annual report 2009 - maxima pojišťovna · 2019. 5. 20. · in the area of life insurance, maxlife...

ANNUAL REPORT

2009

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The Board President’s Introductory Word Dear business partners, In the context of evaluating last year 2009, I have to mention, in particular, last year’s dynamic growth of revenues from prescribed premium, good economic results, and successful accomplishment of optimization processes within the Company. Income from premiums exceeded the business plan for the year by 11 %, which is an increase of 19 % over the year 2008. The point of gravity of these results rests in the acceleration of the segment of emergency medical care insurance for foreigners, on the one hand, and in successful retention of other parts of the premium market, on the other. For instance, in sales of financial loss insurance plants, Maxigep and Maxgarant, our Company still holds its strong, dominant position. Our financial stability has been meaningfully strengthened by historically best economic results that surpassed the previous year by CZK 22,383,000 and also out conservative investment strategy in the area of technical reserves. The main purpose of creating these provisions is to minimize dependence of our investment portfolio on currency and market risks. The Company has devoted a considerable portion of energy into optimizing the processes of its corporate structure, management, and culture, and the results are tangible – not merely in economic terms. While admitting that the year 2009 was objectively demanding, I also have to add that it was a good year for Maxima pojiš�ovna. It was a year in which we also laid down solid prerequisites for further growth and strength in 2010, which entered into in good condition. Without a doubt, this is good news for our shareholders, the clients of Maxima pojiš�ovna, as well as other business partners that have cooperated with us on these results.

Ing. Rudolf Bubla

President of the Board of Directors

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Table of Contents Introductory Word…………………………………………………………………………2 Basic Information on the Company……………………………………………………….4 Licenses……………………………………………………………………………………5 The Insurance Market and Business Results……………………………………………...6 The Management Report…………………………………………………………………..7 The Reinsurance Program…………………………………………………………………7 Overview of Products……………………………………………………………………..8 Financial Statements………………………………………………………………………9 Annex to Balance Sheet…………………………………………………………………..17 Report on Intercompany Relations………… …………………………………………..40 Report of the Supervisory Board of Maxima pojiš�ovna, a.s. on Results in 2009……….41 The Auditor’s Report……………………………………………………………………..42

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Basic Data on the Company Company name MAXIMA pojiš�ovna, a. s. Company address Na Dlouhém lánu 508/41, Prague 6 Taxpayer ID No. 6132 8464 Registration date 1 July 1994 Registry Municipal Court Prague, Volume B, File 3314 Telephone + 420 224 305 403 Fax + 420 224 305 412 Call Center + 420 272 099 900 e-mail [email protected] website www.maxima-as.cz

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Trade License 1) insurance activities as per Sec. 7(3) Act No. 363/1999 Coll., the Insurance Code, as amended Life Insurance − insurance classes 1 life insurance specified in Part A of the Annex to the Insurance Code,

Non-life Insurance

− insurance classes 1a),b),c);3a);8;9;13;16; non-life insurance specified in Part B of the Annex to the Insurance Code,

2) activities related to insurance activities as per Sec. 3(4) of the Insurance Code − broker activities conducted in connection with insurance activities as per Insurance Code − consulting activities related to insurance provided to physical and legal entities as per

Insurance Code − investigation of loss claims conducted on the basis of insurance policies with the

Company as per Insurance Code − broker activities in the area of home builders’ savings plans and supplementary pension

insurance

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The Insurance Market and Business Results In 2009, the Czech insurance market reached, according to preliminary results of the Czech Insurance Association (�AP) prescribed premiums in the amount of CZK 139,915 million. The growth of the prescribed premium amounted to 2.5%, according to �AP. Compared to the prescribed premiums’ growth rate in the whole market, the Company achieved a far more progressive growth, reaching a growth greater by 19% over the year 2008. All this can be viewed as positive information. From the perspective of plan fulfillment, the business plan 2009 was surpassed by 11 %. The Company has been able to adjust its activities fully to the needs of individual clients, both in the area of product structure and risk coverage, as well as pricing. Especially nowadays, at a time of prevailing economic and financial crisis, it is a very forthcoming approach on our part that our clients appreciate. There also exists the option of having insurance protection prepared on a made-to-measure basis, where both the contents and price are proportionately optimized.

An overview of the share of individual types of insurance cover in the overall results in recent years is shown in the following table:

Prescribed premium (CZK)

Type of Insurance 2006 2007 2008 2009 Property insurance 29,987 38,086 53,861 43,261 Liability insurance 24,345 31,587 26,201 30,553 Financial loss insurance 30,520 50,957 46,620 75,002 Collision motor insurance 29 763 4,322 11,924 Accident & sickness insurance 1 2,483 44,560 47,729 Life insurance 66 463 968 927 Total,000 84,948 124,339 176,532 209,396 In graphical rendition, the overall volume of prescribed premium evolved as follows (figures derived from Plan 2010):

� ��

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The Management’s Activity Report Last year, our sales services were particularly successful in selling a product named Emergency Medical Care for Foreigners. The production plan was surpassed multiple times to the extent where helped offset notable decline in other products. Towards the end of 2009 this product was modified and cooperation with new brokers launched.

In the sphere of private owners’ property and liability insurance – the Maxdomov Plan – we were not as successful in our endeavor to initiate cooperation with a broad spectrum of brokers. Therefore, the Company plans to explore other possibilities for finding suitable distribution channels as one of its objectives in the upcoming period, such as real estate agencies or broker companies that provide comprehensive financial analyses to their clients. Another aspect of this objective is to modify this product so as to make it simpler to negotiate.

As for collision motor insurance, Maxauto, the plan was exceeded by far. Thanks to more powerful communication with brokers about this product, cooperation with new acquisition agents was very successful and led to conclusion of business deal of key importance in the area of vehicle fleet insurance.

Also in the area of financial loss insurance, Maxigep, and extended warranty insurance, Maxgarant, the production plan was successfully met. We tied onto the previous year’s strategy of bringing the sale of products closer to other brokers. Furthermore, the previous year’s negative trend was meaningfully diminished and the Company thereupon continued in adopting measures for augmentation of its premium rates and amending its general and special insurance terms and conditions.

In the area of life insurance, Maxlife and Maxjistota, the planned could not be reached, unfortunately. A market analysis indicated that it is necessary to modify these products – thus, new alternatives have been prepared for the following period.

Industrial and commercial insurance always depends on cooperation with major brokers and partly also on development of the situation within the group. For retaining and increasing the volume of business in this area it is indispensable to have a well-prepared and solid reinsurance program.

The Reinsurance Program Existence of a good reinsurance program is a good prerequisite to protecting the Company’s results, as our experience with major loss claims proves time and again (fire at STZ, a.s., where the Company’s share of the settlement is estimated to reach CZK 70 million and reinsurance of the Company’s liability is merely CZK 1.3 mil.). Since 2008, the Company has cooperated with AON/Benfield, a reinsurance broker that has a share of approximately 70% of the Czech reinsurance market. The leading reinsurer is Partner Re (rating S&P AA-)

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Overview of Products Industrial and commercial insurance Commercial elementary insurance Commercial theft insurance Commercial glass insurance Commercial machine insurance Commercial electronics insurance Commercial business interruption insurance Commercial construction risks insurance Commercial third-party liability insurance Management’s liability insurance Councilor’s liability insurance Professional liability insurance – lawyers, notaries, patent attorneys, and court experts Professional liability insurance - auditors, tax consultants, independent accountants (CPAs) Commercial liability insurance – product liability Insurance brokers’ liability insurance Homeowners insurance – MAXHOME Homeowners insurance – building Home contents insurance – household Third-party liability insurance Collision motor insurance (MAXAUTO) Collision motor insurance – individual Collision motor insurance – fleet Financial guarantee insurance – motor vehicles Vehicle acquisition value insurance – Maxigep – CR Vehicle acquisition value insurance – Maxigep – SR Extended warranty motor insurance – new vehicle (CR + SR) Extended warranty motor insurance – used vehicle (CR + SR) Extended warranty motor insurance – used vehicle – N2, N3 Extended motor warranty insurance - new vehicles – N2, N4 LIFE & ACCIDENT INSURANCE Capital life insurance MAXLIFE Risk life insurance MAXJISTOTA Individual accident and medical costs insurance – foreigners Group insurance Individual event accident insurance GROUP TRAVEL INSURANCE – MAXCESTA Medical costs abroad insurance

- accidental death or injury insurance - permanent accident consequences insurance

Travel insurance - luggage insurance - journey cancellation insurance - journey interruption insurance

Third-party liability insurance - health injury liability - other injury liability - material liability

Emergency companion insurance Delayed flight insurance Legal assistance insurance Highjacking insurance Substitute worker insurance Pet insurance (dogs, cats, etc.)

