Annual Report for 2013 1 Sogaz Ojsc, 2013

ANNUAL REPORT FOR 2013 1 SOGAZ OJSC, 2013

MESSAGE OF THE CHAIRMAN OF THE BOARD REINSURANCE 56 OF DIRECTORS 2

SETTLEMENT OF LOSSES 58 MESSAGE OF THE CHAIRMAN OF THE MANAGEMENT BOARD 3 REGIONAL NETWORK DEVELOPMENT 62

SOGAZ INSURANCE GROUP 6 MEDICAL INFRASTRUCTURE DEVELOPMENT 65

RUSSIAN INSURANCE MARKET: RESULTS OF 2013 8 INVESTMENT POLICY 67

MARKET POSITION OF SOGAZ INSURANCE GROUP 13 RISK MANAGEMENT 68

PROPERTY AND LIABILITY INSURANCE 17 PERSONNEL MANAGEMENT 69

PARTICIPATION IN INTERNATIONAL PROJECTS 39 INFORMATION TECHNOLOGY 74

PARTNER AND RETAIL SALES DEVELOPMENT 41 CHARITY AND SPONSORSHIP 75

PERSONAL INSURANCE 44 FINANCIAL PERFORMANCE 80 MESSAGE OF THE CHAIRMAN OF THE BOARD OF DIRECTORS

ОАО «СОГАЗ», 2013

Sogaz has been actively developing its affiliated network and retail business, has been improving its business processes. The Group has taken over TRANSNEFT Insurance Company which has been for many years a leading insurer in pipeline transportation of oil and allied sectors. Sogaz remains focused on the increase Dear shareholders! of customer care level, the improvement of the loss settlement system. Large amounts of insurance benefit Last year, Sogaz Insurance Group turned 20 years old. payments paid by the company in the reportingyear once All these years, Sogaz not only has been a reliable partner again prove that Sogaz is a reliable and responsible of gas industry companies, but also actively facilitated leading insurerin Russia. cooperation with companies engaged in other economy sectors, expanded its geographic reach. I am confident that this active and systematic approach aimed, first of all, to improve business performance will Today, Sogaz Group is a leader of the Russian insurance further increase value of Sogaz, strengthen its leading market, the most profitable Russian insurance company position in the Russian insurance market. ranking first in the volume of assets and insurance reserves. Sogaz provides services to over 40,000 companies and over 15 mln people. Keys to success of Sogaz have been high

quality of service, fulfillment of obligations to customers and Chairman of the Board of Directors, Sogaz OJSC partners at all times, adequate risk management system. Chairman of the Management Board, Gazprom OJSC I am happy to note that in 2013 the Group achieved all A. Miller of its targets, and in many directions it even exceeded them. 2 MESSAGE OF THE CHAIRMAN OF THE MANAGEMENT BOARD

SOGAZ OJSC, 2013

10% due to high profitability of business associated with insurance of enterprises of Transneft, one of global leaders in oil and oil product transportation. We expect that skilled staff of Insurance Company TRANSNEFT will contribute to our Dear shareholders, customers, partners and success. Exchange of hands-on employees of Sogaz Insurance Group! experience and technology between Group companies and expertise of IC TRANSNEFT’ employees will Year 2013 was the first year of volume amounted to more than 94 help Sogaz Group to strengthen implementation of a new Development bln Roubles, and net income of competitive advantage in key Strategy of Sogaz approved by Sogaz OJSC hit record high of 12.2 business areas. its Board of Directors. The results bln Roubles. Currently, Sogaz is the Last year, Sogaz OJSC, main of the year make us believe that most reliable, profitable and actively member of Sogaz Group, once again the Group will reachall the goals it developing insurer in the market. proved to be the leading corporate plans to achieve by2016. Sogaz is One of the key events of the last insurer in Russia. The company won experiencing significant changes: year was affiliation of TRANSNEFT several major tenders, expanded it is growing, it is being reinforced Insurance Company by Sogaz its customer base, took part in by new employees and achieving Group. Acquisition of the company insuring large-scale projects of state successful results in all its business will allow Sogaz Group to increase significance. Among them are 2013 areas. In 2013, the Group’s premium 3 its portfolio by almost as many as Universiade in Kazan, development of Kirinskoye gas and condensate leasing companies increased almost of insured events associated with field, Sakhalin III project, testing three times. Sogaz became one of major and high-profile accidents. a prototype of the Russian fifth- leading insurers under the project of The company paid a record-breaking generation multirole combat aircraft the Sberbank of Russia «Corporate insurance benefit in the amount of Т-50, launches of space vehicles, Credit Insurance», and considerably 73 mln euro as a result of partial construction of the Western High- strengthened cooperation with other loss of Yamal-402 satellite. Sogaz Speed Diameter in Saint Petersburg leading credit institutions. paid over 850 mln Roubles following and many others. Russian an accident of the Tu-204 aircraft of Sogaz keeps growing and Emergency Minister V. A. Puchkov Red Wings airline. insurance benefit expanding its geographic reach. highly appreciated the company’s payments to relatives of passengers In 2013, over 2.8 thousand new work under the state contract of of Boeing that crashed in Kazan employees joined the Group; obligatory insurance of Ministry Airport in November amounted to Sogaz OJSC established 8 new employees against accidents. about 90 mln Roubles. All these affiliates; the regional network was In 2013, Sogaz won a tender for payments were made in exceptionally finally switched to a three-level insuring Gazprom OJSC and its short time for the Russian insurance management system (in which subsidiaries against environmental market, which once again proved Territorial offices play an important risks for the period until 2016. The that Sogaz is a reliable and role). In accordance with its strategy, insurance program includes 32 responsible insurance partner able Sogaz became much more active in companies, total liability of Sogaz to promptly fulfil assumed obligations the competitive segment of corporate amounted to 30 bln Roubles. and understanding the responsibility insurance in regional markets. In and social significance of its work. Sogaz achieved a great success 2013, rate of growth of receipts of in partner sales: at the end of the the regional network was over 30%. Over the year, the company year, the company was well ahead carried out very hard and important Customers decide whether of its plans in all key business areas. work on centralization and or not an insurance company is Receipts from insurance brokers and automation of the loss settlement reliable, whether or not it may be car dealers increased more than procedures, implementation of entrusted with the protection of twice. A number of contracts for the rating system for car service his/her interests, judging by the insurance of legal entities’ property stations, which allowed us to way such company settles losses. entered into through banks and 4 In 2013, Sogaz settled a number SOGAZ OJSC, 2013 speed up and enhance the quality Aviation and Space Salon «MAKS I am grateful to the company’s of service for Sogaz customers 2013» in Zhukovsky and many shareholders for their constant at the stage of insurance benefit others. I believe the most remarkable support of all our projects and payments. To improve business was partnership of 2013 Universiade, plans. processes, we launched a project a major sports event of the year. By And, of course, I am very grateful for centralization of operating and participating in such events, we not to out customers and partners, accounting functions: by the end of only sustain our image as a socially both new and those who has been the year, over 30 affiliates of the responsible insurer, but also change working with Sogaz for years. We company were using the centralized Sogaz itself making it more open work for you! model of work and their number will and the brand – more recognizable. grow. I would like to thank all employees Respectfully, Chairman of the I would like to note a number of the Group for their contribution to Management Board of Sogaz of fascinating, public and socially the common cause: Sogaz would Insurance Group important projects which were not succeed without their daily work, S. Ivanov supported by Sogaz: World Combat persistence, high professionalism Games in St. Petersburg, Russian and integrity. Football Championship, International

5 SOGAZ OJSC, 2013 SOGAZ INSURANCE GROUP

6 ОАО «СОГАЗ», 2013

Year of establishment of the Ratings: A.M. Best Group: 1993 Standard & Poor’s Sogaz OJSC: Key members of the Group: Financial Stability Rating: Sogaz OJSC: Sogaz OJSC «В++», outlook «Stable» Counterparty Credit Rating: IC SOGAZ-Med OJSC Issuer Credit Rating: «BBB-», outlook «Stable» IC SOGAZ-Life LLC «bbb», outlook «Stable» Financial Stability Rating: IC TRANSNEFT CJSC «BBB-», outlook «Stable» SOVAG (Germany): SOT–TRANS LLC National Scale Rating: Financial Stability Rating: «В++», SOVAG (Germany) «ruAAA», outlook «Stable» outlook «Stable» SOGAZ a.d.o. Novi Sad (Serbia) Issuer Credit Rating: SOGAZ-Medservice LLC IC TRANSNEFT CJSC: «bbb», outlook «Stable» SOGAZ International Medical Center Counterparty Credit SOGAZ-PROFMEDITSINA LLC Rating: IC TRANSNEFT CJSC: «ВВВ-», outlook «Stable» Financial Stability Rating: Share capital of main insurance companies: Financial Stability Rating: «В+», outlook «Stable» Sogaz OJSC – «ВВВ-», outlook «Stable» Issuer Credit Rating: 15,111 mln Roubles National Scale Rating: «bbb-», outlook «Stable» IC SOGAZ-Med OJSC - «ruAAA», outlook «Stable» 102.5 mln Roubles IC SOGAZ-Life LLC – 530 mln Roubles IC TRANSNEFT CJSC – 2,099.9 mln Roubles Expert RA MANAGEMENT BOARD Sergey Okhotnikov Deputy Chairman Sogaz OJSC: Sergey Ivanov of the Management Board Insurer Reliability Rating: Chairman of the Management Board «А++» (exceptionally high level of Mikhail Putin Nikolay Galushin reliability), outlook «Stable» Deputy Chairman First Deputy Chairman of the Management Board IC SOGAZ-Med OJSC: of the Management Board Medical Insurers’ Service Reliability Galina Talanova Damir Aksyanov and Quality Rating: Deputy Chairman Deputy Chairman «А++» (exceptionally high level of of the Management Board of the Management Board reliability and quality of services), Dmitri Talaev outlook «Stable» Andrey Botishchev Executive Director, member Deputy Chairman of the Management Board IC SOGAZ-Life LLC: of the Management Board Life Insurer Reliability Rating: Oleg Gotovtsev «А++» (exceptionally high level of Kirill Brovkovich Information Technology Executive reliability), outlook «Stable» Deputy Chairman Director, member of the Management Board National Rating Agency (NRA) of the Management Board Olga Krymova Sogaz OJSC: Deputy Chairman Reliability Rating: of the Management Board «ААА» (highest level of reliability) Aleksey Leonenko Deputy Chairman of the Management Board

Vladimir Nosov Deputy Chairman of the Management Board

7 SOGAZ OJSC, 2013 RUSSIAN INSURANCE MARKET: RESULTS OF 2013

8 # SOGAZ OJSC, 20142013

According to the Central Bank of the Russian Federation, in 2013 the aggregate In 2013, market structure insurance premium in the Russian insurance market amounted to 904.9 bln changed insignificantly: the share of property insurance decreased Roubles*, which is 11.4% more than receipts of 2012 (in 2012, gains amounted (-3%) due to the increase of the to 22.2%). Premiums grew in almost all insurance areas. It should be noted share of life insurance and other that rate of growth of receipts from individuals more than three times exceeds personal insurance. The market rate of growth of the same from legal entities: 17.7% and 5.1% respectively. grew on account of the following segments:

• personal risk insurance, including life insurance: +50.7 bln Roubles, with Growth rates of the insurance market decreased as a result of slowdown growth rate of 39.7%; in the growth of the overall Russian economic performance. GDP grew by 1.3% (as compared to 3.4% in 2012). Market dynamic was greatly affected • voluntary and obligatory by the following factors: vehicle insurance: +15.9 bln

• fierce competition in corporate insurance and, as a result, cut of insurance Roubles and +12.8 bln Roubles rates; respectively;

• cost saving policy of companies, including insurance expenses; • voluntary medical insurance: +6 bln Roubles; • slowdown in rate of consumer loan growth; • insurance of personal property • decrease in the volume of sale of new vehicles in Russia; against fire and other risks: • lack of growth in obligatory insurance rates. +3.9 bln Roubles. *Hereinafter data does not include obligatory medical insurance and reinsurance. Aggregate insurance benefit of employers’ social budgets. In 33.4% amounting in total to 7.1 bln payments for the market were 2013, insurance companies gained Roubles. Voluntary motor vehicle growing faster than insurance 93.8 bln Roubles liability insurance accounted for receipts amounting to 420.8 bln more than half of payments (4 bln Property insurance premiums Roubles, which exceeds the result Roubles). grew by 4.7% up to 445.5 bln of 2012 by 13.5%. Roubles. The amount of insurance In 2013, insurers gained In 2013, voluntary insurance benefit payments increased up to 165.7 bln Roubles (+10.3%) types accounted for 739.1 bln 210.5 bln Roubles (11.4%). The and paid out 94.8 bln Roubles Roubles (+11.6%). Cumulative main directions that contribute to the (+ 24.5%) in the segment of voluntary insurance benefit development of this market segment obligatory insurance. Receipts from payments increased by 10.6% to are insurance of property of legal obligatory personal insurance fell 326 bln Roubles. Life insurance entities and individuals and vehicle by 4.4% down to 18.5 bln Roubles. premiums grew by 60.5% to 84.9 insurance. As compared to 2012, benefit bln Roubles. However, life insurance payments increased by 4.3% up to Vehicle insurance market grew benefit payments fell by 7.6% down 16.7 bln Roubles. In 2012, receipts by 8.8% as compared to 2012. to 12.3 bln Roubles. from obligatory motor third party Slowdown of growth was caused liability insurance grew by 10.5% up Year 2013 faced continuing by fall in the volume of sale of new to 134.2 bln Roubles, and benefit growth in both premiums (+13.5% light private and light commercial payments for the same insurance or 24.8 bln Roubles), and benefit vehicles in 2013 by 5.5% down to type – by 20.6% up to 77.4 bln payments (+11.7% or 10.8 bln 2.78 mln units. In 2013, receipts Roubles. Obligatory motor third Roubles ) in the area of personal from agricultural risk insurance grew party liability insurance accounts insurance (except for life insurance). by 7.1% up to 14.3 bln Roubles. for 81% of receipts and 81.6% of In this insurance type, a significant Premiums in business and financial payments in obligatory insurance portion belongs to voluntary medical risk insurance increased by 11.6% segment (without obligatory insurance of legal entities (growth up to 21.9 bln Roubles. medical insurance). by 5.5 bln Roubles). Slowdown in Receipts from voluntary liability the growth of receipts from this insurance for 2013 fell by 0.9% down insurance type from 11.8% down to 29.7 bln Roubles. At the same to 5.7% is caused by the reduction 9 time, benefit payments increased by SOGAZ OJSC, 2013 RATIO BETWEEN THE NUMBER OF INSURANCE BREAKDOWN OF RECEIPTS COMPANIES AND AGGREGATE SHARE CAPITAL BY INSURANCE COMPANIES OF COMPANIES (without obligatory medical insurance and reinsurance)

