070 Sickness 6 8 Road vehicles less rolling stock 29,726 20,319 Aircrafts 71 Vessels 1, Goods in transit 1, Fire and natural calamities 4,101 3,354 Damages to property 1, TPL for motor drivers 22,720 21,921 General third party liability 1, Credits Guarantees Various financial losses 1, Travel assistance 999 1,084 66,578 52,685 During the reporting period, the Casco of vehicles of BGN 29,726 thousand written premiums and Third Party Liability for motor drivers of BGN 22,720 thousand, which constitute 78,80% of the total insurance portfolio have the largest share in the company s insurance portfolio. Of these, the amounts carried forward to a subsequent reporting period through the provision for unearned premiums are respectively BGN 8,845 thousand for Casco of vehicles and BGN 9,298 thousand for Third Party Liability for motor drivers. 15

16 6. Incurred claims net of reinsurance Amounts and claims paid (23,752) (19,171) Reinsurers share 12,232 3,331 Change in the gross claims outstanding reserve (5,387) (4,020) Change in reinsurers share in the outstanding claims reserve 1,162 2,399 (15,745) (17,461) 6.1 Amounts and claims paid Claims paid (gross amount) (20,461) (15,520) Amounts paid on recourse claims (2,169) (2,116) Costs related to the settlement of claims (3,020) (2,682) Incomes accrued from exercised rights to recourse and abandons 1,898 1,147 (23,752) (19,171) 6.2. Claims paid (gross amount) Accident Sickness 6 12 Road vehicles less rolling stock Vessels Goods in transit Fire and natural calamities Damages to property TPL for motor drivers General third party liability Credits Guarantees 11 Various financial losses Travel assistance Net operating costs Acquisition costs (11,241) (6,640) Administrative costs (16,217) (14,354) Reinsurance commissions and profit participation 6,271 7,078 (21,187) (13,916) 16

17 8. Income from investments Income from land and buildings Revenue from investment income revaluation 4,104 1,639 Income from interest on deposits and securities Profits from investments realisation ,977 2,082 Cost of investments management, interests included (82) (33) Losses from revaluation (858) (932) Losses from the realisation of investments (44) (17) Net income from investments 3,993 1, Investments structure Buildings 5,173 4,073 Shares and other variable-yield securities 8,506 2,718 Debt securities and other fixed-income securities 7,644 6,931 Deposits with financial institutions 3,435 4,219 24,758 17, Receivables and other current assets Receivables from insurance 18,339 9,155 Receivables from reinsurance operations 1,495 4,291 Receivables on recourse and abandon 2,788 2,263 Other current assets 1,484 2,836 24,106 18, Other assets Machinery, plant and equipment 1,982 1,608 Computers and peripheral devices included Intangible assets 807 1,046 including Software 807 1,046 Cash in bank deposits Cash at hand 564 3,091 4,015 6,371 17

18 11.1. Value of depreciable assets The reporting value of accumulated depreciation of depreciable assets as at is as follows: Reporting value Buildings used for own needs and those listed in note 9. 1,316 Computers and peripheral devices 1, Software and licenses 1, Vehicles 3,301 2,059 Fittings and fixtures Total 7,592 3,487 Accumulated depreciation 12. Equity capital 10,000 7,500 The company's equity capital comprises 9,999,992 personal shares of BGN 1 par value each. By minutes dated from the Shareholders General Meeting, the company increased its equity capital by issuing new indivisible personal, nonphysical voting shares at BGN 1 par value each, and decreased its capital by canceling 2 indivisible, personal, nonphysical, voting shares at BGN 1 par value each. The yield per share for the period is calculated as the net profit for the reporting period is divided by the weighted average number of the ordinary shares held, as follows: Weighted average number of shares 8,749,993 6,246,574 Profit in BGN thousand 5,374 4,237 Earnings per share in BGN 0,61 0, Reserves General reserves Share premium reserves 3,351 3,351 Additional reserves Asset revaluation reserves ,354 4,614 The general reserves are formed through allocating 1/10 of the profit, according to the requirements of the Commerce Act and the Company s Articles. 14. Technical reserves Unearned premium reserve Gross amount 21,582 12,917 Reinsurers share 6,430 4,659 Unearned premium reserve, net of reinsurance 15,152 8,258 18

19 14.2. Claims reserve Gross amount 21,582 12,917 Reinsurers share 6,430 4,659 Claims reserve, net of reinsurance 15,152 8,258 The claims reserve includes a provision for claims incurred but not reported for events occurred, which had not been reported to the insurer at the time of drafting the report and allocating the reserve: Gross amount 9,430 5,251 Reinsurers share 5,170 3,499 Reserve for claims incurred but not reported, net of reinsurance. 4,260 1, Reserve fund Payables and other liabilities Payables in direct insurance operations Payables in reinsurance operations 3,222 10,054 Amounts due to credit institutions 1, Liabilities to guarantee fund Other creditors, including taxes and social security 1, ,607 12, Tax expenses According to the Corporate Income Taxation Act, the tax rate for 2007 is 10%. The assets and liabilities on deferred taxes occur as a result of accrued taxes on profit from temporary differences. The tax rate applicable for the reverse manifestation on assets and liabilities of deferred taxes in subsequent period is 10% Assets/ liabilities on deferred taxes Assets on deferred taxes from refundable leaves 8 Liability on deferred taxes from the difference between the reporting and tax carrying amount of noncurrent assets 76 Liability on deferred taxes from the revaluation of investment properties 240 Liabilities on deferred taxes net

20 16.2. Expenses/savings on deferred tax Accrued asset from deferred taxes from leaves refundable for the account of the financial result 4 Accrued liability from deferred taxes from the difference between the reporting and tax carrying amount of noncurrent assets for the account of the revaluation reserves 29 Accrued liability on deferred taxes from the revaluation of investment properties for the account of the financial result 91 Expenses on deferred tax /net/ Related parties As at 31 December 2007, the entities listed below are related with EUROINS INSURANCE PLC Executive director, presidents and members of the management and supervisory board, procurators Enterprises: Eurohold Bulgaria JSC, Eurolease Auto JSC, HealthIC "Nikolay Chudotvorets, Eurolease Asset JSC, Eurolease Rent-a-Car JSC, Eurofinance JSC, Nissan Sofia Single-owner JSC, Nissan Sofia Consult JSC, Scandinavia Motors Single-owner JSC, Espace Auto Single-owner JSC, GPS Control JSC, Sofia Motors Single-owner JSC, Eurohold Properties Single-owner JSC, Eurohold Properties, Veliko Turnovo, Etropal JSC, Eurotest Control JSC, Formoplast JSC, Geoenergoproekt JSC, Euroforum JSC, Forum Plus Single-owner JSC, Euroins Insurance Group, Asitrans Asigurari, Romania, Asitrans Leasing, Romania, Bulland Investment, Cargo Express, Cargo Motors, Cargo Express, Stara Zagora, Euromobile Leasing, Etropal Trade, Plastchim -Т JSC, 18. Additional information No interests were accrued on overdue payments to the state budget for the reporting period, as they constitute an insignificant portion against the financial result of the company. Pursuant to Article 15, para 4 of the Statute of the National Bureau of Bulgarian Motor Insurers (NBBMI), EUROINS INSURANCE PLC has been issued with the bank guarantee from Raiffeisenbank AD to the amount of EURO Vladimir Marinov (sgd. Illegible) Chief Accountant Kiril Boshov (sgd. Illegible and seal) Chairman of the Management Board 20