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MAXIMA pojiš�ovna, a.s.

Balance sheet as at 31 December 2009(In thousands of Czech crowns TCZK)Registered office of the Company:

I�O: 613 28 464

2 009 2 009 2 009 2 008

Gross Adjustment Net Net

A. Receivabless for subscribed registered capital

B. Intangible fixed assets, thereof 13 728 12 496 1 232

a) Incorporation expenses

b) Goodwill

C. Financial placements (investments) 370 102 370 102 395 685

I. Land and buildings (real estate), thereof

a) z�izovací výdajeLand and buildings - self-occupied

II. 155 417 155 417 227 611

1. Participating interests with controlling influence 11 505 11 505 69 251

2.

3. 143 912 143 912 158 360

4.

III. Other financial placements 214 685 214 685 168 074

1. 31 195 31 195

2. Bonds and other fixed-income securities 138 473 138 473 131 682

3.

4.

5. 45 017 45 017 36 392

6. Other financial placements

IV. Deposits with ceding undertakings

D.

b) "OECD" bonds held to maturity

c) other bonds and other fixed-income securities held to maturity

Financial placements for the benefit of life assurance policyholders who bear the investment risk

Description

Debt securities issued by, and loans to, undertakings - controlling influence

Participating interests with significant influence

Debt securities issued by, and loans to, undertakings - significant influence

I. ASSETS

Investments in affiliated undertakings and participating interests

Shares and other variable-yield securities, other participating interests

Financial placements in investment associations

a) bonds and other fixed-income securities valued at fair value through profit and loss

Other loans

Deposits with financial institutions

10

2 009 2 009 2 009 2 008

Gross Adjustment Net Net

E. Debtors 41 602 7 218 34 384 27 512

I. Receivables arising from direct insurance operations 16 889 6 712 10 177 13 594

1. Receivables due from the policyholders, thereof 14 493 6 012 8 481 12 557

85 85 6 146

161

2. Receivables due from intermediaries, thereof 2 396 700 1 696 1 037

II. Receivables arising from reinsurance operations, thereof 15 687 15 687 9 900

III. Other receivables, thereof 9 026 506 8 520 4 018

F. Other assets 1 292 365 927 4 812

I. 556 365 191 672

II. Cash on accounts in financial institutions and cash in hand 736 736 4 140

IV. Other assets

G. Temporary asset accounts 5 830 5 830 39 112

I. Accrued interest and rent

II. Deferred acquisition costs 26 26 38 904

a) in life-assurance business 26 26 31

b) in non-life insurance 38 873

III. Other temporary asset accounts, thereof 5 804 5 804 208

a) Estimated receivables 2 247 2 247

432 554 20 079 412 475 467 121

a) Receivables due from entities in which the Company has a controlling influence

Tangible fixed assets other than land and buildings (real estate), and inventories

TOTAL ASSETS

Description


b) Receivables due from entities in which the Company has a significant influence






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A. Equity 257 411 292 917

I. Registered capital, thereof 250 000 250 000

a) Changes in registered capital

II. Share premium

III. Revaluation fund

IV. Other capital funds 17 835 59 762

V. Statutory reserve fund and other funds from profit 3 936 3 936

VI. -20 781 -4 819

VII. 6 421 -15 962

B. Subordinated liabilities

C. Technical provisions 100 228 108 552

1. Provision for unearned premiums

a) gross amount 112 916 123 023

b) reinsurance share (-) 37 448 75 468 39 447 83 576

2. Life assurance provision

a) gross amount 668 638

b) reinsurance share (-) 668 638

3. Provision for outstanding claims

a) gross amount 46 452 51 483

b) reinsurance share (-) 22 360 24 092 27 145 24 338

4. Provision for bonuses and rebates

a) gross amount

b) reinsurance share (-)

5. Equalization provision

a) gross amount


6. Other technical provisions

a) gross amount


7. Provision for liabilities from the technical interest rate applied

a) gross amount


8. Non-life insurance provision

a) gross amount


II. LIABILITIES

2 009 2 008Description

Profit or loss for the financial year

Profit or loss brought forward

12

D.

a) gross amount


E. Provisions 1 016 350

1. Provisions for pensions and similar obligations

2. Provisions for taxation 666

3. Other provisions 350 350

F. Deposits received from reinsurers

G. Creditors 42 821 55 639

I. Payables arising from direct insurance operations, thereof 14 457 9 895

a) 428 56

b)

II. Payables arising from reinsurance operations, thereof 23 261 22 245

a)

b)

III. Debenture loans

a)

b)

IV. Amounts owed to credit institutions, thereof

a)

b)

V. Other payables, thereof 5 103 23 499

a) 514 5 028

b) 174

c)

VI. Guarantee Fund of the Bureau

H. Temporary liability accounts 10 999 9 663

I. Accrued expenses and deferred revenues 8 148 8 943

II. Other temporary liability accounts, thereof 2 851 720

a) Estimated payables 2 851 720

412 475 467 121

2 009 2 008

Payables to entities in which the Company has a controlling influence, thereof

Description

aa) Convertible loans

Payables to entities in which the Company has a significant influence

Payables to entities in which the Company has a controlling influence

Payables to entities in which the Company has a significant influence, thereof


TOTAL LIABILITIES

Life assurance technical provision where the investment risk is borne by the policyholders





Tax liabilities and payables due to social security and health insurance institutions

ba) Convertible loans


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Profit and loss account for the year 2009(In thousands of Czech crowns TCZK)Registered office of the Company:

I�O: 613 28 464

2 009 2 009 2 009 2 008

Base Subtotal Result Result

I. TECHNICAL ACCOUNT FOR NON-LIFE INSURANCE x x x x

1. Earned premiums, net of reinsurance: x x x x

a) gross premiums written 208 469 x x x

b) outward reinsurance premiums (-) 82 938 125 531 x x

c) change in the gross provision for unearned premiums (+/-) -10 016 x x x

d) change in the provision for unearned premiums, reinsurers' share (+/-) -1 999 -8 017 133 548 33 781

2. Allocated investment return transferred from the non-technical account x x 10 700 1 702

3. Other technical income, net of reinsurance x x 12 902 12 309

4. Claims incurred, net of reinsurance: x x x x

a) claims paid: x x x x

aa) gross amount 57 456 x x x

bb) reinsurers' share (-) 18 393 39 063 x x

b) change in the provision for outstanding claims: x x x x

aa) gross amount -5 067 x x

bb) reinsurers' share (-) -4 785 -282 38 781 23 129

5. Changes in other technical provisions, net of reinsurance (+/-) x x

6. Bonuses and rebates, net of reinsurance x x

7. Net operating expenses: x x x x

a) acquisition costs x 52 599 x x

b) change in deferred acquisition costs (+/-) x 38 872 x x

c) administrative expenses x 40 122 x x

d) reinsurance commissions and profit participation (-) x 21 023 110 570 36 037

8. Other technical expenses, net of reinsurance x x 5 348 6 853

9. Change in the equalisation provision (+/-) x x

x x 2 451 -18 227

Description

10. Sub-total on the technical account for non-life insurance

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2 009 2 009 2 009 2 008


II. TECHNICAL ACCOUNT FOR LIFE ASSURANCE x x x x

1. Earned premiums, net of reinsurance: x x x x

a) gross premiums written x 927 x x

b) outward reinsurance premiums (-) x x x

c) change in the provision for unearned premiums, net of reinsurance (+/-) x -91 1 018 876

