ANNUAL REPORT

Transcription

1 ANNUAL REPORT , G. M. Dimitrov blvd Sofia, Bulgaria tel.: / fax: / office@euroins.bg

2 TABLE OF CONTENTS Address by the Executive Director 3 Macroeconomic Frame of Bulgaria for Insurance Market in Bulgaria during Activity Overview 7 Insurance Portfolio and Basic Financial Indicators 9 Loss Ratio 10 Insurance Reserves 11 Reinsurance Program 12 Human Resources 13 Branch Network 13 Information Technologies 14 Perspectives for development Auditor s Report 17 Balance Sheet of IC Euroins PLC as of Equity Statement of IC Euroins PLC as of Income Statement of IC Euroins PLC as of Cash Flow Report of IC Euroins PLC as of Notes to the Financial Statement 22 General agencies, agencies and branch offices of IC Euroins PLC 31 ANNUAL REPORT

3 SUPERVISORY BOARD Assen Christov Chairman of the Supervisory Board Georgi Denkov Deputy-chairman of the Supervisory Board Radi Georgiev Member of the Supervisory Board MANAGING BOARD Kiril Boshov Chairman of the Managing Board Violeta Darakova Vice-chairman of the Managing Board and Executive Director Assen Minchev Member of the Managing Board Insurance Company Euroins was registered at the end of Euroins holds insurance license No. 8/15 June 1998, issued by the National Council on Insurance at the Council of Ministers of the Republic of Bulgaria The principal shareholders in Euroins are Starcom Holding with 62 percent and Eurohold with 11 percent. Euroins has a two-tiered system of management with a Supervisory Board and a Managing Board. 2 INSURANCE COMPANY EUROINS PLC

4 ADDRESS BY THE EXECUTIVE DIRECTOR Ladies and Gentlemen, It is a pleasure for me to make a presentation of the activity and results of Euroins in The financial sector in Bulgaria was amongst the most dynamically developing ones in Bulgaria for the last year. The insurance market continued its rising rate of development and registered an increase of 25%, which significantly outdistances the growth rate of the national economy. In 2005 Bulgaria adopted several important legislative acts, aiming to harmonize its legislation with the EU one. These changes placed the insurance sector into conditions of liberalization and free determination of the insurance premiums, but increased the requirements to insurers. The past 2005 was a very important period of the development and establishment of Euroins. The efforts and investments made during the last few years ensured the stable growth both in the financial result and the market share, as well as in the income growth. It was a successful year in which the Company significantly improved the structure of its insurance portfolio and expanded its market positions. The realized financial result is a profit to the amount of 1,39 million BGN in comparison to 593 thousand BGN for 2004, or an increase of 134%. The premium income for the year exceeds 40 million BGN, or a growth, according to this basic indicator, by 37%, which significantly outdistances the increase of the premium income on the insurance market as a whole. The loss ratio maintained the 2004 level 37.2%. Compensations paid for year 2005 amount to 15 million BGN. This ratio is acceptable in view of the several heavy floods during the year, which affected numerous regions of the country and caused severe material damage witnessed the successful continuation of the development of the branch network of Euroins, and by the end of the year the process of investments in equipment and construction of new agencies was entirely completed. At present, the company has over 100 modern offices. Euroins introduced new standards in client servicing and in the work with company representatives in conformity with the changes in the legislative arrangement and the EU requirements. At the end of 2005, the process of introduction of the new information and accounting system and the Accounting module were fully completed. The availability of this type of information system considerably increased the effectiveness of the company and helped the quicker and quality servicing of clients. During the year, all company offices received a specific software allowing individual tariffing of the premium of the Third Part Liability insurance in accordance with the risk profile of the driver. In June Euroins increased its capital from 4 to 5 million BGN through monetary contributions from its shareholders and retained earnings from previous years. At the end of 2005 the Financial Supervision Committee confirmed the Prospectus for secondary public offering of shares of Euroins and registered the Company in the Public Companies Register. Trade with the Euroins shares on the Bulgarian Stock Exchange was officially opened on January 31, In 2006 Euroins expects to continue its development with a rate exceeding the development of the insurance market as a whole. Estimates for 2006 are for the market share of the Company to reach 5% and the premium income 55 million BGN, or a growth of over 30% at estimated growth of the insurance market of about 15 17%. Being a socially-engaged corporate structure, Euroins will continue developing and establishing its commercial model, accentuating on the improvement of the insurance portfolio and generation of stable growth of shareholders added value. I would like to thank our clients, partners and shareholders, who showed their support and confidence, for the good results Euroins accomplished in 2005, as well as the managing team and our colleagues for the shared values and their contribution to the mutual goals and mission. VIOLETA DARAKOVA: /Executive Director/ ANNUAL REPORT