% 100 90 29,6 28,5 28,5 250 702 800 30,9 80 40,4 619 700 200 579 70 600 14,1 13,2 14,5 14,7 463 422 60 Bln Roubles 150 500 50 16,0 400 40 100 300 30 55,0 57,2 56,9 56,8 148 154 185 198 210 200 43,6 50 20 100 10 0 0 0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Share capital, bln Roubles Number of insurance companies Top 10 11-20 Rest of them

According to the Bank of Russia According to the Bank of Russia

10 SOGAZ OJSC, 2013 DYNAMICS OF RECEIPTS FROM INDIVIDUALS DYMANICS OF INSURANCE RECEIPTS AND LEGAL ENTITIES BY INSURANCE TYPES (without reinsurance) (without reinsurance)

1000 904,9 Life insurance 900 812,5 Voluntary personal insurance

Bln Roubles 800

700 665 Obligatory personal insurance 600 600 558 Property insurance (without vehicle 513,6 insurance) 500 500

Bln Roubles 400 400 Voluntary vehicle insurance 406 426 Obligatory motor third party liability 300 344 300 288 479 insurance 200 407 200 Third party liability insurance (without 268 321 270 vehicle insurance) 100 246 100 Financial and business risk insurance 0 0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

According to the Bank of Russia According to the Bank of Russia

11 SOGAZ OJSC, 2013 DYMANICS OF INSURANCE BENEFIT PAYMENTS FOR THE MARKET BY INSURANCE TYPES (without reinsurance)

450 420,8 Life insurance 400 370,8 Voluntary personal insurance 350 294,9 303,8 Obligatory personal insurance Bln Roubles 300 285,3

250 Property insurance (without vehicle insurance)

200 Voluntary vehicle insurance 150 Obligatory motor third party liability insurance 100 Third party liability insurance (without vehicle insurance) 50 Financial and business risk insurance 0 2009 2010 2011 2012 2013

According to the Bank of Russia

12 SOGAZ OJSC, 2013 MARKET POSITION OF SOGAZ INSURANCE GROUP

13 # SOGAZ OJSC, 20142013

In 2013, which was the first year of implementation of the new four-year Moreover, in 2013 Sogaz once development strategy, Sogaz OJSC achieved all target goals. again proved to be a leader in aviation and space insurance. Sogaz The Group fortified its leading positions in strategically important market outperformed the market in terms of segments, continued to diversify its corporate insurance portfolio, controlled receipts from voluntary insurance the growth of the retail portfolio, expanded and strengthened its regional of third party liability of owners of presence. hazardous facilities and insurance of corporate car fleets.

In 2013, Sogaz OJSC came second in the market in the total amount In 2013, Uralkali, Sukhoi, Eurochem, of premiums (without obligatory medical insurance) and first in voluntary ROSINKAS, OBORONPROM United insurance types. Overall growth of the insurance portfolio in 2013 in the Industrial Corporation and other circumstances of maintaining its profitability and scheduled slight increase companies became major customers in the combined ratio rate (the ratio of the sum of claims incurred, expenses of Sogaz in the segment of corporate for entry into insurance contracts and administrative expenses to earned property insurance. premium) ensured growth in company’s profit up to 12.2 bln Roubles Sogaz continues to be a consistent according to IFRS. leader in the personal insurance Following the results of 2013, Sogaz once again took the first place in the market, in particular, in voluntary amount of receipts from corporate property insurance (property insurance medical insurance. In 2013, Russian and liability insurance). Moreover, the company became the leader in the Emergencies Ministry, Moscow United amount of receipts from two types of obligatory insurance – obligatory Energy Company (MOEK), Siberian insurance of third party liability of owners of hazardous facilities (OIHF) Coal Energy Company (SUEK) and and obligatory insurance of third party liability of carriers (OIC) with about other companies became Sogaz’s 20% of market share in both types. major customers in personal insurance. Following the results of work in Sogaz became one of the top 2013, Sogaz’s portfolio of individual companies in bank assurance of insurance increased by 1.6 bln collateralized property of legal Roubles through the development entities. In 2012-2013, growth rates of a retail business and partner of receipts in this segment, as well sales and amounted to around 5.5 as in insurance of leasing assets and bln Roubles with 41% gain. Taking mortgage insurance were several into account current situation in the times higher than average market Russian motor vehicle insurance, rates. Sogaz does not aim to establish In several large regions, the itself as a leader in this market company significantly outrun segment. However, the company competitors in the increase in sales achieved a significant increase of mortgage insurance contracts. in receipts from a strategic retail segment – mortgage insurance: the amount of premiums paid grew by 63%, in retail insurance of workers of Sogaz’s corporate customers – by 29.6%.

14 SOGAZ OJSC, 2013 Voluntary medical insurance Insurance of property of legal entities against ﬁre and other risks

15 Obligatory insurance of third party liability of owners of hazardous facilities

L e a Aircra insurance d in g

i o

n Cargo insurance

a Voluntary insurance of third party n

t liability of operators of hazardous y

e s facilities Inward reinsurance Insurance of liability for damage resulting from deﬁciency of goods, work and services

Insurance Obligatory of liability for medical Obligatory damage to insurance insurance third parties of third party liability of carriers 15 SOGAZ OJSC, 2013 RECEIPTS OF SOGAZ OJSC PORTIONS OF INSURANCE TYPES OF THE IN THE INSURANCE MARKET MARKET AND SOGAZ OJSC IN 2013 (without reinsurance (without reinsurance and obligatory medical insurance) and obligatory medical insurance)

9,4% 9,4% 90 10% 8,6% 10% 13% 80 8,3% 9% 7,6% 1% 8% Bln Roubles 70 7% Voluntary Medical Insurance 60 6% 9% 10% 50 15% 3% Accident insurance 3% 5% 29% 40 84,8 Life insurance 76 4% 8% 30 Property insurance against 54,9 3% 47,9 fire + other risks 20 38,9 2% Hull insurance+Voluntary mo- 2% 9% 10 1% tor third party liability insurance Obligatory motor third party 0 0% liability insurance 2009 2010 2011 2012 2013 46% Insurance of third party liability of owners of hazardous facilities Receipts, bln Roubles Market share, % 24% Other types of insurance 17%

According to the Bank of Russia According to the Bank of Russia

external ring – market, internal ring – Sogaz OJSC

16 SOGAZ OJSC, 2013 PROPERTY AND LIABILITY INSURANCE

17 SOGAZ OJSC, 2013 Insurance of key corporate customers’ property

Sogaz remains the leading corporate insurer in Russia providing insurance cover to major companies of oil, gas, railway, nuclear, petrochemical industries, hydropower and electric power, mining, metallurgy and other Mar industries. In 2013, Sogaz OJSC was a number ket of in s one company in the segment of insurance of % u r 5 a 3 n property of legal entities. According to the c z e a o g information of the Central Bank of Russia, f o c

S o

the amount of the company’s premiums in f

this insurance type amounted to 36.5 bln a

e a

Roubles (35% of the market). c

S №

o p e y r t During the year 2013, Sogaz was Cover Contract of Insurance of an active bidder in tenders, many 439.5 thousand items of movable of which it won. Sogaz has a wide and immovable property of Russian network of affiliates. This allows the Railways for the total insurance company to provide services to major amount of 5.918 trillion Roubles. corporations operating in various Sogaz is a leading insurer under a regions. contract with a participatory share of 75%. In 2013, Sogaz for the first time entered into insurance contracts with Sogaz pays considerable attention companies of OBORONPROM United to the development of relations with Industrial Corporation: Rostvertol, existing customers. In 2013, Sogaz Saturn - Gas Turbines, United actively participated in tenders for the Engine Corporation. The following insurance of assets of gas distributing companies also became new organizations. It also won major customers of Sogaz: Oboronenergo, tenders for the insurance of assets Gazprom Investproject, enterprises of RusHydro, Bashneft Open Joint- of RussNeft, Kurgan CHP, Hevel Stock Oil Company, PhosAgro Group, (joint venture between the Renova Inter RAO, enterprises of Gazprom Group and Rusnano), Taganrog Fuel Energoholding. Sogaz significantly Oil Terminal. Sogaz won a tender for expanded its cooperation with the insurance of Magnitogorsk Iron enterprises of Siberian Coal Energy and Steel Works. Company (SUEK). It elaborated the program of insurance against An important event for the business risks of Novatek enterprises, company was its victory in an open continued its work on insurance of tender for the insurance of the whole enterprises of Rostec Corporation, asset complex of a major Russian SIBUR Holding, Gazprom Neft, corporation Russian Railways. Rosneft Oil Company, Evraz Group, Following its results, the company power grid enterprises of FGC UES 18 entered into a three-year Open SOGAZ OJSC, 2013 and IDGC Holding, Metalloinvest, EuroChem Group, Rusvietpetro Joint Venture Company and many others. An important role in Sogaz’s activity plays cooperation with Rosenergoatom Concern in insurance INSURANCE OF PROPERTY OF LEGAL ENTITIES of property against catastrophe risks (without reinsurance) (including nuclear risks) ensuring reinsurance in Western markets. Moreover, the company won tenders 40 40% and extended contracts of property 34,6% 35,0% 35 35% insurance with other major nuclear 27,7% 27,9% companies: Atomredmetzoloto, TVEL. Bln Roubles 30 30% 25 21,3% 25%

20 20% 36,6 36,5 15 26,9 15% 10 16,4 22,4 10%

5 5%

0 0% 2009 2010 2011 2012 2013

Receipts, bln Roubles Market share, %

According to the Bank of Russia

19 SOGAZ OJSC, 2013 Insurance against construction and assembly risks

For many years, Sogaz has been the leading Russian insurer against construction and assembly risks. According to Expert Rating Agency, in 2013 Sogaz OJSC’s receipts in this segment amounted to 10.7 bln Roubles (over 40% of the market).

Market o f in su ra % n 0 c e 4 a z g a a i g n

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s s i e r m

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20 SOGAZ OJSC, 2013 Sogaz provides insurance and Volga Hydroelectric Station. It profile infrastructure projects. The coverage to construction projects provided insurance coverage for company maintained cooperation financed both out of state budget, the engineering and development in the insurance of the construction and by investments of major state- of a range of hydrocarbon fields: program of the Ministry of Defence owned and non-state companies. Medvezhye Oil and Gas Condensate of Russia. It provided insurance Thus, Sogaz is a main insurer of Field, Urengoy Oil and Gas coverage for sites constructed as the construction of Russian fuel Condensate Field, Yamburg Oil and part of the federal target program and energy facilities. It maintains Gas Condensate Field. «National System of Chemical and cooperation in the area of insurance Biological Safety of the Russian Sogaz’s portfolio faces the growth of investment projects by Gazprom, Federation». of capital intensive infrastructure Rosneft, RusHydro, IDGC Holding. projects, including road construction. In 2013, Sogaz took part in Thus, in 2013 the company took part the insurance of a series of large- in the insurance of construction of scale projects of high economic the central section of the motorway importance to Russia. Among «Western High-Speed Diameter» in them are the construction of gas Saint Petersburg. It is planned to pipelines «Bovanenkovo – Ukhta», erect unique overpasses and bridges «Ukhta – Torzhok», South European whose total length will be 8.5 km, Pipeline, the development and and to constructa tunnel there. reconstruction of systems of Insurance coverage for this project gas supply and provision of gas is 106 bln Roubles. supply to Russian regions, the In 2013, Sogaz insured the construction and modernization construction of the Domodedovo of Moscow Oil Refinery. In 2013, airport terminal complex, facilities of Sogaz participated in such major the sea port in the vicinity of Sabetta projects for the insurance against settlement in the Yamal Peninsula, construction and assembly risks as overhaul of M-3 «Ukraine» highway, the construction of power unit No 4 erection of the facilities of 2013 of Perm State District Power Station 21 Universiade in Kazan and other high- SOGAZ OJSC, 2013 INSURANCE AGAINST CONSTRUCTION AND ASSEMBLY RISKS (without reinsurance)