2. Income from financial placements (investments): x x x x

x x x

x x x x

aa) income from land and buildings (real estate) x x x

bb) income from other financial placements (investments) 7 7 x 46

c) value adjustments on financial placements x x 21

d) income from disposal of financial placements x 7 67

3. Unrealised gains on financial placements x x

4. Other technical income, net of reinsurance x x

5. Claims incurred, net of reinsurance: x x x x

a) claims paid: x x x x

aa) gross amount 34 x x x

bb) reinsurers' share (-) 34 x x

b) change in the provision for outstanding claims: x x x x


bb) reinsurers' share (-) 36 70 -49

6. Changes in other technical provisions, net of reinsurance (+/-): x x x x

a) life assurance provisions: x x x x


bb) reinsurers' share (-) 30 x x

b) other technical provisions, net of reinsurance x 30 499

7. Bonuses and rebates, net of reinsurance x x

8. Net operating expenses: x x x x

a) acquisition costs x 153 x x

b) change in deferred acquisition costs (+/-) x 6 x x

c) administrative expenses x 810 x x

d) reinsurance commissions and profit participation (-) x 969 613

9. Expenses connected with financial placements (investments): x x x x

a) investment management charges, including interest x 4 x x

b) value adjustments on financial placements x x x

c) book value of disposed financial placements x 4 1

10. Unrealised losses on financial placements (investments) x x

11. Other technical expenses, net of reinsurance x x

12. Allocated investment return transferred to the non-technical account (-) x x

13. Sub-total on the technical account for life assurance x x -48 -121

Description

a) income from participating interests, with a separate indication of that derived from controlling influence

b) income from other investments, with a separate indication of that derived from controlling influence

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2 009 2 009 2 009 2 008


III. NON-TECHNICAL ACCOUNT x x x x

1. Result of the technical account for non-life insurance x x 2 451 -18 227

2. Result of the technical account for life assurance x x -48 -121

3. Income from financial placements: x x x x

x x x

x x x x

aa) income from land and buildings x x x

bb) income from other financial placements (investments) 7 179 7 179 x x

c) value adjustments on financial placements x 8 167 x x

d) income from disposal of financial placements x 62 155 77 501 143 112

x x

5. Expenses connected with financial placements: x x x x

a) investment management charges, including interest x 1 324 x x

b) value adjustments on financial placements x x x

c) book value of disposed financial placements x 62 439 63 763 134 174

x x 10 700 1 702

7. Other income x x 2 170 1 082

8. Other expenses x x 149 5 920

9. Income tax on ordinary activities x x 1 032

10. Profit or loss on ordinary activities after tax x x 6 430 -15 950

11. Extraordinary income x x

12. Extraordinary expenses x x

13. Extraordinary profit or loss x x

14. Income tax on extraordinary activities x x

15. Other taxes not shown under the preceding items x x 9 12

16. Profit or loss for the financial year x x 6 421 -15 962

Description

4. Allocated investment return transferred from the technical account for life-assurance

6. Allocated investment return transferred to the technical account for non-life-insurance

b) income from other investments, with a separate indication of that derived from controlling influence

a) income from participating interests, with a separate indication of that derived from controlling influence

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Statement of changes in equity for the year 2009(In thousands of Czech crowns TCZK)Registered office of the Company:

I�O: 613 28 464

Registered capital

Own shares

Share premium

Reserve funds

Capital funds

Changes in valuation

Profit (loss) Total

Balance at 1.1.2008 250 000 3 936 282 83 814 -4 819 333 213

Correction of fundamental errors

FX gains (losses) and changes in valuation not included in the profit and loss statement

-24 334 -24 334

Net profit/loss for accounting period*) -15 962 -15 962

Dividends

Transfers to funds

Reduction of funds

Shares issued

Reduction in registered capital

Own shares purchased

Other changes

Balance at 31.12. 2008 250 000 3 936 282 59 480 -20 781 292 917

Balance at 1.1. 2009 250 000 3 936 282 59 480 -20 781 292 917

Correction of significant errors

FX gains (losses) and changes in valuation not included in the profit and loss statement

-41 927 -41 927

Net profit/loss for accounting period*) 6 421 6 421

Dividends

Addition to funds

Reduction of funds

Shares issued

Reduction in registered capital

Own shares purchased

Other changes

Balance at 31.12. 2009 250 000 3 936 282 17 553 -14 360 257 411

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Annex to Balance Sheet ending 31 December 2009

(CZK’000) Contents: II. GENERAL CONTENTS ........................................................................................................ 18

II. 1. Characteristics and Main Activities ...................................................................................... 18 II. 2. Legal Relations ..................................................................................................................... 19 II. 3. Methodology of Preparing Financial Statements.................................................................. 20 II. 4. Important Accounting Methods ............................................................................................ 20 II. 5. Changes in Accounting Methods and Procedures................................................................. 26

III. SPECIAL CONTENTS....................................................................................................... 27

III. 1. Non-life Insurance ................................................................................................................ 27 III. 2. Life Insurance ....................................................................................................................... 28 III. 3. Total Gross Prescribed Premiums by Country...................................................................... 28 III. 4. Overview of Commissions.................................................................................................... 28

IV. OTHER DATA .................................................................................................................... 29

IV. 1. Long-term Intangible Assets ................................................................................................. 29 IV. 2. Financial Placements (Investments)...................................................................................... 29 IV. 3. Receivables and Payables ..................................................................................................... 31 IV. 4. Intercompany Receivables and Payables .............................................................................. 32 IV. 5. Long-term Tangible Assets................................................................................................... 33 IV. 6. Temporary Assets and Liabilities ......................................................................................... 33 IV. 7. Share Capital ......................................................................................................................... 34 IV. 8. Technical Reserves ............................................................................................................... 35 IV. 9. Reserve for Currency Exchange Risk ................................................................................... 35 IV. 10. Financial Obligations Arising from Leasing......................................................................... 35 IV. 11. Potential Future Liabilities.................................................................................................... 36 IV. 12. Supplementary Data to Profit and Loss Statement ............................................................... 36 IV. 13. Taxes ..................................................................................................................................... 38 IV. 14. Notable Circumstances ......................................................................................................... 39 IV. 15. Subsequent Events ................................................................................................................ 39

PRAGUE 2009

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GENERAL CONTENTS I. 1. Characteristics and Main Activities (a) Company: MAXIMA pojiš�ovna, a.s.

(b) Domicile: Prague 6, Na Dlouhém lánu 508, Postal Code 160 00

(c) Comp. ID No.: 613 28 464

(d) Legal status: Joint-stock company

(e) Incorporated at: Municipal Court Prague, Volume B, File 3314 (f) Registration date: 1 July 1994 (g) Registered activities:

1) insurance activities as per Sec. 7(3) of Act No. 363/1999 Coll., the Insurance Code, as amended

Life insurance

− insurance classes 1 life insurance specified in Part A of the Annex to the Insurance Code,

Non-life insurance

− insurance classes 1a),b),c);3a);8;9;13;16; non-life insurance specified in Part B of the Annex to the Insurance Code,

2) activities related to insurance activities as per Sec. 3(4) of the Insurance Code

− broker activities conducted in connection with insurance activities as per Insurance Code

− consulting activities related to insurance provided to physical and legal entities as per Insurance Code

− investigation of loss claims conducted on the basis of insurance policies with the Company as per Insurance Code

− broker activities in the area of homebuilders’ savings plans and supplementary pension insurance

(h) Statutory Body – Board of Directors, as of 31 December 2009 President: Ing. Rudolf Bubla, Birth Index No. 591102/0511

St�ímelická 2499, Prague 4, Post. Code 141 00

Member: Ing. Siarhei Khimaroda, D.o.B. 29.06.1972

Nad Lávkou 847, Zelene�, Post. Code 250 91

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Member: Jaroslav Jenerál, Birth Index No. 440914/450 Toru�ská 329/4, Prague 8, Post. Code 181 00

Director Siarhei Khimaroda, Ing., replaced Director Miroslav Babej – Kmec, Ing., in office with the Board of Directors (membership expired 21.10.2009, deleted from Companies Register 19.2.2010). When representing the Company, the Board President acts independently or two Board Members jointly on behalf of the Company.

