IN S IG sh .a
In su ra n c e In
st it u te IN S
IG s. c
2014
In st it u ti i S
ig u ri m e v e
A NNUAL REPORT
R
APORTI VJETOR
2014
CONTENT
Letter of the General Manager ........................................
Economic Developments in Albania ....................................
Insurance Market ...............................................................
Profile of INSIG s.c. ...........................................................
Ownership on INSIG s.c. ....................................................
Supervisory Board ..............................................................
Organization of INSIG s.c. ..................................................
Distribution Network of INSIG s.c. ......................................
Organizational chart of INSIG s.c. ........................................
Insurance Activity ...............................................................
Losses from insurance activity ............................................
Consolidated financial Statements ......................................
Loss and profit statement and other consolidated
comprehensive income ...............................................
Consolidated Statement of changes in equity ......................
Consolidated statement of cash flows ..................................
Notes on financial statements ............................................
5
LETTER FROM THE GENERAL MANAGER
Dear Shareholder,
Dear Members of the Supervisory Board,
Ladies and Gentlemen,
The financial programe and the objectives of the company for the underwritting year 2014
have aimed to increase the position of the company in the market and decrease inherited
problems by the previous administration. This was achieved through equalization and
consolidation of all economic and financial indicators asset related, based on law
requirements and respective standarts, as well as the profesionalism and integrity of the
people working in Insig and the services offered to the clients.
The economic and financial indicators at the end of 2014 show that Insig, has met most of
the objectives set by the financial programe of the company. This was achieved through hard
work and commitment of the management and employees of Insig in the three territories
where our company operates, Macedonia, Kosovo and in particular, Insig Albania.
For the first time, not only it was stopped the deterioration and the decrease of Insig’s
position in the Albanian market, but also it was improved the market share for most of
the insurance products, sufficiantly increasing the incomes and effectively managing the
expenses.
Fronted with several inherited and unsolved problems, Insig Albania has taken certain
provisions, a part of which unexpected in the financial programe, but necessary to regulate
and consolidate the accounts and assets according to law and technical standards.
The financial data of the company as of 31 December 2014, indicate an achievment on the
financial stability, maintaining an appropriate level of capital, reducing operational costs
and investing the assets in the financial market to guarantee an optimal return.
However, the financial records of the company at the end of the year 2014 indicate a
number of achievements in the financial stability, maintaining the right capital level,
reducing operational costs, as well as investing its assets in the financial market.
6
Following the outcomes of the law and contractual relationships, Insig has made good
efforts offering more trust, security and flexibility to the clients, through the agent’s
network and other structures that operate in Albania, Kosovo and Macedonia.
Following, a brief information about the financial indicators for 2014.
Property insurance, gross premium income (for Albania) are 115,252 thousand Lekë.
Special efforts are made to improve the non life underwriting sector, as an important
element to increase the portfolio and the profit of the company in the future.
Motor Insurance, as for the other companies, as well as for Insig, is the main activity that
contributes on the increase of company’s income. This product has 68% of the premium
income for non life insurance.
Life & Health insurance, the insurance market has reflected the problems and difficulties
of the financial market in general. However, based on our specialists’ knowledge over
mortality, morbidity and longevity trends, INSIG has offered its clients, tailored solutions
to insure their risk and capital management needs. Gross premium income for 2014 are
132,129 thousand Lekë.
During 2014, INSIG paid special attention to the professionalism, accuracy and promptness
of handling the claims, as well as claim payments, applying professional standards, in
both life and non life.
The financial and economic factors of 2014 serve as a good base ralated to the financial
program expectation of 2015, for guaranteeing a qualitative and attractive service for
the clients, as well as to professionally confront the challanges of the insurance market,
including also the ones to achieve the financial indicators and the best possible performance
in the frame work of privatisation process.
EDLIRA DVORANI
GENERAL MANAGER
7
I. ECONOMIC DEVELOPMENTS IN ALBANIA1
The economic activity in Albania improved in 2014. According to INSTAT data, the gross
value added was up 1.4% during the first three quarters of the year and indirect indicators
suggest that it accelerated in the fourth quarter. Overall, economic and financial stability
indicators were improved, although the Albanian economy continues to operate below its
capacity and to face an unfavourable external environment.
From the macroeconomic aspect, inflation and inflation expectations remained low. In the
area of public finance, year 2014 was characterised by a consolidating fiscal policy. Fiscal
revenues were up and, excluding the payment of government arrears, budget deficit was
reduced. In the area of economic and financial relations with abroad, year 2014 did not
see a change from previous trajectories. The current account deficit increased, but the
balance of payments was positive and the exchange rate appeared stable.
From the financial aspect, the Albanian economy and financial system saw progress in
2014, with regard to improvement of liquidity indicators, profitability and asset quality.
However, the banking sector intermediation remains low and its balance sheets continue
to suffer from non-performing loans.