5 MACROECONOMIC FRAME OF BULGARIA FOR 2005 Resume General Economic Tendencies During the year of 2005 Bulgaria made very important steps to the process of joining the European Union. After the Parliamentary elections in June, a threeparty coalition was made with main purpose to join the country to the European Union on 1st of January Macroeconomic stability was preserved in The high economic growth, reported in 2004, continued in the first trimester of The GDP marked an increase of 5.5% supported by the investments, the consumption and the export. Foreign investments for 2005 are 1,789 million EUR, and are effected without the conclusion of a significant privatization deal. The ratio between foreign trade and the GDP of the country, illustrating the stage of integration of Bulgarian economy into the world economy, increased from 103% in 2004 to 119.5% in The financial indicators remained good. The current account deficit increased to 6.4% during the period, compared to 4.9% one year ago covered entirely by direct foreign investments. The external debt of the country was decreased to 62.6% from the GDP (compared to 63% in the end of 2004). According to the last estimate of the Bulgarian National Bank, inflation in the end of 2005 is 6.5% in comparison to 4% for Selected Economic Indicators Selected Economic and Insurance Indicators BNB Central Exchange Rate as of year-end (BGN/USD) 1,66 1,44 1,55 Average Base Interest Rate (%) Annual inflation as of year-end (%) Average annual inflation (%) Annual real GDP growth (%) GDP per capita (EUR) Direct foreign investments (EUR million) Direct investments in Bulgaria/current account deficit (%) Direct foreign investments /GDP (%) Gross external debt as of period-end (EUR million) Gross external debt (% от GDP) Unemployment level as of period-end (%) Current account balance (EUR million) Current account balance (% of GDP) State and state-guaranteed debt (EUR million) State and state-guaranteed debt (% of GDP) Gross premium income from insurance (EUR million) 546,7 425,6 340,5 Insurance penetration (%) Source: Bulgarian National Bank 4 INSURANCE COMPANY EUROINS PLC

6 INSURANCE MARKET IN BULGARIA DURING 2005 The financial sector continued to be the most dynamic sector of Bulgarian economy during The non banking financial intercession vastly overtook development of the whole sector. The insurance sector in Bulgaria marked a growth of 25% during The structure of the insurance portfolio of the insurers also changed dynamically, following the tendencies of the European market. The general premium income for 2005 is 910 million BGN, and the growth in comparison to the same period of 2004 is 25%. The annual premium income is expected to continue going up with 25% till The share of premium income from insurances in GDP is approximately 2.7% and it is vastly lower then the countries in the European union where the medium share is 5.7%. The dynamics of the market continued to be dominated by the Third Party Liability and Casco insurances, forming 65% of the general income. In general insurance, the share of property insurance did not respond to the general tendencies of the market. Notwithstanding the expectations for larger consumption of this type of insurance products, due to the natural disasters in the summer of 2005, the reports for the period indicated a decline from BGN 44,7 MM for 2004 to BGN 34,4 MM realized premium income for Important legislative acts were accepted in December, aiming to harmonize Bulgarian legislation with the legislation of the European Union. These changes placed the sector into conditions of liberalization and free determination of the insurance premiums, but increased the requirements to insurers. Measures were undertaken for the improvement of the information system between the bodies of the Ministry of the Interior, the Financial Supervision Commission and the Guarantee Fund, which system will control the Third Party Liability scope. The objectives placed in the EC report are the reaching of a scope of 90% for this insurance and increase of the insurance culture of the population. ANNUAL REPORT

7 More important events during the year On 13th of April 2005 for deputy chairman of Financial Supervision Commission was appointed Ralitza Again. In June 2005 the Austrian Wiener Stadtische bought 26% of Bulgarian properties from the German HUKcoburg as well as shares of one of the Bulgarian owners and thus increased its shares in Bulgarian properties to 98.15%. In July 2005 the Austrian UNIQA Group acquired 20% of Insurance Company Vitosha. Short after that the Slovenian company Jivlenie and KD Holding applied for a license for registration of Life-insurance Company. Under the name of DSK Garanzia was registered a new general insurance company. The owners of the new company are OTP Garanzia /74%/ and Bulgarian DSK Bank /26%/ which are part of the Hungarian Financial Group OTP. During November 2005 the Austrian Wiener Stadtische, the majority owner of Bulgarian properties acquired 40% of Kardan Financial Services B.V. /KFS/ through capital investment. Kardan Financial Services as a majority owner of TBI Holding 58.18%, which from the other side is a majority owner of 10 nonbanking financial companies including the Bulgarian Bulstrad and Bulstrad Life. In the last trimester of 2005, the more important events in the branch are the withdrawal of the licenses of two insurance companies Hildon AD Insurance Company ( Jupiter AD Insurance Company) and Evropa AD International Insurance Company due to incorrectly presented information about their financial results. 6 INSURANCE COMPANY EUROINS PLC