(i) The Supervisory Board

Chairman: Jaromír Florián, Ing., Birth Index No. 750616/2664, Sudom��ská 1092/30, Prague 3 – Žižkov, Postal Code 130 00

Member: Prof. Miroslav Kavka, DrSc., Ing.., Birth Index No. 440925/118, U 5. baterie 780/2, Prague 6, Postal Code 160 00

Member: Miroslav Kimminich, Ing., Birth Index No. 671123/0548 Jílovská 1153, Prague 4, Postal Code 140 00

Mr. Jaromír Florián, Ing., replaced Mr. Siarhei Khimaroda, Ing., in office with the Supervisory Board (membership expired 21.10.2009, deleted from Companies Register 19.02.2010). (j) Shareholders holding over 20% equity At present, the Company has one shareholder with equity in excess of 20% - it is ZEVETA Bojkovice, a.s. (22.63 %). Another shareholder, Zeveta Bojkovice, a.s., has a direct equity share of 19.99 % and indirect equity share of 2.64 %. (k) Organizational Structure Pursuant to Act No. 589/1992 Coll., on Social Security Insurance, the Company is a so-called “small organization”. It has 24 full-time employees and is structurally divided into the following divisions: Management (4 employees), Sales (5 employees), Operations and Claim Processing (7 employees), Economics (4 employees), and Other (4 employees). I. 2. Legal Relations As of the date of the balance sheet’s compilation, all of the Company’s legal relations complied with the provisions of Act No. 363/1999 Coll., the Insurance Code, as amended (henceforth only “Insurance Code”), Act No. 37/2004 Coll., on insurance policies, as amended, Act No. 38/2004 Coll., on insurance brokers and independent claim liquidators, including the relevant rules of procedure, decrees, and legal provisions currently in effect.

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I. 3. Methodology of Preparing Financial Statements In the administration of its accounting records and compilation of financial statements, the Company proceeded in accordance with Act No. 563/1991 Coll., the Accounting Code, as amended, and Decree No. 502/2002 Coll., which implements certain provisions of Act No. 563/1991 Coll., the Accounting Code, as amended, applicable to accounting units registered as insurers, as amended (henceforth only “Decree 502/2002 Coll.”), Czech accounting standards for accounting units that are subject to Decree 502/2002 Coll., and other relevant regulations. The Company bookkeeping is managed so that its financial statements render an accurate and honest record of the Company’s fiscal and financial situation. I. 4. Important Accounting Methods (a) Prescribed Premium The gross prescribed premium includes all the amounts payable under insurance policies during the given fiscal period, whether or not these amounts apply, fully or partly, to future fiscal periods. (b) Claim Settlement Costs Claim settlement costs are recorded in the amount of admitted settlements arising from settled loss claims, plus the Company’s external and internal expenses related to processing the loss claims. Claim settlements are reduced by regression and the Company’s other legitimate deductions. Claim settlement costs are recorded at the time claim processing closing and determination of the settlement amount. (c) Acquisition Costs of Insurance Policies The acquisition costs of insurance policies include all direct and indirect expenses that the Company incurred in connection with contracting insurance policies. (d) Accrued Acquisition Costs of Insurance Policies In non-life insurance, accrued acquisition costs of insurance policies, i.e., the portion of the costs for contracting insurance policies throughout the current fiscal period, is recorded using the indirect method described under Par. I.4.(e). The application of this method was approved by the Czech National Bank (�NB), Decision No.: 2009/570/560 of 7 May 2009. (e) Reserve for Unearned Premium Reserve for unearned premium is created from basic prescribed premium reduced by the relevant commission payable in future fiscal periods. The amount of the reserve is a summary of the reserves payable under individual insurance policies using the "pro rata temporis" method.

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(f) Reserve for Life Insurance Premiums The amount of life insurance premiums is a summary of the reserves calculated under individual life insurance policies. The reserve for life insurance premiums is the Company’s estimated future liabilities, based on actuary calculation methods, after deducting estimated future premiums. The Company records a zillmerized reserve in accordance with calculation of individual tariffs approved by the Czech Ministry of Finance. The zillmerization method is used for computing accruals to the acquisition costs of insurance policies in life insurance. Using actuary methods, these costs are accounted for in the reserve for life insurance premium. The reserve is adjusted for temporary negative balances that are activated and recorded as deferred expenses. During the activation, the principle of precaution is observed and the risk of premature termination of the policy considered.

(g) Reserve for Claim Settlements Reserves for claim settlements are created, both in life and non-life insurance, in the amount of anticipated/estimated costs of loss claims: a) reported by the end of the current fiscal period but still pending (not settled) in the current fiscal period (RBNS), b) incurred before the end of the current fiscal period but not as yet reported (IBNR). The amount of the reserve for claim settlement arising from loss claims reported by the end of the fiscal period is computed as a summary (total) of reserves for individual loss claims. For loss claims incurred but not reported before the end of the fiscal period, the reserve is computed using the “chain ladder” method. The reserve for claim settlement includes also the estimated amount of all contingent external costs of loss claim liquidation. When applying the reserve for loss claim settlements to loss claims where the Company figures as the leading co-insurer, the Company proceeds in accordance with the relevant provisions of the Act on Insurance Policies. Although the Board of Directors considers the amount of the reserve for claim settlements as being recorded accurately and corresponding to the information available at the time of the balance sheet’s compilation, the final amount of the liabilities arising from the Company’s obligations may differ due to consequential losses or newly revealed circumstances, which may impact significantly on the total amount of clam settlements. Variances in the amount of the reserve are taken into consideration in the fiscal period in which they are revealed. The procedures and methods of estimation are verified regularly. (h) Equalization Reserve While analyzing the loss history in the insurance classes of non-life insurance, the Company arrived at the conclusion that these classes do not show fluctuations and therefore dissolved the entire balance of the equalization reserve in 2006.

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(i) Other Technical Reserves The Company does not create any other technical reserves, such as: • reserve for bonuses and discounts; • reserve for non-life insurance premiums; • reserve for life insurance, if bearing the policyholders’ investment risks; • reserve for meeting obligations arising from the technical interest rate used/applied; • other technical reserves, because the Company does not offer products requiring their creation, nor is inadequate interest rate valuation or need for other technical reserves indicated. (j) Reinsurers’ Share in Actuary Technical Reserves The Company records liabilities in actuary technical reserves in net amounts, i.e., after deducting the reinsurers’ share/participation. The amount of this share depends on the provisions of the relevant reinsurance contracts, the mode of financial settling with reinsurers, and considerations based on the principle of precaution. The Company records reinsurers’ participation in the reserve for unearned premium and claim settlements. Reinsurers do not participate in any other actuary technical reserves. (k) Reserves for Other Risks and Losses These reserves are designated for coverage of risks, losses, and other incidental obligations which are clearly defined and whose origin/cause is probable or certain, but their amount of moment of occurrence is uncertain. The reserve for risks or losses incurred under the above circumstances is created in accordance with Sec. 26 of Act No. 563/1991 Coll. Reserve for Taxes Reserve for taxes is created as of the balance sheet’s closing date, and its amount depends on estimation of the Company’s tax liability payable as corporate income tax. The reserve is used when the Company files its corporate income tax declaration. The balance remaining after paying the corporate income tax is accounted for as advance on income taxes paid during the fiscal period. (l) Financial Placements (Investments) Debt Securities (Bonds) Debt securities are recorded at acquisition time and at acquisition value. Acquisition value is understood as the price paid for purchasing the bonds, including the aliquot interest yield and direct acquisition expenses. The Company amortizes bonuses or discounts on all debt securities. Bonuses and discounts are dissolved in profit and loss statements linearly from the moment of acquisition until date of maturity. On closing date, debt securities are revaluated to actual/fair value.

