20 19 Annual Report WorldReginfo - a853474d-e56f-4d12-ad64-7fb3182bd037 Key indicators in 2019 HUF -0.639 billion result after taxation HUF 28.156 billion insurance premium income 268% consolidated capital adequacy under Solvency II HUF 13.601 billion shareholder’s equity WorldReginfo - a853474d-e56f-4d12-ad64-7fb3182bd037 2 Összefoglalás Contents Foreword by the Chairman of the Supervisory Board 4 Foreword by the CEO 5 History 6 Group Structure 7 Information for shareholders 7 Shareholder structure 8 Share price 8 Share price of CEE insurers 9 Calendar of corporate events 9 Corporate Social Responsibility: PénzSztár 10 Corporate Social Responsibility: Design Without Borders Award 11 Corporate governance 12 Members of the Company’s management 17 Market environment 18 Business policy objectives for year 2020 20 Innovation and digitalization 21 Our products 22 Performance of our unit-linked funds 26 Highlights, events 28 Consolidated financial statement 32 Consolidated financial statements and consolidated business report for the year ended 31 December 2019, prepared in accordance with the international financial reporting standards adopted by the European Union Budapest, 15 April 2020 WorldReginfo - a853474d-e56f-4d12-ad64-7fb3182bd037 3 Foreword by the Chairman of the Supervisory Board The CIG Pannonia Group closes off the most difficult year of its short history. Our shareholders are familiar with the occurrences concerning our property insurance subsidiary in Italy. The unfortunate coincidence of many events has caused the biggest loss to date, and it may take years to finalize the pending cases. The Board of Directors is striving to act with the utmost prudence and makes the necessary reserves based on the known facts. This is not what we were prepared for. In recent years, the Group has achieved better and better results. The 2019 business year would have been the best year in our history, had it not been for the series of claims in Italy, which’s outcome is not yet known. In contrast, with the profit of HUF 660 millionf rom our life insurance com- pany and HUF 442 million from the fund manager, the after-tax result of our Group, due to the negative result of our property insurance company, is a total loss of HUF Dr. József Bayer 639 million. The Board of Directors is determined with all its strength and knowledge to make the best possible decisions about the future of the property insurance company based on the information available, and to further strengthen and build the profitable development of the life insurance company and the fund manager. I thank for the patience of our shareholders. WorldReginfo - a853474d-e56f-4d12-ad64-7fb3182bd037 4 Foreword by the CEO Last year was a tough and challenging year for our insurance com- pany. In recent years our owners may have become accustomed to quarter-on-quarter improvements, therefore our 2019 results are clearly not meeting the expectations. It is worth though to analyze the data more thoroughly to under- stand the inner processes that determine our company’s future on the mid-term. Last year’s results were negatively affected by two unique items: on the one hand, significant losses incurred by our property insurance subsidiary in respect of its Italian cross-border servi- ces and on the other, losses on exchange rates incurred from the Konzum-OPUS share conversion. Without these items, our Group level profit after-tax would amount to HUF 2,807 million, HUF 1,013 million higher than in 2018. Our insurance premium revenue inc- reased by 9 percent, while the life segment’s new acquisitions rea- ched nearly 133 percent of the same number in 2018 Dr. Gabriella Kádár Why is this important? CIG Pannónia’s life insurance business line is financially stable, has sound fundaments, its Solvency II capital adequacy is remarkably high, its cash flow generating ability remains good. We have been able to minimize our risk exposure at our property insurance subsidiary, thanks to the already announced actions and ongoing measures, which consider the costumers’ and owners’ interests to the full extent. Yet besides the good numbers in the life business line, other factors give rise to cautious optimism as well. Our contingent broker, CIG Pannónia Financial Intermediary Ltd., closed its first full business year last year with an excellent performance: They acquired premiums amounting to over HUF 400 million for the life insurer and are dedicated to develop a brokerage firm capable of building a high-quality insurance portfolio and ensuring an exceptionally professional operation. The brokerage firm currently employs 119 registered insurance consul- tants, has sold HUF 443 million of insurance premiums, and the result of its credit brokerage activity, started in May last year, reached