8 ACTIVITY OVERVIEW OF IC EUROINS PLC INSURANCE COMPANY The past 2005 were a dynamic year with regard to the introduced changes in the insurance sector in Bulgaria. For Euroins PLC Insurance Company, the year marked the end of a successful period for the company development, during which it increased its market share and marked a significant growth of collected premium income. The premium income of Euroins PLC Insurance Company for the year exceeds 40 million BGN in comparison to 29,4 million BGN for The company growth according to this basic indicator exceeds 37%, which significantly outdistances the increase of the premium income on the insurance market as a whole and is with 9 points more than the realized share by the company for the previous year. The realized financial result is a profit in the amount of 1,39 million BGN in comparison to 593 thousand BGN for 2004 or an increase of 134%. The Third Party Liability insurance campaign was also successful; its growth for 2005 is 67.7%. The basic reasons for this are the increased number of insurance agents, the wide branch network and the effective advertising campaign. As a result, the premium income of this insurance marks the highest share in the total premium income of the company 39.3% in comparison to 32.0% in Type of insurance Premium Premium Premium Growth of income income income premium income for 2003 for 2004 for 2005 for 2005 in thousand BGN in thousand BGN in thousand BGN in % MTPL Motor Casco Accidents/ Medical Property Cargo Agricultural Green card Financial Marine hull insurance Others Total: ANNUAL REPORT

9 Second in terms of share in the premium income of the company is the Auto Casco insurance 32.3%, and the growth of the collected premiums of Euroins PLC Insurance Company for this insurance is 30.4%. The increased volume of the Auto Casco insurances is largely due to the signed new contracts for insurance servicing of almost all large leasing companies offering leasing financing for the purchase of new automobiles. The fact that the average term of the leasing contracts exceeds 48 months guarantees the company a constantly increasing premium income regarding Motor Casco insurance for the next 4 to 5 years. During 2005 the stable growth of the income from Marine Hull insurance continued over 5 and a half time in comparison to what was achieved in This growth is due to the inclusion of new vessels in the totality insured by the company, and also to the achieved increase of the tariff insurance rates. The Green Card insurance reported a stabilization of its growth in the achieved volume of the premium income due to the fact that on the market, as a whole, there is no growth of this insurance. As a result of the growth of the general premium income of Euroins PLC Insurance Company and the preservation of the volume of the Green Card insurance, its share in the premium income has decreased with 3 percentage points to 7.9%. Over 18% growth was achieved in the property insurances, which is due to newly attracted corporate clients and to the increasing number of insurance policies, concluded with the mediation of the banks leaders in housing crediting. 8 INSURANCE COMPANY EUROINS PLC

10 INSURANCE PORTFOLIO AND BASIC FINANCIAL INDICATORS Growth compared to 2004 in thousand BGN in thousand BGN in % PREMIUM INCOME CLAIMS PAID INSURANCE RESERVES Transfer premium reserves Outstanding payments Reserve funds INVESTMENT PORTFOLIO Deposits Exchequer stocks Mortgage bonds Unencumbered real estates Shares and bonds in commercial companies BALANCE ASSET AMOUNT PROFIT BEFORE TAXATION TAXATION PROFIT AFTER TAXATION ANNUAL REPORT

11 Loss Ratio One of the basic indicators, perceived as universal for the estimation of the insurance companies activity, is the loss ratio, presenting a ratio between the claims paid throughout the year and the collected premium income for the period. The loss ratio of IC Euroins PLC is retained at the level of %. The claims paid for 2005 amount to 15 million BGN. The achieved ratio is acceptable, taking under consideration the several severe floods during the year that have spread over quite a lot of regions in the country and have inflicted enormous material losses. Type of insurance Damages Damages Damages Share Share Share Growth paid paid paid for for for of paid for 2003 for 2004 for damages in thousand BGN in % in % in % in % MTPL Motor Casco Accidents/ Medical Property Cargo Agricultural Green card Financial Marine Hull Others Total: The highest share in the amount of paid compensations is the Casco insurance 55.6%, which marks a decline of over 6 percent in comparison to 2004, followed by the Green Card insurance with 17.3%, marking a growth of 9 percent and MTPL insurance with 12.4% with a decline of 4%. 10 INSURANCE COMPANY EUROINS PLC

12 Selected Financial Indicators Indicators Premium income (thousand BGN) Claims paid (thousand BGN) Loss ratio (%) Profit (thousand BGN) Market share (%) Insurance reserves (thousand BGN) Insurance Reserves Throughout the year, the insurance reserves of IC Euroins PLC were increased from thousand BGN to thousand BGN. The reserve growth is due to the increase of the premium income of the company and also to the development of damages. Reserve to to to in thousand BGN in thousand BGN in thousand BGN Euroins share Reinsurers share Total IC Euroins PLC puts aside a transfer-premium reserve in the amount of thousand BGN for outstanding payments and a reserve for incurred, but not reported damages (IBNR) in the amount of, respectively, thousand BGN and thousand BGN, as well as a credit insurance reserve fund, according to the requirements of the Financial Supervision Commission, in the amount of 74 thousand BGN. The share of reinsurers in the company reserves that are put aside is thousand BGN. Euroins share Reinsurers share Total in thousand BGN to to to ANNUAL REPORT