23

Actual value is understood to be the market value announced in the domestic or foreign stock market or another public (organized) market. The Company applies the market value announced the day that is the closest to the balance sheet’s closing date, not a later date. If no market value is available or if the market value does not reflect a fair value, the actual value is determined by qualified estimation. The Company has debt securities that are classified as tradable. Variations in the actual value of tradable debt securities are accounted for in results. Debt securities denominated in a foreign currency are converted to their value in CZK at the current exchange rate announced by the �NB and currency variances become part of their revaluation to actual value. Shares/Stock and Other Securities with Variable Yield Shares and other securities with variable yield are recorded at acquisition time and at acquisition value. Acquisition value is understood to be the price at which the share and other securities with variable yield were purchased, including direct acquisition expenses. On the balance sheet’s closing date, the shares and other securities with variable yield are revaluated to actual value. Actual value is understood to be the market value announced in the domestic or foreign stock market or another public (organized) market. The Company applies the market value announced the day that is the closest to the balance sheet’s closing date, not a later date. If no market value is available or if the market value does not reflect a fair value, the actual value is determined by qualified estimation. Variations in the actual value of shares and other securities with variable yield are accounted for in results. Shares and other securities with variable yield denominated in a foreign currency are converted to their value in CZK at the current exchange rate announced by the �NB and currency variances become part of their revaluation to actual value. Financial Placements in Entrepreneurial Groups (Equity Shares) Equity shares with controlling influence are understood to be participation in a third-party company, in which the Company has a controlling influence; furthermore, this item may contain other cases where the Company is a controlling entity. Equity shares with substantial influence are understood to be participation in a third-party company, in which the Company has a substantial influence. Unless a proof to the contrary is presented, substantial influence is understood to mean at least 20 % voting rights. Equity shares are recorded at acquisition time and at acquisition value. Acquisition value is understood as the price paid for purchasing the equity share, including direct acquisition expenses. The actual value of financial placements in entrepreneurial groups is based on the net value of the assets or an expert’s appraisal. On the balance sheet’s closing date, equity shares are revaluated to the actual value. Variances in the actual value of equity shares are accounted for in the balance sheet. Deposits with Financial Institutions Deposits with financial institution are recorded at nominal value at acquisition time. At the end of the fiscal period, these assets are revaluated to actual value. The real value of short-term deposits with financial institutions is understood to be their nominal value, including accrued interest. Deposits denominated in a foreign currency are converted to their value in CZK at the current exchange rate announced by the �NB and currency variances become part of their revaluation to actual value. Variations in the actual value are accounted for in results.

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Repo Operations Operations in which securities are sold with redemption rights (repo operations) at a fixed, predefined price or are purchased with redemption obligations (reverse repo operations) are recorded as reinsured loans received or granted. The title to the securities is ceded to the creditor (the entity providing the loan). Securities ceded as part of repo operations remain included in the relevant items as securities in the Company’s balance sheet, and the amount obtained by the cession of the securities as part of repo operations is recorded under “Other liabilities – loans received”. Securities received as part of reverse repo operations are recorded in sub-statements only. The loan granted as part of reverse repo operations is recorded under “Other receivables – loans granted”. For bonds ceded as part of repo operations, the interest is accrued; for bonds received as part of reverse repo operations, the interest is not accrued. Revenues and expenses incurred as per of repo and reverse repo operations, respectively, the differences between the sale and purchase price is accrued over the time of the transaction and recorded in the profit and loss statement as “Revenue from other investment – interest gained” or “Costs of financial placements – interest paid”. (m) Financial Investment Expenses and Revenues The method of recording financial investment expenses and revenues and their allocation to life and non-life accounts Financial investment expenses and revenues related to life insurance classes are recorded under the technical life insurance account. Other financial investment expenses and revenues that are not related to life insurance are recorded in the non-technical account. Financial investment expenses and revenues related to non-life insurance are subsequently transferred from the non-technical account to the technical non-life insurance account. Method of Recording Financial Investment Realized For recording realized financial investment the Company uses the so-called “gross” method of accounting. Pursuant to this method, all revenues from realized financial investments are recorded separately in the amount of the sale price of the given financial instruments and the expenses are recorded separately in the amount of their book value. (n) Long-term Tangible and Intangible Assets Long-term tangible and intangible assets are recorded at acquisition value. Long-term tangible assets at acquisition value up to CZK 40,000 and long-term intangible assets at acquisition value up to CZK 60,000 are recorded under expenses in the fiscal period of their acquisition. Their annual depreciation rate is based on the estimated utilization period of the tangible and intangible assets.

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Depreciation Plan Type of assets Class Years Method % Software 1 3 accelerated 20/40/40

Tangible investment assets 1 3 accelerated 20/40/40

Tangible investment assets 2 5 accelerated 20 p.a.

(o) Conversion of Foreign Currencies Transactions performed during the fiscal year in the area of insurance and reinsurance are converted at the fixed foreign exchange rate announced by the �NB, which always comes into effect the first day of the month. Other transactions performed during the fiscal year are converted at the foreign exchange rate announced by the �NB that is in effect the day of the transaction, or at the rate at which the transaction was realized. Assets and liabilities in a foreign currency are converted on the balance sheet’s date at the official exchange rate of the �NB in effect that day. Currency gains and losses are accounted for in results. (p) Adjusting Items Adjustments are created to receivables and other assets. Adjustment reflect temporary decline of the value of individual assets. The amount thereof is determined on the basis of qualified risk assessment by the Company’s management. As for adjustments to receivables from policyholders, the Company determines them on the basis of an analysis of their recoverability (returns). Adjustments are created on a flat rate basis, according to the age structure of the receivables, taking into consideration the payment default risk in certain individual cases. (q) Permanent or Long-term Decline of the Value of Assets On the balance sheet’s closing date, the Company tests permanent long-term decline of the value of its assets that are not reevaluated to their actual/fair value, as well as assets that are revaluated but the variances in their actual value are recorded in results. Permanent and long-term decline of the value of the given assets is reflected in results. (r) Differentiation of Common Items into Life and Non-life Insurance Financial Investment Expenses and Revenues Financial investment expenses and revenues are allocated to life and non-life insurance in a manner described in Par. I.4.(m). Other Expenses and Revenues

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During the fiscal period, clearly allocable expenses and revenues are recorded directly on technical life and non-life accounts or non-technical account. Expenses and revenues that cannot be unambiguously allocated are recorded primarily on the non-technical account and subsequently transferred to technical life or non-life accounts. The key factor for determining their allocation is the ratio of gross prescribed premium. This method is not used for transferring taxes, fees, or expenses that are not directly related to insurance or reinsurance. (s) Income Tax Income tax for the given period consists of due taxes and fees arising from variances in deferred tax. Due tax includes tax calculated from the tax base using the tax rate in effect in the current year, plus all retrospective tax assessment and tax refund from previous periods. Deferred tax is based on temporary differences between the book and tax value of the Company’s assets and liabilities using income tax rate in effect during the period in which tax liability or refund is claimed. Deferred tax is claimed only if no doubt exists that the refund could be applied to tax liability in the following fiscal periods. (t) Consolidation The Company’s accounting records are compiled as a non-consolidated balance sheet. I. 5. Changes in Accounting Methods and Procedures Since 2009 accruals to commissions on insurance policies are recorded indirectly, whereby the base for calculation of the reserve for unearned premiums is reduced by the relevant commissions. This methodical change did not have any impact on the Company’s economic results, see I. 4(e). Also, since 2009, other acquisition costs of insurance policies are not being accrued. This change did impact on the Company’s economic results in 2009, reducing the pre-tax results by CZK 2,693,000.

