КОМПАНИЈА ДУНАВ ОСИГУРАЊЕ а.д.о.

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2 C O N T E N T S : 1. ECONOMIC TRENDS Economic trends in the Republic of Serbia Insurance market in the Republic of Serbia 4 2. COMPANY BACKGROUND Classes of insurance business Business organization Age and qualification structure of employees 9 3. THE MOST IMPORTANT ACTIVITIES IN FINANCIAL PERFORMANCE INDICATORS IN THE PERIOD I-XII Summary of performance in the period I-XII Financial result in the period I-XII Financial result from MTPL business in the period I-XII Insurance premium Gross premium Collected premium Settled claims Technical result Operating costs STRUCTURE OF ASSETS Intangible assets, property, plant and equipment Long-term and short-term financial investments Long-term financial investments Short-term financial investments Currency structure of financial investments Receivables Structure of receivables Valuation of receivables Cash and cash equivalents STRUCTURE OF CAPITAL AND LIABILITIES Capital and reserves Guarantee fund Technical reserves Long-term provisions Long-term liabilities Short-term liabilities Unearned premium Reserved claims OPERATIONAL RISKS 54 ATTACHMENT 58 Balance sheet as at 31 December Income statement for the period I-XII Prepared by: Department for planning, analysis and budgeting 2

3 1. ECONOMIC TRENDS 1.1. Economic trends in the Republic of Serbia Mean exchange rate of EURO as at 31 December 2012 was 113,7183 RSD. As at 31 December 2011 the mean exchange rate of EUR was 104,6409 RSD. The growth in EUR exchange rate was 8,7 %. 8,7% the growth in EUR exchange rate. Prices of goods and services used for personal consumption in December 2012 in relation to November 2012 decreased by 0.4% on average. Consumer prices in December 2012, when compared to December 2011, increased by 12,2%, whereas the average annual growth was 7,8%. Annual inflation rate 12,2% Industrial production in the Republic of Serbia in December 2012, when compared to December 2011, increased by 0,7%, and in relation to 2011 average, it increased by 7,1%. In the period of January December 2012, compared with the same period of 2011, the industrial production decreased by 2,9%. Industrial production decrease in the period January December ,9% decrease. The average earnings paid in the period January December 2012 in the Republic of Serbia, compared to the same period in 2011, increased in nominal terms by 8,9% and by 1,0% in real terms. 8,9% rise in average earnings for 2012 Average earnings (gross) in the Republic of Serbia, paid out in December 2012 were RSD. Compared to the average earnings paid out in November 2012, they grew by 10,6% in nominal and by 11,0% in real terms. Average earnings without taxes and contributions (net) paid out in December 2012 in the Republic of Serbia was RSD. In 2012, Index Belex 15 (index of 15 most liquid shares) recorded a 4.98% growth, whereas Index Belexline ( benchmark index of the Belgrade Stock Exchange) recorded a 2.90% growth. 4.98% growth in Belex15 Index and 2.90% growth in Belexline index GDP in the fourth quarter of 2012 declined by 1.5% against a year earlier. *Source: Statistical Office of the Republic of Serbia 3

4 1.2. Insurance market in the Republic of Serbia In the third quarter of 2012, 28 insurance companies operated in Serbia, one more than in the same period of a year earlier. Twenty four companies are engaged in insurance activities only, and 4 in reinsurance activities only. Оf insurance companies, 7 are exclusive life insurers, 11 exclusive non-life insurers, whereas 6 carry on both life and nonlife business. 28 companies operate in the market In the third quarter of 2012, total premium came at 47.5 bln RSD (413 mln EUR or 534 mln USD, at the mean exchange rate of the NBS as at 30/09/2012), which is 6.7% growth compared to the same period of the previous year. The share of non-life insurance in total premium was 82.4%, while the share of life insurance rose from 1.8% to 17.6% compared to the same period in the previous year. The share of Dunav Insurance Company in the total gross premium in the insurance market of the Republic of Serbia in the period I-IX 2012 was 30.2%, which is by 3.3 percent point more compared to the end of The share of Company non-life insurance in the total non-life gross premium in the period I-IX 2012 was 34.6%, whereas the share of life insurance was 9.5%. In the third quarter of 2011, Company share was 28.2%. Company share of 30.2%. In the observed period, three insurance companies (Dunav Insurance, Delta Generali and DDOR Novi Sad) accounted for the majority part of total premium in Serbia (64.2%). Ranking of insurance companies by their share in gross premium: No. Insurance company (in 000 RSD.) TOTAL PREMIUM - share of companies in the total premium in Serbia I-IX Amount Share (in %*) Amount Share (in %*) Amount Share of companies in the total premium earned in insurance market in the period I-IX 2012 Share (in %*) 1. Dunav ,2% ,9% ,9% 2. Delta Generali ,0% ,0% ,5% 3. DDOR ,9% ,2% ,5% 4. Wiener ,7% ,0% ,7% 5. UNIQA (life and non life) ,0% ,7% ,1% 6. Takovo ,6% ,0% ,0% 7. Grawe ,2% ,5% ,6% 8. Triglav Kopaonik ,8% ,7% ,5% 9. AMS ,3% ,5% ,7% 10. Other companies ,3% ,5% ,5% TOTAL ,0% ,0% ,0% 2010 Grawe 3,2% Triglav Kopaonik 2,8% AMS 2,3% Other companies 8,3% Takovo 3,6% Dunav 30,2% UNIQA (life and non life) 7,0% Wiener 8,7% DDOR 13,9% Delta Generali 20,0% 4

5 In the third quarter of 2012, compared to 2011, the Company recorded the biggest increase in market share in MTPL insurance (by 6.1 percentage points), in Goods in Transit (by 3.7 percentage points), in other Property lines (by 2.9 percentage points) and in Accident Insurance (by 2.1 percentage points). The biggest market share drop was recorded in General Liability Insurance (by 1.0 percentage points). Insurance type DUNAV ( in %) Premium share of Dunav Insurance in the total market premium of the corresponding class I-IX OTHER PROPERTY INSURANCE 50,3 47,3 47,3 GOODS IN TRANSIT 41,9 38,2 37,1 FIRE AND ALLIED PERILS 40,4 39,2 37,4 GENERAL LIABILITY 34,5 35,4 31,2 ACCIDENT 32,1 30,0 28,4 MTPL 29,9 23,8 21,7 CASCO 28,7 28,5 28,3 HEALTH 12,5 11,5 8,8 OTHER NON-LIFE INS. 26,0 26,4 30,3 LIFE (total) 9,5 8,0 7,5 Comparing the structure of 2012 gross premium realized in the period I-IX by the three biggest insurance companies in the market (Dunav Insurance, Delta Generali and DDOR Novi Sad), a similarity in terms of portfolio can be observed between Dunav Insurance and DDOR Novi Sad where Motor Insurance is predominant casco and liability and property lines, whereas with Delta Generali, in addition to the said classes, life insurance takes a considerable share in total (with the share of 23,8%). Premium structure of the three biggest insurance companies in the Serbian market for the period I-IX % 5,6% 6,6% 90% 4,1% 3,3% 2,3% 2,8% 23,8% LIFE (total) 80% 70% 30,2% 19,0% 6,5% 1,3% OTHER NON LIFE INS. GENERAL LIABILITY MTPL 60% 50% 23,8% 33,1% OTHER PROPERTY INSURANCE FIRE AND ALLIED PERILS 26,6% 40% 13,6% GOODS IN TRANSIT 30% 20% 10% 0% 11,3% 1,8% 10,7% 0,7% 6,7% 1,0% 15,7% 1,9% 12,3% Share of Dunav Insurance Company in the total amount of settled claims in the insurance market of the Republic of Serbia in the period I-IX 2012 was 28,0%. 12,1% 5,1% 0,8% 8,5% 4,9% 3,8% Dunav DDOR DELTA CASCO HEALTH ACCIDENT Company share in settled claims 28% 5

6 Ranking of insurance companies by their share in settled claims: No. Insurance company ( in 000 RSD.) SETTLED CLAIMS - share of companies in the total settled claims in Serbia I-IX Amount Share (in %*) Amount Share (in %*) Amount Share (in %*) 1. Dunav ,0% ,6% ,6% 2. DDOR ,7% ,8% ,4% 3. Delta Generali ,3% ,7% ,3% 4. Wiener ,2% ,3% ,6% 5. UNIQA (life and nonlife) ,8% ,5% ,3% 6. Takovo ,4% ,8% ,7% 7. Triglav Kopaonik ,7% ,3% ,0% 8. Grawe ,7% ,1% ,7% 9. AMS ,6% ,8% ,9% 10. Other companies ,6% ,0% ,6% TOTAL ,0% ,0% ,0% Ranking order of insurance companies by their share in settled claims, allowing for minor deviations, follows the ranking order of their share in gross premium, which is not surprising considering that claims are directly connected with the portfolio size. Compared to 2011 and observed by insurance classes, in the period I-IX 2012, the share of claims settled by Dunav Insurance Company in the total settled claims in the market saw the rise, notably in Goods in Transit (by 14.9 percentage points), General Liability (by 4.8 percentage points) and other property insurance lines (by 3.0 percentage points). DUNAV ( in %) Class of insurance Share of claims settled by Dunav Insurance in the total settled claims in the market I-IX OTHER PROPERTY INS. 59,6 56,6 54,1 GENERAL LIABILITY 39,1 34,3 32,7 ACCIDENT 38,7 36,9 35,2 CASCO 27,6 27,6 26,8 FIRE AND ALLIED PERILS 24,4 43,1 32,3 MTPL 23,8 22,1 23,5 GOODS IN TRANSIT 22,3 7,4 49,6 HEALTH 11,9 12,7 10,9 OTHER NON-LIFE INSURANCE 21,9 54,5 54,5 LIFE (total) 6,0 6,6 11,1 Source: NBS 6

7 2. COMPANY BACKGROUND Dunav Insurance Company a.d.o. is a business entity established as an open joint-stock company for property and personal insurance, coinsurance, reinsurance and other insurance-related services. Registered Office of the Company: Belgrade, Makedonska Street No. 4. Company ID Number: Tax Identification Number (TIN): The Company is a legal successor of the Company Osiguranje Dunav d.d. organized under the Decision of the Shareholders Meeting of the Shareholding Insurance Company Dunav passed in IX session held on 26/04/1994 and entered in the Register of the Commercial Court in Belgrade under the Decision IV-Fi No. 9281/94 of which, under the Decision of the Commercial Court in Belgrade II-Fi No. 7821/97, court registry entry , of , was registered in accordance with the Law on Property and Personal Insurance as a joint stock company. Under the Decision of the Business Registers Agency in Belgrade No. 1992/2005 of , the Company was registered in the Register of Companies as a joint stock insurance company. Dunav Insurance Company a.d.o. is organized and existing under the Insurance Law ( Official Gazette of RS No. 55/04,70/04,61/05, 101/07 and 99/11) and the Company Law ( Official Gazette of RS, No. 36/11 and 99/11). Business entities founded by the Company as the majority or substantive shareholder are subsidiaries controlled by the Company in proportion to its share in capital. The enterprises operating as Company's subsidiaries are: Dunav Re, Dunav Auto, Dunav Tourist, Dunav Voluntary Pension Fund Management Company, Dunav Stockbroker, Dunav osiguranje Banjaluka, Dunav Auto Banja Luka and Dunav Banka Zvečan. 140-year long tradition Eight subsidiaries % share in capital of subsidiaries: No. SUBSIDIARIES SHARE IN CAPITAL 1 Dunav Auto, Beograd 100,00% 2 Dunav Voluntary Pension Fund Management, Beograd 100,00% 3 Dunav Stockbroker, Beograd 100,00% 4 Dunav Re, Beograd 88,41% 5 Dunav Osiguranje, Banja Luka 76,34% 6 Dunav Auto, Banja Luka 76,34% 7 Dunav Tourist, Beograd 66,82% 8 Dunav Banka, Zvečan 59,93% 2.1. Classes of insurance business The Company is licensed by the National Bank of Serbia to draw profit from business operations in the following lines of insurance: non-life insurance: accident insurance including worker's compensation and insurance of occupational diseases, voluntary health insurance, motor insurance, aviation insurance, vessel insurance, rolling stock insurance, goods in transit insurance, insurance of property against fire and allied perils, other property lines, motor vehicle liability, aircraft liability insurance, vessel liability insurance, general liability insurance, credit insurance, guarantee insurance, financial losses insurance, insurance of legal expenses, travel assistance and other classes of non-life insurance; life insurance: life assurance, annuity insurance, life rider, voluntary pension insurance and other lines of life assurance. The only company in the domestic market registered for all insurance lines. 7

8 2.2. Business organization The Company operates in the following branches: Head Office and Main Branch Offices and in its territorial organizational units. Head Office deals with insurance, coinsurance and reinsurance business which is of interest for the Company as a whole. The Head Office organizes, controls and coordinates insurance work process (of individuals and entrepreneurs, SMEs, major companies, life insurance lines, sale of non-life insurance lines, sale and marketing of life insurance, shared insurance functions, marketing and PR and claim settlement), compliance, financial, legal, HR and administrative affairs, IT, internal audit, property, procurement and maintenance and actuarial. The Company operates throughout the Republic of Serbia through its network of 29 main branch offices grouped into five regions. Life sales network operates through 5 main branch offices. Head office and main branch offices. 29 main branch offices, 5 regions. 8

