Report of the Board of Directors

In spite of the ongoing economic downturn in the Czech Republic, in 2012 Komerční pojišťovna exceeded CZK 6 billion in written premium.

The key objective of Komerční pojišťovna is to offer a broad range of insurance and financial products to provide customers with insurance protection and support them in achieving their personal wishes and goals. Komerční pojišťovna uses a single licence for the delivery of services within the European Union territory and cooperates with partner companies of the Société Générale Group in Bulgaria, Romania and Germany.

Komerční pojišťovna, a member of the Société Générale Financial Group, focuses on life insurance, but it also sells other types of insurance that suitably complement banking and other financial products offered by its partners within SG Group. KP’s products are mostly distributed via KB Group members, especially through the distribution network of KB, and also by the Company’s external partners from the ranks of insurance brokers.

Macroeconomic Overview 2012

In 2012 the Czech economy declined by 1.2% year-on-year (measured by GDP). In general, 2012 was characterized by higher unemployment, the unemployment rate in December 2012 was 9.4%. Inflation ranged from 3% to 4% in the first nine months of 2012, then began to decline in November and fell to 2.4% at the end of the year. The average yearly inflation rate was 3.3%. While average income from Czech government bonds in Q1 2012 was 2.9%, in following three quarters average income kept falling till 1.7% recorded in Q4 2012.

Trends in the Czech Insurance Market

In 2012, total written premiums fell by 1.2% year-on-year to CZK 140 billion. Conversely, the life insurance market as such kept growing at a rate of 1.8% year-on-year. The volume of premium in the life insurance segment totalled more than CZK 72 billion (all figures have been calculated in accordance with the Czech Insurance Association’s old methodology). As a result, the ratio of life to non-life premiums written changed in 2012 in favour of life insurance which accounted for 51.4%.

KP’s Position in the Insurance Market

In spite of the ongoing economic downturn in the Czech Republic, in 2012 Komerční pojišťovna succeeded in surpassing the CZK 6 billion mark in written premium. In the long run, Komerční pojišťovna has been achieving excellent results, in particular as a result of offering competitive products which provide above-average appreciation to clients despite the volatile conditions in the financial markets and decreasing interest rates.

Depending on the product type, Komerční pojišťovna ensured an attractive appreciation of 2.3% to 2.7% for its clients in 2012. In addition, Komerční pojišťovna significantly boosted its sales of products outside the Komerční banka Group. 2012 was again a very successful year in terms of distribution of KP’s risk life insurance within the sales networks of external partners from the ranks of insurance brokers; compared to 2011, the number of new policies doubled and the volume of written premiums even tripled.

Komerční pojišťovna’s business strategy is built upon four pillars

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

  • Savings and unit-linked life insurance
  • Risk life insurance
  • Non-life insurance

2. Cooperation with other partners in the KB Financial Group – MPSS, ESSOX, KB PS

  • Savings and unit-linked life insurance
  • Risk life insurance
  • Non-life insurance

3. External business partners

  • Risk life insurance

4. International cooperation within the Société Générale Group

  • Non-life insurance

KP’s products are mostly distributed via KB Group members, especially through the distribution network of KB, and also by the Company’s external partners from the ranks of insurance brokers.

For the past two years, Komerční pojišťovna has ranked fifth in the Czech life insurance market. At the end of 2012, KP’s market share accounted for 8.14% in this segment (the figure has been calculated in accordance with the Czech Insurance Association’s old methodology).

In the non-life insurance segment, Komerční pojišťovna achieved favourable results as well, notably in the sale of new or redesigned products prepared in cooperation with Komerční banka, such as MojePojištění plateb or the Merlin insurance policy designed to protect clients against credit card fraud.

Similarly to prior years, cooperation with SG Group’s companies continued in 2012. Total written premiums generated from sales of non-life insurance products by international partner companies significantly climbed by 64% year-on-year.

In 2012, KP created provisions for bonuses and discounts in the amount of CZK 194 million for the clients’ future profit sharing (see clause 2.7. in the Notes to the Financial Statements).

Product Portfolio and New Products in 2012

As in previous years, Komerční pojišťovna designed several new products for its clients in 2012.

In February KP launched a new guaranteed fund Optimo Komodity, allowing customers to participate in commodity markets growth and ensuring return on investment. A second tranche of the fund became available for clients in May.

Since mid-2012 Komerční pojišťovna has expanded its product range with Pojištění Penze, sold via broker companies’ distribution networks. It ranks among risk life insurance policies taken out along with supplementary pension insurance (currently 2nd and 3rd pillars of the pension reform). It protects clients in the event of diminished ability to keep up with payments, such as disability, sick leave, loss of job, etc. Since January 2013 the product has been available also within sales networks of KB and MPSS.

The start of the holiday season coincided with redesigned travel insurance. At the same time, KP began to sell risk life insurance related to a new cash loan provided by Essox, distributed through the MPSS sales network.

October and November were busy months in terms of a variety of new products. KP launched a brand new insurance product in the Czech market – insurance against corporate credit card fraud commited by employees. In addition, in cooperation with Investiční a kapitálová společnost KB, a.s. KP has modified the portfolio of funds listed with unit-linked insurance Vital Invest and Brouček.

Saving product Vital Premium was expanded by a EUR tranche to help clients diversify their investments and savings.