13 Reinsurance Program The Reinsurance Program of IC Euroins PLC for 2005 is a part of applied in the previous years common company s policy to protect the portfolio and the financial stability of the company in such types of insurance, where possibility exists for the occurrence of extremely great single damages or of events affecting many sites and bringing to a large amount of claims within the portfolio, caused by such events. The protection of the Company under the above designated types of insurance is organized by means of a single reinsurance contract of the Bouquet type, where the main role belongs to the leading American Reinsurer Transatlantic (having AA financial stability rating assigned by S&P). This contract is administered from the Reinsurance Brokers BMS Harris & Dixon, London. The excellent results achieved by IC Euroins PLC with the insurances reinsured under the above contract brought to agreement of higher premiums for the current year and also to sensibly increasing contract s capacity about the single covered risks and about the catastrophic cover contributed by this contract. The year 2005 was the first year for IC Euroins PLC, for which the company bought additional protection for its insurance portfolio against catastrophic risks as its capacity was sensibly increased on the contract s renovation for In 2005 was doubled the number of the joined facultative reinsurance contracts of the company. In the scope of automatic cover are included and some financial risks. The joined contracts of IC Euroins PLC for protecting the portfolio and the financial stability of the company remained unchanged: the portfolio of Motor Casco and Motor Third Party Liability Insurances is reinsured under a proportional contract; with respect to the Green Card Insurance is reinsured with contract of the Excess of Loss type for claims on policies issued by Euroins and exceeding EUR 250, INSURANCE COMPANY EUROINS PLC

14 Human Resources At the end of 2005, IC Euroins PLC has about 372 employees in comparison to 339 for Young people in the company prevail 77% of persons are younger than 40 years of age. The increased number of employees is a result of the increased volume of work and to the opening of new positions, most typical for the Central Management. During the year some changes were effectuated in the organization and management structure of the company, in relation to which a number of reappointments were carried out in conformity with the new insurance code and with the National Classification of Professions and Positions. At present, the personnel are entirely optimized in relation to the company activity and in 2006 no significant changes are to be made in the average-list structure of the company employees. Branch Network 2005 witnessed the successful continuation of the branch network of IC Euroins PLC and by the end of the year the process of investments in equipment and construction of new agencies was entirely completed. At present, the company has over 100 modern offices in all inhabited locations in Bulgaria, having a population over 30 thousand. Yet the efforts were not directed only to the increase of the number of offices and agencies in the country, but also to the improvement of the professional skills of the insurance agents of the company. In this connection, IC Euroins PLC introduced new standards in client servicing and in the work with company representatives in conformity with the changes in the legislative arrangement and the EU requirements. ANNUAL REPORT

15 Information Technologies At the end of 2005, the process of introduction of the new information and accounting system and the Accounting module were fully completed. The software corresponds entirely to the requirements of the European insurance directives. The presence of this type of information system considerably increased the effectiveness of the company and assisted the quicker and quality servicing of clients. During the year, all company offices received specific software allowing fixing the tariff of the premium of the Civil Liability insurance individually in accordance with the risk profile of the driver. This allowed the company to have adequate tariffs for this insurance with regard to the considerable decline of the premiums as a result of the liberalization introduced by the Insurance Code. Perspectives for Development In 2006, IC Euroins PLC expects to continue its development with a rate exceeding the development of the insurance market as a whole. According to forecast data, the premium income of the company for 2006 is expected to reach 55 million BGN or a growth of over 30% at a forecast growth of the insurance market of about 15 17%. The company expects for the realized net profit for 2006 to reach 1,75 million BGN. 14 INSURANCE COMPANY EUROINS PLC

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18 TO THE SHAREHOLDERS OF IC EUROINS PLC SOFIA AUDITOR S REPORT We have audited the enclosed balance sheet of IC EUROINS PLC (the Company ) as of 31 December 2005 and the related statements of income, cash flows and changes in equity for the year then ended. The financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the professional requirements of the International Standards on Auditing. Those standards require that the audit be planned and performed to obtain reasonable assurance about whether the financial statements are free of material misstatements. The audit includes examining, on a spot test basis, of the evidence supporting the amounts and disclosures in the financial statements. The audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the financial statements give a true and fair view of the property and financial position of the Company as of 31 December 2005 and of the result of its operations and its cash flows for the year in accordance with the International Financial Reporting Standards. Without qualifying our opinion, we draw attention to the following: In 2005 the taxation regime of the insurance companies has been changed. In the comparative information (as of 31 December 2004) the eventual effect from the change in the tax legislation has not been presented. Registered auditors: RADKA BOEVSKA MARGARITA RADEVA 31 March 2006, Sofia ANNUAL REPORT

19 BALANCE SHEET as of in thousand BGN ASSETS Notes Investments Receivables and other current assets Cash and cash equivalents Property, plant and equipment Intangible fixed assets TOTAL ASSETS LIABILITIES Insurance reserves Premium reserve Outstanding claims Reserve fund Payables and other liabilities CAPITAL AND RESERVES Share capital Reserves Financial result Retained earnings from previous periods Profit for the period TOTAL CAPITAL AND RESERVES CAPITAL AND LIABILITIES INSURANCE COMPANY EUROINS PLC

20 AMENDMENT OF EQUITY STATEMENT as of in thousand BGN Share Reserves Accumulated Total capital Profit BALANCE AS OF Allocation for reserves 154 (154) Allocation for dividends (232) (232) Allocation for main capital (1 000) Net profit for the year BALANCE AS OF Allocation for reserves 59 (59) Revaluation assets reserves Allocation for increasing the main capital 690 (690) Cash deposits from shareholders Net profit for the year BALANCE AS OF ANNUAL REPORT