9 2.3. Age and qualification structure of employees C O M P A N Y Qualification / age PhD MSc Bachelor's degree Associate degree Highly skilled worker Secondar y school education Skilled worker Lower school education over Total Total Number of employees Total number of employees at December 31, 2012 amounted to Qualification structure of the employees Age structure of the employees Lower school education 0,7% Skilled worker 2,6% PhD 0,3% MSc 1,1% years old 14,8% years old 3,9% years old 29,5% Secondary school education 39,9% Вachelor's degree 41,2% years old 25,6% Highly skilled worker 0,6% Associate degree 13,6% год. 26,2% Permanently Temporary Trainee Total full time part time full time part time full time part time full time part time Total number of employees for 8 working hours

10 3. THE MOST IMPORTANT ACTIVITIES IN 2012 The operations of the Dunav Insurance Company in 2012 were marked by the following most important activities: In accordance with the changes identified in the market and needs and demands of clients, the following new products were created within insurance development activities in terms of insurance conditions and tariffs: - All-Risk Property Insurance, - Professional Liability Insurance for Lawyers, - Professional Liability Insurance for Enforcement Agents, - Liability Insurance for Public Notaries, - All-Risk Property and Business Interruption Insurance, - Casco Insurance of Passenger Vehicles (Mini Casco), - Travel Health Insurance, - Travel Insurance (travel insurance package). Set of amendments were made to the existing insurance terms and conditions, premium tariffs and technological instructions with the aim to improve the offer of particular type of products, increase their outreach, improve risk-spreading and Company competitiveness in the immediate market environment. Regarding life products, Tariff System was supplemented in the part of underwriting costs and the Decision on minimum life premium amounts was amended. New products were created. Set of amendments were made to insurance terms and conditions and tariffs Particular focus was placed on reinsurance cover of risks relating to aircraft and vessel insurance, motor vehicles (trams, vehicles of RST, vehicles of RTB Bor, Customs Administration), and money transport insurance with the aim to create an optimum, effective and efficient reinsurance programmed which provides maximum protection of Company financial result and solvency. The Company introduced its special package Dunav Business Bonus Package intended for small and medium-sized enterprises and entrepreneurs which provides a unique protection level of property and employees against unforeseeable events and is comprised of the main package, optional covers and special bonuses. In this way, our insurance company meets the needs of small and medium businesses for comprehensive protection of property and employees. The Company participated in the work of the Commission for Bonus/Malus, Commission for Motor Vehicles of the Association of Serbian Insurers and the Commission for Voluntary Health Insurance with the aim to change the legal ambiance for better promotion of this insurance class. In addition, the Company took active participation in the activities organized by the Ministry of Agriculture, Trade, Forestry and Water Management Credit Support Programme for Development of Cattle Breeding in 2011 through subsidizing part of interest rate, which continued in In 2012, the Company took part in the Tourism Fair, Children s Fair, Agricultural Fair in Novi Sad and Auto-Moto Fest in Niš, with the aim to promote various products of the Company. Fair activities. In terms of information technology, in 2012 the priority was to continue the Implementation of INSIS and Wind implementation of INSIS software package for the support to the Company core module. 10

11 activity and the implementation of non-life and life sales software on the web platform (Wind). Business year 2012 was marked by the activities on the implementation of the project Profile of the Insured and the project Tachograph as well as Eurotax and its integration in the Company IT system. The development of the package Dunav Bureau was continued in terms of the implementation of application and information solution Е- pisarnica (Office Automation System), the solution which enable entering, registering, signing and dispatch of documents in a simple manner. In terms of harmonization of Serbian regulations with those of the EU, the Company started the implementation of the project Solvency II. Solvency II introduces a new risk-based solvency requirement, defines different capital size and structure requirements and tighter risk management standards. To preserve the leading position of the Company brand in the insurance market of the Republic of Serbia, in 2012 Company participated in different events. The Company organized a prestigious regional conference entitled the Development of Insurance Market in the South East Europe, participated by the representatives of regional financial sector and Serbian top Government officials. Dunav insurance company was again awarded the Belgrade Winner, the award traditionally given by the Belgrade Chamber of Commerce to the best economic entities and individuals in the capital which, in their business, achieve excellent results and with their activities influence a broader development of economy and society in general. In 2012, 64 employees voluntarily left the Company and the total amount of severance pays for voluntary redundancy was thousand Dinars. 11

12 4. FINANCIAL PERFORMANCE INDICATORS IN THE PERIOD I-XII Summary of performance in the period I-XII 2012 ITEM Realization I-XII 2011 Plan I-XII 2012 (in 000 RSD.) Realization I-XII 2012 % of increase/ decrease realization I-XII 2012 / realization I-XII 2011 % of increase/ decrese realization I-XII / plan I-XII Total income ,5 39,9 Total expenses ,9 41,0 Profit/loss before taxation ,1-17,0 Profit/loss after taxation ,2-72,8 Gross premium ,8 6,5 Collected premium (without tax) ,2 4,8 - Collected premium (money, offset) ,6 - - Оther ,4 - Settled claims ,6-7,1 Paid claims ,8-10,9 Operating expenses ,0 28,3 (in 000 RSD.) ITEM realization realization % increase/ decrease Total balance sheet assets / liabilities ,5 Total contigent assets / liabilities ,4 ITEM December 2011 (in 000 RSD.) December 2012 % increase/ decrease Average net income per employee ,3 Average net earnings per employee ,4 Number of employees as at 31 December of the current year ,0 ROE (profit / capital) 2,7% 0,7% ROА (profit / total property) 1,0% 0,2% CIR1 (expenses / operating income) 58,2% 56,3% CIR2 (expenses / total income) 36,3% 35,2% 12

13 Indicators Share of collected premium in gross premium Realization I-XII 2011 (in %) Realization I-XII 2012 COMPARISON DEVIATION Plan Previous year 103,2 95,5-1,5-7,7 Share of settled claims in gross premium 45,8 40,6-5,9-5,2 Share of gross earnings in gross premium 24,6 22,9 3,6-1,7 Share of settled claims in collected premium 44,4 42,5-5,5-1,9 Share of paid claims in total claims payable 99,6 95,1-4,0-4,5 Share of operating expenses in gross premium 54,4 51,2 8,7-3,2 In the period I-XII 2012 the profit before taxation was 282,3 million Dinars, whereas after taxation, realized net profit was 72,0 million Dinars. Fixed and other capital of the Company was 5.9 billion Dinars, out of which 5.3% was the share capital, 92.5% socially-owned capital and 2.2% accounted for other (socially-owned) capital. Profit before taxation 282,3 mln RSD, profit after taxation 72,0 mln RSD. Fixed and other capital 5,9 bln RSD. As at 31 December 2012, short-term and long-term investments of the Company were 4,8 billion RSD and 3,4 billion RSD respectively. Total investments 8,2 bln RSD. In the period I-XII 2012, the total gross premium was 17.9 billion Dinars which was by 15.8% more compared to the previous year and 6.5% more compared to the plan for the observed period. In the total portfolio, the respective share of non-life and life insurance was 93,9% аnd 6,1%. Gross premium 17,9 bln RSD. Non-life 93,9%, life 6,1%. The collected premium amounting to 17,1 billion Dinars is higher by 7,2% compared to the previous year, while compared to the plan it was higher by 4,8%. In the period I-XII 2012, claims settled totaled 7.3 billion Dinars which, compared to the previous year, was an increase of 2,6% Settled claims 7,3 bln RSD. 13

14 4.2. Financial result in the period I-XII 2012 In the period I-XII 2012, the Company realized profit (before taxation) in the total amount of 282,284 thousand Dinars, and after taxation the profit was 72,016 thousand Dinars. No. (in 000 RSD) (5/3) 7 (5-3) 8 (5/4) 9 (5-4) 1.1. Gross premium (insurance and coinsurance) , , DESCRIPTION Net increase / decrease of unearned insurance and coinsurance premiums EXECUTION I-XII 2011 PLAN I-XII 2012 EXECUTION I-XII 2012 COMPARISON realization I-XII 2012 / realization I-XII 2011 Relative (index) Absolute COMPARISON realization I-XII 2012 / plan I-XII 2012 Relative (index) Absolute ( ) ( ) ( ) 431, , ( ) Revenues from premium , , Net increase in mathematical reserve ( ) ( ) ( ) 134, , Prevention reserves ( ) ( ) ( ) 113, , Fire fighting contribution (22.826) (14.564) (17.032) 74, , Guarantee fund ( ) ( ) ( ) 132, , Republic Fund of Health Insurance (0) (0) ( ) Premium provisions - net ( ) ( ) ( ) ( ) 156, , (1.- 2.) Revenues from premium deducted by provisions , , Premium ceded in coinsurance ( ) ( ) ( ) 124, , Premium ceded in reinsurance ( ) ( ) ( ) 99, , Provision from reinsurance business , , Premium ceded in reinsurance and coinsurance ( ) ( ) ( ) ( ) 109, , (3.-4.) Self - retained net premium , , Settled claims (insurance and coinsurance) ( ) ( ) ( ) 102, , a. Recourses , , b. Claim recovery (18.227) (21.422) ( ) 2.669, , (6.-7а.+7b.Settled claims - recourses ( ) ( ) ( ) 99, , Coinsurance returns for claims , , Reinsurance returns for claims , , Coinsurance and reinsurance returns for claims ( ) , , (8.-9.) Setttled claims - net ( ) ( ) ( ) 94, , a Net increase / decrease of provision for reported claims ( ) ( ) , b Net increase / decrease of provision for not reported claims ( ) ( ) , Profit before taxation 282,3 mln RSD, profit after taxation 72,0 mln RSD 11.c Net revenues from decreased provisions for coinsurance claims Net increase of provisions for risk equalization ( ) ( ) (11.а+11.б- Net increase of provisions for claims ( ) ( ) , в+12.) 14. ( ) Total claims ( ) ( ) ( ) 132, , а Discounts and bonuses ( ) ( ) ( ) 121, , б Operating expenses ( ) ( ) ( ) 109, , Total expenses (15а+15б) ( ) ( ) ( ) 109, , a Net increase in adjustment for premiums and expenses , b Debt acquittance ( ) ( ) ( ) 95, , (16.а+16.b Total net increase in adjustment for premiums and recourses , , Financial income and expenses result 18. Result of other and extraordinary income and expenses , , , , ( ) Investment and extraordinary profit (loss) , , NET PROFIT ( ) NET PROFIT AFTER TAXATION , , , ,

15 RATIO REALIZATION PLAN REALIZATION I-XII 2011 I-XII 2012 I-XII 2012 Ratio of net settled claims 10/5 49,1 50,9 42,6 Ratio of reserved claims 13/5-7,6 5,5 8,2 Total claims ratio 14/5 41,5 56,3 50,8 Ratio of discounts and bonuses costs 15a/5 2,4 2,7 2,7 Ratio of operating costs 15b/5 66,4 51,6 66,8 Ratio of operating costs 15/5 68,9 54,3 69,5 Ratio of net effects of value adjustment for premium and recourse 16/5-4,2-3,8-1,9 Ratio of financial result 17/5 7,2 7,7 10,5 Ratio of investment and extraordinary result 18/5 1,8 1,6 9,9 TOTAL RATIO (TOTAL RESULT) 97,3 97,5 97,9 In the period I-XII 2012, the realized profit of the Company (before taxation) was thousand Dinars, whereas after taxation, it amounted to thousand Dinars. Realized gross premium (with coinsurance) amounted to thousand Dinars, in the period I-XII 2012, which is 6.5% more compared to the plan and 15.8% more compared to the previous year. Profit before taxation 282,3 mln RSD, after taxation 72,0 mln RSD Gross premium 17,9 bln RSD In 2012, net provisions / allocations from premium recorded the rise of as much as 56.0%, which is the consequence of new obligation of insurance companies which, under the Law on Compulsory Traffic Insurance are obliged to credit 5% of the gross premium from MTPL insurance to the account of the Republic Health Insurance Fund as a legal entity which provides and conducts compulsory health insurance. Expense on the basis of reinsurance and coinsurance premium (together with the commissions from reinsurance operations), amounted to thousand Dinars and it was realized at a level higher than planned. Compared to the same period of the previous year, the expenses were higher by thousand Dinars or 9.4%. The amount of retained net premium also recorded a rise compared to 2011 by 8.4%. In the period I-XII 2012, settled claims, together with settled claims from accepted coinsurances amounted to thousand Dinars, which was 7.1% less in comparison with the plan for the observed period, and 2.6% more in comparison with the previous year. The share of settled claims in the realized gross premium was 40.6%, which is less than the 45.8% share in the previous year, whereas the share projected under the plan for the observed period was 46.5%. Premium ceded to reinsurance and coinsurance 1,8 bln RSD Settled claims 7,3 bln RSD Business year 2012 was marked by a considerable increase in provisions for claims which, in total, amounted to thousand Dinars. Increase in provisions was realized within Reported but not Settled Claims and within Incurred but not Reported Claims. In the period I-XII 2012, realized operating costs amounted to thousand Dinars and were higher by 9.0% compared to the ones in the previous year. Operating costs accounted for 51.2% of the total realized gross premium in the observed period. In the previous year the observed share was 54.4%. Operating costs 9.2 bln RSD. 15