Bln Roubles 10

8 10,7 6 12,5 4 8,7 2 4,2

0 2009 2010 2011 2012 2013

Receipts, bln Roubles

According to the information of Expert Rating Agency with respect to Sogaz Group

22 SOGAZ OJSC, 2013 Insurance of offshore drilling operations and energy risks

Having vast experience, technology, funds and staff, Company Ltd. (Sakhalin II Project), and drilling rig operator Gazflot LLC Sogaz Insurance Group is an absolute leader in oil BlueStream Pipeline Company B.V. chose Sogaz for protection of property and gas insurance. Sogaz provides insurance coverage It continued its work on the risks and liability for the period of against risks associated with operations of enterprises insurance of the energy fleet of construction of wells and operation both in Russia and abroad. Gazprom OJSC represented by of floating drilling rigs. semi-submerged and self-elevating In 2013, Sogaz participated in the insurance of In July, 2013 the first start-up floating drilling rigs. Last year, the major offshore projects of Gazprom OJSC in Russia, complex of Prirazlomnaya offshore fleet was replenished by the new as well as new Upstream projects of key customers ice-resistant oil platform (located in the self-elevating floating drilling rig of Sogaz OJSC whose number is constantly joined by Pechora Sea) was put in commission «Arkticheskaya». new companies. and insured by Sogaz. Insurance Due to the preparation for the coverage was also provided for three Over the year, the company was successfully development of Yuzhno-Kirinskoye initial wells drilled from the platform. developing its cooperation with strategic customers – field (development of the gas Gazprom Group and Rosneft Group companies – in Major events for Sogaz OJSC phase of Sakhalin III project) Sogaz insuring annual programs of well drilling, development were its victoryin the tender for the provided insurance coverage against and upgrading. insurance of the energy fleet of risks associated with the drilling of AMNGR OJSC and in the tender for two exploration wells in the Sea of The company renewed comprehensive insurance against Okhotsk near the coastline ofthe comprehensive programs of risks of Rusvietpetro JV associated Sakhalin island and Kirinskoye gas insurance against energy risks with the development of fieldsof the and condensate field which was with Exxon Neftegas Limited joint venture between Russia and already put in operation. It should (operator of the Sakhalin I Project) Vietnam. be noted that the general contractor and Sakhalin Energy Investment 23 Gazprom Geologorazvedka LLC SOGAZ OJSC, 2013 Small and medium business insurance

Pursuant to the Sogaz’s warehouse premises, land plots, Main objectives of the new Strategy for the period until 2016, goods in circulation, equipment department include the development one of the major tasks for regional and other assets. The company’s of insurance operations of Sogaz divisions of the company is the customers include gas stations, food Insurance Group in the sector of development of insurance of small facilities, farm businesses, trading commercial property insurance, and medium business property. and service companies, printing which represents a key direction Sogaz elaborated a special houses and many other small and of further diversificationof the program for small and medium medium business enterprises all company’s insurance portfolio. enterprises which was used to over the country. introduce a simplified system of In October 2013, the company insurance of property pledged established a new selling to banks. The program takes subdivision, the department for into account a specific nature of insuring non-industrial assets, to operation of small and medium coordinate work of Sogaz in sales enterprises and helps them to of all types of insurance of non- save time and money. industrial facilities: business centers, In 2013, Sogaz entered into malls, hotels, restaurants, logistics thousands of contracts of insurance centers, etc. of production, trading, office and

24 SOGAZ OJSC, 2013 Obligatory insurance of third party liability of owners of hazardous facilities

EM PR IU E M In 2013, the Law «On Obligatory Key corporate customers of C N D RE Insurance of Third Party Liability of Sogaz in this insurance type are A U R 1.7 S AROUND

U N

Owners of Hazardous Facilities for enterprises of Gazprom OJSC, S BLN ROUBLES I N

Causing Harm as a Result of an PhosAgro, VSMPO-AVISMA I 37 000 FACILITIES Accident» (OIHF) that came into force Corporation, Eurochem, enterprises BILI a year before, extended to hazardous of State Atomic Energy Corporation IA TY L F AROUND facilities owned by state-financed ROSATOM, Mosenergo OJSC, O

enterprises and institutions. OGK-2 OJSC, Evraz Group, I 600 M

I BLN ROUBLES Rosneft Oil Company and others. L Sogaz remained the leader in the T E Major hazardous facilities insured K OIHF market. According to the Central R S A by the company were hydraulic M Bank of the Russian Federation, O D structures that belong to «Krasnodar F LE H T in 2013 the GPW of the company I

G T OVER Reservoir», «Administration of O E

S amounted to 1.7 bln Roubles. The A

the Volga-Don Basin of Inland Z 200 company provided protection to some LOSSES Waterways», TGC-1. 37,000 hazardous facilities with an MARKET aggregate liability limit of about 600 In 2013, Sogaz settled more than LEADER bln Roubles. 200 OIHF losses for the amount of UT O D over 80 mln Roubles, which is more I OVER A than any other insurance company. P 80 MLN ROUBLES

25 SOGAZ OJSC, 2013 Obligatory insurance of third party liability of carriers

On January 1, 2013, Federal Law Sogaz was one of the first No. 67-FZ «On Obligatory Insurance insurance companies to obtain a of Third Party Liability of Carriers for license for OIC in February 2013. Causing Harm to the Life, Health Over the year, Sogaz entered into CLU or Property of Passengers and the more than 1,000 OIC contracts. ON D C E Procedure for Compensating Such According to the information of the OVER D Harm to Passengers Travelling National Association of Liability by the Underground» (OIC) came Insurers, Sogaz became the OIC CONTRACTS into force. Pursuant to this Law, all market leader gaining over 720 T companies engaged in passenger mln Roubles. The main contracts E K

R S carrying (except for the underground) were concluded with State Unitary A

M O

are obliged to insure their liability to Enterprise of passenger transport C

I E G C AN PR passengers. Liability limits under the «Mostransavto» and State Unitary O R E

M A U OVER

I U law amount to 2.025 mln Roubles in Enterprise «Mosgortrans». Z

N I case of death of a passenger, 2 mln M MARKET MLN ROUBLES Roubles in case of personal injury, LEADER and 23 thousand Roubles in case of property damage.

26 SOGAZ OJSC, 2013 D&O Insurance

Sogaz is a major player in the Russian market of directors’ and officers’ liability insurance (D&O insurance).

Over the last years, the company considerably expanded its customer base. It entered into D&O insurance contracts with Rosneft Oil Company, MegaFon, Gazprom Neft, AvtoVAZ, International Airport Irkutsk JSC. In August 2013, Sogaz won the tender for the insurance of liability of the Board of Directors and members of the Management Board of Mosenergo for the amount of 600 mln Roubles.

It should be noted that insurance coverage provided by Sogaz complies with the international practices of D&O insurance. In 2013, the aggregate GPW of Sogaz in D&O sector amounted to 159.1 mln Roubles.

27 SOGAZ OJSC, 2013 Inland transport insurance

According to the Central Bank of the Russian Sogaz has a vast experience in the insurance of Federation, in 2013 the aggregate amount of Sogaz special-purpose machinery under both direct and leasing OJSC’s receipts from voluntary inland transport insurance contracts with contractors of Gazprom, Rosatom, Russian (excluding railway transport) amounted to almost 6.5 bln Railways, various construction companies, airfield Roubles. services, agricultural producers.

Sogaz OJSC’s total GPW in the sector of obligatory In 2013, Sogaz OJSC’s receipts from the insurance motor third party liability insurance for 2013 amounted of railway transport reached 214.3 mln Roubles, and to 2.5 bln Roubles. The share of obligatory motor third the total insurance cover grew by 28.4% up to 434.3 bln party liability insurance in the company’s portfolio Roubles. Thus, over the year, the company insured is insignificant. Legal entities and individuals whose almost 13.3 thousand gas tanks of SG Trans, over 8,9 obligatory motor third party liability was insured by Sogaz thousand hopper cars of Rusagrotrans and 4,000 railroad accounted for nearly equal amounts of GPW: 49.2% cars of RusTransCom. and 50.8% respectively. Sogaz’s share in the Russian market of obligatory motor third party liability insurance for 2013 was 1,87%.

28 SOGAZ OJSC, 2013 VOLUNTARY VEHICLE INSURANCE OBLIGATORY MOTOR THIRD PARTY (Hull+VOLUNTARY MOTOR THIRD PARTY LIABILITY INSURANCE LIABILITY INSURANCE, without reinsurance)

3000 1,87% 2,0% 7 3,0% 3,5% 1,8% 6 3,0% 2500 1,6% Bln Roubles 5 2,3% 2,5% Mln Roubles 1,4% 2000 1,2% 1,1% 1,1% 1,1% 1,2% 4 2,0% 1,6% 1,5% 1,5% 1500 1,0% 6,5 3 1,5% 54,9 2517,0 0,8% 1000 4,6 54,9 0,6% 2 1,0% 54,9 1441,3 54,9 1150,7 2,6 1009,2 0,4% 1 2,2 2,1 0,5% 500 920,6 0,2% 0 0,0% 0 0,0% 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Receipts, bln Roubles Market share, % Receipts, mln Roubles Market share, %

According to the Bank of Russia According to the Bank of Russia

29 SOGAZ OJSC, 2013 RAILWAY TRANSPORT INSURANCE # (without liability insurance)

250 15,0% 16,0% 13,2% 12,4% 14,0% 200 12,0%

150 8,7% 10,0% 7,0% 8,0% 214,3 100 194,2 6,0% 110,9 4,0% 50 115,9 62,2 2,0% 0 0,0% 2009 2010 2011 2012 2013

Receipts, mln Roubles Market share, %

According to the Bank of Russia

30 SOGAZ OJSC, 2013 Aviation insurance

In 2013, Sogaz for the first time insurance coverage against risks bln Roubles. Premium for direct became the leader of the Russian associated with test flights of insurance of air transport amounted aviation insurance market, leaving prototypes of fifth generation fighter to 1.56 bln Roubles, for insurance far behind its closest competitors aircrafts Prospective Airborne of liability of air transport owners – in terms of accrued and received Complex of Frontline Aviation 494 mln Roubles. premium. (PAK FA) (T-50), flight tests and acceptance flights of serial aircrafts It renewed insurance contracts Su-30 (Su-34, Su-35), as well as with major aviation companies such exercise flights, flight demonstrations as Rossiya Special Flight Squadron, at air shows under the open cover Transaero, Gazpromavia, Polet, aviation insurance contract with I Fly. Sogaz’s new customers are Sukhoi. In addition,the company Sukhoi Holding Company, FSUE was offered cooperation with Irkut «State ATM Corporation». Moreover, Corporation as a co-insurer of test Sogaz entered into an agreement flights of serial Su-30 aircrafts of of its appointmentas a co-insurer of various modifications (MK, MKI, Aeroflot – Russian Airlinesstarting MKM), Yak-130, and cargo carrier for from 2014. the manufacture of the prospective Sogaz has been extensively jet airlinerMS-21. developing insurance of military In 2013, aggregate receipts of aircrafts manufactured by enterprises Sogaz from aviation insurance of United Aircraft Corporation. In increased by 68.1% up to 2.1 particular, the company provided 31 SOGAZ OJSC, 2013 AVIATION INSURANCE (including liability insurance)

2500 25,0% 22,3%

2000 20,0% Mln Roubles 14,6% 14,9% 14,7% 1500 15,0%

2053,4 1000 8,8% 10,0%

1160,5 1221,5 500 1070,6 5,0% 670,4

0 0,0% 2009 2010 2011 2012 2013

Receipts, mln Roubles Market share, %

According to the Bank of Russia

32 SOGAZ OJSC, 2013 Space insurance

According to the Russian Association of Aviation and Space Insurers, in 2013 Sogaz came first in space insurance among Russian companies. The company’s receipts in this segment amounted to around 1 bln Roubles.