21 INCOME STATEMENT as of in thousand BGN TECHNICAL STATEMENT Notes Earned premiums, net of reinsurance Allocated investment income, from non-technical Report Other technical income, net of reinsurance Claims incurred, net of reinsurance 5 (11 557) (7 662) Net operating expenses 6 (10 826) (6 074) Other technical expenses, net of reinsurance (4 571) (2 201) Taxation on insurance income (1 140) Change in the reserve fund (+/-) 8 (6) (22) Balance of technical statement general insurance NON-TECHNICAL STATEMENT Investment income-net Allocated investment income, from the Technical Report on General Insurance 7 (474) (44) Financial Income/Expense-net (200) (220) Net result from Extraordinary Operations Profit or Loss for the Financial year INSURANCE COMPANY EUROINS PLC

22 CASH FLOW REPORT as of in thousand BGN CASH FLOWS FROM MAIN ACTIVITY Premium income Paid insurance premiums Paid compensations and amounts Amounts refunded by re-insurers Payments to suppliers and employees Paid acquisition expenses Interests received 10 3 Taxation on insurance income Other cash flows from main activity (1 577) (2 042) Net cash flows from main activity (I) CASH FLOWS FROM INVESTMENT ACTIVITY Income from sales of shares 263 Income from capital emission 310 Fixed-income securities yield 609 Purchase of shares Purchase of fixed-income securities Other cash flows from investment activity Net cash flows from investment activity (II) 761 (95) CASH FLOWS FROM FINANCAIL ACTIVITY Dividends paid Interests paid Cash flows related to granted/paid loans Other cash flows from financial activity (14) (23) Net cash flows from financial activity (III) (595) (394) CHANGE OF THE CASH RESOURCES DURING THE PERIOD (I+II+III) CASH RESOURCES IN THE BEGINNING OF THE PERIOD CASH RESOURCES AT THE END OF THE PERIOD ANNUAL REPORT

23 NOTES TO THE FINANCIAL STATEMENT 1. Generals IC Euroins PLC was founded in Bulgaria in 1996 as a Public Limited Company. With decision of the National Council on Insurance the Company was granted License No. 8/1998 for insurance activity. 2. Grounds for preparing and drawing up of financial statement The financial statement of IC Euroins PLC was drawn up in accordance with the requirements of the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Committee (IASC) and the explanations published by the Permanent Committee of explanations to the CIAS and the requirements of the Bulgarian legislation observing the following principles: Documentary rationale of the economic operations; Current assessment; Juxtaposition between income and expenses; Provision of necessary information for the management and external institutions. The financial statement was drawn up in Bulgarian leva, rounded to one thousandth. According to the requirements of the Accountancy Act, financial institutions in Bulgaria draw up their financial statements in conformity wit the IAS. 22 INSURANCE COMPANY EUROINS PLC

24 3. Accounting policy Recognition and reporting of income and expenses Insurance premiums are reported as an income on the grounds of premiums under insurance contracts charged during the reporting year, regardless of the fact that the risk refers to future reporting periods. When premiums are paid by installments, all future installments are shown as receivables from clients. The charged premiums include commission fees payable to insurance brokers but they do not include taxes, charges and others. Insurance premiums under compulsory insurances are recognized as income for the reporting period of their receiving. At termination of the insurance contracts the refunded premiums are: Reversed from the premiums charged if they refer to the accounting period; Are referred to other insurance expenses if they refer to previous reporting periods. Revenues and expenses under passive reinsurance are reported on the grounds of reinsurance contracts. At co-insurance only acts of the insurer from the total amount of premiums and payments are reported. Insurance payments are reported as expenses on the grounds of claims paid during the reporting period, reduced with the amounts received and charged for receivables under regressions and abandons. Damages occurred, net from reinsurance, include all payments made during the current financial year, reduced by the amounts refunded by re-insurers, augmented with provisions for future payments for the current year and reduced with the reserve for outstanding payments for the previous reporting period Account relations under insurance contracts are reported as accounts with clients. Net expenses for commission fees included: income from commission fees, received and paid, from re-insurers and co-insurers reduced by the commission fees of insurance brokers paid and calculated. Net operative expenses include: expenses occurred in connection with the collecting of insurance premiums, portfolio administration, and passive reinsurance. ANNUAL REPORT