16 Positive effects of value adjustment on the Income Statement for (insurance and coinsurance) premiums and recourses was thousand Dinars. In 2011, positive effect on the Income Statement for premiums and recourses was thousand Dinars. This is the result of 2012 growth in the collected premium both in terms of the plan and in terms of the same period of the previous year. In the period I-XII 2012, 74.5% of planned collection was realized. Collection task for the period I-XII 2012 was thousand Dinars comprising the uncollected premium carried forward from the previous period ( thousand Dinars) and written premium in 2012 ( thousand Dinars) with the adjustment for the premium which was not due for payment until the end of the observed period ( thousand Dinars). The result of financial income and expenditure was positive and it amounted to thousand Dinars. It comprises the following: (in 000 RSD) Proceeds from placements Positive effect of value adjustment for premiums and recourses mln RSD 74.5% of planned collection was realized. Profit after financial income and expenses 1.4 bln Dinars. Income from interest on premium Income from other interests Negative effects of exchange differentials (not related to placements) Negative effects of the currency clause (not related to placements) Negative effects of the value adjustment for receivables from interests (25.060) (10.721) (5.128) Other TOTAL The result of extraordinary and other income and expenditures was positive and it amounted to thousand Dinars and for the most part it comprised: (in 000 RSD.) Income from decrease of other provisions Net effect from investment property valuation Income from sold Green Card Income from rental Income from collection of written-off receivables Profit from extraordinary and other income and expenditures 1,4 bln RSD. Income resulting from recovery of litigation costs Income from commission Income from stolen vehicles found Income from police report services Net effects resulting from the matching of shares in other legal entities, deposits and investments ( ) Other (38.284) TOTAL

17 FINANCIAL RESULT FROM MTPL BUSINESSES IN THE PERIOD I-XII 2012 Total gross premium of compulsory motor insurance (tariff 26 + tariff 29) realized in the period I-XII 2012 was thousand Dinars, which is by 32.2% higher compared to the previous year. In the total gross premium, thousand Dinars relate to insurance gross premium and 116 thousand Dinars to the gross premium from accepted coinsurance. Gross premium MTPL 5.8 bln RSD Gross premium structure: (in 000 RSD) % Tariff Gross Technical Expense % share % share share Prevention premium premium loading TP/GP EL/GP Prev./G P (3/2) 7 (4/2) 8 (5/2) Тariff 26 - Compulsory Motor Third Party Liability Insurance - MTPL ,0 18,0 2,0 Тariff 29 - Insurance of vehicles with foreign licence plates ,0 18,0 2,0 TOTAL - INSURANCE ,0 18,0 2,0 Тariff 26 - Compulsory Motor Third Party Liability Insurance - MTPL - coinsurance ,5 9,5 0,0 TOTAL - COINSURANCE ,5 9,5 0,0 TOTAL - INSURANCE + COINSURANCE ,0 18,0 2,0 Expense loading realized in MTPL business was 18,0% gross premium earned in this insurance, which is in accordance with the Law on Compulsory Traffic Insurance (Article 45), which stipulates that the expense loading can be maximum 23% of the gross premium. Within the contribution to loss prevention find, thousand Dinars is allocated to the introduction, operation and improvement of the system for traffic monitoring, control and management road video surveillance system. In the period I-XII 2012, in MTPL insurance (tariff 26+29) the Company recorded the loss in the amount of thousand Dinars. (in 000 RSD) CATEGORY Realization Realization I-XII 2011 I-XII 2012 Index Total income ,0 Total expenses ( ) ( ) 140,7 PROFIT/LOSS ( ) The above result relates to all income and expenses directly connected to the tariffs 26 and 29, including the part of income and expenses which cannot be directly connected to a particular tariff/type of insurance and instead are allocated with the help of keys to all insurance classes (Decision on the manner of defining the costs for provision of original services, sources for coverage of costs for provision of original services, recording of subledgers for costs of acquisition, administration, investigation, assessment and settlement of claims, criteria on the manner of allocation of indirect income and expenses to additional subledgers by individual balancesheet categories). If we observe income and expenses directly linked to the tariffs 26 and 29, without using the keys to allocate the unallocated funds by insurance types, the financial result of MTPL business in 2012 would be positive, amounting to thousand Dinars. CATEGORY Realization I-XII 2011 (in 000 RSD) Realization I-XII 2012 Index Total income ,5 Total expenses ( ) ( ) 150,2 PROFIT/LOSS ,9 17

18 Structure of income and expenses from MTPL business (tariffs 26 and 29, with allocation of unallocated amounts): No. DESCRIPTION REALIZATION I-XII 2011 REALIZATION I-XII 2012 INDEX realization I-XII 2012/ realization I-XII (4/3) 1 Revenues from premium , Prevention reserves (79.773) ( ) 130, Guarantee fund ( ) ( ) 131, Republic Fund of Health Insurance (0) ( ) 0,0 2. ( ) Premium provisions - net ( ) ( ) 229,3 3. (1.- 2.) Revenues from premium deducted by provisions , Premium ceded in coinsurance 0 0 0, Premium ceded in reinsurance (49.084) ( ) 231,3 4. ( ) Premium ceded in coinsurance and reinsurance (49.084) ( ) 231,3 5. (3.-4.) Self-retained net premium ,2 6. Settled claims ( ) ( ) 103,6 7. Recourses ,7 8. (6.-7.) Settled claims - recourses ( ) ( ) 95, Coinsurance returns for claims 0 0 0, Reinsurance returns for claims ,8 9. ( ) Reinsurance and coinsurance returns for claims ,8 10. (8.-9.) Settled claims - net ( ) ( ) 96,3 11.a Net increase / decrease of provisions for reported claims ( ) 11.b Net increase / decrease of provisions for not reported claims ( ) 12. Net increase of provision for risk equalization ( ) (11.a+11.b+12.) Net increase of provisions for claims ( ) 14. ( ) Total claims ( ) ( ) 290,0 15.a Discounts and bonuses (13.220) (158) 1, Costs of provisions for fringe and other employee benefits (928) (11.597) Commission costs ( ) ( ) 141, Depreciation costs ( ) ( ) 135, Costs of materials (33.412) (43.928) 131, Fuel and power costs (55.198) (73.260) 132, Costs of transport services (25.889) (30.534) 117, Costs of maintenance services (20.374) (19.551) 96, Rental costs ( ) ( ) 104, Costs of other production services (5.967) (7.949) 133, Costs of fair exhibit (5.321) (2.119) 39, Costs of market research (0) (2.588) 0, Costs of other services - not mentiones (11.541) (23.576) 204, Costs of services of other legal entities (0) (0) 0, Costs of advertising (4.896) (8.200) 167, Costs of commercials ( ) ( ) 105, Costs of sponsorhip (48.793) (44.414) 91, Costs of donorship (18.801) (19.698) 104, Business entertainment costs (21.207) (30.358) 143, Costs of insurance premium of the Company (2.949) (2.985) 101, Costs of sales tax charged to the Company (3.577) (7.014) 196, Costs of other taxes (profit, land...) (35.958) (40.926) 113, Contribution costs (0) (0) 0, Costs of payment operations (24.227) (21.466) 88, Non-productive services costs ( ) ( ) 116, Other expenses related to associated entities (92.233) ( ) 161, Other non-productive operating costs (57.835) (75.183) 130, Costs of gross earnings ( ) ( ) 126, Costs of taxes on earnings charged to the employer ( ) ( ) 126, Allowances for service contracts (10.919) (14.148) 129, Allowances for copyrights contracts (177) (197) 111, Allowances for part-time and casual employment contracts (3.958) (5.884) 148, Allowances for physical persons per other contracts (3.365) (13.252) 393, Fees to members of Managing and Supervisory Board (5.252) (4.894) 93, Severance pay for termination of employment (35.920) (41.072) 114, Other personal expenses (New Year's gifts for children, aid) (17.555) (22.420) 127, Other allowances - business trips (68.623) ( ) 147,7 15.b Operating costs (UW costs + costs related to loss inspection, assessment, settlement + depositing and investment costs) ( ) ( ) 122,3 15. (15а+15b) Total expenses ( ) ( ) 121,7 16.a Net increase / decrease in adjustment for premiums ,0 16.b Net increase / decrease in adjustment for recourses (51.381) (49.728) 96,8 16. (16.а+16.б) Total net increase in adjustment for premium and recourses (39.932) (44.003) 110,2 RESULT FROM ORDINARY INSURANCE ACTIVITIES ( ) 17. Financial income and expenses result 18. Result of other and extraordinary income and expenses (68.346) ( ) , ( ) Investment and extraordinary profit (loss) ,8 NET PROFIT / LOSS ( ) ( ) 18

19 Despite a considerable increase in gross premium, the negative result from MTPL business in 2012 was notably influenced by considerable increase in provisions for claims and the increase in operating costs. Settled claims from compulsory motor insurance (tariff 26 + tariff 29) in the period I-XII 2012 amounted to thousand Dinars, which is by 3.6% higher compared to the same period of the previous year. The share of settled claims in the gross premium was 33.0%, which is less than in the previous year, when it was 42.1%. Settled claims MTPL 1.9 bln RSD Total costs arising from MTPL business in 2012 were thousand Dinars, comprising of: Costs for providing the original services in the amount of thousand Dinars; (administration thousand Dinars, acquisition thousand Dinars, other thousand Dinars); Costs of investigation, assessment, settlement and payment of claims, in the amount of thousand Dinars; Expenses from investments in the amount of thousand Dinars. Costs for providing original services so disclosed include, in addition to the costs directly allocated to tariffs 26 and 29, a part of costs which could not be allocated to particular tariffs/insurance types when recorded. Instead, they were allocated to the said tariffs by keys. Costs for providing original services from MTPL business, realized in the period I-XII 2012, were by thousand Dinars higher than the expense loading, taking into account insurance and coinsurance gross premium i.e. by thousand Dinars if we observe gross insurance premium only. If we observe expenses directly linked to the tariffs 26 and 29, without allocation of the unallocated funds, the costs for providing original services in MTPL business were thousand Dinars in 2012 i.e. by thousand Dinars less than the realized expense loading, taking into account the insurance and coinsurance gross premium i.e. by thousand Dinars if we observe gross insurance premium only. Total commission granted for sales of MTPL polices in the period I-XII 2012 amounted to thousand RSD. The share of commission costs in the gross earned premium was 2.7%. If the amount of commission costs is included in the part of costs which are not directly allocated to tariffs 26 and 29, commission costs amount to thousand Dinars and their share in gross premium is 2.9%. In both cases, the costs of commission for sales of MTPL insurance policy do not exceed 5% of gross premium for this insurance, which is in accordance with the Law on Compulsory Traffic Insurance (Article 45). 19

20 Structure of costs for providing original services in MTPL business: No. D E S C R I P T I O N COSTS FOR PROVIDING THE ORIGINAL SERVICES - MTPL MTPL costs I-XII 2011 (tariffs allocation) MTPL costs I-XII 2012 (tariffs allocation) (4/3) I Costs of depreciation and provisions ,4 II Costs of materials, energy, services and intangible costs (from 1 tо 10) ,9 1. Costs of materials (а+b+c) ,6 a. Costs of materials ,9 b. Costs of spare parts ,3 c. Costs of small inventory ,0 2. Fuel and power costs ,3 3. Costs of production services (а+b+c+d+e+f+g+h+i) ,6 a. Transport services ,1 b. Maintenance services ,2 c. Rental ,3 d. Other production services ,3 e. Fair exhibit ,8 f. Commission ,8 g. Research costs ,0 h. Other services - not mentioned ,4 i. Services of other legal entities 0 0 0,0 4. Costs of commercials and advertising (а+b+c) ,0 a. Costs of advertising and commercials ,9 b. Costs of sponsorship ,0 c. Costs of donorship ,8 5. Business entertainment costs ,3 6. Costs of insurance premium ,2 7. Costs of taxes and contributions ,3 8. Costs of payment operations ,6 9. Non-productive services ,6 10. Other non-productive operating costs (а+b) ,8 a. Other non-productive operating costs ,5 b. Membership fees ,6 III Earnings, allowances and other personal expenses (from 1 to 3) ,1 1. Earnings, allowances and taxes on earnings and allowances debited to employer ,2 2. Allowances (serivce contracts, part-time and casual employment contracts, fees to members of Managing and ,8 Supervisory Board and other physical persons) 3 Other personal expense and allowances ,3 TOTAL COSTS (I+II+III) ,2 Index 20