R E C E AROUND I

Z BLN T

A 1 ROUBLES S G

C E

33 SOGAZ OJSC, 2013 The company continues to At the end of 2013, Sogaz was Security Committee) for the first fortify its position insuring major named a winner of an open tender time approved Sogaz as an insurer space projects. In November 2012, for the insurance of risks of TsENKI and reinsurer of aviation and space it entered into a contract of co- Federal State Unitary Enterprise for risks without relation to the territory insurance of launches and flight the period of launches and flight of the former USSR. Thus, foreign tests of 7 space vehicles with tests of 13 space vehicles as part of offices of Aon may use Sogaz’s Federal State Unitary Enterprise the Russian federal space program capacity for placement of risks of «Center for Operation of Space for 2006-2015. Nine launches under foreign airlines and risks associated Ground-Based Infrastructure» this co-insurance contract are with launch and operation of space (TsENKI). During the year 2013, scheduled for 2014 and 2015, one satellites. It should be noted that Sogaz was a coordinating insurer of them already took place and was Sogaz became one of the first of 3 out of 5 launches scheduled in successful. Russian insurers approved by Aon the contract. Five space vehicles for that. The company continued to take were placed into orbit as planned, part in the insurance of Sea Launch 4 of which are still in space, and project. In spite of failure in February one, Bion-M project, after successful to place into orbit a European work in space and zero-gravity satellite, Sogaz renewed contracts of conditions, brought to Earth in a insurance of transportation of launch descent module the results of a vehicles and boosters, of pre-launch biological experiment with living preparation of space rockets and objects. Two remaining launches sea infrastructure, including a sea under this contract are scheduled launch commander and a launching for 2014. Sogaz successfully took platform. part in the co-insurance of launches of Soyuz and Progress spacecrafts Sogaz pays considerable which deliver crews and cargo to attention to the development of the International Space Station in cooperation with foreign partners. In the framework of the manned space 2013, Financial Security Committee program. of one of major international 34 insurance brokers Аon (Aon Market SOGAZ OJSC, 2013 Marine insurance

Sogaz is a member of «National insuring the construction of 2 small- Shipping Chamber» and one of size missile ships under project the leading insurers of marine 21631 for Russian Navy. risks in Russia. Currently, over A combination of Sogaz’s 300 sea, river and fishing vessels financial stability and experience are insured by Sogaz. Sogaz also and skills of its employees allows provides coverage of builders’ the company to provide high- risk, shipowner’s liability and quality insurance coverage of third party liability in the course shipping and merchant shipping of operation of ports and port risks. The reliability of insurance terminals. coverage provided by Sogaz is In 2013, the company continued ensured by the biggest contract to develop cooperation in the sector of obligatory reinsurance of marine of marine insurance with Gazprom and cargo in the Russian market Group, companies of Rosneft concluded in 2013, which provides Group, Sovcomflot, FESCO, for coverage limit in the amount of National Container Company, USD 100 mln. Moreover, at least Universal Cargo Logistics Holding, 97% of the aggregate coverage limit companies of United Shipbuilding under the obligatory program is Corporation. For Sogaz, cooperation reinsured with companies whose with companies working in defence international financial stability rating sector is extremely important. Thus, is not less than «A-» according to 35 the company entered into a contract Standard & Poor’s and A.M. Best. SOGAZ OJSC, 2013 MARINE INSURANCE # (with liability insurance)

600 9,1% 10,0% 8,7% 9,0% 500 8,0%

Mln Roubles 6,2% 7,0% 400 5,6% 5,6% 6,0% 300 5,0% 571,3 478,2 4,0% 200 329,6 3,0% 298,0 284,4 2,0% 100 1,0% 0 0,0% 2009 2010 2011 2012 2013

Receipts, mln Roubles Market share, %

According to the Bank of Russia

36 SOGAZ OJSC, 2013 Cargo insurance

Sogaz provides insurance of Over the year, it insured In Spring 2013, Sogaz entered transportation by various modes transportation of cargo of major into an open cover insurance of transport all over the world. Its Russian companies: Gazprom, policy for the transportation of the range includes all cargo types: from Rosatom, Rosoboronexport. unique processing equipment – the materials and equipment required Following the results of an world’s biggest gold ore grinding for construction and uninterrupted annual tender, it entered into an mill manufactured in Belgium. functioning of national nuclear, open cover insurance contract The equipment was transported defence, oil and gas sectors to with Techsnabexport for the total from the Magadan Sea Port to consumer goods. insurance amount of more than Natalka deposit and was intended USD 5.5 bln. TVEL’s cargo was for Matrosov Mine gold recovery In 2013, Sogaz achieved great insured for the amount of 165.6 bln factory. success and took the first place Roubles. Among new customers in the cargo insurance market. of the company is ROSINKAS, for Company’s total income in this which Sogaz’s maximum cargo segment reached 1.78 bln Roubles. insurance liability limit amounted to USD 500 mln.

37 SOGAZ OJSC, 2013 CARGO INSURANCE

2000 8,4% 9,0% 1800 7,2% 7,3% 8,0% 6,9% 1600 7,0%

Mln Roubles 1400 5,1% 6,0% 1200 5,0% 1000 1779,6 1650,6 4,0% 800 1596,5 3,0% 600 1281,7 400 2,0% 794,0 200 1,0% 0 0,0% 2009 2010 2011 2012 2013

Receipts, mln Roubles Market share, %

According to the Bank of Russia

38 SOGAZ OJSC, 2013 PARTICIPATION IN INTERNATIONAL PROJECTS

39 SOGAZ OJSC, 20142013

In 2013, Sogaz Insurance Sogaz actively cooperates with all members of one Group continued to expand its more major international project –Yamal LNG. Over participation in the insurance of the year, as part of the project it entered into contracts major transnational projects for of obligatory motor third party liability insurance, motor field development and energy carrier hull, OIHF, of insurance of liability of self-regulatory transportation. organization’s members, of voluntary medical insurance, etc. Company’s specialists conducted preparations for For the first time, the company entry into a contract of insurance against construction entered into a direct cargo insurance and assembly risks for the whole project, and for entry contract as part of Sakhalin II into a contract of well and drilling insurance. project. Moreover, Sogaz increased its share of reinsurance capacity by As part of the South Stream international project, renewal of a contract for insurance Sogaz cooperates with operators with respect to the of the offshore part of Sakhalin offshore and the onshore parts of the project, their Energy’s assets, and extended shareholders, advisersof lenders, professional insurance insurance coverage under contract market players. of insurance of the onshore part of Sakhalin Energy’s assets by inclusion of additional oil and gas infrastructure facilities. #

In 2012, Sogaz Insurance Group ensured its entry into the European insurance market by means ofacquisition of the controlling interest in SOVAG, German insurance company, and establishing SOGAZ a.d.o. Novi Sad, a subsidiary insurance company in Serbia.

The main activity of SOVAG is SOGAZ a.d.o. Novi Sad is an insurance of industrial and trading actively developing project. Its companies. SOVAG provides for development strategy for the first the Group’s participation in insuring three years is establishing direct European assets of Gazprom, contacts with Serbian companies, Gazprom Neft, GUNVOR Group, including businesses with foreign Nordic Yards and other corporate ownership. In 2013, the company’s customers of Sogaz Group. Over gains grew by 165% up to 3.6 mln 2013, the amount of GPW of euro. SOVAG amounted to 111.5 mln euro (as compared to 107.4 mln euro in 2012).

40 SOGAZ OJSC, 2013 PARTNER AND RETAIL SALES DEVELOPMENT

41 SOGAZ OJSC, 20142013

One of the priorities of the SOGAZ Insurance Group is the expansion of the partner sales channel and the development of retail insurance while maintaining a high level of profitability of the insurance business. The insurance premium for this business direction in GPW, bln rubles 2013 increased by 52% to 8.57 billion rubles and the technical result amounted to 1.2 billion rubles.

In 2013, SOGAZ considerably strengthened its market position in the market of bank assurance and 1,9 1,4 Car dealers insurance through leasing companies. The company has been actively developing new federal and regional 1,5 Mortgage and accident insurance 0,8 markets such as insurance of consumer credit borrowers Banks and leasing against accidents. With regards to auto insurance all Retail insurance 3,1 necessary measures to control the loss of profitability IIP ECC and preservation of the profitability of the motor own damage and obligatory motor third party liability portfolio. In the course of the year in most company’s branches effective organizational structures, teams of professionals with active and experienced leaders taking positions of deputy directors for partnerships and retail According to the Bank of Russia sales have been formed. The premium growth for the Such high performance indicators direction Banks and leasing were also made possible thanks companies withthe rate of 76% (up to to active cooperation with partner 3.1 bln rubles). In 2013, the number of banks such as «Delta Credit», major partners of the (with the annual «Raiffeisenbank», «Vozrozhdenie», amount ofinsurance services sales of «Rosbank», «VTB 24», «UniCredit # more than 1 million rubles) increased Bank», and the Agency for Housing from 115 to 138, of which 63 are Mortgage Lending (AHML). banks and 75 – leasing companies. High growth rates in 2013 were In total, operating partners of SOGAZ shown by partner sales through car include 255 banks and 164 leasing dealers and insurance brokers. The companies. During the year SOGAZ GPW premium increased by 98% to managed to secure the greatest 1.8 billion rubles. During the year, possible presence in the business about 100 agency agreements of banks – strategic partners: with new partners have been «Gazprombank», «SOBINBANK» concluded, insurance products and AB «RUSSIA». Thanks to the have been sold through 700 federal effective work within the «Credit and regional car dealers. SOGAZ insurance» project sales through continued to develop a successful OJSC «Sberbank of Russia» more partnership in auto insurance than doubled. with such famous companies as Within the framework of «Autoworld», «AutoSpecialCenter», “Mortgage lending and personal «Major», «Modus», «Nezavisimost loans” the GPW of OJSC SOGAZ (Independence)», «AGAT», «BRT», for 2013 increased by 2% and «Guédon», «KlyuchAuto» «TTS», totaled 0.8 billion roubles (the «TIM»,» Eurorosib.» As a result of received premium increased by the refusal to work with unprofitable 97% and stood at 0.86 billion partners, changes in procedures for roubles). vehicle insurance and the imposition 42 SOGAZ OJSC, 2013 NT # I S O O P F F

S O

of restrictions on sales in unprofitable branches SOGAZ

2 842 A

R L

succeeded in reducing the gross loss ratio of motor own E

N M U S OF damage insurance through car dealers by 5%. T S N I A

L O

A significant role in developing retail sales of SOGAZ E

is attributed to the Integrated insurance program of Inte 394

gra W

te E d N employees of companies – corporate clients (IIP ECC). In in su r 2013, 394 sales points of the IIP ECC were opened and Z a n A c their total number reached 2,842. Their coverage zone G e

O p extends to almost 1.1 million employees of corporate r S o g OVE clients of the SOGAZ Group. Since 2013, the company r C R

a ’

A m S G

has been paying special attention to cross-sales and N

o E

extension of previously concluded agreements as an r

S e 1.1

R mln persons

effective tool to increase receipts and maintain high E

s l

o t

profitability of the IIP ECC. In general, SOGAZ receipts n

e l

s c

with regards to the IIP ECC and retail insurance in 2013

t f

reached 2.9 billion rubles, which is 33% higher than a p r

p o a c n

i –

year earlier. s IN S E A S L E By the end of the year a profitable and balanced A S

portfolio of retail insurance was established. R 33% C

N I

43 SOGAZ OJSC, 2013 PERSONAL INSURANCE

44 SOGAZ OJSC, 20142013 Voluntary personal insurance

SOGAZ had been the absolute leader in the voluntary personal insurance market for many years (excluding life insurance) in Russia. According to the CBR, in 2013 the share of SOGAZ in this segment of the insurance market in Russia amounted to about 13%. Receipts rose by 10% to 26.64 billion rubles.

In 2013, SOGAZ concluded a total is health insurance (VHI), which enterprises or tens of thousands of of more than 419 thousand contracts accounts for about 29.3% of the people in large holding structures. of personal insurance, including with total portfolio of the company. An individual VHI program is the country’s leading corporations. SOGAZ receipts in this type of developed for each client, which New major clients of SOGAZ in this insurance in 2013 reached 24.9 shall be optimum for him specifically. area included «MOEC», «SUEK», billion rubles. The number of insured During the year the Group had «Metalloivest», «Bosco» Goup through VHI contracts exceeded 2.1 victories in competitions for the right of Companies, «Sheremetyevo million people. to voluntary medical insurance of International Airport» and many SOGAZ provides VHI services to employees of NC «Rosneft», «Mail of Russia», «Rosselhozbank», others. any companies regardless of their profile of activity and number of «Rostelecom», «FosAgro AG», The main SOGAZ business employees: a collective agreement «Kurchatov Institute» and a number in voluntary personal insurance may include a few people in small of other leading companies and organizations. VOLUNTARY PERSONAL INSURANCE Voluntary Health Insurance (excluding life insurance)

30 14,5% 30 25,0% 14,0% 21,0% 21,6% 13,9% 25 14,0% 25 18,5% 17,6% 18,3% 20,0%

Bln Roubles 13,5% 20 12,9% 13,2% 20

Bln Roubles 15,0% 12,8% 13,0% 15 15 24,9 12,5% 22,8 10,0% 10 24,2 26,6 10 17,8 17,0 18,9 12,0% 15,9 14,2 13,1 5,0% 5 11,5% 5

0 11,0% 0 0,0% 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Receipts, bln Roubles Market share, % Receipts, bln Roubles Market share, %

According to the Bank of Russia According to the Bank of Russia

45 SOGAZ OJSC, 2013 NUMBER OF INSURED THROUGH VHI, INSURANCE AGAINST ACCIDENTS thousand of persons AND ILLNESSES

2500 2000 4,5% 4,0% 1800 4,0% 2000 1600 3,0% 3,5% 1400 3,0% 1500 mln Roubles 1200 2,3% 1,9% 2,5% 1000 1,8% 1779,6 1000 1650,6 2155 2,0% 1596,5 1948 800 1778,1 1,5% 1281,15437 1546 600 1366,1 1130,2 500 1157 400 1110,8 1,0% 794,0 1080,7 200 0,5% 0 0 0,0% 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Receipts, mln Roubles Market share, %

According to SOGAZ own data According to the Bank of Russia

46 SOGAZ OJSC, 2013 Compulsory Health Insurance

As part of the SOGAZ Insurance of the Far Eastern Federal District • medical care provided in Group OJSC SOGAZ-Med (DFO), increasing its share in the day hospitals – more than Insurance Company implements number of DFO insured residents 0.8 million patient-days; compulsory health insurance. DFO from 10% to 25%. • ambulance calls – more than Since 2004, SOGAZ-Med has been During the year SOGAZ-Med 3.3 million the leader among Russian health concluded agreements to provide insurance companies in terms and pay for VHI healthcare in total of the degree of penetration into with more than 4.7 thousand medical regional markets, and since 2005 organizations as well as established has been among the top three CHI 38 contracts with TFOMS in Russian market leaders. Its regional network regions. The amount of target funds includes more than 550 divisions on received by the company for CMI territories of 38 Russian regions. in 2013 amounted to 130.7 billion By the end of 2013 the number of rubles, which is almost 89% higher insured SOGAZ Honey exceeded than a year earlier. Payments to 14.8 million people (more than 10% medical institutions also rose to of Russia’s population). 136.2 billion rubles. In particular, In In 2013, the company continued particular, the company has paid for: to expand its geographic presence • outpatient care – more than for in the regions. SOGAZ-Med was 80.3 million visits; included into the CHI systems in • inpatient care – more than Amur and Magadan regions and took 2.9 million finished cases; 47 a leading position in the CHI system SOGAZ OJSC, 2013 T CAR F INS EN E O U I R R T E A E D P More than B More than