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II. SPECIAL CONTENTS II. 1. Non-life Insurance

Overview of non-life insurance in 2009 and 2008 is articulated by class as follows:

Insurance class

Gross prescribed premiums

Gross earned

premium

Gross claim

settlement costs

Gross operating expenses

Results from reinsurance

Direct insurance

Accident and sickness 1

2009 47,729 47,876 3,179 38,662 -1,702 2008 44,560 9,654 2,553 12,006 -283 Motor and other 3 2009 11,924 12,043 8,828 4,522 293 2008 4,322 3,244 1,473 996 -568

Fire and other property 8,9

2009 43,261 53,118 1,524 21,221 -30,737 2008 53,861 48,980 43,565 12,869 1,950 Third-party liability 13 2009 30,553 38,541 5,667 9,013 -21,938 2008 26,201 18,764 105 6,697 -16,599 Other losses 16 2009 75,002 66,907 33,191 58,175 3,778 2008 46,620 39,149 22,744 23,171 -3,497Total 2009 208,469 218,485 52,389 131,593 -50,306 2008 175,564 119,791 70,440 55,739 -18,997

Growth of gross earned premium and gross operating expenses is the result of changed methodology of calculating accruals of acquisition costs (see Par. I.5).

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II. 2. Life Insurance Gross prescribed premium in life insurance: 2009 2008Individual premium 927 968Premium from group insurance policies 0 0Total 927 968Current premium 927 968Single premium 0 0Total 927 968Premium from no-bonus policies 927 968Premium from bonus policies 0 0Premium from policies where the policyholder bears investment risks 0 0

Total 927 968Result from reinsurance 0 0 II. 3. Total Gross Prescribed Premiums by Country Total amount of gross prescribed premium by country: 2009 2008 Czech Republic 190,403 164,547 Slovak Republic 18,993 11,985 Total 209,396 176,532 II. 4. Overview of Commissions The total amount of commissions payable in direct insurance in 2009 amounted to CZK 56,058,000 (2008: 45,395,000), thereof, acquisition commissions in 2009 amounted to CZK 45,450,000 (2008: 33,288,000), and collecting commissions in 2009 amounted to CZK 10,608,000 (2008: 12,107,000). Collecting commissions are recorded as part administrative expenses.

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III. OTHER DATA III. 1. Long-term Intangible Assets As of 31 December 2009, the Company owns long-term intangible assets at residue value of CZK 1,232,000 (as of 31 December 2008, this value was nil). III. 2. Financial Placements (Investments) (a) Actual/Fair Value and Acquisition Value of Financial Investments

Actual value Acquisition value Type of financial investment 2009 2008 2009 2008

Equity with controlling influence 11,505 11,514 7,338 7,338

Equity on entities with substantial influence 143,912 158,360 120,189 120,189

Shares and other securities with variable yield* 31,195 57,737 31,719 31,719

Debt securities 138,473 131,682 135,650 116,884

Deposits with financial institutions 45,017 36,392 45,017

36,378

Total 370,102 395,685 339,913 312,508 (b) Equity Shares 2009 Name & Domicile

Equity share in %

Equity share

(acquisition value)

Total amount of registered

capital

Total amount of

share capital

Economic result for

fiscal period

Equity on controlled entities EGIDA, a.s. 100 2,000 2,000 3,258 589 M Securities o.c.p., a.s. 100 5,338 8,040 8,247 128 Equity in entities with substantial influence ZEVETA Bojkovice, a.s. 28.55 120,189 497,426 559,181 4,311 Total N/A 127,527 507 466 570,686 5,028

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2008 Name & Domicile

Equity share in %

Equity share

(acquisition value)

Total amount of registered

capital

Total amount of

share capital

Economic result for

fiscal period Equity share with controlling influence EGIDA, a.s. 100 2,000 2,000 3,258 589 M Securities o.c.p., a.s. 100 5,338 8,040 8,256 550 Spolek pro chemickou and hutní výrobu, a.s. * 4.44 31,719 1,850,381 2,162,815

28,021

Equity share in entities with substantial influence

ZEVETA Bojkovice, a.s. 28.55 120,189 497,426 554,870 2,090 Total N/A 159,246 2,357,847 2,729,199 31,250 * In 2008, the Company had an equity share of 4.44 % in Spolek pro chemickou and hutní výrobu, joint-stock company (henceforth only “Spolek”), but due to acting in accord with the leading shareholder, it was classified as a controlling entity. On 28 August 2009, acting in accord was terminated and the Company ceased to be a controlling entity. Therefore, the Company transferred the investment in Spolek, as of the said date, from the category of Equity Shares to the category of Shares and Other Securities with Variable Yield, the comparable data for fiscal period 2008 were adjusted in Table III.2(a) accordingly. As of the date of the transfer, the Company revaluated the value of these shares from the initial actual value recorded as of 31 December 2008 in the amount of CZK 57,737,000 to the actual value of CZK 22,922,000, based on an expert’s appraisal, and entered it in the balance sheet under Appreciation Adjustment/Variances. The Company set the actual value of the shares, as of 31 December 2009, at CZK 31,195,000, in accordance with an expert’s appraisal. The Company entered the change of the actual value from the date of the transfer until 31 December 2009 under results, in accordance with accounting procedures. In 2009, the resulting impact of the transfer and the change in the actual value on share capital, before tax, and the Company’s operating results, was CZK -34,815,000 on the appraisal differences and CZK 8,273,000 on the economic result.

(c) Land & Buildings (Real Estate)

As of 31 December 2009, the Company owns no land or buildings.

(d) Other Loans

The Company has not granted any loans to policyholders. (e) Debt Securities

Actual value Acquisition value Debt securities 2009 2008 2009 2008

Tradable securities 138,473 131,682 135,650 127,723

Total 138,473 131,682 135,650 127,723

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As of 31 December 2009, the Company owned corporate bonds from a sole issuer at actual value of CZK 65,193,000. Due to non-existence of an active market for these bonds, their actual value, as of 31 December 2009, was determined by qualified estimation. III. 3. Receivables and Payables (a) Adjusting Items to Receivables As of 31 December 2009, adjustments to receivables from policyholders amounted to CZK 6,012,000 (2008: 4,686,000). (b) Other Receivables 2009 2008 Ceded receivables 0 1,820 Advances paid 91 71 Receivables from insurance brokerage 5,457 1,820 Deferred tax receivables (refund) 2,418 0 Other receivables 554 307 Other receivables, total 8,520 4,018 (c) Overdue Payables and Receivables The total volume of other overdue payables reached, as of the balance sheet’s closing date, the amount of CZK 615,000 (2008: 422,000); as of the same date, the Company had other overdue receivables in the amount of CZK 5,457,000 (2008: 0,000). (d) Long-term Payables and Receivables (maturity period above five years) At the end of 2009, the Company had no record of long-term payables or receivables with maturity period exceeding five years (2008: 0,000). (e) Payables and Receivables to/from Reinsurers The Company has a debit balance of payables and receivables with reinsurers in the amount of CZK 7,574,000 (2008: 12,345,000).

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III. 4. Intercompany Receivables and Payables (a) Receivables and Payables to/from Controlled Entities Receivables Payables Company name 2009 2008 2009 2008 Long-term *) 0 0 0 0 Short-term EGIDA, a.s. 0 0 428 56 Spolek pro chemickou and hutní výrobu, a.s. 0 6 146 0 0

MAXIMA Slovakia s.r.o. 85 0 0 0 Total 85 6,146 428 56 *) Receivables and payables with maturity period exceeding 5 years. (b) Receivables & Payables from/to Entities in which the Company has Substantial Influence

Receivables Payables Company name 2009 2008 2009 2008 Long-term 0 0 0 0 Short-term ZEVETA a.s. 0 161 0 0 Total 0 161 0 0

(c) Receivables and Payables from/to Other Companies in the Group As of the end of 2009 and 2008, the Company had no receivables or payables from/to other companies in the group. All transactions with associated entities were realized under normal market conditions.