25 Insurance reserves Insurance reserves the company is forming at the end of the reporting period are: Brought forward premium reserve; Reserve for future (outstanding) payments; Reserve for damages occurred but not declared; Reserve fund under credit insurance. They are created according to the Regulation on the order and the methods for the creation of insurance reserves. The Brought forward premium reserve represents the part of the premium charged which the company allots to cover liabilities to insurance contracts already concluded but not expired as at the end of the reporting period, net from re-insurance. The method used to calculate the Brought forward premium reserve is the method of the exact date. The Reserve for future (outstanding) payments represents an allotted amount with the purpose to cover the payments of the insurer for insurance claims, occurred before the end of the reporting period but not yet settled at its end. The reserve is formed according to the method Damage by damage according to the data of the registered damages and the amount of the insurance claims from the register of damages. The Reserve for damages occurred but not declared represents a fund allotted to cover damages resulting from events occurred at the end of the period for which the report was drawn up but are not declared by the insurer. This reserve is calculated according to the Chain column-like method. Reserve fund under credit insurance has to be compulsory allotted, it is calculated on an annual basis and is intended to cover unforeseen unfavorable development of the risk during the year. It is appropriated from the positive result under credit insurance. Investments of the insurance reserves and own resources The Company invests the net amount of the insurance reserves in state securities, corporate bonds, mortgage bonds, deposits in financial institutions and real estates, free of burdens. Investments of own resources include coparticipations of the company in the capitals of associated and other enterprises, deposits in financial institutions. Financial assets report is in accordance with IAS 28, 39. At initial acquisition the financial assets are reported with the price of acquisition, including the fair price plus all expenses related to the deal carrying out. The subsequent assessment is made according to the method of fair value for financial assets, held for trading and financial assets declared for sale. At the end of the period the financial assets of the company are reported according to fair prices as the difference between the price of acquisition and the fair price is referred to the income statement. 24 INSURANCE COMPANY EUROINS PLC

26 Investment properties are represented by their fair value determined by a licensed appraiser. The fair price is determined on the grounds of current prices in an active market of similar properties. The profit or the loss resulting from the change in the fair value is recognized in the income statement. Income from the rent of investment properties is recognized on the grounds of current charging as Income from investments of investment properties. Taxes For the accounting year 2005, according to the Bulgarian tax legislation the Company owes corporate tax worth 15% on the converted financial result according to Art. 23 under the procedure of the Corporate Income Tax Act (CITA). During the previous reporting period (year 2004) the taxation was made according to Art. 11 of CITA at tax rate of 7% on the difference between the amount of the gross insurance premiums received, reduced with the gross amount of the re-insurance premiums ceded, as well as the income from all other activities, not related to the insurance, including. Long-term tangible assets Long-term tangible assets represent real estates, machines, plants, transport means and inventory which acquisition price is above BGN 500. Long-term tangible assets are represented with their acquisition price, reduced with the charged depreciation and losses from depreciation with the exclusion of the buildings, which are revaluated according to their fair price as at the date of the balance sheet, determined by a licensed appraiser. At an augmentation of the value after a revaluation the augmentation is referred to the own capital Revaluation reserve. Long-term tangible assets are depreciated according to the linear method during their useful period of exploitation as their reported or revaluated value is reduced till the amount of their balance sheet value with the following annual depreciation norms: Buildings 4% Computers and periphery 50% Automobiles 25% Inventory 15% The depreciation charging starts on the date of commissioning of the depreciable asset. ANNUAL REPORT

27 Long-term intangible assets Long-term intangible assets given in the balance sheet represent licenses and software. Initially the long-term intangible assets are assessed according to their price of acquisition, which includes the selling price (including customs fees and nonrefundable taxes) and all direct expenses related to the preparing of the asset for use according to its destination. The writing down of the long-term intangible assets from the balance sheet is made at a sale or when the asset is definitely removed from use and after its writing down other economic profits are not expected. Long-term intangible assets are depreciated according to the linear method as their depreciation is charged from the date of commissioning of the assets. Stocks Stocks are assessed according to their value of delivery, which include all expenses related to the purchase as well as other expenses made in connection with their delivery to the current location and condition. At material ordering the method of the price fixed for the particular case is used. Receivables under insurances Receivables under insurances represent the charged insurance premiums, recognized as an income, occurred during the current or previous reporting periods. They are reported according to their expected realizable value. At the end of the reporting period an overview of all receivables is made and are determined all receivables difficult to collect and bad debts. Bad debts are written out during the period during which they have been determined as such. Receivables and liabilities under re-insurance activity Receivables and liabilities under re-insurance activity reflect the charged reinsurance income and expenses occurred during the current or previous reporting periods. 26 INSURANCE COMPANY EUROINS PLC

28 Personnel income Short-term income granted to the personnel includes the basic remuneration for the time of work, remuneration above the basic according to the schemes of payment applied, additional remuneration for continuous work or overtime, other additional remuneration, agreed in the individual employment contract. Amounts due as compensating leaves of the personnel are reported as a liability and as an expenses related to the short-term income of the personnel. Effects from a change in the exchange rates Monetary resources in currency, receivables and liabilities in currency are reported in Bulgarian leva according to the central exchange rate of BNB at the date of transaction. Monetary assets and liabilities in foreign currency are revaluated in Bulgarian leva every month and as at the date of preparing of the statement according to the final exchange rate of BNB as at that date. Differences resulting of the revaluation of the currency are recognized in the income statement. Limit of solvency According to the regulation on the own resources and the solvency limit of insurance companies, the solvency limit is determined according to the following methods: Calculations in respect of premiums; Calculations in respect of the average annual amount of the claims. The solvency limit is equal to the higher of both results. 4. Premiums Earned net of Reinsurance in thousand BGN Gross Written Premiums Premiums Ceded to Re-insurers Change in the Gross Premium Reserve (+/-) Change in the Re-insurers share in the Premium Reserve (+/-) ANNUAL REPORT