T M

U U

O 14.8 80.3 N AT mln visits NP IEN F INS I T persons O U R R C E A E More than D R B More than

E M

2.9 U 10%

mln cases N of the Russian population

les ub R IN ln YS DA DICAL O b A I E R L M G D Y A H N T C Z More than T I N I Z 2 A A A E W . R I

T E S

T G P I

T 4.7

6 a C O N

0.8 C

E O thousand

y mln b A

3 m T

S T

E N

R i S O g C

1 a

t t

U y t n

ial fu ds i

o r n

to R m i

L u

BU AN rr m s

M C e s A E e

T i

e I C d

№ n d H

More than i r

c O e

i L

a c

L h

l 38 t

s o

r t

3.3 u

a a

mln t

n n n o C

z a t i s o n

D TARG E E IV T E E C D

ECEIV R R U ED

OF T F 130.7 N

T A

R O

N D

bln Roubles

U G S

E T

Almost by T N

M U

A A M

F H

89% U

E I N R C

48 SOGAZ OJSC, 2013 One of the most important The company conducted a Med actively participated in improving activities of SOGAZ-Med is to control thorough examination of each and developing the CHI legislation the quality of medical care provided complaint aimed at protecting and preparing proposals for its to patients. For this, in 2013, SOGAZ- the rights and legitimate interests further development with the CHI Med experts conducted more than of insured citizens. With the Federal Fund, the Russian Ministry 2.25 million examinations, which assistance of SOGAZ-Med more of# Healthcare and the Government involved more than 1.3 thousand than 1.2 thousand substantiated of the Russian Federation, including highly qualified specialist doctors. complaints on violations of rights the implementation of orders of the Following the results of expert of the insured in CHI were settled in Russian President following the activities over 1.28 billion rubles the pretrial and trial order, including July 30, 2013 meeting of the State was withheld and returned to the financial compensation from health Council on the accessibility and CHI systemfor violations of medical organizations exceeding 2.9 million quality of healthcare. care provision. rubles.

Much attention is paid to the In 2013, SOGAZ-Med continued company’s work with citizens. In the program of introducing modern 2013, the 24-hour dispatch and technologies to develop the CHI consulting service with number system. Many offices were equipped 8-800-100-07-02 received and with machines to design single form processed more than 66.5 thousand CHI policies as plastic cards with an statements of insured citizens, and electronic means («e-policy»). During more than 14.3 thousand complaints the year, the company’s offices issued were received through the “on-line more than 707 thousand «e-policies.» consultant” service on the company’s Several branches of the company website. also participated in implementing the «Universal electronic card» federal The total number of complaints project. of insured persons to SOGAZ-Med for 2013 amounted to 2.4 thousand, As a member of the Interregional 50% of them were considered Union of Health Insurers and the

49 reasonable. Russian Union of Insurers, SOGAZ- SOGAZ OJSC, 2013 DYNAMIS OF THE NUMBER OF # INSURED IN OJSC SC SOGAZ-Med, million persons

10 14,77 14,42 13,01 5 12,90 12,50 794,0

0 2009 2010 2011 2012 2013

According to the data of OJSC SC SOGAZ Med

50 SOGAZ OJSC, 2013 Life insurance

Life and health insurance wihin the SOGAZ Group is managed by specialized company SOGAZ-LIFE, Russia’s first life insurance company, which has received the highest score of the «Expert RA» rating agency: А++ («Extremely High Level of Reliability,» Forecast «Stable»).

Following 2013 the total amount of insurance premiums of SC SOGAZ-LIFE amounted to 2.5 billion rubles. As of today the company’s portfolio is comprised almost entirely of voluntary insurance programs. 98% of the voluntary insurance portfolio is mixed life insurance and pension insurance. In 2013, the company continued to develop the classical life insurance, abandoning credit borrowers insurance.

51 SOGAZ OJSC, 2013 SC SOGAZ-LIFE is the traditional leader in the corporate life insurance market. The company occupies 26% of this market segment and cooperates with of fuel and energy complex, machine building, electric power, chemical industry, pharmacy enterprises, etc.

The company aims to develop long-term relationships in the corporate sector and is ready to assist its clients in developing social policy and human resource management, improving motivation and loyalty of employees as well as offers private insurance services. Key partners of SC SOGAZ-LIFE include «Gazprom» Group of companies, regional gas companies, CJSC «Globus-Telecom», OJSC «Gazprom gas distribution», 6% JSC «Giprogaztsentr», OJSC «VNIPI-Gas production», 2 z a LLC «NPP Petrochemicals, «OJSC «LEPSE», SOC g o C S o

«Vietgazprom», FSUE «Armavir Biofabrika», FC «Zenit» f r o p o and several other leading Russian companies. e r r a

The amount of assets under the management of the h e

company by the end of 2013 rose to 11.1 billion rubles. e

Incomes on policies involving the investment income of s

the insurer increased to 7.048%. In 2013, the net profit MARKET a

LEADER c of SC SOGAZ-LIFE amounted to 134.7 million rubles. e

52 SOGAZ OJSC, 2013 #

LIFE INSURANCE

4 9,0% 10% 3,5% 3,5 9% 7,1% 3,1 8% 3 6,6 2,5% 7% Bln Roubles 2,5 4,8% 6% 2 5% 1,5 2,9 4% 1,1 1,1 3% 1 2% 0,5 1% 0 0 2009 2010 2011 2012 2013

Pension insurance Life insurance taking into account regular insurance payments

Life insurance against death, survival to a certain age or time, or another event According to the data of the Bank of Russia, SC SOGAZ-Life

Market share, %

53 SOGAZ OJSC, 2013 LIFE INSURANCE AGAINST DEATH, # SURVIVAL TO A CERTAIN AGE OR TIME, OR ANOTHER EVENT

3500 9,4% 10,0% 9,0% 3000 7,8% 7,4% 8,0% 2500 7,0% 5,4% 6,0% 2000 5,0% Mln Roubles 3284,9 3,5% 1500 4,0% 2745,1 1000 2236,2 3,0% 2,0% 500 982,8 991,7 1,0% 0 0,0% 2009 2010 2011 2012 2013

Receipts, mln Roubles Market share, %

According to the data of the Bank of Russia, SC SOGAZ-Life

54 SOGAZ OJSC, 2013 LIFE INSURANCE TAKING INTO ACCOUNT # REGULAR INSURANCE PAYMENTS

200 6,3% 7,0% 180 6,0% 160 140 5,0%

Mln Roubles 120 4,0% 100 152,2 2,6% 174,5 3,0% 80 2,1% 60 1,4% 118,9 2,0% 40 0,9% 112,4 1,0% 20 41,4 0 0,0% 2009 2010 2011 2012 2013

Receipts, mln Roubles Market share, %

According to the data of the Bank of Russia, SC SOGAZ-Life

55 SOGAZ OJSC, 2013 REINSURANCE

56 SOGAZ OJSC, 20142013

According to the Russian CBR, in 2013, the interests of the SOGAZ Group reinsurance capacities aimed at GPW of SOGAZ OJSC on inward reinsurance are represented by the SOVAG insuring energy and engineering Insurance Company, with the risks, the maximum limit of liability amounted to 6.1 billion rubles, which headquarters in Hamburg (Germany) for which amounted to 1 billion is 37.6% more than in a year earlier. The and representative offices in other U.S. dollars – the largest on the company is the The company ranks first in the countries, including the UK (SOVAG territory of the former USSR. Russian market with a share of reinsurance UK). Judging by the results of 2013, Moreover, the largest obligatory the amount of premiums for inward reinsurance contract for marine risks 13,7%. reinsurance from abroad amounted and shipments with the coverage to about 3 billion rubles. SOGAZ has limit of 100 million US dollars was SOGAZ, having an extensive been active in entering the U.S. concluded. Having said this, no less experience in underwriting and reinsurance market, arrangements than 97% of the to tal limit of the settling claims for large and complex were made to obtain risks with coverage for the obligatory program risks, is a leader in the reinsurance several insurance companies and is reinsured in companies with the of industrial and energy projects brokers. international financial stability rating both in domestic and international not below «A-» in Standard & Poor’s In outward reinsurance the markets. The company cooperates and A.M. Best. company focused on building with leading insurance brokers direct long-term relationships with and actively develops reinsurance reinsurers, which will allow creating in the former Soviet Union, South unique solutions that are of high Korea, India, Mexico, United States, demand in changing markets with Venezuela, Eastern Europe, etc. increasing competition. Thus, during Within the European Union the 2013 SOGAZ successfully resumed Another strategic direction of the company in inward reinsurance is a gradual revision of the policy on its own retention. SOGAZ aims to reduce its dependence and the need for reinsurance, so it increasingly inclines to purchase only the necessary reinsurance protection to cover it against catastrophic risks, by analogy of the protection structured by large Western companies. INWARD REINSURANCE

7 16,0% 13,7% 14,0% 6 12,0% 5 10,4% bln Roubles 10,0% 4 7,8% 8,0% 3 5,5% 6,1 6,0% 4,4 2 3,4% 2,7 4,0% 1 1,9 1,4 2,0% 0 0,0% 2009 2010 2011 2012 2013

Receipts, bln Roubles Market share, %

According to the Bank of Russia,

57 SOGAZ OJSC, 2013 SETTLEMENT OF LOSSES

58 SOGAZ OJSC, 20142013 Settlement of losses with regards to property insurance (including the obligatory motor third party liability)

In 2013, SOGAZ received about 103 thousand applications for damages under insurance contracts for automobile transportation, liability, property of individuals and legal entities. During this period, more than 87 S E T thousand of losses were settled, and the total size of T More than L

E payouts exceeded 14 billion rubles. D 87 0 thousand of losses SOGAZ has once again confirmed its status as a 0s n io 0t a L reliable insurer professionally, efficiently and responsibly c i o 3 l s p s fulfilling its commitments. This was vividly proven by p 0 a e s insurance payments made within an unprecedentedly 1 s

short time for such technically complex insurance types t t

l e

as insurance of aviation and space risks. Thus, in March m e

2013, the company paid 855 million rubles after the n t

aircraft crash of Tu-204, «Red Wings» airline, occurred n

r o

e u c r a n L A TA MO O U T N More than T

14 P

bln Rubles A

E S N T on December 29, 2012 at the «Vnukovo» In these and in other cases the victims introduction of the rating system of auto airport in Moscow. More than 3 billion and relatives of victims received their repair businesses. Each company is rated rubles was paid in connection with the compensation as soon as possible. on a monthly basis after the analysis of partial loss of the «Yamal-402» satellite certain indicators. During 2013 37 branches In 2013, the company continued as a result of its output to an unplanned of the company and more than 880 public to centralize processes related to the orbit in December, 2012. This payment car repair businesses were connected to settlement of losses – another 39 branches has become the largest in the Russian the rating system. The purpose of this were added to 14 pilot ones. Thus, by insurance market in 2013 and the largest in project is to provide a balanced model the end of 2013 centralization covered 53 the history of SOGAZ. In 2013, significant for choosing a service provider for the branches. The company plans to complete payments were also made as a result of repairs of vehicles. this process before the end of 2014, accidents in the fuel and energy sector. which will provide uniform standards for In the past year a project to centralize These included the payment of 582 million losses settlement and improve the quality subrogation work implemented in 2012 rubles to a company of the electric power of customer service. Centralization of was launched in full. Smooth subrogation sector, and 955 million rubles to a company losses settlement is accompanied by large- activities can significantly improve the in the gas shipment industry. scale modifications and automation of the financial results of the company. In just The company showed its social SOGAZ information system. This enables one year more than 250 million rubles was responsibility in resolving a number of to track not only the loss settlement period received on complaints provided on the major transportation accidents. The most as a whole, but also each of its stages central basis. resonant accidents in 2013 were the plane separately. Such an approach improves the crash at the airport of Kazan (about 90 control over the performance of obligations million rubles was paid) and a passenger to clients and speed of losses settlement. bus accident near Podolsky (a total of Another important project implemented more than 49 million rubles was paid). by the company in 2013 was the

59 SOGAZ OJSC, 2013 Settlement of losses and maintenance of personal insurance programs

In accordance with the has developed special programs for objectives set in the SOGAZ rehabilitation treatment of workers LS PR AL O C C Development Strategy in 2013 the in sanatorium medical institutions E S

company actively developed and for many large customers, taking E

425 D enforced common standards in into account the specifics of their thousand the organization of medical care to production. Los e in th se as e clients of the company insured under s e n During the reporting year, work se r u tt c m l n the VHI. To this end, a project to b e I

was undertaken to systematize the Z m More than by e

A e r

establish a single federal medical

n o

G s

process of medical examinations l

t f

45% p

O a

contact center was implemented. r

c in all branches, which allowed to d S e e s d s

In 2013, in total the health care

improve the efficiency with medical M a

organization service processed i help n institutions, to comprehensively al in

t ic

e d h 425 thousand calls, which is 45% n

e e

assess the work of expert doctors, a More than a

n M l

higher than in 2012. Medical care c

to develop additional activities e 5.9

i o

thousand n

was provided to insured persons in f

for interaction with medical and P

institutions t

e m

a r

r s

i more than 5.9 thousand hospitals s o

o g n

prophylactic institutions. As a result a

l P

I n e

c s u n r in all regions of Russia, as well as a Medic of the work of 130 expert doctors in a l 117 foreign clinics. h 2013 insurance payments to medical e l

