Annual Report of SOGAZ Insurance Group Annual Report of SOGAZ Insurance Group 2011 CONTENTS > A WORD FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS ...................5 > A WORD FROM THE CHAIRMAN OF THE MANAGEMENT BOARD ....................6 01 > ABOUT SOGAZ INSURANCE GROUP ..............................................................8 Management .................................................................................................................................... 12 Position in the Insurance Market ................................................................................13 • Russian Insurance Market: 2011 Results .................................................................... 13 • Group Operation Results ......................................................................................... 16 02 > GROUP’S ACTIVITIES IN 2011 ........................................................................18 Insurance ...................................................................................................................20 • Property and Liability Insurance .................................................................................20 • Special Risk Insurance .............................................................................................24 • Personal Insurance .................................................................................................26 Sales Channel Development ....................................................................................................... 31 Reinsurance ..................................................................................................................................... 33 • Inwards Reinsurance ...............................................................................................33 • Outwards Reinsurance .............................................................................................34 Loss Adjustment ............................................................................................................................. 35 • Property Insurance Loss Adjustment ...........................................................................35 • Personal Insurance Loss Adjustment and Program Support .............................................36 Medical Infrastructure Development ......................................................................................... 38 Regional Network ........................................................................................................................... 41 International Development ........................................................................................................... 42 Investment Activity ........................................................................................................................ 44 Personnel Management ................................................................................................................ 46 Information Technology ................................................................................................................ 48 Charity and Sponsorship .............................................................................................................. 49 03 > GROUP’S FINANCIAL STATEMENTS .............................................................52 Consolidated Statement of Financial Position ........................................................................ 54 Consolidated Aggregate Income Statement ........................................................................... 56 04 > CONTACT INFORMATION ................................................................................58 SOGAZ Annual Report, 2011 A word from the Chairman of the Board of Directors > DEAR SHAREHOLDERS! For a number of years SOGAZ Insurance Group has been demonstrating steady development, consistently expanding presence in key industries of the Russian economy. As of today, the Group’s total assets exceed 100 bln roubles; the scale of business places SOGAZ among the top three largest Russian insurers. In 2011 many leading Russian com- panies and corporations chose SOGAZ as their insurer, associating the com- pany with reliability and dynamic progress. The same choice was again made by Gazprom, and we believe that our decision is definitely the right one. At the same time, I am positive that SOGAZ still has an immense de- velopment potential that should be realized through further business diversi- fication and competitive capability enhancement, while preserving the high efficiency of insurance activities. These are the tasks that SOGAZ Insurance Group Development Strategy for 2013-2016 will build on. Chairman of the Board of Directors, I am pleased to note that work along this line started last year: SOGAZ OJSC SOGAZ, team was augmented with professionals boasting impeccable reputation in Chairman the insurance market; the Company’s organizational structure is being im- of the Management Board, OJSC Gazprom, proved, the business process system is being streamlined, new technologies are being introduced. In the near future the Group intends to entrench its A.B. Miller position in small and medium business insurance, foster partner channels to sell insurance products, expand the comprehensive insurance program for corporate client employees. I am sure that all these and other measures taken by the SOGAZ man- agement and supported by shareholders will contribute to the further growth of the Company’s value and to the strengthening of its leading positions in the Russian insurance market. 5 SOGAZ Annual Report, 2011 A word from the Chairman of the Management Board > DEAR SHAREHOLDERS, CLIENTS, PARTNERS AND EMPLOYEES OF SOGAZ INSURANCE GROUP! Over the past year SOGAZ Insurance Group has proved its status as the most profitable and efficient insurance company in Rus- sia. According to international accounting standards, the Group’s premium written has grown by 18% and made over 60 bln roubles, while net profit has increased by 19%, reaching 6.9 bln roubles. SOGAZ occupies the first place in Russia in terms of equity, which has risen by 20% over the year and made 34.3 bln roubles. Particular attention to capitalization, adequacy of insurance reserves and reliable risk reinsurance were appreciated by the expert community: in 2011, Standard&Poor’s, one of the most respectable international rating agencies, for the first time increased SOGAZ’s rating to Chairman of the investment grade. Management Board, SOGAZ Insurance Group SOGAZ Insurance Group is an all-purpose nation-wide insurer. The S.S. Ivanov Group’s regional network includes over 600 divisions and sales offices from Kaliningrad to Khabarovsk. It is no coincidence that more and more large companies and corporations trust us for insurance coverage. In 2011 SOGAZ Group added to its client base Saipem, an Italian engineering com-pany, Irkut Corporation, Bashneft, and a number of IES- Holding companies. Important victories were won in insurance tenders of RusHydro, Rostelecom, Nornickel; a major insurance contract for USD 30 bln was renewed with Evraz. SOGAZ continued active participation in the insurance of major investment projects such as Nord Stream, Jubga – Lazorevskoye – Sochi gas pipeline, under- water tunnels across the Nevelsky Strait and the Baidaratskaya Bay, and construction at the Kirinskoye gas condensate field. 6 SOGAZ Annual Report, 2011 Owing to the professionalism and strict compliance with obligations, the Group’s reputation as an exceptionally reliable partner is constantly gain- ing strength: over 500,000 Russians chose OJSC SOGAZ as their insurer in 2011. Remarkable success was achieved by our subsidiaries, too: IC SOGAZ-LIFE demonstrated almost double growth in gross written premium, and SOGAZ-MED, one of the largest health insurers in the country, started operations in the Moscow insurance market. Enormous work was carried out to adjust the losses incurred in 2011 and earlier. SOGAZ paid all claims in respect of the Novokuibyshevsk Refin- ery, which exceeded 900 mln roubles. The losses caused by the notorious “ice rain” of 2010 were adjusted. Claims were paid to the passengers of the Tu-154 plane belonging to Kogalymavia that had burned in Surgut; first claims were paid to the heirs of the Yaroslavl Locomotive hockey players who had been killed in a tragic accident last September; thousands of other insured events were settled. As in the past, we continue to carry out the social policy aimed at sup- porting socially vulnerable children, the healthcare system, as well as profes- sional and amateur sports. In 2011, SOGAZ for the first time became the General Partner of the Russian National Football Team as well as the official partner of the Football Championship of Russia. I am positive that these and other projects will contribute to new victories of Russian athletes, popularizing and improving the prestige of the national sports all around. We achieved a lot in the past year and we can be proud of the results. I am grateful to the Company’s shareholders for their unfaltering support and to our clients and partners for their open-mindedness and readiness for mutually beneficial cooperation. I would like to express appreciation to all SOGAZ em- ployees for their energy, professionalism and passion in work. These qualities make us believe that our Company can face any challenge. 7 ABOUT SOGAZ INSURANCE GROUP At the end of 2011, the total insurance premium collected by the Group’s companies amounted