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III. 5. Long-term Tangible Assets

Inventory Transportation

means Total Acquisition value as of 1.1.2009 354 270 624 Increments 43 0 43 Decrements 111 0 111 Acquisition value as of 31.12.2009

286 270 556

Adjustments as of 1.1.2009 354 54 408 Depreciation 14 54 68 Adjustment losses 111 0 111 Adjustments as of 31.12.2009 257 108 365 Residue value as of 1.1.2009 0 216 216 Residue values as of 31.12.2009

29 162 191

III. 6. Temporary Assets and Liabilities (a) Residue Accruals on Acquisition Costs of Insurance Policies 2009 2008 Life insurance 26 31 Non-life insurance 0 38,873 Total 26 38,904 Since 2009, the acquisition costs of insurance policies are accrued indirectly, as described in Par. I.4(d). (b) Estimated Assets Under estimated assets, the Company records estimated prescribed premium from insurance policies signed in 2009, but entered into the system only after the December closing date, in the amount of 2 274,000 (2008: 0,000).

(c) Estimated Liabilities 2009 2008 Other 292 644 Performance bonus 1,305 0 Commissions based on estimated premium 756 76

Reinsurance premium based on estimation 498 0

Total 2,851 720

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Estimated Reinsurance Premiums and Commissions

Under reinsurance premium, the Company records estimated reinsurers’ equity shares based on estimated prescribed premium entered in estimated receivables; under estimated commissions, the Company records estimated commissions based on estimated prescribed premium entered in estimated receivables.

III. 7. Share Capital (a) Registered Capital Registered basic capital consists of 250,000 bearer shares at nominal value of CZK 576, i.e., a total value of CZK 144,000,000; and 250,000 ordinary bearer shares, certificated, at nominal value of CZK 424, i.e., a total value of CZK 106,000,000, y which the registered capital was increased in the course of 2007. As of 31 December 2009, 100 % of the registered capital increment has been paid up in full. (b) Other Capital Funds 2009 2008 Revaluation of assets and liabilities at actual/fair value 17,553 59,480 Other capital funds 282 282 Total 17,835 59,762 (c) Revaluation of Assets & Liabilities at Actual/Fair Value 2009 2008 Balance as of 1.1. 59,480 83,814

Change in actual value of financial investments (hedging derivates not included) -49,272

-17,733

Deduction of revaluated financial investments in P&L statement upon realization or permanent depreciation or maturity date 0 -6,601

Change in deferred taxes 7,345 0

Balance as of 31.12. 17,553 59,480 (d) Planned Distribution of Current Fiscal Period Profit/Loss In the current fiscal period, the Company generated profit in the amount of CZK 6,421,000. Distribution thereof will be subject to the next General Assembly’s decision.

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III. 8. Technical Reserves (a) Overview of Technical Reserves

Gross amount Equity share reinsurers Net amount

Reserve for unearned premium 2009 112,916 37,448 75,468 2008 123,023 39,447 83,576 Reserve for life insur. premium 2009 668 0 668 2008 638 0 638 Reserve for claim settlements 2009 46,452 22,360 24,092 2008 51,483 27,145 24,338 Total 2009 160 59,808 100,228 Total 2008 175,144 66,592 108,552 (b) Reserve for Claim Settlements Result of loss claim liquidation The difference between the amount of the reserve for claim settlements created as of 31 December 2008 and the claim settlements paid in 2009 (concerning loss claims payable from this reserve) constitutes the balance amount of this reserve as of 31 December 2009. i.e., the result of loss claim liquidation. The gross amount thereof is presented in the table below: Insurance class 2009 2008 Motor insurance - other types of 459 484 Fire and other types of property insurance 14,654 -449

Liability insurance - 568 1,342 Insurance of other losses - 228 -1,062 Accident and sickness insurance 1,425 n/a Total 15,742 297 III. 9. Reserve for Currency Exchange Risk At present, the Company has a reserve for currency exchange risk due to liabilities payable in EUR in the amount of CZK 350,000. III. 10. Financial Obligations Arising from Leasing On 5 December 2007, the Company signed a leasing contract with �SOB Leasing, a.s., for rent-to-own leasing a personal vehicle, VOLVO XC D5 2.4. The total of installments amounts to CZK 853,000, thereof installments amounting to CZK 326,000 were paid in 2009 (2008: 488,000).

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III. 11. Potential Future Liabilities

(a) Court Actions

The Company is not involved in any court action, actively or passively. III. 12. Supplementary Data to Profit and Loss Statement

(a) Administrative Overhead

2009 2008 Collecting commission 10,608 12,107 Personnel expenses 12,513 6,361 Other 6,461 1,198 Consultancy and services, including audits 5,386 5,722 Marketing and promotion 1,868 1,391 SW services 1,748 2,696 Rents 1,501 1,002 Materials and energy 536 426 Travel expenses 311 368 Administrative expenses, total 40,932 31,271

(b) Information on Statutory Auditors’ Remuneration

Remuneration paid to the statutory auditor is contained in the Company’s administrative overhead. The total amount of CZK 2,469,000 (2008: 1,453,000) consists of the following amounts:

2009 2008 Ex-lege audit 2,219 1,227 Other consulting services 250 0 Tax consultancy 0 226 Total remuneration 2,469 1,453 In 2009, the Company recorded auditing and consulting services under expenses, on the basis of the invoices received, in the period they were provided. This principle will also be applied to the following fiscal periods. (c) Other Technical Expenses and Revenues

2009 Gross amount Equity share

reinsurers Net amount Non-life insurance Other technical expenses 5,348 0 5,348 Other technical revenues 12,902 0 12,902 Life insurance Other technical expenses 0 0 0

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Other technical revenues 0 0 0

2008 Gross amount Equity share

reinsurers Net amount Non-life insurance Other technical expenses 6 853 0 6 853 Other technical revenues 12 309 0 12 309 Life insurance Other technical expenses 0 0 0 Other technical revenues 0 0 0 The amount of other technical expenses in 2009 was influenced by the amount of adjustments to receivables, which amounted to CZK 2,026,000 in 2009; claims-free history expenses to CZK 1,110,000; insurance brokerage expenses to CZK 1,082,000; and reinsurance operations reached CZK 1,130,000. In 2008, the amount of other technical expenses was influenced by the amount of adjustments to receivables, which amounted to CZK 5,727,000 in 2008; and currency differences in the amount of CZK 959,000. Other technical revenues in 2009 came from commissions for mediation of insurance policies in the amount of CZK 5,923,000 and profit shares of CZK 6,979,000. Other technical revenues in 2008 came from commissions for mediation of insurance policies in the amount of CZK 11,807,000 and currency variances in commissions in the amount of CZK 502,000. (d) Employees Average number of employees in 2009 and 2008 2009 Average number of

employees Payroll Social security & health insurance

Other costs

Total 24 11,619 3,150 9 2008 Average number of

employees

Payroll Social security & health insurance

Other costs

Total 15 8,133 2 422 24 Personnel expenses are recorded both under acquisitions and administrative expenses. (e) Mandatory Social Security and Heath Insurance Premiums The total of mandatory social security and health insurance premiums amounted to CZK 382,000 (2008: 223,000), thereof CZK 264,000 (2008: 157,000) for social security and CZK 118,000 (2008: 66,000) for health insurance. None of these payables are overdue.

