Report of the Board of Directors

The main goal of Komerční pojišťovna is to offer a broad range of insurance products and financial tools to provide protection to its clients and support them in achieving their personal wishes and goals. Komerční pojišťovna uses the European license for the delivery of services within the whole EU and cooperates with partner companies in the Société Générale Group in Bulgaria, Romania and Germany.

Business strategy of Komerční pojišťovna is based on four pillars:

1) Bank-insurance business model in cooperation with Komerční banka

Savings and unit-linked life insurance

Risk life insurance for loans

Non-life insurance

2) Cooperation with other partners in the KB Financial Group – Modrá pyramida stavební spořitelna, ESSOX, Penzijní fond KB

Risk life insurance

Non-life insurance

3) External business partners

Risk life insurance

4) International cooperation within the Société Générale Group

Non-life insurance

Czech economy and the insurance market in 2010

Macroeconomic context

In 2010 the Czech economy finally emerged from the red numbers recorded in 2009, growing 2.3% year-on-year (measured by GDP).

All in all, 2010 was characterized by unemployment rate stabilization; however, it still remains high, having reached 9.6% in December 2010.

Inflation development was a positive feature in 2010; during the whole year, inflation stayed at very low values and the average inflation rate reached 1.5%.

In Q4 2010, the trend of government bonds changed and their revenues started growing slowly once again, unlike in the first three quarters, when their revenues declined considerably.

Development of the insurance market in the Czech Republic

In 2010, the total written premium increased by 8% vs. 2009. The performance of the life insurance sector was even better and its year-on-year increase was 19% whereas its share in the overall written premiums was approximately 47%.

A major feature of 2010 was an increase of single premiums vs. 2009 by 58%, which indicates a change in the confidence of clients in life insurance products as a reliable, safe and profitable tool for depositing money.

However, the share of life insurance premiums in the Czech Republic‘s GDP is still lower than half of that achieved in developed Western European countries, and the Czech insurance market therefore
has a huge growth potential for the future.

KP‘s position in the insurance market

In 2010, Komerční pojišťovna continued in a trend started in the previous years and claimed a strong position in the life insurance market, ranked second in terms of written premiums during the whole year. Compared to 2009, this was an improvement of 4 places. KP‘s share in the life insurance market was 12.3% at the end of 2010.

At the same time the company managed, in spite of the fading unfavourable domestic and global economic situation and decreasing interested rates, to ensure for its clients a yield of 2.4-3.3%, depending on the type of product. In 2010, Komerční pojišťovna created a reserve for bonuses and discounts in the amount of CZK 165 million for the client‘s future shares of profits, see clause 2.7 in the Notes to the Financial Statements.

Just like in the previous years, the written premiums increased once again in 2010 for risk life insurance, which secures the clients and their relatives against unexpected life events. Compared to 2009, the written premiums in risk insurance increased by 6%. Komerční pojišťovna will continue developing these products because they constitute a suitable hedging instrument for loans of all types.

Komerční pojišťovna also did well in non-life insurance, with an increase of almost 10% vs. 2009. This achievement was particularly possible in light of the developing business activities of KP within the Société Générale Group outside of the Czech Republic. Non-life insurance products serve to suitably complement banking and other financial products.

Sales through distribution channels other than Komerční banka also recorded a year-on-year increase. MPSS increased the volume of written premiums by 9% and ESSOX by almost 7%.

In the international insurance market, KP managed to develop cooperation with SG Group companies in 2010. One of them – Bulgarian company SGEB, Komerční pojišťovna provides insurance against misuse of payment or credit card and travel insurance for payment and credit cards. At the same time, partnership with a major Romanian bank BRD was established to provide BRD with KP insurance against misuse of payment or credit cards. Additional cooperation was launched with the Bulgarian company TBI, which uses KP to provide insurance against the risk of loss of job. This development confirms an extremely good cooperation with companies within the Société Générale Financial Group.

2010 can be described as a very successful year also in terms of sales through brokerage companies, as the company entered into cooperation with major partners, such as Fincentrum and INSIA.

KP‘s product portfolio

New products in 2010

Komerční pojišťovna was focusing on extending its life insurance offer and on risk life insurance innovation.

In cooperation with Komerční banka, KP continued offering Guaranteed Funds Forte in 2010. In the course of the year, three new Forte funds were introduced on the market, offering secured returns on investments and a potential yield of up to 10% p.a. to the clients.

In the first half of the year in cooperation with ESSOX, Komerční pojišťovna introduced its new products Super Vega (special insurance against misuse of credit card) and insurance of the ability to repay loans on car purchase..

As regards risk life insurance, the scope of insured risks was enlarged for the distribution network of MPSS to cover most situations where problems may arise for the client with loan repayment. The risk life insurance product was also redesigned to suit brokerage companies.

1. Unit-linked and capital life insurance – Vital product family

Vital Invest – unit-linked life insurance

This is a modern and flexible product that not only protects the client, but also brings an innovative guarantee of return on investment in case of the client‘s death. This guarantee ensures the return of invested funds to the client’s relatives even in case of significant market fluctuations.

In Vital Invest, KP also offers a guaranteed interest rate fund with the yield of 3.0% in 2010. The Guaranteed Funds Forte are also available to provide clients with a guaranteed yield and the possibility to participate in the yields of capital markets at the same time.

Brouček – children‘s unit-linked insurance

The product allows parents to save an amount necessary for their children to start their adult life and, at the same time, it gives them an opportunity to insure themselves and their child against unexpected events. Assistance services are included in the product as well.

Vital – savings life insurance

It is a long-term, fully flexible savings product offering clients an attractive and steady yield and the possibility to make free extraordinary withdrawals, if needed. Moreover, compared to pure savings products, in the case of death Vital offers an insurance benefit increased by up to 15%.

Program Vital – life insurance with an employer’s contribution

Capital life insurance for employees consists of two products – a pure savings product and a combined option. It is up to each employer to decide which group of employees should be motivated and what the amount for motivation should be to increase their loyalty to the company. For this product it is possible to take an opportunity to arrange insurance contracts directly with the employer.

Vital Premium – savings life insurance for KB‘s private banking clients

KB‘s key clients are offered by Komerční pojišťovna a very flexible savings product with an attractive guaranteed yield. In 2010, the value of the clients’ funds was appreciated by 3.3%.

2. Risk-oriented insurance products

Risk life insurance for loans

The client can decide which of the four main life risks he or she wants to be insured against. In the case of death, disability, inability to work or loss of job, KP shall pay the client’s instalments of the loan and, in certain cases, even the entire outstanding balance of the loan.

Merlin, Vega a Super Vega – insurance against loss and misuse of payment or credit cards

Today, each payment card can be fully secure if it is insured. At a very good price, it is possible to insure not only against misuse of the card as such, but also against any costs related to loss of keys or identification documents, misuse of a mobile phone or theft or damage of the goods purchased using the card. The client does not bear any loss participation. In the past, the Merlin insurance policy was recognized in the Golden Crown competition as one of the best financial products in the field of payment cards. KP offers this type of product also to SG Group companies within the EU.

Profi Merlin – insurance against loss or misuse of payment or credit cards for entrepreneurs

The newer version of the popular product Merlin is aimed at the corporate sector. At a very favourable price, the client can obtain insurance against misuse of the payment card, payment of stop-listing fees or against losses incurred when an entrepreneur’s proceeds are stolen on the way to a KB branch or when cash withdrawn from an ATM is stolen or against theft and misuse of a mobile phone or purchased goods. The client does not bear any loss participation.

Patron – accident insurance

If the client dies due to an accident, the product Patron will secure the client’s relatives and compensate them for his or her regular income for the period of one year. In case of death due to injury, the survivors shall be provided an immediate benefit covering the most necessary expenses in such a complicated life situation which it received within 48 hours of submitting all documents, and then for a period of one year with respect to monthly consideration payment. This insurance cover is provided without a medical examination.

Profi Patron – accident insurance for entrepreneurs

After the good experience of clients with Patron, KP launched this version, tailored especially for entrepreneurs, Profi Patron on the market; they can choose from two options depending on their incomes. The entrepreneur’s family always receives half of the amount credited to his or her business account during the year.

Travel insurance

Komerční pojišťovna covers a full range of risks associated with travelling, i.e. medical expenses, loss of luggage, accident and liability for damage. KP provides travel insurance also within the framework of payment and credit cards of Komerční banka. And for partners from the SG Group within the EU as well.

Risk life insurance for credit cards and consumer loans

KP offers coverage of the risk of death, permanent disability, inability for work and loss of job for the owners of credit cards and consumer loans in KB and ESSOX.

Comments on the financial results

Net profit

In 2010, according to Czech Accounting Standards, the net profit of Komerční pojišťovna was CZK 139 million. According to International Financial Reporting Standards, used for consolidation purposes with KB, the net profit amounted to CZK 153 million.

Gross written premiums

In 2010, the volume of gross written premiums reached CZK 8,982 million, i.e. almost double of the amount generated in 2009. In 2010 Komerční pojišťovna was particularly successful in life insurance operations, where the collected premiums amounted to CZK 8,689 million, i.e. 90% growth from 2009.