HUF 17.9 million. The keeper of our customers’ assets, MKB-Pannónia Fund Manager became the “Equity Fund Manager of the Year” at the Best of BSE Gala. It is reassuring that our investments are safeguarded and managed by an award-winning team handling over HUF 650 billion of assets. Beyond the numbers, our implemented developments in the area of sales and our asset managers reinforce that we remain a financially stable insurer, that can improve its sales numbers despite the toughest challenges. In addition to all of this, the current year presents a much more serious challenge not only for our insurance company, but for the entire insurance market, and for the whole economy. We do not yet know what effect the coronavirus pandemic will have on economic growth and people’s financial situation. But we do know, that after the pandemic, the world will not be the same again as it was before. CIG Pannonia needs to be pre- pared for this and develop and offer products, services, which are tailored to the changing personal needs of our customers. Our goal, however, is even more to provide services that exceed our customers’ expectations. WorldReginfo - a853474d-e56f-4d12-ad64-7fb3182bd037 5 History The Insurer was founded at the end of 2007 by well- Also at the end of 2018, the CIG Pannónia Employee known and acknowledged Hungarian public figures Stock Ownership Plan Organization was founded as and insurance experts under the name of CIG Central a legal entity serving to implement the Company’s European Insurance Company Ltd.; the company remuneration guidelines. started operations in 2008. In 2011, CIG Pannónia Life Insurance Plc. and its stra- Since the autumn of 2010, when it was first listed on tegic partner Pannónia Pension Fund jointly founded the stock exchange, the Insurer has operated as CIG Pannónia Investment Services Ltd. as a company that Pannónia Life Insurance Plc. provides portfolio management services, primarily for institutional customers (mainly insurance com- The intention of the founders was to create an insur- panies and investment funds). In 2013 the company ance company—run by Hungarian management, was transformed into an investment fund manager, focusing on the Hungarian market and supported simultaneously adopting the name Pannónia CIG and privately financed by recognized and credible Fund Manager Ltd. In July 2017, the range of the Fund Hungarian personalities—which was to become, Manager’s shareholders widened; through this, the within a short time, a dominant player in the domes- assets managed by it increased and its profitability tic market. The prevalence of the principle of mutual- improved significantly. The Company’s shareholding ity was an important element of this, i.e. we wanted in the Fund Manager—which adopted the name of our shareholders to become clients, and vice versa. MKB-Pannónia Fund Manager Ltd.—decreased to 16%. This was the rationale behind the public offering of CIGPANNONIA shares in 2010 and their listing on the Budapest Stock Exchange. Of the Company’s share- holders, 97 percent are Hungarian private individuals or Hungarian enterprises. Starting operations in 2011, CIG Pannónia First Hungarian General Insurance Company Ltd. is a non-life subsidiary 100% owned by CIG Pannónia Life Insurance Plc. It focuses on Hungarian small and medi- um-sized enterprises, state- and municipality-owned institutions, companies, trade chambers, associations and societies. Besides, it is present in the export of insurance, as well with its cross-border services. The Insurer realizes certain life-insurance services through the activities of Pannonia PI-ETA Tribute Service Ltd., which is another 100% owned subsidiary of CIG Pannónia Life Insurance Plc. This company basi- cally provides funeral-related services to customers who, in their life insurance contracts, applied for the services necessary for their final rest. In November 2018, the Company founded, with 95% equity participation, CIG Pannónia Financial Intermediary Ltd; this company deals with the sale of life insurance products and other financial products as an intermediary. WorldReginfo - a853474d-e56f-4d12-ad64-7fb3182bd037 6 Group structure CIG Pannónia Life Insurance Plc. CIG Pannónia CIG Pannonia First Hungarian Pannónia Financial General PI-ETA Ltd. Intermediary Insurance Ltd. Company Ltd. MKB-Pannónia CIG Pannónia Life Insurance Fund Manager Employee Stock Ownership Ltd. Plan Organisation Information for shareholders Registering authority: Budapest Metropolitan Court as Court of Registration Registration number: 01-10-045857 Tax number: 14153730-4-44 Registered address: 1033 Budapest, Flórián tér 1. Mailing address: 1300 Budapest, Pf. 177. E-mail address: [email protected] Fax number: +36 1 247 2021 Investor relations contact: