Annual report 2015 ARMEEC INSURANCE JSC – ALWAYS WITH YOU! Armeec Insurance Jsc is a Bulgarian insurance company and part of the largest Bulgarian holding Chimimport. Incorporated 19 years ago, the company is already an established brand on the Bulgarian insurance market, reporting a growth in the premium income for the thirteenth consecutive year. Armeec Insurance Jsc ranked first on the nonlife insurance market with market share of 13.2 per cent and the collected premiums amounting to more than BGN 207 million, representing a growth of 9.5 per cent over the previous year. Since May 2011, the company has been a recognized leader in Motor Casco insurance and occupies a leading position also in Travel Assistance Abroad insurance. According to official data, the company achieved growth in collected revenue in almost all types of business. The company employs more than 630 employees in 53 agencies and over 60 own representative offices throughout the country. The distribution of the insurance products is also carried out by 300 insurance brokers and 1,100 insurance agents. Armeec Insurance Jsc has a longterm credit rating iBBB positive perspective, issued by the Bulgarian Credit Rating Agency, and maintains a stable reinsurance program with leading global reinsurers. For a fifth consecutive year Armeec Insurance Jsc is included in the SeeNews’ list of the top insurance companies in Southeast Europe, taking 20th position in 2015. In November 2015 the company was awarded “Best Insurer in Bulgaria for 2015” by Finance Awards. 2 3 2 3 4 5 4 5 CONTENTS 1. MESSAGE TO THE SHAREHOLDERS 2. BULGARIA IN 2015 - Business overview - Insurance market 3. ARMEEC IN 2015 - About the company - Brief history - Shareholders and share capital - Management team - Insurance business - Reinsurance program - Membership and credit rating - Staff - Achievements Market position Insurance results Key financial data Activity overview Future development 4. FINANCIAL STATEMENTS Statement of Financial Position Statement of Comprehensive Income Statement of Changes in Equity Statement of Cash Flows 5. INDEPENDENT AUDITOR’S REPORT 6. DISTRIBUTION AND BRANCH NETWORK 7. ZK ITIL ARMEEC 6 7 6 7 Message to shareholders Dear shareholders, Permit us to express our gratitude that once again, during 2015, you have continued to support the activities of the “Armeec” insurance company. During the the last 19 years of presence on this specific market our company has been able to cope with a number of challenges which have only served to make as more resilient and flexible. We extend our gratitude to those clients and partners of ours, who have thought the best of us and who continue to show confidence in our abilities. It is now the thirteenth consecutive year durning which we have been able to register growth in premium incomes and – indeed – the company has achieved many successes which will, doubtless, make a lasting imprint on our future develop-ment. In a highly competitive environment we have kept our leading position on the general insurance market with a share of 13.2% and a nearly 6% increase when compared to the levels reached during the same period of the preceeding year. Armeec has obtained an international recognition and indeed, its was classified as the "Best general insurance company in Bulgaria for 2015" at the World Finance Global Insurance Awards - 2015. For the fifth consecutive year the company has found its place among the top 100 insurance companies based in Southeastern Europe. In 2015 Armeec became the first insurer on the contemporary Bulgarian general insurance market which topped the 200 million Lev premium income for one single calendar year. Such excellent results can only be possible thanks to the work of each and everyone of our employees; their high level of professionalism, responsibility and care for our customers and their satisfaction from the services we have been able to provide. On the eve of the 20th anniversary of the Armeec insurance company we must say that the year 2016 will bring us to face an exceptionally dynamic and challenging period; a period of changes. The new Insurance Code wil come into force and with it the principles laid down in the Directive “Solvency II”. The new Insurance Code will bring a change in the currently acting insurance contractual law which will give us the opportunity to review our insurance products and supplement them with new coverages and improved terms and conditions. We believe that following our success formula and approaching everything we do with respect, pride and inspiration we will keep our shareholders, our current and future customers and partners fully satisfied with the services we offer. From the Management of Armeec Insurance Jsc 8 9 8 9 Bulgaria in 2015 Business Overview In 2015 the global economic growth reached 3.3 per cent. For the last 