In 2010, Komerční pojišťovna focused also on non-life products with the support of international cooperation. The gross written premiums in non-life insurance increased by 10% compared to 2009.

Comparison of the growth of gross written premiums in 2009 and 2010, life insurance (CZK million)

Comparison of the growth of gross written premiums in 2009 and 2010, life insurance (CZK million)

Comparison of the growth of gross written premiums in 2009 and 2010, non-life insurance (CZK million)

Comparison of the growth of gross written premiums in 2009 and 2010, non-life insurance (CZK million)

Structure of gross written premiums

In 2010, the development of the structure of gross written premiums continued in the trend started in 2009. The share of risk life insurance and non-life insurance continued decreasing in favour of savings insurance. In terms of yield, the most attractive products for the clients currently include products with guaranteed yields and Forte funds, offered within the framework of the Vital Invest product.

Structure of gross written premiums in 2010

Structure of gross written premiums in 2010

Structure of gross written premiums in 2009

Structure of gross written premiums in 2009

Portfolio structure

As regards the basic structure of the investment portfolio, there were no significant changes and Komerční pojišťovna continues focusing on conservative titles most of all. Fixed-income bonds account for about 96% of the portfolio, making it possible to guarantee a fixed yield to the clients. The Czech Republic‘s government bonds and bonds issued by banks and corporations seated within the EU constitute a major portion of the portfolio. In addition, it includes time deposits in banks, shares and bonds with variable coupon.

Structure of KP‘s portfolio

Structure of KP‘s portfolio


As at 31 December 2010, total equity amounted to CZK 1,382 million, a 12.5% increase compared to 2009. Total assets at 31 December 2010 reached CZK 21,700 million, which marks a year-on-year growth of almost 50%.

Human resources

KP continues to work on developing its human capital. This can be demonstrated by the execution of the year-long manager training programme, the majority of which took place in 2010. The remit was to develop a set of 5 key leadership competencies across all manager levels, sandwiched by 360 degree feedback.

Once again, HR remained amongst the priorities at Komerční pojišťovna. To meet the challenges set by the company, the HR department underwent reorganisation with the goal of moving closer to the business and bringing more added value. Thus an HR Partner model was developed and implemented to bring HR personnel closer to managers and employees and to better streamline the organisation of specialist activities.

In light of this and in line with the clearly stated goal of enabling employees to develop their careers, KP mapped employee priorities for career development within the group – so-called internal mobility. Towards the end of the year the first fruits of this initiative became apparent with numerous instances of internal mobility, both from within KP, but also from within the SG group, prepared for enacting at the beginning of 2011.

KP HR continues to take part in the regular cooperation and support between SG group entities within the Czech Republic. This established approach to produce synergies at a local level can be best demonstrated by the project to implement SG Evaluation, a new group-wide employee appraisal process and IT tool, which was started at the end of the year, to finish in the first half of 2011. The project is led by a project team from KB, demonstrating a more streamlined country approach to SG project implementation.

All in all, in terms of HR, KP is in a good position to deliver the goals of SG Ambition 2015.

Internal processes

The primary operating objective in 2010 was to flexibly respond to the significant growth of written premiums, especially in the area of savings insurance, offered under the products Vital Invest Forte and Vital Premium. In particular, to further reinforce the satisfaction of the clients and the security of the processes, Vital Premium was migrated to the core IT system of the company “AIA“ in Q4 2010.

The project aimed at consolidating application support for claims handling for all product groups, launched in 2009, was successfully completed in May. Since May 2010, all claims have been therefore settled in the core IT application dedicated to claims handling and will benefit of the secured and automized processes.

The operating processing of risk insurance contracts was redesigned on the back of an extension of distribution channels thanks to cooperation with brokerage firms. In addition, internal processes associated with the redesign of risk insurance for Modrá pyramida, carried out in August, were modified.

In the course of 2010, a workflow management system was gradually deployed in the company‘s individual departments.

Under the Quality Programme, a Document Dematerialization project was triggered in 2010 to eliminate exchange of printed documents with the distributors and clients and to replace them with alternative non-printed forms. This project is coordinated with Komerční banka‘s related project activities within the framework of SG Ambition 2015.

At the same time, in mid-year 2010, for the second time within the Quality Programme, a survey of satisfaction with KP‘s services was conducted in Komerční banka‘s distribution network. It was designed to identify areas for further improvements in quality and efficiency of operating processes.

Komerční pojišťovna, part of the Société Générale Financial Group, focuses on life insurance as well as on the sale of other types of insurance that suitably complement the banking and other financial products of its partners. KP’s products are distributed via KB Group members, especially through the distribution network of KB, but also by the company‘s external partners among financial brokers.