kpmg KPMG d.o.o. Beograd Tel.: +381 (0)11 20 50 500 Milutina Milankovića 1J Fax: +381 (0)11 20 50 550 11070 Belgrade www.kpmg.com/rs Serbia T R A N S L A T I O N Independent Auditor's Report To the Shareholders of Dunav - Re a.d.o. Beograd Opinion We have audited the accompanying In our opinion, the accompanying financial financial statements of Dunav - Re a.d.o. statements give a true and fair view of the Beograd (the “Company”), which comprise: financial position of the Company as at 31 December 2020, and of its financial — the balance sheet as at performance and its cash flows for the year 31 December 2020; then ended in accordance with the and, for the period from 1 January to accounting regulations effective in the 31 December 2020: Republic of Serbia and other relevant laws and by-laws which regulate financial — the income statement; reporting of insurance companies in Republic of Serbia. — the statement of other comprehensive income; — the statement of changes in equity; — the cash flow statement; and — notes, comprising a summary of significant accounting policies and other explanatory information (the “financial statements”). © 2021 KPMG d.o.o. Beograd, a Serbian limited liability company and Registration Number:17148656 a member firm of the KPMG global organization of independent Tax identity number: 100058593 member firms affiliated with KPMG International Limited, a private Bank Acc.:: 265-1100310000190-61 English company limited by guarantee. All rights reserved. kpmg T R A N S L A T I O N Basis for Opinion We conducted our audit in accordance with the Accountants International Code of Ethics for Law on Auditing and the Law on Accounting of Professional Accountants (including the Republic of Serbia, the Decision on the International Independence Standards) (IESBA content of reports on the audit of financial Code) together with the ethical requirements statements of an insurance company and that are relevant to our audit of the financial applicable auditing standards in the Republic of statements in the Republic of Serbia and we Serbia. Our responsibilities under those have fulfilled our other ethical responsibilities in regulations are further described in the Auditor’s accordance with these requirements and the Responsibility for the audit of the financial IESBA Code. We believe that the audit statements section of our report. We are evidence we have obtained is sufficient and independent of the Company in accordance appropriate to provide a basis for our opinion. with International Ethics Standards Board for Key Audit Matters Key audit matters are those matters that, in our audit matters were addressed in the context of professional judgment, were of most our audit of the financial statements as a whole, significance in our audit of the financial and in forming our opinion thereon we have statements of the current period. They are the summarized our response to those risks. We do most significant assessed risks of material not provide a separate opinion on these misstatements, including those due to fraud, matters. We have determined the following key described below and we performed appropriate audit matter: audit procedures to address these matters. Key Valuation of incurred but not reported claims (IBNR provisions) As of 31 December 2020, the Company’s technical reserves amounted to RSD 5,626,412 thousand. Of the total technical reserves, the outstanding claim reserves amounted to RSD 4,286,789 thousand (Notes 10.3). The major part of outstanding claim reserves relates to incurred but not reported claims and to reported but not settled claims. Within total outstanding claim reserves, incurred but not reported claims amounted to RSD 848,343 thousand. For information on accounting and valuation policies used please refer to Note 3.5 (Summary of significant accounting policies - technical reserves) and for details about estimates and assumptions used please refer to Note 2.4.b) (Use of Estimates and Key Accounting Estimates and Judgments). Further information about line item in the financial statements can be found in Note 10.3 (Outstanding claims) and 27.4 (Disclosures Regarding Insurance Contracts). Key audit matter Our response The Company estimates incurred but not Our procedures performed, with the reported claims based on historical claims assistance from our own actuaries, included experience, adjusted for current the following: developments in claims-related factors. In the estimation process variety of methods can be — Tests of design, implementation and used, often generally accepted actuarial operating effectiveness of identified key valuation methods have to be adjusted to controls; particular circumstances, and those — Evaluation of whether key information adjustments also include high level of used for developing incurred but not judgment. In the estimation of incurred but reported claims assumptions is not reported claims the Company uses data appropriate (such as date of claim related to number and amount of already occurrence, date of claim reporting, date incurred and reported claims, average cost of claim settlement and claim amount per claim request as well as claim frequency. paid), by tracing them to the underlying the Company evidence; 2 kpmg T R A N S L A T I O N The key assumptions used include — Independent re-calculation of incurred assessment of adequacy of past trends for but not reported claims for a sample of future claim development patterns and their segments based on our assessment of final settlement. risk considerations and comparison with the Company’s calculations; Due to the above factors, we considered valuation of incurred but not reported claims — Reassessment of key assumptions used as a key audit matter. for calculation of incurred but not reported claims. Among other things, we especially assessed whether development factors used by the Company are appropriate, based on our analysis of development factors in the past; — Evaluation of adequacy of incurred but not reported claims recognized in the past, through comparison of historical estimates with actual settled claims ("run off test"); — Evaluation of the completeness and adequacy the disclosures in the notes to the financial statements against the relevant requirements of the applicable financial reporting framework. Other Matter The financial statements of the Company as at unqualified opinion on those financial and for the year ended 31 December 2019 were statements on 19 March 2020. audited by another auditor who expressed an Other Information Management is responsible for the other financial statements, in our opinion the information. The other information comprises information given in the Annual Business the Annual Business Report for the year ended Report for the financial year for which the 31 December 2020. financial statements are prepared, in all material respects: Our opinion on the financial statements does not cover the other information and, except to — is consistent with the financial statements the extent otherwise explicitly stated in our and report we do not express any form of assurance — has been prepared in accordance with the conclusion thereon. applicable legal requirements and by-laws In connection with our audit of the financial issued by the National Bank of Serbia. statements, our responsibility is to read the In addition, in the light of the knowledge and other information and, in doing so, consider understanding of the Company and its whether the other information is materially environment obtained in the course of our audit, inconsistent with the financial statements or our we are required to report if we identify material knowledge obtained in the audit, or otherwise misstatements in the Annual Business Report appears to be materially misstated. and to give an indication of the nature of any of Based solely on the work required to be such misstatements. We have nothing to report undertaken in the course of the audit of the in this regard. 3 kpmg T R A N S L A T I O N Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation In preparing the financial statements, of financial statements that give a true and fair management is responsible for assessing the view in accordance with the accounting Company's ability to continue as a going regulations effective in the Republic of Serbia concern, disclosing, as applicable, matters and other relevant laws and by-laws which related to going concern and using the going regulate financial reporting of insurance concern basis of accounting unless companies in Republic of Serbia, and for such management either intends to liquidate the internal control as management determines is Company or to cease operations, or has no necessary to enable the preparation of financial realistic alternative but to do so. statements that are free from material Those charged with governance are misstatement, whether due to fraud or error. responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable — Identify and assess the risks of material assurance about whether the financial misstatement of the financial statements, statements as a whole are free from material whether due to fraud or error, design and misstatement, whether due to fraud or error, perform audit procedures responsive to and to issue an auditor’s report that includes our those risks, and obtain audit evidence that opinion. Reasonable assurance is a high level is sufficient and appropriate to provide a of assurance, but is not a guarantee that an basis for our opinion. The risk of not audit conducted in accordance with the Law on detecting a material misstatement resulting Auditing of the Republic of Serbia, the Decision from fraud is higher than for one resulting on the content of reports on the audit of financial from error, as fraud may involve collusion, statements of an insurance company and forgery, intentional omissions, applicable auditing standards in the Republic of misrepresentations, or the override of Serbia will always detect a material internal control; misstatement when it exists.