21 4.3. Insurance premium Gross premium In the period I XII 2012, the total gross premium amounted to thousand RSD ( thousand RSD accounted for insurance premium, and thousand RSD accounted from the premium from accepted coinsurances), which is 15,8% more than the gross premium earned in Compared to the plan for the period I-XII 2012, realized gross premium of insurance and coinsurance is higher by 6,5%. Gross premium 17,9 bln RSD Realization of gross premium in the period in 000 RSD gross premium in 000 RSD In the total portfolio, the respective share of non-life and life insurance was 93,9% and 6,1%. Amount (in 000 RSD.) Struc. Col (5-4) 8 (5/4) 9 (5-3) 10 (5/3) 01 Accident , , ,8 02 Voluntary health , , ,1 03 Motor vehicle - casco , , ,8 04 Rolling stock , , ,7 05 Aircraft , , ,5 06 Vessels , , ,6 07 Goods in transit , , ,6 08 Property against fire and allied perils , , ,0 09 Other property , , ,8 10 Motor vehicle liability , , ,6 11 Aircraft liability , , ,0 12 Vessel liability , , ,8 13 General liability , , ,5 14 Credit , , ,2 15 Guarantee , , ,7 16 Financial losses , , ,6 17 Legal protection expenses Road assistance , , ,9 19 Other non-life insurance lines TOTAL NON-LIFE Absolute Relative (index) Absolute Relative (index) , , ,7 20 Life insurance , , ,9 21 Annuities insurance Life rider , , ,2 23 Voluntary pension insurance Other life insurance TOTAL LIFE LINE OF INSURANCE Gross premium I - XII 2011 Gross premium plan I - XII 2012 Gross premium I - XII 2012 Comparison performance I - XII 2012 / plan I - XII 2012 Comparison performance I - XII 2012 / performance I - XII , , ,6 Non-life 93,9%; Life 6,1%. ALL INSURANCE LINES - TOTAL , , ,8 21

22 The following insurance types have the biggest share in the total gross premium: - motor vehicle liability insurance 32.8%; - other property business 24.0%; - motor insurance Casco 11.1%; - property insurance against fire and allied perils 10.6%. Motor liability insurance in respect of the use of motor vehicles is the type which accounts for the one third of Company gross premium. The Company improved its market position from 24% in 2011 to 30% of market share in 2012 and reaffirmed its leading position in this area. In addition, the Company recorded a growth in its portfolio, both in the number (growth of vehicles) and the amount of premium. Other property business account for one fourth of Company gross premium. The achieved growth in this type of insurance (compared to the previous year and compared to the plan) is notably the result of the gross premium growth in tariffs: power industry machinery breakdown insurance part of Power Industry tariff and machinery breakdown insurance. In addition to the said tariffs, a significant growth was made regarding the animal insurance tariff, largely due to the inclusion of new insured into the Company portfolio - Carnex Vrbas, a significant premium increase in relation to the insured Agroziv, and newly effected insurances under the Programme and the Contract with the Ministry of Agriculture, Trade, Forestry and Water Management. Structure of gross premium in the period I XII 2012 by lines of insurance GENERAL LIABILITY; 2,2% LIFE INSURANCE (total); 6,1% OTHER LINES OF INSURANCE (of less than 1% share); 1,9% ACCIDENT; 7,0% MOTOR VEHICLE - CASCO; 11,1% MOTOR VEHICLE LIABILITY; 32,8% PROPERTY AGAINST FIRE AND ALLIED PERILS; 10,6% AIRCRAFT (casco and liability); 1,3% ROAD ASSISTANCE; 1,2% GOODS IN TRANSIT; 1,8% OTHER PROPERTY; 24,0% The most important growth in gross premium was achieved in the following lines of insurance: - Aircraft insurance Casco and liability (plan exceeded by 30.5%, growth compared to the previous year 35.1%), - Guarantee insurance (plan exceeded by 28.7%, growth compared to the previous year 39.7%), - Motor liability insurance (plan exceeded by 25.0%, growth compared to the previous year 31.6%), - Credit insurance (plan exceeded by 11.2%, growth compared to the previous year 40.2%). The biggest growth: -Aircraft ins. - Guarantee ins. - MTPL - Credit ins. 22

23 In comparison with the same period of the previous year, the largest drop in gross premium was recorded in the following lines of insurance: - motor vehicle casco by thousand RSD, or 3,2%, - rolling stock by thousand RSD, or 8,3%. In comparison with the plan, the biggest shortfall in the period I-XII 2012 was recorded in the following lines of insurance: - motor vehicle - casco by thousand RSD, or 11,5%, - road assistance by thousand RSD, or 18,2%; - rolling stock by thousand RSD, or 33,0%. Largest drop 64,5 mln RSD - Motor vehicle (casco) Biggest shortfall 257,7 mln RSD - motor vehicle (casco) The reasons for underachievement of the gross premium plan for motor vehicle insurance Casco and considerably lower achievement than in the same period of the previous year lie notably in adverse market conditions. The circumstances in the market of this class of insurance and continued economic crisis, which affected the dramatic drop in the sales of new vehicles, caused considerable decrease in motor Casco insurance. According to the data for the period I-XII 2012, 26% less vehicles were sold in Serbia than in The number of so-called newer vehicles the owners of which opt for this type if insurance or are obliged to effect the full motor Casco policy is growingly lower. In addition, the car fleet in the market and Company portfolio are largely comprised of old cars, which consequently results in premium decrease. The reason for non-fulfillment of gross premium plan for rolling stock insurance and underachievement in the observed period, compared to the same period of the previous year, is a considerably lower premium written for rolling stock insurance of the Insured Serbian Railways, which accounts for the biggest share in the premium of this class. The aforementioned is the consequence of the decrease in the assessed value of the Insured s property. Gross premium in the period I XII 2012 by lines of insurance in 000 RSD Out of the total realized gross insurance and coinsurance premium in 2012, the Company ceded to reinsurance thousand RSD, i.e. 8.8%. In terms of realized premium, the biggest reinsurance cover was provided in Aircraft (84.8%) and Guarantee Insurance (70.5%). Compared to the previous year, the 2012 insurance premium recorded a drop of 17.2% (2011 insurance premium was thousand Dinars). Reinsurance premium 1,6 bln dinars 23

24 Collected premium In the period I XII 2012, the total collected premium amounted to thousand RSD ( thousand RSD refer to insurance premium and thousand RSD refer to the premium from accepted coinsurances), which is by 7,2% higher than the collected premium realized in In comparison with the plan for I-XII 2012, the realized collected insurance and coinsurance premium was 4,8% higher. Amount (in 000 RSD.) Struct. col. 5. Absolute Relative Absolute Relative (5-4) 8 (5/4) 9 (5-3) 10 (5/3) 01 Accident , , ,3 02 Voluntary health , , ,9 03 Motor vehicle - casco , , ,9 04 Rolling stock , , ,8 05 Aircraft , , ,0 06 Vessels , , ,0 07 Goods in transit , , ,5 08 Property against fire and allied perils , , ,8 09 Other property , , ,8 10 Motor vehicle liability , , ,4 11 Aircraft liability , , ,4 12 Vessel liability , , ,7 13 General liability , , ,8 14 Credit , , ,7 15 Guarantee , , ,0 16 Financial losses , , ,1 17 Legal protection expenses Road assistance , , ,9 19 Other non-life insurance lines TOTAL NON - LIFE , , ,4 20 Life insurance , , ,8 21 Annuities ins Life rider , , ,0 23 Voluntary pension ins Other life ins TOTAL LIFE LINE OF INSURANCE ALL INSURANCE LINES - TOTAL Collected premium I-XII 2011 Collected premium plan I-XII 2012 Collected premium I-XII 2012 Comparison performance I-XII 2012 / plan I-XII 2012 Comparison performance I-XII 2012 / performance I-XII , , , , , ,2 Collected premium 17,1 bln RSD Within non-life insurance lines, the highest share in total collected premium is accounted for the following: - Motor vehicle liability 34,3%, - Other property insurance 23,0%, - Motor vehicle - casco 11,2% and - Property against fire and allied perils 10,4%. The most considerable growth in collected premium was realized in the following lines of insurance: - Motor liability insurance in respect of use of motor vehicles Motor Liability (plan exceeded by 25.1%, growth compared to the previous year 31.4%), - Credit insurance (plan exceeded by 20.8%, growth compared to the previous year 56.7%), - Guarantee insurance (plan exceeded by 17.9%, growth compared to the previous year 24.0%), - Financial loss insurance (plan exceeded by 14.6%, growth compared to the previous year 43.1%), - Life insurance - total (plan exceeded by 9.5%, growth compared to the previous year 22.2%). 24 The biggest growth: - MTPL - Credit ins. - Guarantee ins. - Financial loss ins. - Life ins.

25 In comparison with the previous year, the biggest drop in collected premium was recorded in the following lines: - property against fire and allied perils by thousand RSD, or 17,2%, - motor vehicle casco by thousand RSD, or 11,1%, - rolling-stock by thousand RSD, or 52,2%, - aircraft casco and liability by thousand RSD, or 13,0%. Biggest drop 368,3 mln RSD Property against fire and allied perils In comparison with the plan, the biggest shortfall was recorded by the following lines of insurance: - motor vehicle casco by thousand RSD, or 13,0%, - property against fire and allied perils by thousand RSD, or 4,5%, - rolling-stock by thousand RSD, or 60,4%, - road assistance by thousand RSD, or 18,8%, - other property insurance by thousand RSD, or 0,9%, - aircraft insurance casco and liability by thousand RSD, or 3,9%. Biggest shortfall 287,4 mln RSD Motor vehicle casco Non-fulfillment of the plan for collected premium and poorer results compared to the previous year in terms of motor insurance Casco, is the consequence of underachievement of gross premium plan, considerable decrease in leasing and sales of motor vehicles, adverse economic situation, decline in living standard and purchasing power. One of the reason for underachievement in this insurance class is the fact that major Insureds left the Company portfolio (Nis, Carlsberg, JP PTT Srbija, JKP Vodovod i kanalizacija Novi Sad, Bambi Banat, Credit Agricole Bank...). The most important reasons for underachievement in the insurance of property against fire and allied perils are the inability to collect from major insureds (RTS, GSP Beograd, Politika a.d., Petrohemija, Azotara, Južni Banat, Putevi Užice, Zastava, budget institutions...), and initiation of bankruptcy proceedings and restructuring over particular number of insureds, some of them were in litigation. Within other property, there are outstanding debts of major insureds (Petrohemija, Azotara, Južni Banat, Agroživ) and budget institutions (health care centers). Underachievement in rolling stock insurance was partly due to unrealized collection from the Insured GSP Beograd and the Insured ŽTP, with which the Restructuring agreement was signed in August 2012 defining the payment schedule of the outstanding premium. However, due to the circumstances of the Insured, it did not fully meet its part of obligations. The main reason for underachievement in the aircraft insurance is the non-fulfillment of collected coinsurance premium plan, which was developed based on the evaluated premium collection for coinsurance of a big Jat Airways fleet. The plan for collected coinsurance premium was not fulfilled due to the inability of Jat to settle its outstanding liabilities (due premium installments) under the Insurance Agreement with trilateral consortium, due to an extremely adverse financial situation of this company. To assist our national airline, the Consortium approved the extension of periods/payment schedule of due installments. 25

26 Structure of collected premium in the period I XII 2012 by lines of insurance LIFE INSURANCE (TOTAL); 5,9% GENERAL LIABILITY; 2,1% OTHER LINES OF INSURANCE (of less than 1% share); 2,8% ACCIDENT; 7,2% MOTOR VEHICLE - CASCO; 11,2% ROAD ASSISTANCE; 1,2% MOTOR VEHICLE LIABILITY; 34,3% PROPERTY AGAINST FIRE AND ALLIED PERILS; 10,4% OTHER PROPERTY; 23,0% GOODS IN TRANSIT; 1,9% Gross and collected premium ratio by lines of insurance for the period I-XII 2012 The structure of collected premium in the amount of thousand RSD comprises: - cash thousand RSD or 88,0%; - offset thousand RSD or 7,2%; - granted discounts thousand RSD or 2,0%; - receivables write-off thousand RSD or 1,2%; - other premium closings thousand RSD or 1,6%. 26

27 Structure of premium collection in the period I-XII 2010, 2011 and 2012 The realization of collection task for the period I-XII 2012 was 74.5%. The collection task for the period I-XII 2012 amounted to thousand RSD and included the outstanding premium carried forward from previous years ( thousand RSD) and written premium in 2012 ( thousand RSD) with the adjustment for the premium not due for payment till the end of the observed period ( thousand RSD). Realization of collection task 74.5% 27