The organization of rehabilitation institutions were reduced by more i 117 n

hospitals

s o l

treatment of insured persons was than 70 million rubles. Received r

S a

a g p

n s

o further developed in 2013. More than n h

In order to further improve the 135 a

t t

thousand o

135 thousand persons underwent n r

quality of customer interactions, persons u m

t r sanatorium treatment. The company e reduce the period for the examination

60 SOGAZ OJSC, 2013 and settlement of losses under of the crew in the crash of the «Red contracts on voluntary insurance Wings» aircraft on December 29, against accidents and illnesses, 2012. Besides, a large payment in insurance of costs of citizens the amount of 75 thousand euro was travelling outside their places of made to a member of the Chinese residence, the decision-making delegation at the XXVII World process with regards to payments Summer Universiade 2013 suffering was centralized and carried out by in a road accident. experts of the SOGAZ Head Office. otal a In 2013, the company acquired T mo u nt s o Traditionally, much attention an extensive experience in the state le f b p u a o y R m in 2013 was given to work with compulsory insurance of Emergency ln e b n statements of insured persons and ministry employees. SOGAZ has ts

7 b the insured. The company has made more than two thousand . y

S addressed more than 280 appeals, insurance payments, including to 3 O

G which resulted in the development the heirs of emergency ministry

2 A

Z and implementation of measures to employees who died while on duty at

n improve the quality of divisions of fire-fighting in the Leningrad region

r OJSC SOGAZ, medical institutions and Noginsky district of the Moscow

Pa V

ym H and service companies. Region. I

n p

t o

s g

a The total amount of payments u m n s d of SOGAZ under VHI programs in

e s

e 2013 amounted to 23.7 billion rubles.

s 399.2 n

s s

e mln Rubles Payments for insurance against

r n

l a

i n

accidents and illnesses reached

a a

399.2 million rubles, including 2.1

s d i t

c a c million rubles to the victims and successors of deceased members

61 SOGAZ OJSC, 2013 REGIONAL NETWORK DEVELOPMENT

62 SOGAZ OJSC, 20142013

As a federal insurer SOGAZ operates in most Russian the company reorganized existing regions. In 2013, in accordance with the approved divisions in regions where existed development strategy a key member of the Group – more than one branch of SOGAZ in OJSC SOGAZ continued to expand its regional network the past. As a result, by the end of OF B ER RA B N by opening branches and additional offices in the most the year SOGAZ was presented in M C U H

E N promising Russian cities important for the company. 76 regions of Russia. 75 S During the year eight branches, five divisions, 33 regional OF SEP R AR E A B T M E agencies and one additional office were established. U D

N I

Regional expansion took place according to corporate I

251 O

interests, real assessment of the feasibility of the SOGAZ

t s n ion e g F EMP presence in the insurance market in a particular region s O LO e ER Y e r B E r M E n S R U p a and in strict compliance with the uniform standards of the i I N N s e

s T i s g

i H

u 4 287 E o

service quality. The development of existing branches

Z R n persons R

A a G

6 O l R

G A and opening of new ones contributed to the strengthening L W

T N n E 7

O e

of the SOGAZ presence in regions, the development w

o se in r ea th

r e of corporate and partnership sales channels, and as a k c n

In u

m d b

e r consequence, the expansion of the company’s client v

k o

THE e f

F C o e

O O l

o m

S M w By

p 20%

T P p

portfolio and its diversification. e

P A n

N y

E a e

n n

More than e

C t

n e r

t h

E e R

The number of branches of the company in L 39.5%

A GRO

T W

O NCRE T

T I S

2013 grew from 67 to 75 and the total number H H N

I S

A E R E S O I N S F

of separate divisions (including offices and C C T

S O N H

O M By

E 9%

M P P

By V I

31% R S

regional agencies) increased from 220 to 251. P T E

R E

H F

R 33.5

E E

E N

V I S

Simultaneously with the opening of new divisions, bln Roubles N

I S

R E E C In 2013, the company finally Aggregate receipts of the SOGAZ conditions of intensive and extensive moved to the new model of sales regional networks in 2013 amounted growth of the SOGAZ regional management, which provides for the to 33.5 billion rubles, an increase by network Territorial Directorates designation of financial responsibility 31% compared with 2012. The share as subjects of management will centers by business segment (large of the regional network in the total improve the efficiency of regional federal clients and centralized amount of receipts of the company sales management and optimize federal insurance programs, market has reached more than 39.5%. administration and business corporate business, partnerships processes in subordinate branches. Competition activities have been and retail sales) and associated playing an increasingly important To build an effective financial new systems of business planning role in the work of regional divisions. management model for the regional and performance evaluation regional Over the past year the company’s network based on a single operational network divisions. regional network took part in the center the Head office continued The regional development of the 3,690 contests (143%), 32% of them centralization of accounting, company was accompanied by an were won. operational and financial functionals increase of the number of employees. of branches: in 2013, 35 branches During 2013 the company finally The number of employees in already participated in the project. shifted to a three-tier system of the company’s regional network With regards to HR administration the branch network management. increased by more than 700 persons and regression and subrogation The company has seven Territorial or by 20% – to 4,287 persons. 24 new activities the branch network of directorates by federal districts (the branch directors were appointed. With the company was fully shifted to a Territorial Directorate for South and this, the analysis of the effectiveness centralized mode of operation. North Caucasus Federal Districts is of regional sales showed that despite joint). As part of extending powers of An important place in the work an increase in the total number Territorial directorates further in 2013 of SOGAZ branches is allocated to of employees in regional offices, authority and functional management interaction with executive bodies of the sales performance has also with regards to marketing and Russian regions and the development growing: compared to 2012 the size HR were delegated to them, and of insurance under government of collected insurance premiums per Territorial Directorates were fully programs and investment projects. employee of the regional network integrated into the budget and increased by 9%. 63 resource planning of the company. In SOGAZ OJSC, 2013 During the year, the company They included the preparation for signed agreements on cooperation the 2013 Universiade in Kazan, the with the Governments of Tyumen, state program on socio-economic Omsk and Belgorod regions, the development of the Kuril Islands Altai region Administration as well (the Sakhalin oblast), construction as with municipal administrations of medical facilities in the Tyumen of Ulyanovsk, Yekaterinburg and region, the reconstruction of Omsk. Regular interaction with the autoroads in the Republic of executive authorities of the Moscow Bashkortostan. During the year region and state-owned enterprises within insurance of the risks of state in the region was organized as well. programs, FTIPs FTPs and regional investment programs more than 2.8 SOGAZ provided insurance thousand insurance contracts were coverage to the largest facilities, the made (2.5 times more than in 2012), construction of which was carried and the extent of SOGAZ’s liability out in the framework of federal doubled, reaching more than 280 and regional target programs. billion rubles.

64 SOGAZ OJSC, 2013 DEVELOPMENT OF MEDICAL INFRASTRUCTURE

65 SOGAZ OJSC, 2013

One of the priorities of the after Ordzhonikidze» in Podolsk Institute», «Mechel» and other SOGAZ Insurance Group is to (the Moscow region). Paramedic companies. improve the quality of medical care centers operate on the basis of A number of projects in to the insured under voluntary health «Mosenergo», «OGK-2», «Gazprom development of medical insurance programs. An important mining shelf», «ROTEP.» 150 health infrastructure in cooperation with role in this process is played by centers for the preroute, afterroute «B. Braun Avitum Russland» was healthcare company LLC SOGAZ and preshift health inspections of implemented by the SOGAZ Medservis included into the Group. motor vehicle drivers and production Insurance Group under the employees of the company work on The company has an ambulance Agreement with the Government the basis of «Moscow United Electric station comprising 10 ambulance of the Irkutsk region. Thus, in Grid» in Moscow and the Moscow teams of various specialities and a 2013, a joint project was completed region. modern fleet of vehicles, as well as aimed at establishing two dialysis a division of emergency home care. Another important area of centers in Irkutsk equipped with activities of SOGAZ Medservis is 52 last generation «artificial Within the «Production Medicine» the organization of health services kidney» devices for patients with project implemented by the SOGAZ in offices of large companies renal insufficiency. A second Medservis company together with whose employees are insured with modernization phase of the medical large industrial enterprises in SOGAZ. Health centers operate infrastructure of the region started Moscow and other regions, in 2013 in the office center of «Gazprom for the purpose of establishing a health centers were established Energy Home’, offices of NC regional center of high medical on the basis of «Yamal LNG» in «Rosneft», «Rosselkhozbank», technologies and a radiology center the village of Sabetta (the Yamal State Corporation «Rostechnology», in Irkutsk. region) and the «Plant of named «Gazprombank» SRC «Kurchatov Together with the «Angarsk petrochemical company» (included in NC «Rosneft») and with the support of the Government of Irkutsk region in 2013 SOGAZ started to modernize the APC medical unit # number 36, based on which it is planned to establish a corporate Center of Production Medicine and high medical technologies. The project goal is to improve the accessibility and quality of health services provided to employees of OJSC «NC» Rosneft «and residents of the region within VHI and CHI programs.

66 SOGAZ OJSC, 2013 INVESTMENT POLICY

6761 SOGAZ OJSC, 2013

In managing its investment portfolio SOGAZ requirements to the composition and structure of assets traditionally adopts a moderately conservative strategy. accepted to cover the insurer’s own means approved The main requirements for investment assets, in order of by the regulation of the Russian Ministry of Finance their importance were reliability, liquidity and profitability. No 101n dated 02.07.2012. In forming an investment portfolio the preference was made for fixed income financial instruments: deposits

TME of the largest Russian banks and highly liquid bonds ES NT V N P I O of issuers with high financial stability ratings. A part of E R

H F

97.5 O

the portfolio of securities was held in trust to diversify L

bln I

E Roubles

M ESTME

investment strategies in the stock market and actively U N

L V O T V N I I N manage a portfolio of stocks. C O

6.2 M

bln E During 2013 the investment portfolio (including funds Roubles on current accounts) increased from 79 billion rubles to

Z OF C 97.5 billion rubles. According to the outcomes of 2013, TY UR A LI R I E B N G A the investment income amounted to more than 6.2 billion T T I I

O N

F V

S 8.5% E

rubles, and the current investments yield was 8.5% per R

P annually

annum (8.4% in 2012). I N

S N

The management of the OJSC SOGAZ investment S

portfolio is exercised in the full compliance with the E

procedure for placing insurance reserves funds by P

I C insurers approved by the regulation of the Russian Y Ministry of Finance dated No 100n dated 02.07.2012 and RISK MANAGEMENT

6862 SOGAZ OJSC, 2013

The development of a risk management respective methods for calculating the Risk Management Committee, system is one of the SOGAZ priorities. risks associated with investments the principles of qualitative risk in securities, deposits and real assessment, stress testing, etc. In 2013, with the assistance of estate were developed. Insurance international consultants a roadmap Since 2014, the company plans to and investment risks assessment for developing the risk management start establishing a regular internal models in conjunction with other system was elaborated, in risk reporting. risks assessment (currency, accordance with which the internal operational, etc.) allow to form an regulatory and methodological overall quantitative assessment of framework for risk management the company’s financial risk and was formed. In particular, a model capital required for its coverage. for the insurance risk assessment was developed allowing to assess A key factor for the effective risk potential losses upon the occurrence management system iscorporate of major insurance events and the culture. Every manager and ideally – unprofitably growth in large scale every employee should understand insurance types. Apart from a the risks of the company within its quantitative risk assessment this area of responsibility and manage model is proposed to be used them in accordance with internal to establish the company’s own policies and guidelines. In this deductions and calculate tariffs. regard, much attention was paid in 2013 to the development of internal In order to quantify the regulations defining the functional investment risks of the company the and role of the risk owners and PERSONNEL MANAGEMENT

6963 SOGAZ OJSC, 2013

Employees of the company are a Group increased by more than 2.8 key value of SOGAZ. The company’s thousand (41%) compared with policy in personnel management is 2012 – to 9,660. by the end of the aimed at establishing a professional year 5,684 persons worked in OJSC M F E PLO GE AGE O Y A O team supporting the Group’s SOGAZ, including 1,397 in the Head R E R F E E E E V B S M A

P M O

U L

corporate values and capable of office and 4,287 in branches. 3,976 F

9660 35 E

persons E T THE A qualitatively fulfilling its strategic employees worked in subsidiaries IN years T S

S E A G

S HE E

O S

G E N E Y P

U R U E

Z O O

G R C M Y objectives. of the SOGAZ Insurance Group. An U N B O I By more N L

E G

than R

increase in the number of employees

O 41% E

2013 was marked with a F T

41% E

is primarily accounted for projects N

0 L

O S Y E significant increase in the number E aimed at centralization of business E AGE H BE of employees and managers. The T T T W A F EMP E processes launched in 2013. O LO S E R Y E number of employees of the SOGAZ Z E E Z N E E B

A S A Y 3 M 1

P P O

O U L

G e G e 31.5% A

F P

N N

M r D

O s O s 5684 4

o 0 o Y G

S persons S E A S R

n A n

n n

J S

e C e

l l

E AGE m m TH BE T T

A W a a

ees o S E n

oy f n E

l th E

p N

a e

m a E

4 g e Y

f e g

a O e

o e

d L A m r

m 16%

e o N

b f D e

f e

c n

1397 0

t Y u

A S

R o

N persons IT f W H

S H

S E I

O E G

G RE C Y H A

A H S O Z J

O O S F E W L R es of t P O ye h e E lo M p b M

r D a E

m E n U e N

c f 84% C

r n

T OF S

e E e E 73% I R

O G ER t V

b V E Y w EMP N A T F LO IC T H

m 4287 S

O Y o E I

u E R

R E r G O

E N persons D

E O M A

B S o L

f R F E

S About

M O A

O Works for

E G C

S A F J U Z

O V

M more than

A L S

years P

3976 U 3 L

B years

persons E

S 5

R I E S The basis team of SOGAZ ishigh in the Directorate of Monitoring of quality managers and specialists. The Labor Relations and Labor Protection average age of employees is 35 years: in the Head office. The introduction among these, 41% are employees of PM for branches is organized by under the age of 30 years; 31.5% – federal districts and provided by at M F E PLO GE AGE O Y A O 31 to 40; 16% from 40R to 50 years.E least two specialists of the personnel R F E E E E V B S M A

P M O

U L

The share of women is 73%. AlmostF management of the regional network,

9660 35 E

every third employee of OJSCpersons SOGAZ which drastically increased the E T THE A

IN years T S

S E A G

S HE E

O S

G E N E Y P

U R U E

Z O O

G R C M Y works in the company for more than efficiency and quality of personnel U N B O I By more N L

E G

than R

M five years and the average length documents preparation.