7 years no such growth rate has been observed – since the beginning of the economic crisis. Net exports, reflecting the higher growth of exports than that of import of goods and services, have made a fundamental contribution to economic growth. Both, the private consumption and gross formation of share capital, have been an important contributor to growth as well. During the fourth quarter of 2015, short term conjuncture indicators mostly showed positive trends for the development of the economy. The expected recovery of demand of goods and services, keeping oil prices down, positive attitudes of households and companies, and high production capacity utilisation provided greater access to employment opportunities and supported entity’s investment activity. The annual inflation rate was negative in 2015 and amounted to minus 0.9 per cent at the year end as a result of the continuing reduction in the international oil prices. In 2015, the nominal pace of growth in export had increased by 5.9 per cent while the import posted a growth by 1.1 per cent on a year to year basis. It is expected that exports and imports of goods will continue to grow in real terms in the first half of 2016 compared to the first half of 2015, with export growth outpacing import growth. The dynamics of exports in real terms will be in line with expectations for a rising trend in foreign demand for Bulgarian goods, while imports in real terms will reflect the projected increase in consumption and larger private foreign investment inflows. In 2015 the flow of direct foreign investments to the country amounted to EUR 1,575.1 million (3.5% of GDP) compared to EUR 1,289.1 million (3.1% of GDP) in 2013. In 2015, the households’ savings rate remained high. The employment continued to increase slightly in 2015, with an increase in most sectors of the economy for the year as a whole. Income from salaries of households increased, but at low rate for most of 2015 compared to 2014. For the fourth quarter of 2015, the labour productivity increased by 2.5% in comparison to the same period of the previous year. In 2015 the situation in the labour market on a global economic scale improved slightly. The unemployment rate decreased, reaching 8.7% at the end of 2015. As a result, the scale of long duration unemployed (more than one year) reached 5.6% of workforce. The amount of the gross external debt amounted to EUR 34.09 billion (77.2 per cent of GDP) in December 2015. Sources: BNB and NSI 10 11 10 11 Insurance market In 2015 the GDP of the Eurozone marked a growth of 1.9 per cent. The Eastern European countries achieved a relatively In 2015 the premium income from Accident insurance scored a considerable growth (18.2 per cent), with the same trend being higher growth, in terms of percentage, while in the countries in the Eurozone this growth fluctuated around 1.5 per cent. In observed with Financial Risks insurance (about 60 per cent). The total premium income from the latter amounted to BGN Bulgaria, GDP grew by 3 per cent in 2015, reaching BGN 86.3 billion. 23,741 thousand, formed by Guarantee insurance, Credit insurance and Miscellaneous financial losses insurance. At the same time, the growth in the insurance sector outpaced the growth in GDP of the country: the growth in premium In 2015 there were no catastrophic events in Bulgaria, similar to those that had occurred in the summer of 2014. The growth income was 8.9 per cent, formed by a growth in non-life insurance of 8.9 per cent and a growth in life insurance of 8.6 per cent, in the amount of claims paid under non-life insurances was 4 per cent in 2015, or BGN 873 million compared to BGN 838 respectively. Irrespective of the development of the insurance market at a faster pace, the insurance penetration in Bulgaria million a year earlier. This growth relates to the fact that at the beginning of 2015 the insurers still continued to pay claims in is slightly more than 2 per cent, way below the European Union average of about 8 per cent. connection with the catastrophic events which had occurred in 2014. The sound development of the risk in 2015 had an effect on the financial ratios of the insurers as well; most of the insurers closed the year by reporting positive financial results with a At the end of 2015 the insurance companies domiciled in Bulgaria numbered 30 non-life insurers, 14 life insurers, 1 life total profit of BGN 54 million reported by the non-life insurance market as a whole. insurance cooperative and 1 reinsurer. Beyond them, there are several branches of EU insurers registered in the country. Many EU insurance companies carry out insurance activities in the territory of Bulgaria as well, under conditions of freedom At the end of the reporting period the assets of the non-life insurance companies amounted to BGN 2,365 million or an to provide services.