28 4.4. Settled claims Settled claims in the period I-XII 2012 amounted to thousand RSD ( thousand RSD refers to settled insurance claims, whereas thousand RSD refers to settled coinsurance claims), which exceeds by 2,6% the amount of settled claims in the same period in Compared to the plan for I-XII 2012 the amount of realized settled claims was lower by 7,1%. Amount (in 000 RSD.) Struct. col. 5. Absolute Relative Absolute Relative (5-4) 8 (5/4) 9 (5-3) 10 (5/3) 01 Accident , , ,3 02 Voluntary health , , ,3 03 Motor vehicle - casco , , ,7 04 Rolling stock , , ,3 05 Aircraft , , ,2 06 Vessels , , ,4 07 Goods in transit , , ,9 08 Property against fire and allied perils , , ,9 09 Other property , , ,4 10 Motor vehicle liability , , ,7 11 Aircraft liability Vessel liability , , ,8 13 General liability , , ,5 14 Credit , , ,3 15 Guarantee , Financial losses , , ,6 17 Legal protection expenses Road assistance , , ,5 19 Other non-life insurance lines TOTAL NON - LIFE , , ,0 20 Life insurance , , ,2 21 Annuities ins Life rider , , ,5 23 Voluntary pension ins Other life ins TOTAL LIFE LINE OF INSURANCE ALL INSURANCE LINES - TOTAL Settled claims I - XII 2011 Settled claims plan I - XII 2012 Settled claims I - XII 2012 Comparison performance I-XII 2012 / plan I-XII 2012 Comparison performance I-XII 2012 / performance I-XII , , , , , ,6 Settled claims 7,3 billion RSD In terms of insurance lines, the highest share in the total amount of settled claims was recorded in: - Other property 27, 1%, - Motor vehicle liability 26, 9%, - Motor vehicle -casco 17, 4%, - Accident 11, 0%. In comparison with the same period in the previous year, the largest increase in settled claims was achieved in the following lines of insurance: - Property against fire and allied perils by thousandrsd or 81,9%, - Goods in transit by thousandrsd or 357,9%, - Motor vehicle liability by thousandrsd or 2,7%, The highest rise 291,3 mil. RSD property against fire and other perils. - Other property by thousandrsd or 2,4%, - Accident by thousandrsd or 6,3%, - Life insurance-total by thousandrsd or 31,1%, - General liability by thousandrsd or 43,5%, - Road assistance by thousandrsd or 44,5%. 28

29 In comparison with the plan, the biggest overachievement in the period I-XII was recorded in the following lines of insurance: - Property against fire and allied perils by thousandrsd or 24,4%, - Goods in transit by thousandrsd or 201,6%, - General liability by thousandrsd or 36,8%, - Road assistance by thousandrsd or 43,9%, - Credit by thousandrsd or 475,1%. Biggest overachie vement 127,1 mil.rsd property against fire and other perils. In property against fire and allied perils insurance, the deviation from the plan, and an increased amount of settled claims compared to the previous year, was principally the result of settled fire claim for the insured MK Mountain resort on Kopaonik, the insured Sunoko and Elektromreža Srbije. In goods in transit insurance, the deviation form the plan and an increased amount of settled claims compared to the previous year was accounted for by increased portfolio of this line of insurance resulting in a an increase in claims. Deviation from the plan was principally due to settlement of claim of the insured Jugoimport SDPR amounting to thousand RSD. The increase in settled motor vehicle liability claims may be justified by a 31% growth of invoiced premium in this connection over the last year which resulted in the increase in the number of claims for indemnity. Regardless of a significant rise in gross premium from motor vehicle liability, the rise in settled claims was only 2, 7 % in comparison with The amount of settled other property insurance claims has risen compared to the observed period in the previous year (2,4%), whereas in comparison with the planned amount of settled claims, a considerable saving of approximately 150 million RSD was realized due to significantly smaller amounts of settled claims for crops and fruit insurance. The amount of settled accident insurance claims is absolutely in line with settled claims plan. Increase in the amount of settled claims in comparison with the observed period in the previous year is accounted for by the change of legal nature of contracts for Pensioners Group Life Insurance with accident rider as regards some branch offices, i.e. Claims Centres and as from the beginning of 2010 such contracts are treated as group accident and now they include this tariff. The increase in the amount of settled claims is also associated with children and students accident insurances. Increase in the number of settled life insurance claims in the period I-XII 2012 compared to the same period in the previous year, resulted from an increased number of reported and settled claims by reason of maturity (life insurance) and increased number of reported and settled disability claims (rider to life insurance). Rise in claims was also consequence of an increased number of insurance contracts and bigger premium in comparison with the same period in the previous year. Increase in the amount of settled general liability claims is accounted for by an increased number of new insurances, and as a result of indemnity claims as well, but also by increased awareness among clients and claimants of rights they are entitled to under this insurance. Over-achievement of plan and increased amount of settled claims in comparison with the same period in the previous year for road assistance insurance primarily refers to tariff 77- Voluntary Travel Health Insurance. The majority of claims settled in 2012 were incurred in Additional factors that impacted growth of the amount of settled claims were improved knowledge of beneficiaries/insureds on how to achieve their rights under the insurance contract but also medical services price growth in Turkey, Greece and Egypt as top destinations. The exceeding of planned values of settled claims as regards credit insurance was the result of settlement of three major claims of the insured Jugopetrol (due to bankruptcy of 29

30 Malev-Hungarian Airline Company) and the liquidation of a court claim of Hypo bank dating from an earlier period. Structure of settled claims in the period I XII 2012 by lines of insurance GOODS IN TRANSIT; 1,7% GENERAL LIABILITY; 1,5% LIFE INSURANCE (TOTAL); 2,6% OTHER LINES OF INSURANCE (of less than 1% share); 1,9% ACCIDENT; 11,0% VOLUNTARY HEALTH; 1,0% MOTOR VEHICLE LIABILITY; 26,9% MOTOR VEHICLE - CASCO; 17,4% OTHER PROPERTY; 27,1% PROPERTY AGAINST FIRE AND ALLIED PERILS; 8,9% In the period I-XII 2012 the Company recorded new claims for indemnity. In the period I-XII 2012 the total number of claims to be settled, together with outstanding claims carried forward and reinstated claims, was out of which claims for indemnity have been settled. In the period I-XII 2012 the amount of paid claims was thousand RSD, which accounts for 95,1% of total claims payable. Total claims amount to be paid, for the observed period, was thousand RSD including settled and not paid out claims from the previous period ( thousand RSD) and settled claims in the current period ( thousand RSD.). Paid out claims are smaller by 1,8% than those paid out in the same period in the previous year while increase in settled claims was 2,6%. In 2012 the reinsurers and the coinsurers share in total settled claims was thousand RSD or 9,8% and thousand RSD or 3,3% respectively claims for indemnity settled 95,1% of claims paid out. Settled claims by lines of insurance in 000 RSD 30

31 The share of settled claims, at Company level, in gross premium and technical premium was 40,6% and 54,8% respectively. The share of non-life claims in gross premium was 42,1%, which is by 5,2% less than in the same period of the previous year. The share of settled claims in gross life premium was 17,5% which is by 0,7% less than in the same period of the previous year. Share of settled claims in gross and technical premium in the period I-XII 2012 Share of settled claims in gross premium 40,6%. LINE OF INSURANCE (in 000 RSD.) Share SC/GP (in %) Share SC/TP (in %) (3/4) 7 (3/5) 01 Accident ,0 91,3 02 Voluntary health ,0 81,4 03 Motor vehicle - casco ,0 91,4 04 Rolling stock ,4 36,3 05 Aircraft ,7 2,0 06 Vessels ,7 45,1 07 Goods in transit ,0 54,2 08 Property against fire and allied perils ,1 48,6 09 Other property ,0 65,6 10 Motor vehicle liability ,3 41,7 11 Aircraft liability ,0 0,0 12 Vessel liability ,5 2,2 13 General liability ,5 40,7 14 Credit ,8 414,0 15 Guarantee ,1 0,1 16 Financial losses ,5 0,7 17 legal protection expenses Road assistance ,4 52,3 19 Other non-life insurance lines TOTAL NON - LIFE ,1 57,1 20 Life insurance ,1 20,3 21 Annuities ins Life rider ,8 42,2 23 Voluntary pension ins Other Life ins LIFE INSURANCES - TOTAL ALL INSURANCE LINES - TOTAL Settled claims I - XII 2012 Gross premium I - XII 2012 Tech. premium I - XII ,5 22, ,6 54,8 31

32 4.5. Technical result In 2012 the Company realized a positive technical result to the amount of thousand RSD (72,63%). In the previous year the technical result was thousand RSD (60,17%). The following technical results were realized per insurance lines: INSURANCE LINE PURE SELF - RETAINED PREMIUM UNEARNED PURE SELF - RETAINED TOTAL RESERVED REPORTED AND PREMIUM EARNED PURE SETTLED SELF - NON-REPORTED PREMIUM RETAINED CLAIMS as at as at as at as at (3+4-5) ( ) 12 (6-11) 13 (11/6) 01 Accident , , , , , , ,46 0, , ,14 105,69 02 Voluntary health , , , , , , ,84 0, , ,71 89,19 Collected recourses (in RSD.) Earned claims Loss ratio % ACCIDENT AND HEALTH TOTAL , , , , , , ,30 0, , ,43 104,11 03 Motor vehicle , , , , , , , , , ,27 91,24 04 Rolling stock , , , , , , ,96 0, , ,06 50,57 05 Aircraft , , , , , , , , , ,70-34,24 06 Vessels , , , , , , ,74 0, , ,26 47,60 10 Motor vehicle liability , , , , , , , , , ,14 89,79 11 Aircraft liability , , , ,21 0,00 0, , , , ,58-663,35 12 Vessel Liability , , , , , , ,18 0, , ,22-1,43 MOTOR VEHICLE AND LIABILITY TOTAL , , , , , , , , , ,24 88,45 07 Goods in transit , , , , , , , , , ,77 40,40 08 Property against fire and allied perils , , , , , , , , , ,97 25,07 09 Other property , , , , , , , , , ,31 65,80 13 General liability , , , , , , , , , ,45 78,80 14 Credit , , , , , , , , , , ,32 15 Guarantee , , , , ,46 0, ,56 0, , ,24 5,87 16 Financial losses , , , , , , ,11 0, , ,33 0,71 17 Legal protection expenses 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 18 Road assistance , , , , , , ,01 0, , ,81 67,81 19 Other non-life 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 OTHER NON-LIFE TOTAL TOTAL NON - LIFE , , , , , , , , , ,99 54, , , , , , , , , , ,79 76,86 20 Life ,94 0,00 0, , , , ,84 0, , ,30 21,25 21 Annuity 0,00 0,00 0,00 22 Life rider ,11 0, , , , , ,16 0, , ,93 53,44 23 Voluntary pension 0,00 0,00 0,00 24 Other life 0,00 0,00 0,00 LIFE TOTAL ALL LINES TOTAL ,05 0, , , , , ,99 0, , ,22 23, , , , , , , , , , ,02 72,63 32

33 4.6 Operating costs At Company level, in the period I XII 2012, operating costs amounted to thousand RSD and they are by 9,0% higher in comparison with the same period of the previous year. Operating costs 9,2 billion RSD Operating costs account for 51,2% of total realized gross premium. The observed share was 54,4% in the same period of the previous year. Total operating costs incurred in the period I XII 2012 include: Underwriting costs, amounting to thousand RSD and accounting for 91,9% of total costs. Costs related to loss inspection, assessment, settlement and payment of claims, amounting to thousand RSD and accounting for 7,8% of total costs. Costs related to deposits and investments, amounting to thousand RSD and accounting for 0,3% of total costs. Breakdown of operating costs per type of costs: No. ITEM OPERATING COSTS I-XII 2011 PLAN OF OPERATING COSTS I-XII 2012 UNDERWRITING COSTS OPERATING COSTS I-XII 2012 Costs related to loss inspection, assessment and settlement Depositing and investments costs OPERATING COSTS (in 000 RSD) struct. col. 8 Index Index (I-XII 2012 / (I-XII 2012 / plan I-XII 2011) I-XII 2012) (5+6+7) 9 10 (8/4) 11 (8/3) Costs related to depreciation and provisions for fringe I ,7 123,3 112,3 and other employee benefits II Costs of material, energy, services and intangible costs(from 1 to 10) 1. Costs of material (а+b+c) ,9 125,7 108, ,4 128,0 111,4 a. Costs of material ,3 130,1 127,6 b. Costs of spare parts ,0 72,2 78,6 c. Costs of small inventory ,1 128,7 40,7 2. Fuel and power costs 3. Costs of production services (a+b+c+d+e+f+g+h+i) ,4 111,5 114, ,9 114,2 110,9 a. Transport services ,0 97,5 99,7 b. Maintenance costs ,6 65,0 80,6 c. Rental ,2 130,8 110,4 d. Other production services ,3 114,7 114,7 e. Fair exhibit ,1 33,4 29,4 f. Commission ,0 128,2 131,1 g. Research costs ,1 101,7 h. Other services - not mentioned ,6 96,2 73,9 i. Services of other legal entities ,0 4. Costs of commercials and advertising (а+b+c+d) ,5 154,4 109,4 a. Costs of advertising andcommercials ,3 167,4 113,6 b. Costs of donorship ,5 96,8 85,6 c. Costs of donorship ,7 132,2 99,6 5. Business entertainment costs ,1 139,2 133,0 6. Costs of insurance premium ,8 93,1 106,2 7. Costs of taxes and contributions ,6 102,3 104,2 8. Costs of payment operations ,4 80,3 92,1 9. Non-productive services ,1 88,0 97,0 10. Other non-productive operating costs (а+b) ,7 174,4 107,0 a. Other non-productive operating costs ,9 212,7 106,1 b. Membership fees ,8 107,2 109,8 III Earnings, allowances and other personal expenses (from 1 to3) Earnings, allowances and taxes on earnings and allowances debited to employer Allowances (service contracts, part-time and casual employment contracts, fees to members of Managing and Supervisory Board and other physical persons) ,4 131,1 108, ,6 126,7 108, ,2 152,7 137,7 3. Other personal expenses and allowances ,6 174,0 111,9 TOTAL COSTS (I+II+III) ,0 128,3 109,0 * Note: Underwriting costs (col. 5) do not include reinsurance and retrocession commission. Underwriting costs decreased by said commission which was thousand RSD would amount to thousand RSD. 33

34 Non-life operating costs account for 93,9%, of total costs in the period I-XII 2012 whereas life operating costs account for 6,1% (gross non-life premium accounts for 93,9%, of total premium, whereas life premium accounts for 6,1%). In comparison to the same period of the previous year, non-life insurance costs are greater by 9,3%, whereas life insurance costs recorded a 4,1% rise. Operating costs: Non- life 93,9%, life 6,1%. Breakdown of non-life and life operating costs: (in 000 RSD) No. DESCRIPTION OPERATING COSTS I-XII 2011 PLAN OF OPERATING COSTS I-XII 2012 UNDERWRITING COSTS OPERATING COSTS I-XII 2012 Costs related to loss inspection, assessment and settlement Depositing and investments costs OPERATING COSTS struct. col. 8 Index Index (I-XII 2012 / (I-XII 2012 / plan I-XII I-XII 2011) 2012) (5+6+7) 9 10 (8/4) 11 (8/3) 1 Costs related to depreciation and provisions for fringe and other employee benefits ,4 123,7 113,5 2 3 Costs of material, energy, services and intangible costs Costs of earnings, allowances and other personal expenses ,4 127,0 108, ,1 130,9 109,4 4 COSTS - NON-LIFE (1+2+3) ,9 128,6 109, Costs related to depreciation and provisions for fringe and other employee benefits Costs of material, energy, services and intangible costs Costs of earnings, allowances and other personal expenses ,3 115,0 90, ,5 71,3 102, ,3 133,4 105,1 8 COSTS - LIFE (5+6+7) ,1 123,0 104,1 TOTAL COSTS (4+8) ,0 128,3 109,0 In total operating costs incurred in the period I-XII 2012 the largest shares were recorded by: - costs of earnings gross earnings including tax on earnings charged to the employer - costs of commercials and advertising together with sponsorships and donorships - costs of production services, which mostly relate to commissions (5,0%) and rental fees (3,2%) 44,6%; 15,5%; 10,9%; - costs related to depreciation and provisions 6,7%; - other personal expenses and allowances 5,6%. Realization of operating costs in the period I - XII 2012 Payment operations Insurance premium Business entertainment Material Taxes and contributions Fuel and power Other non-productiv operating costs Non-productive services Depreciation and provisions for fringe and other employee benefits Other personal expenses and allowances Productive services Commercials and advertising Earnings - total Costs of earnings by

35 Observed by cost groups the plan was exceeded in the observed period in respect of: - Costs of earnings, in the amount of thousand RSD, i.e. by 26,7%; Costs of earnings (together with membership fees to chambers and associations, paid concurrently with salaries of employees) account for 44,6% of total operating costs, and for 22,9% of gross premium. Average number of employees in 2012 was The lowest labour cost was increased once, in July, from ,00 RSD to ,00 RSD or by 3,38%. - Costs of commercials and advertising with sponsorships and donorships, in the amount of thousand RSD or 54,4%; As regards this group of costs, the most considerable plan over-fulfillment was experienced in other advertising costs by thousand RSD and mostly relating to Dunav auto ( thousand RSD). Organizational units wise, the plan highest over-fulfillment was recorded within non-life sales network (plan exceeded by thousand RSD). The share of costs of commercials and advertising in total operating costs was 15,5%, and in gross premium 7,9%. - Other personal expenses and allowances, in the amount of thousand RSD or 74,0%; The largest cost overrun in respect of the plan was recorded in the following categories: - Severance compensations severance compensations were paid out by reason of consensual termination of employment and they amounted to thousand RSD (for 64 employees), which was not envisaged under the plan; - Other allowances to employees and physical persons exceeding the plan by thousand RSD (e.g. one-off medical allowance in the amount of thousand RSD); - Voluntary pension insurance, exceeding the plan by thousand RSD. The share of other personal expenses and allowances in total operating costs is 5,6%, whereas in gross premium it is 2,9%. - Costs of depreciation and provisions, in the amount of thousand RSD or 23,3%; Within this group, costs overrun in respect of the plan was recorded in depreciation costs-exceeding the plan by thousand RSD and costs of provisions and other benefits for employees exceeding the plan by thousand RSD. Activation of FADATA early in 2012, of WIND in April 2012 and of SAGA MICROSOFT licenses at the end of the previous year had an impact on the rise in depreciation costs. Costs of depreciation and provisions accounted for 6,7% of total operating costs and for 3,4% of gross premium. - Costs of commission, in the amount of thousand RSD or by 28,2%. Within this group, the major cost overrun in respect of the plan was recorded in commissions costs covering agency services of intermediaries-legal entities- exceeding the plan by thousand RSD and in costs of fees associated with contracts for sale of motor liability policies exceeding the plan by thousand RSD, which is in direct connection with the growth of motor liability gross premium. Costs of depreciation and provisions by 115,3 mil.rsd Costs of commission by 101,5 mil.rsd Rental costs by 68,1 mill.rsd 35

36 Costs of commissions account for 5,0% of total operating costs and for 2,6% of gross premium. - Rental costs, in the amount of thousand RSD or by 30,8%. Within this group, the major cost overrun in respect of the plan was recorded in costs of business premises rental exceeding the plan by thousand RSD. Rental costs by 68,1 mill.rsd The share of rental costs in total operating costs was 3,2%, and in gross premium 1,6%. Effects of stated costs exceeding the planned ones were considerably reduced on account of expenses lower than planned in the following groups: - costs of non-production services (Lawyers services, education, literature, brokerage services) by thousand RSD - maintenance costs by thousand RSD, - fair exhibition costs by thousand RSD, - payment operations costs by thousand RSD.. In comparison with the previous year operating costs in the period I-XII 2012 experienced a growth by 9,0% (absolutely thousand RSD). The highest growth in comparison to the same period in the previous year was recorded by costs of earnings (growth of thousand RSD or by 8,0%). A significant growth was registered in costs of commercials and advertising with sponsorships and donorships (growth of thousand RSD or 9,4%). Costs that experienced a growth in 2012 in comparison with the same period of the previous year, were also: - Commission costs growth of thousand RSD, or by 31,1%, - Depreciation and provisions costs growth of thousand RSD, or by 12,3%, - Other personal expenses and allowances growth of thousand RSD, or by 11,9%, - Costs of fuel and energy growth of thousand RSD, or by 14,5%, - Rental costs growth of thousand RSD, or by 10,4%. Costs of taxes and contributions amounting to thousand RSD account for 20,6% of total operating costs and they have registered a 7,9% increase in comparison with the same period of the previous year. In the business year 2012 total payments/liabilities of the Company to the government, including, in addition to taxes and contribution, video surveillance fee, fire brigade contribution, allocation of 5% of motor liability premium to the Republic Fund of Health Insurance, amounted to thousand RSD. In comparison with the previous year, the stated payments registered an increase of 23,8%, mainly as a result of the new obligation of insurance companies which starting from 2012 are obliged to, by virtue of the Law on Compulsory Traffic Insurance, pay 5% of motor liability gross premium into the account of the Republic Fund of Health Insurance as the legal entity providing and conducting compulsory health insurance. 36

37 Breakdown of taxes and contributions costs for the period I-XII 2012: No. DESCRIPTION Costs of taxes and contributions I-XII 2011 ( in 000 RSD) Costs of taxes and contributions I-XII 2012 Index (4/3) I (а+b) Costs of taxes and contributions ,1 a (1 to 8) Taxes ,2 1 Property tax ,3 2 Fee for the use of municipatility property ,1 3 Fee for the use of construction land ,6 4 Environmental protection fee ,0 5 Other local public expenditures ,9 6 Other taxes (on customs duties and other dues) ,6 7 Tax charged to the Company - non residents, gifts ,1 8 Tax charged to the Company - non - life insurance lines 0 0 0,0 b ( ) Membership fees ,9 9 Membership fees and contributions of Chambers and Associations ,1 10 Membership fees (contributions) of Chambers and Associations paid concurrently with salaries if calculated ,5 11 NBS fees ,7 II (d+e) Costs of taxes and contributions on salaries and fringe benefits ,0 d (12+13) Costs of taxes on salaries and fringe benefits ,3 12 Costs of taxes on salaries ,3 13 Costs of taxes on fringe benefits 0 0,0 e Contributions on salaries and fringe benefits ,8 14 Contributions on salaries ,8 III Costs of taxes on salaries and fringe benefits charged to the employer ,8 ђ Costs of contributions on salaries and fringe benefits charged to the employer ,8 15 Costs of contributions on salaries and fringe benefits charged to the employer ,8 IV (16 to 19) Taxes on service contracts, author fees and occasional and temporary work ,1 16 Fees for service contracts ,1 17 Fees for contracts for occassional and temporary work ,8 18 Others fees for donations ,3 19 fees of MB and AB ,6 V (20+21) Other allowances (jubilee bonusese, terminal wages and other alowances) ,8 20 Other allowances (jubilee bonusese, terminal wages, other alowances) ,6 21 Car allowances ,0 VI Costs of tax on gratis policies ,2 22 VII ( ) Other bonuses to employess and other physical persons (tax on free of charge policies) Other fees and contributions (video surveillance, disabled persons and fire brigade) TOTAL COSTS OF TAXES AND CONTRIBUTIONS (I+II+III+IV+V+VI+VII) , , ,9 23 Assets for the implementation, operation and improvement of traffic monitoring, supervision and control system - roads video surveillance 1.2% of gross premium ,5 24 Participation in the finance of disabled persons earnings ,8 25 Fire contribution ,6 26 Allocation of 5% of motor liability premium to Republic Fund of Health Insurance ,0 TOTAL PAYMENTS / LIABILITIES TO GOVERNMENT ,8 37

38 Non-current assets Current assets КОМПАНИЈА ДУНАВ ОСИГУРАЊЕ а.д.о. 5. STRUCTURE OF ASSETS In the structure of Company assets as at December , intangible assets, real property, plant and equipment had the biggest share of 37,3%, followed by receivables 19,5% and short-term financial investments which made 16,0%. Structure of assets as at December No. (in 000 RSD.) (3/4) ITEM INTANGIBLE ASSETS, PROPERTY, PLANT, EQUIPMENT Balance as at Balance as at Index % structure ,5 38,33 37,34 2. LONG-TERM FINANCIAL INVESTMENTS ,4 11,92 11,37 37,3% intangible assets, real property, plant and equipment, 19,4% receivables, 16,0% shortterm financial investments 3. SHORT-TERM FINANCIAL INVESTMENTS ,1 23,82 15,99 4. RECEIVABLES ,8 16,16 19,44 5. CASH AND CASH EQUIVALENTS ,3 6,30 13,24 6. OTHER (stocks, prepaid exenses, unearned premium and reserved claims debited to coinsurers and reinsurers) TOTAL ASSETS ,5 3,46 2, ,0 100,0 100,0 As at December , the share of non-current assets in the total assets decreased compared to December (from 50,3% to 48,7%), which correspondingly increased the share of current assets (from 49,7% as at December to 51,3% as at December ). Structure of assets as at December and December ,46 2, ,30 13, Non-current assets Current assets 16,16 19,44 23,82 15,99 11,92 11,37 38,33 37,34 OTHER (stocks, prepaid exenses, unearned premium and reserved claims debited to coinsurers and reinsurers) CASH AND CASH EQUIVALENTS RECEIVABLES SHORT-TERM FINANCIAL INVESTMENTS LONG-TERM FINANCIAL INVESTMENTS INTANGIBLE ASSETS, PROPERTY, PLANT, EQUIPMENT

39 5.1. Intangible assets, property, plant and equipment As at December , intangible assets, property, plant and equipment rose by 9,6% compared to December (in 000 RSD) Balance as at Balance as at No. ITEM Index (3/4) 1. INTANGIBLE ASSETS ,7 Intangible assets, property and equipment 11,2 billion RSD PROPERTY, PLANTS, EQUIPMENT AND BIOLOGICAL ASSETS ( ) Property, plants and equipment intended for performing business activities , , Investment properties ,5 TOTAL ,6 Company s property was assessed in 2012 by Pecići, the Agency for Consulting, Engineering and Design, Belgrade. Dinar depreciated against EUR in the period from to by 28,35% which brought about a fictitious reduction in the value of Company s property, although it increased by 15,84% in real terms Long-term and short-term financial investments Total financial investments (long-term and short-term) as at December amounted to thousand RSD and are lower by thousand RSD or by 13,9% compared to A portion of short-term financial investments was cancelled on December and deposited to dinar and foreign currency sight deposit accounts (Item 5.4 cash and cash equivalents increased by thousand RSD compared to December ) Long-term financial investments Long-term financial investments as at December amounted to thousand RSD and recorded a 7,2% growth compared to the end of previous year. Structure of long-term financial investments: Long - term financial investments Balance as at (in 000 RSD) Balance as at Index (2/3) Share in the capital of other legal entities ,5 Komercijalna banka a.d. Beograd ,3 "Robno transportni centar" a.d. Šabac ,0 Holding Company Free zone Belgrade - Belgrade ,0 Belgrade Stock Exchange, Belgrade ,0 Meat Industry Bek ,6 Association of Serbian Insurers ,4 Raška holding company a.d ,2 Yuhor - export'', Jagodina ,3 Share in the capital of associated legal entities ,0 Dunav banka a.d. Zvečan (Kosovsko Metohijska banka a.d.) ,0 Dunav Insurance a.d. Banja Luka ,0 Dunav Re a.d ,0 DUNAV Company for voluntary pension fund management a.d ,0 Dunav Auto d.o.o ,0 Dunav Stockbroker a.d ,0 HTP Dunav Tourist d.o.o ,0 Other long - term financial investments (corporate bonds and housing construction loans) ,7 Non-tradeable government bonds in EUR ,2 Corporate bonds held to maturity ,0 Term deposits with banks in the country TOTAL ,2 Long-term financial investments 3,4 billion RSD 77,5% associated legal entities, 9,0% other legal entities, 13,5% other longterm financial investment s. 39

40 Increase in the value of long-term investments is mostly a result of additional investments in long-term EUR-denominated government bonds. At the same time, the share in the capital of Komercijalna banka decreased (by thousand RSD) as a result of the drop in the value of those shares by 17,7% compared to the beginning of the year. There were no additional investments in associated entities in 2012, so the share of the Company in their capital remained the same as at the beginning of the year. During 2012, the percentage share in the capital of Dunav banka decreased from 69,77% to 59,93%, after the fifth and sixth issue of shares of Dunav banka in which the Company did not participate. At the Regular Shareholders Meeting held on April , Reinsurance shareholding company Dunav Re a.d.o. enacted the Decision on payment of dividend of 4.018,79 RSD per share on account of which the Company became entitled to dividend of ,29 RSD. The dividend was paid to the Company on June 29, Within the long-term financial investments, non-tradable government bonds in EUR recorded growth of 166,2% compared to Short-term financial investments As at December , short-term financial investments amounted to thousand RSD. In 2012 the value of short-term financial investments decreased compared to December by 24,5%, i.e. by 1,5 billion RSD. If short-term investments are considered together with sight deposits, (item 5.4) a 9,1% increase in the total short-term financial investments can be recorded. Short-term financial investments 4,8 bn RSD Structure of short-term financial investments: (in 000 RSD) (2/3) 1. Time deposits with the banks in the country ,1 2. Non-tradeable securities (corporate bonds) ,8 3. Item 1 Government issued securities (treasury notes, old savings bonds) Balance as at Balance as at ,6 4. Securities tradeable in the domestic market - shares ,2 I TOTAL SHORT-TERM FINANCIAL INVESTMENTS ,5 Index II SIGHT DEPOSITS ,3 TOTAL (I+II) ,1 There was also a reallocation within the balance sheet subitems of dinar and foreign currency investments in absolute terms. Dinar and foreign currency deposits with commercial banks are part of the Company s investment portfolio and include both time and sight deposits on account of which the Company earns interest, in accordance with the protocols concluded with commercial banks. 40

41 As at December , the Company had thousand RSD time deposits in dinars and foreign currencies with commercial banks, thousand RSD in foreign currency, and thousand RSD in Dinars. Total revenue the Company earned on account of both dinar and foreign currency deposits (time and sight) in the period I-XII 2012 amounted to thousand RSD. Time deposits 3,0 billion RSD At the end of 2012 the Company had sight deposits of thousand RSD and ,47 ЕUR. The most significant effect on the decrease in the value of short-term financial investments had the change of category of certain deposits from time deposits to sight deposits (deposits with Dunav banka and AIK banka) although the interest rates remained the same as in case of time deposits. Sight deposits are shown under cash item. The balance of cash and cash equivalents at the end of 2011 was thousand RSD, whereas at the end of 2012 it was thousand RSD, which is 2,36 times more than at the end of the previous year. If we compare the total value of short-term financial investments at the end of 2011 when they amounted to thousand RSD with the value at the end of 2012 when they were thousand RSD, we can conclude that the value of short-term financial investments and cash increased during 2012 by thousand RSD, i.e. by 9,15%. The total value of cоrporate bonds owned by the Company as at December was thousand RSD and it included bonds in dinars with currency clause that are mostly placed per annual rate of 9%, and for which interest is calculated based on the foreign currency equivalent of the nominal bond value. Short-term corporate bonds 1,4 billion RSD Compared to the end of the year, the value of corporate bonds rose by thousand RSD, i.e. by 45,6%, as a result of the outstanding corporate bonds amounting to thousand RSD issued by Concern Farmakom Zajača and Lece mines, because of their failure to convert foreign currency funds in the market due to shorter working hours and limited functioning of interbank foreign currency market on the last day of the year. As at December 31, 2012 the bonds were shown within the portfolio of Company s corporate bonds and they were collected to the full amount on January 3, As at December , the value of tradable shares in the Company s portfolio was thousand RSD, which is an increase compared to the end of the previous year by thousand RSD or by 11,7%. Such change in value is a result of both increased market value of shares the Company s has in its portfolio and the sale of Jafa shares amounting to 752 thousand RSD. Tradable shares 177,2 billion RSD The highest drop in tradable share price was recorded by Banini shares and Tigar shares by thousand RSD i.e thousand RSD respectively. On the other hand, the shares of Galenika Fitofarmacija recorded the greatest growth by 37,4% compared to the end of the previous year. Such growth resulted in increase of revenues on account of adjustment of market value by thousand RSD. The rise in value of tradable shares portfolio was a result of the increase in share value of Sojaprotein by thousand RSD, after the announcement of offer to purchase shares from dissenting shareholders. The value of tradable shares that include the shares of Komercijalna banka and RTC Šabac as at December was thousand RSD. The value decreased by thousand RSD i.e. 14,9% compared to the end of the previous year, as a result of the drop in the share value of Komercijalna banka. 41

42 Dividend income from shares of Metalac and Galenika Fitofarmacija was thousand RSD. Dividend income from Dunav Re amounted to thousand RSD. The Company also has fixed income securities issued by the Republic of Serbia, treasory notes and series A2013 to A2016 old savings bonds classified as short-term financial investments, while long-term coupon bonds that reach maturity in 2014 and 2026 are classified as subitems within long-term financial investments. Securities issued by the state 707,3 mil RSD The total value of government securities was thousand RSD; thousand RSD refers to old savings bonds, thousand RSD to treasory notes, and thousand RSD to long-term coupon bonds. The Company cashed in series A2012 old savings bonds that reached maturity on December to the amount of EUR. Average yield-to-maturity of old savings bonds as at December was 4,62%. In addition to the old savings bonds, the Company has long-term coupon bonds that reach maturity in 2014 i.e In 2012, the Company invested additional funds in long-term coupons that come due in 2014, the nominal value of which is ,00 ЕUR, i.e ,00 ЕUR and coupon rate of 5,75% with semi-annual coupon payments. During 2012 Q4, the Company added treasury notes to its portfolio, at the nominal value of ,00 ЕUR. Maturity of notes is thirteen months and effective interest rate is 5,36%. Their estimated value as at December was ,19 ЕUR i.e thousand RSD. When purchased, the notes were classified as securities held to maturity, but as at Balance sheet date, December , they were reclassified as securities that come due within a year from the Balance sheet date, since their maturity is in November Currency structure of financial investments In the total investment structure, the share of investments in RSD decreased from 37,9% to 33,0%, compared to the beginning of the year. Total financial investments in RSD were cut by about 897 mil RSD i.e. by 24,9% compared to December Foreign-exchange investments recorded growth in the structure of total investments from 62,1% at the end of the previous year to 67,0% as at December From the aspect of currency structure, the total investments in RSD as at December amounted to thousand RSD. Structure of investments in RSD: Type of investment Balance as at % share (in 000 RSD) Balance as at Share in the capital of associated legal entities , ,1 2. Share in the capital of other legal entities , ,9 I Long-term financial investments , ,0 1. Time deposits with the banks in the country , ,1 2. Corporate bonds (RSD) 0 0, ,4 3. Securities tradable in the domestic market - shares , ,4 II Short-term financial investments , ,0 TOTAL (I+II) % share , ,0 Investments in RSD 33,0%, foreigncurrency investments 67,0% Investments in RSD 2,7 bn RSD III SIGHT DEPOSITS , ,1 TOTAL (I+II+III) , ,0 42

43 Dinar time deposits of the Company with commercial banks amounted to thousand RSD as at December The average interest rate of Dinar time deposits in 2012 was 10,02%, while the average interest rate for Dinar sight deposits was 8,5%. For the purpose of reducing the potential investment risk in the changing market interest rates environment, funds were deposited for a period from one to three months. A special attention was paid to the risk exposure in respect of each bank. As at December , the total foreign-exchange investments amounted to thousand RSD i.e ЕUR according to the NBS mean exchange rate. Total foreign-exchange investments dropped by around 422 mil Dinars compared to December Structure of foreign-exchange investments: Type of investment Balance as at % share (in 000 RSD) Balance as at % share 1. Share in the capital of associated legal entities , ,0 2. Corporate bonds (currency clause) 0 0, ,0 3. Time deposits with the banks in the country ,7 0 0,0 4. Non-tradable government bonds in ЕUR , ,0 I Long-term financial investments , ,0 1. Old savings bonds , ,1 2. Time deposits with banks in the country , ,1 3. Non-tradable government securities in EUR ,2 0 0,0 4. Corporate bonds (currency clause) , ,7 II Short-term financial investments , ,0 TOTAL (I+II) , ,0 III SIGHT DEPOSITS , ,3 TOTAL (I+II+III) , ,0 Foreignexchange investments 5,5 bn RSD Total foreign currency investments together with sight deposits recorded growth by thousand RSD i.e. 20,8% compared to the same period the year earlier. Total amount of foreign currency time deposits as at December was thousand RSD ( ,00 ЕUR). The average interest rate for foreign currency time deposits in 2012 was 5,15% per annum, while the term was from one to thirteen months, while the average interest rate for foreign currency sight deposits was 3%. * * * In the environment of highly changeable interest rates and strong depreciation of Dinar, the Company s assets were reallocated. Dinar deposits were converted into treasury notes i.e. Euro denominated long-term government bonds, which proved to be a very good decision having in mind the exchange rate volatility. The anticipated fluctuation of exchange rate in the following period provides justification for the Company s investment potential structure where assets denominated in foreign currency and placed under fixed rates, maturity dates and definable payments take the highest share. On account of depositing and investing, including income from investment property rental and evaluation, the Company realized income of thousand RSD in

44 5.3. Receivables Structure of receivables The total receivables (net) as at December amounted to thousand RSD, outstanding premium having a predominant share of 66,4%. No. ITEM Balance as at (in 000 RSD) Balance as at Index (3/4) STRUCTURE Total receivables (net) 5,8 bn RSD 1. OUTSTANDING PREMIUM ,0 57,23 66, RECEIVABLES FROM THE REPUBLIC OF SERBIA (conclusion of the Government of the Republic of Serbia) RECEIVABLES FROM SHARE IN DAMAGE RECOVERY ,0 31,24 23, ,0 4,53 0,10 4. RECEIVABLES FROM RECOURSES ,0 1,20 2,90 5. OTHER RECEIVABLES ,9 5,79 7,49 RECEIVABLES TOTAL ,3 100,00 100,00 Within total receivables, the greatest increase compared to December was recorded by receivables from recourse (by 226,0%) and outstanding premium (by 57,0%). Structure of receivables as at December Structure of receivables as at December RECEIVABLES FROM SHARE IN DAMAGE RECOVERY 0,10% RECEIVABLES FROM THE REPUBLIC OF SERBIA (conclusion of the Government of the Republic of Serbia) 23,10% RECEIVABLES FROM RECOURSES 2,90% OTHER RECEIVABLES 7,49% RECEIVABLES FROM SHARE IN DAMAGE RECOVERY 4,53% RECEIVABLES FROM THE REPUBLIC OF SERBIA (conclusion of the Government of the Republic of Serbia) 23,10% RECEIVABLES FROM RECOURSES 1,20% OTHER RECEIVABLES 5,79% OUTSTANDING PREMIUM 66,42% OUTSTANDING PREMIUM 57,23% Valuation of receivables As at December , valuation of receivables was carried out pursuant to the Decision of the NBS and the Rules on valuation of balance and off-balance sheet items. Declared value adjustments of total receivables were as follows: Receivables from Outstanding receivables as at Adjustment of receivables as at: (in 000 RSD) Net amount of receivables as at Increase"+" / Decrease "-" % adjustment =4-2 6 (4-3) 7=4/2 Insurance and coinsurance premium ,73 Recourses ,25 Premium and recourses - Total ,51 Accrued interest ,63 Prepayments ,03 Payroll deductions ,19 Associated legal entities ,00 Оther receivables ,27 Оther receivables ,91 TOTAL ,92 Adjustment of outstanding premium 49,73% 44