O 41%

41% E

of service of employees is about N

0 L

O S Y E E three years. About 84% of SOGAZ E AGE H BE T T T W A F EMP E employees have higher education. O LO S E R Y E Z E E Z N E E B

A S A Y 3 M 1

P P O

O U L

In G the previous year SOGAZ e G e 31.5% A F P

N N

M r D

O s O s 5684 4

o 0 o Y G

S persons S E conducted a large-scale project to A S R

n A n

n n

J S e C

centralize the personnel management e

l l

E AGE m m TH BE T T

(PM) of all branches of the company A W a a

ees o S E n

oy f n E

l th E

p N

a e

m a E

h in order to establish standard 4 g e Y

f e g

a O e

o e

d L A m r

m 16%

e o N

M requirements to employees, improve f D

b e

f e

c n

1397 0

t Y u

A S

R o

N persons IT the quality and efficiency of the PM f W H

S H

S E I

O E G

G RE C Y H A

A H S O Z J

O O S F E W in branches. Since December, 2013 L R es of t P O ye h e E lo M p b M

r D a E

m E n U

HR management in all branchese N

c f 84% C

r n

T OF S

e E e E 73% I R

O G ER t V

has been effected by specialistsb V E Y w EMP N A T F LO IC T H

m 4287 S

O Y o E I

u E R

R E r G O

E N persons D

E O M A

B S o L

from the Department of Personnel f R F E

S About

M O A

O Works for

E G C

S A F J U Z

O V

M more than

L S

management of the regional network years P O

3976 U 3 L

B years

persons E

S 5

R I E S

70 SOGAZ OJSC, 2013 Over the last two years, the speaking skills; specialized trainings company mainly focuses on started for management document developing an internal training system support employees as well as both in person and using remote effective telephone sales trainings technologies such as webinars, for the Single Contact Center. remote learning courses and online # In total in 2013 552 thematic video lectures. In 2013, a uniform training activities were held, and system of standards for training, the number of participants has more effectiveness evaluation learning than doubled – to 12.5 thousand quality was established. In addition (including 7.5 thousand- in regions). to the current composition of the Trainings were also organized for Head Office Staff Assessment and more than 850 employees of SOGAZ Development Center, a coaching partner banks. body is established on the basis of Territorial Directorates, which allows The remote learning format has to efficiently implement training become increasingly popular. In 2013, programs for employees in Moscow 65% students gained knowledge and regions uniform for the company. on SOGAZ insurance products, insurance programs with partners The training types were and other trainings by their activity significantly expanded in 2013 profile by this means. to include systematic training of managerial effectiveness for middle managers, additional courses on presentations and practice of public

71 SOGAZ OJSC, 2013 In late 2013 a new remote learning the literacy of employees in the system was launched on the WebTutor insurance business and practical basis, which will provide training using issues of business of the company. interactive multimedia training courses, Main speakers of the school are monitor training passage, and create Members of the Management Board, and store a single knowledge base. Directors of practices (practices in various insurance areas). Up to 250 In 2013, the company continued employees of the company study to work on developing the system at the school at the same time of business, professional and by attending lectures and online managerial trainings. Strategic broadcasts. sessions were organized for the top management on leadership, Given the scale of the business, personnel management in periods the complexity and uniqueness of of change within the program risks insured by SOGAZ, the company to improve the efficiency of the faces the particularly acute issue management team. A development of searching and selecting narrow program for Directors of branches specialists. To address this issue, the and Directors of the Head Office company formed its own recruiting was also established. The training body on the basis of the Head program focuses on the development office and Territorial directorates. of a manager as a personality In addition, in 2013, the concept capable to make difficult decisions, of increasing the attractiveness of build effective communications and the company’s brand for external introduce changes. The program was applicants was developed. According developed on a biennial basis and to the research the All-Russian has been implemented since 2013. Public Opinion Research Center (VTsIOM) held in September 2013 The «School of the Insurer» SOGAZ was among the top five project has become completely new attractive employers in Russia. 72 to SOGAZ. Its goal is to increase SOGAZ OJSC, 2013 In the circumstances of a demographic «gap» – In 2013, a series of changes was implemented in the social the lack of qualified staff at the working age the policy of SOGAZ: a social benefits package was updated, company mainly searches for young and talented principles and approaches to the connection of Head Office professionals. Since July, 2013 a project was launched employees to VHI programs were revised, employees were on cooperation with leading universities. Currently offered a parity private pension system. agreements are signed with the Plekhanov Russian The financial motivation system has undergone drastic University of Economics, RANHiGS, Financial University changes. Approaches to awarding employees of OJSC SOGAZ by the Government of the Russian Federation, MADI, based on KPI targets and target maps and the relationship Kutafin Moscow State Law University, MGIMO, HSE, a between outcomes and wages were revisited. number of regional universities. The company actively participates in job fairs. The Company takes great Under the new Regulation on awards at the end of the interest in graduates of the Lomonosov Moscow State year the «Best Employee» contest was held and awards University. were given to the winners at the New Year corporate party. In 2013 SOGAZ celebrated its 20th anniversary. In connection with the anniversary 16 employees were given gratitude letters from the President of the Russian Federation, the Government of the Russian Federation and the Ministry of Finance.

73 SOGAZ OJSC, 2013 INFORMATION TECHNOLOGY

74 SOGAZ OJSC, 20142013

Modern information technologies are the key to the competitive advantage complex of Single Contact Center of the company. OJSC SOGAZ. The company’s successes In 2013, the project on technical centralization of local databases of branches achieved in information technology and establishment of a Single Centralized Database (SCD) – the in 2013 received recognition of the main accounting system of SOGAZ was completed ahead of time. The creation public and experts. The SOGAZ of a SCD allows to ensure the functional centralization of main accounting, Insurance Group won the XII Annual National Award «IT-Leader» in the financial and operational processes, significantly ease the administration of «Insurance Company» category and system 1S:USK, increase its accessibility and stability. Executive Director of the SOGAZ Information Technology Department The main emphasis in information document management system Tatiana Porton was awarded ded a technology has been made to was extended, including at the diploma for her personal contribution enhance the existing functionality expense of putting into operation to the development of information of the existing corporate information the contract documents system and technologies in Russia. system (CIS) of the company. Thus, the introduction of the system of the the main accounting system of the centralized input of insurance and company has resolved the issue on accounting documents. Furthermore, further automation of financial and the industrial operation of a new managerial accounting, maintenance technological platform Dispatch of insurance and reinsurance remote of the St. Petersburg branch contracts and losses settlement. started within the expansion of the The functional of the electronic functionality of hardware-software CHARITY AND SPONSORSHIP

75 SOGAZ OJSC, 20142013

Social and charitable programs have long become an inSocial and charitable programs have long become an integral part of the modern large business. SOGAZ, like many large companies, regards support and building as its moral obligation to the society.

Children

One of the priorities in charitable Over these years the SOGAZ Every book has a special device policies of the SOGAZ Insurance funds were used to release about that helps children not only to Group is to help children. There 500 complete sets of books (each discover and read the letters and are programs in which the company consisting of 5 editions). A part of the poems, but also to hear them as participates each year. At the same donation was aimed at developing a well as music specially selected for time SOGAZ provides targeted new alphabet for visually impaired every page. In 2013, more than 50 assistance to families with sick and blind children – a unique complete sets of such an alphabet children who need expensive textbook covering residual vision, was transferred to pupils of the treatment. touch and hearing of a child. Each Sergiev Posad orphanage for the page is devoted to a letter of the blind and deaf. The most long-term charitable alphabet, which is represented by a project of the company is cooperation The company has recently started convex contour, duplicated Braille, with the Fund «Illustrated Books developing «corporate charity illustrated with images that are bright for Blind Children,» which has program.» Moscow SOGAZ Head and easy to understand by touch. successfully continued since 1996. office employees assist students of the Roslavlskiy Social Rehabilitation Center for Adolescents «Teremok». with the International Children’s Day. A substantial part of the children For September 1, company’s Insurance coverage was provided to were those who found themselves in employees helped prepare children 488 students who were sent by their difficult situations and children from for the new school year by collecting parents to a vacation at the summer disadvantaged families. During the and sending to them sets of school recreation complex «Pearl» in Anapa. shift camp participants took part in supplies. And for the New Year, they The Yekaterinburg branch together sporting activities, training on military implemented cherished desires of with the «SINARA» company also subjects, mountaineering lessons, the students of the center, giving participated in the construction of trips and excursions to the Nizhny every child exactly what he/she playgrounds for orphanages of the Novgorod region. wanted. region. The St. Petersburg branch Regional offices of the company The SOGAZ branch in Khabarovsk traditionally supports talented also have their own charitable since 2009 has been participating in children, and for many years has projects. In the Astrakhan region a charity project «White Ship.» Every helped organize the annual contest SOGAZ participates in the target year on the «Vasily Poyarkov» ship of children’s writings, drawings and program «Development of preschool a children’s health and rehabilitation photographs entitled «The Voice of education in the Liman district for camp for gifted children with the child.» 2012-2016». During 2013 funds disabilities, orphans and children of were allocated for capital repairs and families caught in a difficult situation redecoration of three kindergartens in is organized. villages Karavannoye, Promyslovka In 2013, the Nizhny Novgorod and Zanzeli as well as for the branch took part in one of the large- purchase of furniture, equipment, scale socially significant projects dishes and tools for kindergartens «Guardsman» – a defense and in villages Karavannoye, Zarechnoye sports camp on the basis of the and Promyslovka. Mulinsky military garrison.

In the 2013 summer SOGAZ Students of 8-11 grade, cadet participated in a charity event in schools, military and patriotic youth Yekaterinburg timed to coincide 76 organizations took part in the event. SOGAZ OJSC, 2013 Health

SOGAZ cooperates with medical funds and transfers funds to charity funds of medical and social rehabilitation of children «Follow the Heart», «The Joy of Childhood» and Nonprofit Fund of the Medicine, Culture and Sport Support «Creation» and the Samara regional public organization of disabled people «Disabled Persons’ Federation of the Volga Region.»

The company provides targeted assistance to families with sick children and the disabled. Thus, in October specialized rehabilitation equipment for home use was purchased – an electromechanical lift – for a disabled girl from Tyumen.

The St. Petersburg branch of the company since 2011 has been cooperating with a children’s hospice in Olgino. SOGAZ purchased medical equipment for children undergoing rehabilitation in a daycare of a children’s hospice, paid for the preparation of prostheses for a patient, assisted in organizing the Easter holiday and the publication of poems of hospice patients in the youth poetry anthology «the Green Environment». The company also participates in charity events aimed at aiding a children’s hospice, including the annual «White Flower» campaign.

77 SOGAZ OJSC, 2013 Sports

The SOGAZ Insurance Group to more than 260 billion rubles. The players and arbiters are under the traditionally pays much attention to company succeeded to build the reliable insurance protection of the supporting professional and youth necessary «insurance infrastructure» company. sports and helping athletes. It is in a short time - a network of services SOGAZ is also a regular partner not only an image project for the for all insured with the appropriate of the International tournament company, but also a way to contribute information level, including in foreign of children CHL hockey teams to the promotion of healthy lifestyle languages. After the Universiade «Gazprom Neft Cup» held annually and improve Russia’s international SOGAZ fulfilled all its obligations in April in Omsk. In 2013, the risks of prestige. associated with the settlement of tournament organizers were insured losses. In 2013, the major sports event and all the participants were given was the Universiade in Kazan. As In October 2013, SOGAZ was life and health insurance policies. an official partner and insurer of the official insurer of the World Besides, the insurance protection the Games SOGAZ insured all the Martial Arts Games 2013. Insurance was provided to a major trophy – property used for tests and during coverage was provided for the civil «Gazprom Neft Cup.» the Universiade as well as the liability of the Directorate of of the financial risks and civil responsibility Games as well as international of the organizers. All participants, organization SportAccord as guests and volunteers were insured organizers of mass events. against accidents. For the past six years, the The total amount of liability of company is the general partner and SOGAZ on the insurance of risks the insurer of the Continental Hockey related to the Universiade, amounted League. Life and health of CHL team 78 SOGAZ OJSC, 2013 Another priority is to support domestic football. Since 2011, the company acts as the title sponsor of the Russian Football Championship. Furthermore, over the years SOGAZ has been insuring players, coaches and the staff of the St. Petersburg football club «Zenith», providing medical support for all home and away matches of the club.