29 5. Claims Incurred net of Reinsurance in thousand BGN Gross amount Re-insurers Share Change in the Gross Reserve for Outstanding Losses Change in the Re-insurers share in the Reserve for Outstanding Losses Net Operative Costs in thousand BGN Acquisition Costs Administrative Costs Reinsurance Commissions and Profit Commissions Income from Investments in thousand BGN Income from Land and Buildings Income from Bank Deposits and Bonds Positive Result from Investments Revaluation Gains from Investment Realization Costs for Management of the Investments, Interests inclusive 32 1 Negative Result from Investments Revaluation 9 1 Losses from Investment Realization Distributed Net Income from Investments Investments Structure in thousand BGN Land and Buildings Financial Assets for Sale Financial Assets Retained for Trade Deposits in Financial Institutions INSURANCE COMPANY EUROINS PLC

30 9. Receivables and Other Current Assets in thousand BGN Receivables from Insured Persons Receivables from Intermediaries Receivables from Reinsurance Operations Receivables from Retrogressions and Abandons Other Current Assets Other current assets Prepaid expenses Interests receivables Legal and awarded receivables Receivables from clients and suppliers Others Other Assets in thousand BGN Other Long-term Tangible Assets incl. Land and Buildings Used by the Company Intangible Assets 2 incl. Software 2 Cash Share Capital Structure in thousand BGN Starcom Holding Eurohold The Company increased its Share Capital by the issuance of 1,000,000 new personal shares. The transfer of the undistributed profit made 690,000 BGN of the increase for 2004 and the rest was achieved by monetary instalments from the shareholders. ANNUAL REPORT

31 12. Reserves in thousand BGN General Reserves Additional Reserves Revaluation Reserves General reserves are formed by allocation of 1/10 part from the profit in accordance with Bulgarian Trade Law and Company s Articles of Association. 13. Insurance Reserves in thousand BGN Premium Reserve Gross Amount Re-insurers Share Premium Reserve net of Reinsurance Outstanding Losses Reserve Gross Amount Re-insurers Share Outstanding Losses reserve net of Reinsurance Reserve Fund Payables and Other Liabilities in thousand BGN Liabilities for Direct Insurance Operations Liabilities for Reinsurance Operations Amounts due to Financial Institutions Other Creditors, incl. Taxes and Social Assurance INSURANCE COMPANY EUROINS PLC

32 GENERAL AGENCIES AND AGENCIES, BRANCH OFFICES GENERAL AGENCIES AND AGENCIES Sofia Main office, 1797, 16 G. M. Dimitrov blvd. tel.: / Sofia , 42 Vassil Levski blvd., fl. 1 tel.: / sofia1@euroins.bg Sofia , 52 Buzludzha str., fl. 1 tel.: / sofia2@euroins.bg Sofia , 6 Triaditza str. tel.: / sofia3@euroins.bg Sofia , 20 Zhulio Kuri str., fl. 2, room 210 tel.: / sofia4@euroins.bg Sofia , Nikolaj Kopernik str. tel.: / sofia5@euroins.bg Sofia , 172 Nishka str., fl. 3, opposite the Arena cinema tel.: / sofia6@euroins.bg Sofia , 8 Sveta Sofia str., fl. 4, room 9 tel.: / sofia7@euroins.bg Sofia , 35 Maria Luiza blvd. tel.: / sofia8@euroins.bg Sofia , 9 Tzarigradsko shosse blvd., fl. 2 tel.: / sofia9@euroins.bg Sofia , 89 Vassil Levski blvd., fl. 1 tel.: / sofia10@euroins.bg Sofia , 5 Hristo Botev blvd., fl. 1 tel.: / sofia11@euroins.bg Sofia , 96А Vitosha blvd. tel.: / sofia12@euroins.bg Sofia , Sveta Troitza complex, Tzar Simeon str., bl. 303B, entr. B, fl. 5, ap. 41 tel.: / Sofia , 4 Kiril Vidinski str. tel.: / sofia14@euroins.bg Sofia , 25A Fritiof Nansen blvd. tel.: / Sofia , Business Park Sofia, bl. 2 tel.: / Assenovgrad 4230, 1 Izlozhenie sq., Trade center Chaia tel.: / asenovgrad@euroins.bg Blagoevgrad 2700, 15 Dr. Hristo Tatarchev str., ground fl. tel.: / blagoevgrad@euroins.bg Botevgrad 2140, 7 Neznaen voin sq., office 3 tel.: / botevgrad@euroins.bg Bourgas 8000, 15 Rilska str. tel.: / burgas@euroins.bg Bourgas 8000, 9 Antim I str. tel.: / burgas2@euroins.bg Bourgas 8000, 137 Alexandrovska str., entr. В, fl. 1 tel.: / burgas3@euroins.bg Bourgas 8000, 24 Al. Stamboliiski str., fl. 1 tel.: / burgas_office@euroins.bg Varna 9000, 46 Seliolu str. tel.: / varna@euroins.bg Varna 9000, 5 Kliment str. tel.: / varna1@euroins.bg Varna 9000, 36 Tzar Simeon str. tel.: / varna2@euroins.bg Veliko Tarnovo 5000, 19 Nikola Gabrovski str. tel.: / vtarnovo@euroins.bg Veliko Tarnovo 5000, 7 Slaveikov sq., fl. 2 tel.: / Vidin 3700, 12 Tzar Alexander II str., fl. 1 tel.: / vidin@euroins.bg Vratza 3000, 17 Demokratzia blvd. tel.: / vraca@euroins.bg Gabrovo 5300, 1 3 Pencho Slaveikov str. tel.: / gabrovo@euroins.bg Gorna Oriahovitza 5100, 10 Tzar Osvoboditel str. tel.: / euroins@gorna.net Gotze Delchev 2900, 16 Hristo Botev str. tel.: / gdelchev@euroins.bg Dobrich 9300, 4 Vassil Levski str. tel.: / dobrich@euroins.bg Dupnitza 2600, 6 Nikola Lazarkov str. tel.: / dupnica@euroins.bg Kazanlak 6100, 32 Hristo Botev str., fl. 2, office 3 tel.: / kazanlak@euroins.bg Kardzhali 6600, 47 Bulgaria blvd., complex Orphei, fl. 2, office 1 tel.: / karjalli@euroins.bg Kjustendil 2500, 25 Bulgaria blvd. tel.: / kustendil@euroins.bg ANNUAL REPORT