A significant project related to Komerční pojišťovna’s product range offered in 2012 was the introduction of new risk life insurance against major life risks, such as disability, permanent consequences of an accident, serious illnesses, death, inability to work, etc. The new type of insurance was launched in October for the MPSS sales network (under the brand name Moudré pojištění) and for external partners (under the brand name Elán). Another insurance intended for external partners was risk life insurance linked to mortgage loans, marketed under the brand name Hypo. Furthermore, KP adjusted the rates of risk life insurance of mortgage loans due to the implementation of unisex rates.

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 provides 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 the event of major market fluctuations. With the Vital Invest product, KP also offers a guaranteed-appreciation fund with a yield of 2.3% in 2012. Our product offer also comprises the Forte and Optimo guaranteed funds, some of which provide not only the opportunity to participate in capital markets yields, but also the certainty of a guaranteed yield.

Brouček – children’s unit-linked life insurance

The product allows parents to save an amount necessary for their children to start their adult life and, at the same time, it provides an opportunity to insure themselves and their child against unforeseeable events. The product comes complete with assistance services.

Program Vital – life insurance with employer’s contribution

This capital life insurance for employees offers an interesting appreciation and tax benefits. The programme allows companies and their employees to play an active part in their pension insurance and improve their standard of living even when retired. It is up to each employer to decide which group of employees should be motivated and what the amount for motivation should be to enhance their loyalty toward the company. Policyholders may take advantage of signing insurance contracts for this product directly with the employer.

Vital Premium – savings life insurance for KB’s private banking and affluent clients

Komerční pojišťovna offers KB’s VIP clientele a highly flexible savings product with an attractive guaranteed appreciation, which in 2012 accounted for 2.6%. Since 2012 the product has been available in EUR denomination where 2012 appreciation accounted for 2.7%.

2. Risk-oriented insurance products

Risk life insurance

Risk life insurance provides coverage of clients’ key risks and helps them to overcome financial losses arising from death, disability, long-term illness or involuntary loss of job.

Risk insurance against defaulted loans

This insurance policy protects clients against a inability to repay a loan. The clients can decide which of the four main life risks they want to be insured against. In the event of death or disability, KP shall pay the balance of the loan; in the event of incapacity for work or loss of job, KP shall take over the client’s loan instalments.

Pension insurance – insurance against inability to pay contributions within pension plans associated with KB PS products

Pension insurance is risk insurance ensuring that, in the event of unanticipated events, policyholders can continue payments to their pension savings plans, i.e. within the second pillar or supplementary pension savings plan – third pillar.

Risk life insurance Elán / Moudré pojištění

This product covers clients against major risks – 2nd and 3rd-degree disability, permanent consequences of an accident, serious illnesses, death, sick leave, loss of job, hospitalization.

Merlin, Vega and Super Vega – Insurance against loss and abuse of payment or credit cards

Today, each payment card can be fully secure if it is insured. At a very good price, the card is protected against abuse, plus the policy covers any expenses related to a loss of house keys or identification documents. It also covers the purchase of a new mobile phone if the client’s old phone is misused. In November 2011, the Merlin product was redesigned to include insurance of personal belongings and coverage of selected KB’s bank fees. No loss participation is required from the policyholders. KP makes this type of product available for other SG Group companies within the EU.

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

Insurance of credit and payment cards also comprises the corporate segment. At a favourable price, clients can take out insurance against card fraud, payment of stop-listing fees, stolen cash withdrawn from ATMs, business proceeds stolen on the way to a KB branch, and a stolen or misused mobile phone. In November 2011, the Profi Merlin product was redesigned to include insurance of personal belongings and coverage of KB’s selected bank fees. No loss participation is required from the policyholders.

MojePojištění plateb – payments insurance

MojePojištění plateb ensures funds needed for regular monthly payments executed from the client’s current account maintained by Komerční banka in the event of a long-term inability to work, disability, loss of job or sudden death. The amount of regular payments is determined on the basis of regular payments from the policyholder’s account, such as rent, electricity and phone bills, etc.

Profi pojištění plateb – payments insurance

Profi pojištění plateb ensures funds needed for regular monthly payments executed from the client’s business account maintained by Komerční banka in the event of a long-term incapacity for work, disability, or sudden death.

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, as well as for SG Group’s partners within the EU.

Risk life insurance to credit cards and consumer loans

KP offers coverage of the risk of death, permanent disability, incapacity for work and loss of job for credit card holders and clients who take advantage of consumer loans from KB and ESSOX.

Insurance to credit cards Lady karta and A karta

This insurance, automatically included for the relevant cardholders, protects clients’ purchases and mitigates the impact of any unforeseeable events. The product covers insurance of purchased goods, extended guarantee, online shopping and insurance of the lowest price. Ticket cancellation insurance reimburses the costs of a cultural or any other event if the clients cannot participate for unforeseeable reasons. The credit card insurance also comprises home assistance services and the Lifestyle service, including ticket reservation for cultural and sporting events and help with ordering gifts. In addition, holders of Lady karta can take advantage of insurance against theft and robbery of their purse.

Insurance against Komerční banka’s corporate card fraud

The insurance covers financial losses of employers in the event the corporate card holder uses the card in conflict with the employer’s instructions.