The company successfully cooperates with hockey clubs «TSSKA», «Admiral» (Vladivostok) and «Yamal Siberian Cranes» (Noyabrsk), men’s basketball club «Spartak» (St. Petersburg), women’s volleyball club «Sparta & K», mini football club «Gazprom-Yugra» basketball club «UGMC».

Besides, in 2013, the Kemerovo branch of the company supported the all-Kuzbass para olimpic sports festival by buying equipment for athletes with disabilities.

79 SOGAZ OJSC, 2013 FINANCIAL PERFORMANCE

80 SOGAZ OJSC, 20142013

In 2013, the net profit of the SOGAZ Insurance Group judging by international financial reporting standards reached more than 11 billion rubles.

The amount of assets of the Group was 177 billion rubles, an increase of 29% compared to the last year, which accounts for rising receipts and investment portfolio of the company as well as the transaction in the IV quarter of 2013 for the acquisition of 98.91% shares of CJSC SC Transneft with assets of nearly 17 billion rubles. The capital of the Group in 2013 increased by 5.8 billion rubles to 50.1 billion rubles, including the payment of dividends in May 2013 in the amount of 5.5 billion rubles.

The Group demonstrates high rates of return on assets and return on equity – 7.4% and 23.4%, respectively. SOGAZ GROUP Consolidated Statement of Financial Position

(in thousands of Russian rubles) Notes. Dated December 31, 2013 Dated December 31, 2012 ASSETS # Cash and cash equivalents 7 3 899 000 2 688 662 Deposits with banks 8 66 851 684 48 264 812 Loans 9 535 057 76 360 Securities at fair value through profit or loss 10 18 979 420 18 434 193 Investment securities available for sale 11 11 917 364 1 632 132 Investment securities held to maturity 12 – 9 181 606 Investment in associates 13 10 718 473 6 874 847 Receivables 15 20 535 532 17 245 374 Prepayment 16 5 490 485 3 240 719 Current income tax asset 471 289 418 923 Reinsurers’ share of provision for unearned premiums 20 8 726 021 7 268 381 Reinsurers’ share of loss provisions 21 11 572 225 6 833 289 Investment property 14 445 710 834 586 Deferred acquisition costs 30 4 059 861 3 557 205 Deferred income tax asset 32 104 489 228 787 Premises and equipment 17 9 423 340 8 644 779 IIntangible assets 18 2 839 607 1 141 264 Goodwill 19 640 676 188 368 Other financial assets – 207 811 Other assets 144 253 237 846 TOTAL ASSETS 177 354 486 137 199 944

81 SOGAZ OJSC, 2013 (in thousands of Russian rubles) Notes. Dated December 31, 2013 Dated December 31, 2012 LIABILITIES Provision for unearned premiums 20 45 774 040 38 830 391 Loss provision 21 51 897 193 38 973 956 Deferred commission income 30 858 243 543 059 Payables 23 #20 478 236 7 794 938 Current income tax liability 108 000 6 092 Deferred income tax liability 32 2 724 157 2 912 934 Other financial liabilities 25 2 524 657 1 745 818 Other liabilities 25 2 890 474 2 138 522 TOTAL LIABILITIES 127 255 000 92 945 710 Share capital 27 15 328 487 15 328 487 Share premium 27 2 610 2 610 Preventive measures reserve 28 – 222 085 Fair value reserve for investment securities available for sale 27 109 428 124 430 Reserve for translation to presentation currency 27 92 190 (24 839) Retained earnings 33 310 698 27 283 425

Net assets attributable to the Company’s owners 48 843 413 42 936 198 Non-controlling interest 26 1 256 073 1 318 036

TOTAL EQUITY 50 099 486 44 254 234

TOTAL LIABILITIES AND EQUITY 177 354 486 137 199 944

82 SOGAZ OJSC, 2013 SOGAZ GROUP Consolidated Statement of Profit or Loss and Other Comprehensive Income

(in thousands of Russian rubles) Notes 2013 2012 INSURANCE # Gross premiums written 34 94 231 620 84 159 853 Premiums ceded 34 (19 435 390) (13 754 584) 74 796 230 70 405 269 Change in provision for unearned premiums, gross 20 (3 099 310) (10 232 436) Change in reinsurers’ share of provision for unearned premiums 20 925 430 1 175 418 (2 173 880) (9 057 018) Changes in the prior years’ contracts (2 082 942) (1 302 522)

Net premiums earned 70 539 408 60 045 729

Gross claims paid 34 (46 133 251) (38 094 653) Reimbursement of claims for risks ceded to reinsurers 34 4 672 988 662 281 (41 460 263) (37 432 372) Change in loss provision, gross 21 (7 759 551) (2 613 463) Change in reinsurers’ share of loss provision 21 3 015 960 1 008 316 (4 743 591) (1 605 147) Claims handling expenses (2 307 171) (2 179 390)

Net claims incurred (48 511 025) (41 216 909)

83 SOGAZ OJSC, 2013 (in thousands of Russian rubles) Notes 2013 2012 Acquisition costs net of related commission income from premiums ceded to 30 (4 553 453) (3 728 882) reinsurers Subrogation income 675 639 384 468

Total results from insurance activity 18 150 569 15 484 406 #

INVESTMENT INCOME AND EXPENSES Gains less losses from securities at fair value through profit or loss 462 795 707 938 Realised gains arising from securities available for sale 59 092 963 626 Interest income 29 6 465 433 5 177 191 Interest expenses (161 916) (166 597) Dividend income 114 252 349 694 Foreign exchange translation gains less losses/(losses net of gains) 205 296 (115 459)

Investment income and expenses, net 7 144 952 6 916 393

Other operating income 31 2 734 136 2 096 344 Administrative and other operating expenses 31 (14 099 498) (10 633 249) Share of results of associates 13 18 524 138 624

Profit before taxes 13 948 683 14 002 518 Income tax expense 32 (2 913 706) (2 692 681) Profit for the year 11 034 977 11 309 837

84 SOGAZ OJSC, 2013 (in thousands of Russian rubles) Notes 2013 2012 OTHER COMPREHENSIVE INCOME/(LOSS): Items that may be reclassified subsequently to profit or loss: Gains arising from securities available for sale 53 730 184 191 Realised gains transferred to profit or loss (59 092) (963 626) Income tax recorded directly in other comprehensive income 32 (54 554)# (52 063) Change in the reserve for translation to presentation currency 211 465 (43 741)

Other comprehensive income/(loss) for the year that may be reclassified 151 549 (875 239) subsequently to profit or loss

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 11 186 526 10 434 598

Profit/(loss) attributable to: Owners of the Company 11 242 003 11 385 075 Non-controlling interest 26 (207 026) (75 238)

11 034 977 11 309 837

Total comprehensive income/(loss) attributable to: Owners of the Company 11 344 030 10 497 602 Non-controlling interest 26 (157 504) (63 004)

11 186 526 10 434 598

85 SOGAZ OJSC, 2013 SOGAZ GROUP Consolidated Statement of Changes in Equity

Attributable to owners of the Group Reserve for # translation to Fair value reserve for Non-control- In thousands of Russian Share Share presentation investment securities ling interest Roubles Notes capital premium currency available for sale Retained earnings* Total (Note 26) Total equity

31 December 2011 8 259 005 2 610 – 987 064 24 190 496 33 439 175 878 844 34 318 019 Profit/(loss) for the year – – – – 11 385 075 11 385 075 (75 238) 11 309 837 Other comprehensive – – (24 839) (862 634) – (887 473) 12 234 (875 239) income/(loss)

Total comprehensive in- – – (24 839) (862 634) 11 385 075 10 497 602 (63 004) 10 434 598 come/(loss) for the year

Increase of share capital 27 7 069 482 – – – (7 069 482) – – – Disposal of subsidiary 41 – – – – – – (878 706) (878 706) Acquisition of subsidiary 41 – – – – – – 1 258 040 1 258 040 Origination of subsidiary 41 – – – – – – 122 862 122 862 Dividends declared 33 – – – – (1 000 579) (1 000 579) – (1 000 579)

31 December 2012 15 328 487 2 610 (24 839) 124 430 27 505 510 42 936 198 1 318 036 44 254 234 Profit/(loss) for the year – – – – 11 242 003 11 242 003 (207 026) 11 034 977

* Retained earnings at 31 December 2011 and 31 December 2012 include preventive measures reserve.

86 SOGAZ OJSC, 2013 Attributable to owners of the Group Reserve for # translation to Fair value reserve for Non-control- In thousands of Russian Share Share presentation investment securities ling interest Roubles Notes capital premium currency available for sale Retained earnings* Total (Note 26) Total equity Other comprehensive – – 117 029 (15 002) – 102 027 49 522 151 549 income/(loss)

Total comprehensive in- – – 117 029 (15 002) 11 242 003 11 344 030 (157 504) 11 186 526 come/(loss) for the year

Acquisition of subsidiary 26 – – – – – – 95 541 95 541 Dividends declared 33 – – – – (5 517 188) (5 517 188) – (5 517 188) Dividends returned 33 – – – – 80 373 80 373 – 80 373

31 December 2013 15 328 487 2 610 92 190 109 428 33 310 698 48 843 413 1 256 073 50 099 486

* Retained earnings at 31 December 2011 and 31 December 2012 include preventive measures reserve.

87 SOGAZ OJSC, 2013 SOGAZ GROUP Consolidated Statement of Cash Flows Open Joint Stock Company “Insurance Company of Gas Industry” Consolidated statement on cash flows for 2013

In thousands of Russian Roubles Notes 2013 2012 # Cash flows from operating activities Gross premiums received 90 429 204 79 749 903 Ceded premiums paid (14 787 646) (12 926 897) Gross claims paid (46 325 244) (38 094 653) Reimbursement of claims received 4 498 411 531 485 Acquisition costs paid (5 998 308) (5 505 242) Claims handling expenses paid (2 226 891) (2 179 390) Subrogation income received 675 639 269 122 Interest received 4 786 001 4 585 654 Commission income received on trust management of assets – 245 345 Commission income from obligatory medical insurance program 1 394 312 1 146 755 Other operating income received 1 293 382 401 826 Administrative and other operating expenses paid (12 491 665) (8 173 505) Income tax paid (3 453 614) (2 627 627)

Cash flows from operating activities before changes in operating assets and liabilities 17 793 581 17 422 776

88 SOGAZ OJSC, 2013 In thousands of Russian Roubles Notes. 2013 2012

Changes in operating assets and liabilities Net (increase) in deposits with banks (6 455 738) (19 263 917) Net (increase) in loans issued (454 370) – Net decrease in loans and repurchase receivables – 706 781 # Net decrease/(increase) in receivables 322 550 (19 850) Net (increase)/decrease in prepayments (1 464 173) 452 670 Net decrease/(increase) in other assets 532 522 (469 187) Net decrease/(increase) in net obligatory medical insurance program assets and liabilities 740 348 (3 637 562) Net increase in payables 891 280 68 230 Net increase in other liabilities 268 643 282 332

Net cash received / (used in) operational activities 12 174 643 (4 457 727)

Cash flows from investing activities Cash received from realization/(used for acquisition) of securities at fair value through profit or loss 827 644 (1 009 417) Proceeds from disposal of investment securities available for sale 11 2 393 200 1 504 247 Acquisition of investment securities available for sale 11 (3 220 698) (181 029) Acquisition of investment securities held to maturity 12 – (3 340 179) Proceeds from disposal of investment securities held to maturity 12 101 087 Acquisition of associates 13 (4 006 319) (77 000) Cash inflow resulted from the advance payment related to additional share issue by the disposed 41 – 3 899 236 subsidiary Cash outflow resulted from disposal of subsidiaries including cash disposed 41 – (15 165) Cash (outflow)/inflow resulted from acquisition of subsidiaries net of cash paid 41 (527 521) 333 301 Acquisition of premises and equipment (333 126) (463 205)

89 SOGAZ OJSC, 2013 In thousands of Russian Roubles Notes 2013 2012 Acquisition of intangible assets (204 834) (209 569) Proceeds from disposal of premises and equipment 38 475 49 561 Acquisition of investment property – (348 428) Realised losses from stock exchange trading – (766) Dividend income received 114 252 349 694 # Dividend income received from associates 181 217 –

Net cash (used in)/received from investing activities (4 737 710) 592 368

Cash flows from financing activities Dividends paid to owners of the Group 33 (5 436 815) (1 000 579) Repayment of finance lease (696 393) (447 057) Repayment of interest on finance lease 17 (124 680) (159 692)

Net cash used in financing activities (6 257 888) (1 607 328)

Effect of exchange rate changes on cash and cash equivalents 31 293 (22 818)

Net increase/(decrease) in cash and cash equivalents 1 210 338 (5 495 505) Cash and cash equivalents at the beginning of the year 7 2 688 662 8 184 167

Cash and cash equivalents at the end of the year 7 3 899 000 2 688 662

90 SOGAZ OJSC, 2013 SOGAZ OJSC, 2013