33 Lovech 5500, 31 Bulgaria blvd. tel.: / Montana 3400, 53 Treti Mart str. tel.: / Pzardzhik 4400, Vazrajdane sq., BC Trakia, office 101 tel.: / Pernik 2300, 46 Targovska str. tel.: / Pirdop 2070, 6 Batemberg str. tel.: / Pleven 5800, 18 D. Popov blvd., fl. 3 tel.: / pleven@euroins.bg Plovdiv 4000, 25 Ivan Vazov str. tel.: / plovdiv@euroins.bg Plovdiv 4000, 80 Iztochen blvd. bl. Pejos, office 403 tel.: / plovdiv2@euroins.bg Plovdiv 4000, 160 Bulgaria blvd. tel.: / Razgrad 7200, 4 N. J. Vaptzarov str., bl. Alen mak tel.: / razgrad@euroins.bg Rousse 7000, 12 Borissova str. tel.: / ruse_ga@euroins.bg Rousse 7000, 87 Alexandrovska str. tel.: / ruse_pred@euroins.bg Sandanski 2800, 2 Banska str / Samokov 2000, 1 Prof. Vassil Zahariev str. tel.: / samokov@euroins.bg Svishtov 5250, 23 Tzar Osvoboditel str., fl. 2 tel.: / euroins@svishtov.com Sevlievo 5400, 8 Pencho Slaveikov str. tel.: / sevlievo@euroins.bg Silistra 7500, 8 Rakovska str. tel.: / silistra@euroins.bg Smolyan 4700, 1 Grudio Voivoda str. tel.: / Sliven 8800, 17 Hadzhi Dimitar str., fl. 1, ap. 10 tel.: / sliven@euroins.bg Stara Zagora 6000, 61 Gen. Gurko str., fl. 3 tel.: / szagora@euroins.bg Targovishte 7700, 7 Sv. Sv. Kiril i Metodij str. tel.: / targoviste@euroins.bg Troyan 5600, 28 Gen. Katzarov str. tel.: / Shumen 9700, 82 Tzar Ivan Alexander str., fl. 1 tel.: / shumen@euroins.bg Shumen 9700, 35 Rishki Prohod str. tel.: / , tel./fax: / Haskovo 6300, 16 Otetz Paisij sq. tel.: / haskovo2@euroins.bg Yambol 8600, 6 Al. Stamboliiski str. tel.: / jambol@euroins.bg BRANCH OFFICES Ajtos 8500, 92 Slavyanska str. tel.: / Byala 9 Ekzarh Josif str. Velingrad 4600, 1 Krivolak str. tel.: / Veliki Preslav 9850, 72 Boris Spirov str. tel.: / 3358 Glavinitza 7630, 1 Rozova Dolina str. tel.: / 2191 Dimitrovgrad 6400, 5 Tzar Boris І str., fl. 1 tel.: / Dulovo 7650, 2 Nikola Rusev str. Ihtiman 2050, 85 Tzar Osvoboditel str. tel./fax: / Karlovo 4300, 9 Vassil Levski blvd Nessebar 8230, hotel Mesemvria / Novi Pazar 9900, 4 Oborishte str., fl. 2 tel.: / Panagiurishte 4500, 20th April sq., GUM, fl Petrich 2850, 3 Slavyanska str. tel.: / Peshtera 4550, Bulgaria sq., Trade Center Pomorie 8200, 4A Aheloj str. tel.: / Popovo 7800, 46 Bulgaria blvd. tel.: / Tutrakan 7600, 10 Transmariska str. tel.: / 2254 Kotel 8970, Vazradjdane sq. Omurtag 7900, 3 Kliment Ohridski str. Sliven 8800, complex Rechitza 2 Todor Assenov str. tel.: / INSURANCE COMPANY EUROINS PLC