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(f) Obligations to the State – Tax Liabilities and Subsidies

In 2009, the Company’s tax liabilities amounted to CZK 132,000 (2008: 246,000) and represent tax liability payable on December salaries in the amount of CZK 146,000 (2008: 246,000) and advance payments in the amount of CZK 14,000. (g) Remuneration of the Members of Statutory Bodies For fiscal periods 2009 and 2008, the following remunerations were paid to the members of statutory bodies: 2009 2008 Members of the Board of Directors and Supervisory Board 360 315 Total remunerations 360 315 (h) Loans and Advances Paid to Current Members of Statutory Bodies In 2009 and 2008, as of balance sheet’s closing date, the Company granted or paid no loans or advances to members of the Board of Directors or Supervisory Board (statutory bodies) (2008: 0,000). (i) Facts of Concern The Company does not have a majority shareholder. Shareholders do not have any contracts of controlling. An intercompany report will form part of the Annual Report. (j) Transfer of Costs Between Technical and Non-technical Accounts The total amount of costs transferred between the technical accounts of life insurance, non-life insurance, and non-technical account, using the key specified in Par. I.4.(r), amounted to CZK 28,819,000 (2008: 2,193,000), as of the balance sheet’s closing date. (k) Profit Shares In 2009 and 2008, the Company received no profit shares. (l) Result on Non-technical Account As of 31 December 2009, the result on non-technical account amounted to CZK 5,050,000 (2008: 2,386,000). (m) Profit/Loss Before Tax As of 31 December 2009, the fiscal period’s pre-tax profit reached CZK 7,462,000 (2008: loss -15,950,000). III. 13. Taxes Deferred tax receivables / Deferred tax liabilities

39

In 2009, the Company recorded deferred tax receivables (refund) from valuation variances recorded in the balance sheet in the amount of CZK 2,424,000 (2008: deferred tax liability CZK 4,921,000) and CZK 6,000 tax liability from depreciation variances. III. 14. Notable Circumstances Administrative proceedings ensuing an inspection performed by the Czech National Bank in 2009 were still in progress at the time of the issue of the Auditor’s Statement.

III. 15. Subsequent Events As of the balance sheet’s compilation date, the Company’s management has no knowledge of any significant event requiring amendment to the Company’s balance sheet. Prague, 9 April 2010 Statutory representative: Siarhei Khimaroda, Ing.

[Member]Vice-president of the Board of Directors


40

Report on Intercompany Relations Due to increment of the Company’s registered capital, entered in the Companies Register on 21.9.2007, the Company’s shareholder structure has changed. Thus, in 2009, as a result of this change, there was no controlling entity in the sense of the provisions of Sec. 66a of the Commercial Code, and the Company is therefore not subject to the obligation of compiling a report on intercompany relations between the controlling and controlled entities, or between the controlling and other entities controlled by the same controlling entity.

41

REPORT

of the Supervisory Board of MAXIMA pojiš�ovna, a.s., prepared for Ordinary General Meeting held on 29 April 2010

Dear Shareholders, The Supervisory Board of MAXIMA pojiš�ovna, a.s., has been meeting regularly and conducted its activities on a current basis since the last Ordinary General Meeting. During its meetings, the Supervisory Board was monitoring the activities of the Board of Directors, as well as the overall situation related to the Company’s activities and development.

The Supervisory Board’s evaluation focused primarily on issues concerning assurance of the Company’s financial and business operations, timely processing and settlement of loss claims, internal operations, loss claim reinsurance, approach to the supervisory authority, and last but not the least the Company’s response to legislative updates concerning the insurance sector.

From the Board of Directors, the Supervisory Board was presented with all the materials and decisions concerning the Company’s activities and management, as well as information concerning the Company’s results and activities as a whole, in a timely manner.

The Supervisory Board’s members were present when the conclusions of the Czech National Bank’s inspection were verbally presented and are also acquainted with the Company’s objections to the contents of the inspection checklist, including the decisions arising therefrom

The Supervisory Board reviewed, during its March meeting, the balance sheet for 2009, including the independent Auditor’s Statement, which confirms that the Company’s financial statements, as of 31.12.2009, reflect accurately the Company’s assets, liabilities, share capital, and overall financial situation, and that its economic operations comply with the provisions of Act No. 563/1991 Coll., the Accounting Code, and other relevant regulations currently in effect in the CR.

The Supervisory Board recommends that the General Meeting approve the Company’s Balance Sheet and P&L Statement 2009 and the decision to use the recorded profit of CZK 6,421,000 for covering previous fiscal periods’ losses, after allocations to the reserve funds.

Prague, 30 March 2010

Ing. Jaromír Florián

Supervisory Board Chairman

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AUDITOR’S REPORT

Auditor’s Report for the Shareholders of MAXIMA pojiš�ovna, a.s. Balancing of Books Having completed an audit of the company’s accounting records, we issue today, 9 April 2010, a financial report, which constitutes a part of the Annual Report 2009, in the following wording: We performed an audit of the financial records of Maxima pojiš�ovna, a.s., i.e., the balance sheet as of Dec. 31, 2009, the profit and loss statement 2009, the overview of changes in the Company’s equity capital 2009, and the Annex to the financial statements, including description of the most important accounting methods and other supplementary information. Information on Maxima pojiš�ovna, a.s., is presented in Par. I.1. of this Annex to these financial statements.

(a) The Statutory Body’s Responsibility for the Financial Statements

Compilation and accuracy of the financial statements of Maxima pojiš�ovna, a.s., as well as their conformity to the Czech accounting regulations is the responsibility of the statutory body of Maxima pojiš�ovna, a.s. The Board’s competences include making arrangements for, implementing, and assuring internal audits over the compilation and accuracy of the Company’s financial statements, so that no discrepancies could occur due to fraud or error. Furthermore, the Board decides what accounting methods to choose and apply, and ensures that estimation is done adequately.

(b) The Auditor’s Responsibility

It is our duty to take a standpoint to these financial statements, on the basis of our audit, which we carried out in compliance with the Act on Auditors, the International Auditing and Assurance Standards, and the contingent Application Clauses of the Chamber of Auditors, Czech Republic. Pursuant to the aforesaid provisions, we are obliged to adhere to certain ethical standards and to plan and conduct audits in a manner that precludes, with a reasonable degree of certainty, the possibility of significant inaccuracies. The audit involves a number of auditing procedures with the aim of acquiring evidence proving the amount and circumstances specified in the financial records. Selection of auditing procedures is up to the auditor’s discretion, including assessment of the potential risk that the records contain significant inaccuracies due to fraud or error. In assessing this risk, the auditor takes into consideration the Company’s internal controlling that is relevant for the financial statements’ compilation and accuracy. The objective of assessing the quality of the Company’s internal audits is to be able to choose relevant procedures, not to judge the

KPMG KPMG �eská republika Audit, s.r.o. Pob�ežní 648/1a 186 00 Prague 8 Czech Republic

Telephone +420 222 123 111 Fax +420 222 123 100 Internet www.kpmg.cz

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effectiveness of internal controlling. Furthermore, the audit includes assessment of the suitability of the accounting methods used, the adequacy of the estimation methods used by the Company’s management, and assessment of the reporting value of the financial records as a whole. We believe that the evidence data constitute an adequately solid base for issuing our statement. The Auditor’s Statement In our opinion, the audited annual financial statements render an accurate and honest picture, in all the relevant aspects, of the assets, liabilities, and financial situation of Maxima pojiš�ovna, a.s., as of December 31, 2009, as well as of the expenses, revenues, and operating results in 2009, in accordance with Czech accounting provisions. The Annual Report Furthermore, we have verified the Annual Report’s compatibility with the aforesaid financial statements. While responsibility for the accuracy of the Annual Report is on the part of the Company’s statutory body, our role is to issue a statement on the Annual Report’s compatibility with the financial statements, based on the results of our audit.

We conducted the audit in compliance with the Act on Auditors, the International Auditing and Assurance Standards, and the contingent Application Clauses of the Chamber of Auditors, Czech Republic. These Standards require us to plan and conduct audits so as to be reasonably certain that the information in the Annual Report describes circumstances that correspond in all the important aspects to the relevant financial statements. We are confident that the audit we performed provides adequate material to justify this Statement.

In our opinion, the information presented in the Annual Report reflects, in all the important aspects, the facts recorded in the balance sheet.

In Prague, April 13, 2010

KPMG �eská republika Audit, s.r.o. Romana Benešová, Ing. Partner

License No. 71 License No. 1934

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