45 5.4. Cash and cash equivalents TOTAL BALANCE OF MONETARY ASSETS ACCOUNTS Balance as at (in 000 RSD) Balance as at Index Cash and cash equivalents 4,0 bn RSD (2/3) Dinar assets (sight deposits) ,2 Foreign currency accounts in the country (sight deposits) ,9 Foreign currency accounts abroad ,0 TOTAL ,2 As at December , the Company had 112 Dinar bank accounts with 17 commercial banks. Dinar and foreign currency payment transactions of Dunav Insurance Company are mostly carried out through Dunav banka and Komercijalna banka. The Company has also developed payment operations through Unicredit bank, Banca Intesa, CredyAgricole, ProCredit and Aik bank. At the meeting held in May 2012, the Company s Invesment Board passed the Decision to withdraw foreign currency funds and close the account with Geniki bank Greece, so as at December , the Company had no funds placed abroad. The funds deposited with Geniki bank in Greece amounting to ,67 ЕUR were withdrawn at the end of Q2 and the foreign currency account was closed. Structure of monetary assets balance as at December Dinnar assets; 30,0% Foreign currency accounts in the country; 70,0% 45

46 6. STRUCTURE OF CAPITAL AND LIABILITIES In the capital and liabilities structure of Dunav Insurance Company as at December , the capital and reserves were dominant accounting for 35,9%, and followed by the reserved claims accounting for 20,8% and unearned premium of 19,2%. The capital structure was not significantly changed compared to December No. ITEM Balance as at (in 000 RSD) Balance as at (3/4) 6 7 Index structure in % 35,9% capital and reserves, 20,8% reserved claims, 19,2% unearned premium 1. CAPITAL AND RESERVES ,8 37,8 35,9 2. LONG-TERM PROVISIONS ,8 11,0 11,6 3. SHORT-TERM LIABILITIES ,8 8,7 9,4 4. LONG-TERM LIABILITIES ,0 0,4 0,0 5. UNEARNED PREMIUMS ,3 18,3 19,2 6. RESERVED CLAIMS ,9 19,4 20,8 7. OTHER LIABILITIES (deferred tax liabilities and other accrued costs) TOTAL LIABILITIES ,8 4,4 3, ,5 100,0 100,0 Structure of capital and liabilities Structure of capital and liabilities OTHER LIABILITIES (deferred tax liabilities and other accrued costs) 4,4% RESERVED CLAIMS; 19,4% CAPITAL AND RESERVES; 37,8% UNEARNED PREMIUMS; 18,3% LONG-TERM LIABILITIES; 0,4% SHORT-TERM LIABILITIES; 8,7% LONG-TERM PROVISIONS; 11,0% 46

47 6.1. Capital and reserves Structure of capital and reserves: (in 000 RSD) No. ITEM Balance as at Balance as at Index (3/4) 1. SHARE CAPITAL ,0 2. SOCIALLY-OWNED CAPITAL ,0 3. STAKES AND OTHER CAPITAL ,0 4. RESERVES ,0 5. REVALUATION RESERVES , UNREALISED PROFITS FROM SECURITIES AVAILABLE FOR SALE UNREALISED LOSSES FROM SECURITIES UNAVAILABLE FOR SALE UNDISTRIBUTED PROFIT FROM THE CURRENT YEAR UNDISTRIBUTED PROFIT FROM PREVIOUS YEARS TOTAL , , , , ,8 Fixed and other capital of the Company includes share capital (5,3%), socially-owned capital (92,5%) and other (socially-owned) capital (2,2%). Fixed capital of the Company (share and socially-owned capital) amounting to thousand RSD as at December , significantly exceeded the minimum fixed capital stipulated under Article 28 of the Insurance Law. Insurance shareholding companies providing both life and non-life insurance services are obliged to maintain at any time minimum EUR fixed capital, which as at December was thousand RSD in Dinar countervalue ( EUR based on the mean exchange rate as at December (1 EUR = 113,7183 RSD)). Fixed capital 5,8 bn RSD 92,5% sociallyowned capital, 5,3% share capital, 2,2% other capital As at December , the Company s total share capital amounted to thousand RSD. Share capital was held by shareholders (194 legal entities, physical persons and 13 custodian entities), who altogether held ordinary shares with unit nominal value of RSD. Share capital structure Physical entities 19,2% Custodian entities 12,5% Legal entities 68,3% 47

48 Ten major shareholders hold the total of 39,4% of the Company s share capital. SHAREHOLDERS % share Number of shares (in 000 RSD) TOTAL SHARE CAPITAL AS AT I CUSTODIAN ENTITIES 12, II 10 MAJOR LEGAL ENTITIES 39, КОМЕRCIJALNA BANKA AD 10, 'UTMA COMMERCE'' DOO 6, АMS OSIGURANJE ADO 5, THE REPUBLIC OF SERBIA 3, RUDARSKO TOPIONIČARSKI BASEN BOR 2, SAOBRAĆAJNI FAKULTET 2, МЕТАLAC AD GORNJI MILANOVAC 2, KLINIČKI CENTAR 2, TCK KOSJERIĆ DOO 2, JUGOBANKA IN BANKRUPTCY 1, shareholders, ordinary shares, Nominal share value RSD III ОTHER LEGAL ENTITIES 28, LEGAL ENTITIES TOTAL (II+III) 68, IV PHYSICAL PERSONS 19, TOTAL (I+II+III+IV) 100, CATEGORIES VALUE OF SHARE CAPITAL OF INDIVIDUAL SHAREHOLDER AS AT NUMBER OF SHAREHOLDERS (CUSTODY ACCOUNTS) TOTAL SHARE CAPITAL OF A CATEGORY (in 000 RSD) SHARE IN TOTAL SHARE CAPITAL (in %) OVER thousand RSD ,66% thousand RSD ,42% thousand RSD ,37% thousand RSD ,42% thousand RSD ,38% thousand RSD ,72% UNDER 10 thousand RSD ,03% TOTAL ,00% As at December , revaluation reserves amounted to thousand RSD i.e. increased by thousand RSD compared to December , as a result of the evaluated property value. Unrealised profits from securities available for sale was thousand RSD, which is significantly lower compared to the previous year since the portion of unrealised profits from shares sold during previous years was removed from accounts. Reserves formed out of undistributed profit i.e. excess from previous years as at December werе thousand RSD. These reserves cannot be allocated but can be used to cover losses. 48

49 Guarantee fund Guarantee fund provides security for permanent performance of obligations. Guarantee fund of the Company as at December amounted to thousand RSD and it comprised the following items: Guarantee fund 7,8 billion RSD GUARANTEE FUND (in 000 RSD) Amount 1. Socially-owned capital Ordinary share capital Profit reserve Revaluation reserves Up to 50% of undistributed profits from previous years Recognized % of undistributed profits from the current year Previous years loss 0 8. Current year loss Total ( ) Тechnical reserves Technical reserves provide coverage for obligations arising from insurance activities. Total self-retained technical reserves as at December amounted to thousand RSD and comprised the following: Technical reserves 14,5 billion RSD TECHNICAL RESERVES NON-LIFE INSURANCES LIFE INSURANCES (in 000 RSD) TOTAL 1. Unearned insurance premium from own portfolio Unearned premium from received coinsurances Reserved claims from own portfolio Provisions for share in loss on account of received coinsurances Risk equalization funds Life insurance mathematical reserve I TOTAL TECHNICAL RESERVES ( ) Unearned reinsurance premium Share of reinsurers in reserved claims Reinsurance mathematical reserve II TOTAL SELF-RETAINED TECHNICAL RESERVES (I-7-8-9) As at December , the Company provided coverage of technical reserves according to the Decision on Restrictions on Specific Forms of Depositing and Investing Technical Reserve Assets and on Maximum Levels of Specific Deposits and Investments of Guarantee Fund of insurance companies ( Official Gazette of the RS, no. 87/2012). 49

50 6.2. Long-term provisions Long-term provisions as at December amounted to thousand RSD, which is thousand RSD (or 17,8%) higher than as at December and refer to: No. (in 000 RSD) (3/4) 1. CATEGORY LIFE INSURANCE MATHEMATICAL RESERVE Balance as at Balance as at Index ,9 Long-term provisions 3,5 billion RSD 2. RISK EQUALIZATION PROVISIONS ,8 3. OTHER LONG-TERM PROVISIONS ,1 TOTAL ,8 Mathematical reserve of life insurance lines rose by 612 million RSD compared to the same period of 2011, which was a result of the increase in total life insurance portfolio. Other long-term provisions refer to provisions for allowances (anniversary awards, severances) IAC Long-term liabilities The Company did not have any long-term liabilities as at December Short-term liabilities Short-term liabilities as at December amounted to thousand RSD, which is 21,8% higher than as at December and refer to: Short-term liabilities 2,8 billion RSD No. (in 000 RSD) (3/4) CATEGORY LIABILITIES ON ACCOUNT OF PREMIUM, SALARIES AND OTHER LIABILITIES ON ACCOUNT OF CLAIMS AND CONTRACTED AMOUNTS Balance as at Balance as at , SHORT-TERM FINANCIAL LIABILITIES Index 4. TAX LIABILITIES ON ACCOUNT OF PERFORMANCE TOTAL , ,8 50

51 Liabilities on account of premium, salaries and other liabilities refer to: CATEGORY Balance as at (in 000 RSD) Balance as at Index (2/3) Liabilities on account of reinsurance premium ,7 Liabilities on account of coinsurance premium ,2 Liabilities on account of recourses Liabilities towards suppliers ,7 Liabilities for salaries ,9 Liabilities for building site contribution, premium tax and VAT ,2 Received insurance and coinsurance prepayments ,0 Other received prepayments ,2 Other unmentioned liabilities ,6 TOTAL ,5 Liabilities on account of claims and contracted amounts recorded growth of thousand RSD relative to the same period of The largest portion of outstanding claims from 2012 was settled in the first week of Liabilities on account of recourse in most part refer to the 1976 Zagreb mid-air collision ( thousand RSD). Total amount of short-term financial liabilities ( thousand RSD) refer to the renewal and purchase of Microsoft licenses Unearned premium As at December , unearned premium amounted to thousand RSD and was higher by 18,3% than as at December (in absolute terms by thousand RSD), when it amounted to thousand RSD. The share of unearned premium in gross premium in the period I-XII 2012 was 32,1%, while in the same period the year earlier it was 31,5%. Unearned premium 5,7 billion RSD 6.6. Reserved claims Reserved claims as at December amounted to thousand RSD, which was higher by 20,9% (in absolute terms by thousand RSD) than as at Decemebr when they amounted to thousand RSD. In the period I-XII 2012, claims were reserved in total. Reserved claims 6,2 billion RSD Reserved reported but not settled claims accounted for thousand RSD or 60,8%, whereas reserved incurred but not reported claims accounted for thousand RSD or 39,2%. 51

52 The following table provides the structure of reserved claims: (in 000 RSD) CODE OF IC INSURANCE CLASS RESERVED REPORTED BUT NOT SETTLED CLAIMS RESERVED INCURRED BUT NOT REPORTED CLAIMS TOTAL RESERVED REPORTED AND NON-REPORTED CLAIMS AS AT TOTAL RESERVED REPORTED AND NON-REPORTED CLAIMS AS AT INDEX (3+4) 6 7 (5/6) 01 Accident ,0 02 Voluntary health ,9 03 Motor vehicle ,3 04 Rolling stock ,5 05 Aircraft ,7 06 Vessels ,3 07 Goods in transit ,1 08 Property against fire and allied perils ,2 09 Оther property ,1 10 Motor vehicle liability ,7 11 Aircraft liability Vessel liability ,8 13 General liability ,9 14 Credit ,9 15 Guarantee Financial losses ,0 17 Costs of legal protection Road assistance ,3 19 Other non-life Life ,6 21 Annuity Life rider ,4 23 Voluntary pension Other life ALL CLASSES TOTAL ,9 52

53 In the structure of reserved claims, motor third party liability claims, property claims, fire claims, accident claims and motor casco claims had the largest share Settled claims Reserved claims In comparison with the same period a year earlier, the biggest growth was recorded in: - motor vehicle liability by thousand RSD or 52,7%; - aircraft insurance (total) by thousand RSD or 185,0%; - accident insurance by thousand RSD or 5,0%; - motor vehicle insurance casco by thousand RSD or 4,3%. Compared to the 2012 plan, reserved claims were lower by thousand RSD or 8,0%. 53