Bank of Albania estimates suggest that economic growth in 2014 will be higher than in
the previous year. This growth was mostly driven by the increase in private consumption
and investments, as a result of the improved businesses and consumers’ confidence,
private sector’s balance sheets, and lending standards. The consolidating fiscal policy
resulted in the reduction of the fiscal stimulus, while foreign demand did not contribute
to economic growth. Economic difficulties in Albania’s trading partners did not favour
growth of demand for Albanian goods and services; in the presence of certain supplyside
shocks, they were reflected in low increase of Albanian exports. Albeit upward, aggregate
demand was insufficient to fully utilise production capacities of the economy.
The cyclical weakness of demand has created an economic environment with weak
pressures on the rise of wages, labour costs, profit margins and consumer price inflation.
In addition, imported inflation was downward and added disinflationary pressures in
the economy. Consumer price inflation averaged 1.6% in 2014, remaining below Bank of
Albania’s target.
Beyond driving domestic demand, the transmission of the monetary stimuli in the economy
contributed positively to financial soundness indicators. The deceleration of the increase
in non-performing loans, improvement of liquidity in the system, preservation of sound
balance sheets in the financial sector and stability of the exchange rate have all contributed
to the country’s financial stability.
1
Annual Report of i Bank of Albania for 2014, Economic Developments in Albania
8
II . INSURANCE MARKET2
In 2014 the Albanian insurance market sufficiently increased in terms of total gross
written premiums which were ALL 11.62 billion, increasing by nearly 36.15% compared
with 2013 and an average increase of the last five years of 8.95%. In 2014, the number of
the companies operating in this market, was reduced due to the merging of two insurance
companies in one.
In terms of its structure, the market remained oriented towards Non-Life insurance, which
brought in about 90.93% of the total volume of gross written premiums in this market. Life
insurance accounted for 8.83% of the total volume of gross written premiums. In 2014,
voluntary insurance accounted for 40.48% and compulsory insurance 59.52% of total
gross written premiums in the insurance market.
In 2014 the increase of the insurance market was mainly influenced by the compulsory
motor insurance increase dynamics.
2 Annual Report of Financial Supervisory Authority for 2014, Insurance Market.
9
III. PROFILE OF INSIG
In 2014, INSIG continued to operate in Albania, Kosovo and Macedonia. As of 31 December
2014, INSIG had 230 employees in these three countries.
Non – life insurance in the three territories were represented by various insurance products,
that cover third party liability, casco, fire and allied perils, theft, bank security, different
types of liability, marine and cargo, agriculture and livestock, etc.
Life insurance products offered by the company are mainly short-term products, such
as individual life insurance and group life insurance, pupils and students life insurance,
debtor’s life insurance, combined life, health and life insurance, etc.
Over 2014, INSIG maintained stable relationships with important partners in the
international insurance and reinsurance market. INSIG ceded a part of the risks to
international reinsurers, based on laws in Albania, Kosovo and Macedonia.
In 23 years of operation, INSIG has significantly improved the quality of staff, through
good recruitment policies and continous training.
10
IV. OWNERSHIP ON THE COMPANY
In accordance with the Company’s Bylaws, Article 6, the subscribed capital is 1.020.000
thousand lek devided into 1,700 shares with a nominal value 600 thousand leks. In 2014
the shares of the Company were 100% state owned, represented by the Minister of Finance.
SUPERVISORY BOARD
Ervin Mete – Chairman
Engjëll Agaci – Deputy/Chairman
Anila Denaj – Member
Luneda Sufali - Member
Spiro Brumbulli – Member
ORGANIZATION OF THE COMPANY:
Average number of employees in 2014:
Head office Tirana : 55
Branches in Albania : 57
Branch INSIG Kosovo : 38
Macedonia : 80
DISTRIBUTION NETWORK OF INSIG S.C.
Branches and number of employees
Kosovë
Maqedoni
Albania
Macedonia
31.12.2014
Branches/
No. of
Agencies
employees
Berat
2
Dibër
2
Durrës
4
Elbasan
5
Fier
4
Gjirokastër
3
Kavajë
3
Korçë
3
Kukës
2
Laç
1
Lezhë
1
Lushnje
3
Pogradec
3
Sarandë
3
Shkodër
3
Tiranë
12
Vlorë
3
Total Branches
/ Agencies
57
Kosovo
31.12.2014
Affiliation
Head Office
Pristine - Mitrovicë
Ferizaj - gjilan
Prizren
Pejë - Gjakovë
Total
No of
employees
29
3
2
2
2
38
11
31.12.2014
No of
Affiliation
employees
Head Office
Skopje
Kumanovë
Tetovë
Gostivar
Kavadarci
Strumica
Bitola
Kocani
Veles
Prilep
Struga
Kicevo
Resen
Negotino
Gjevgjelia
Shtipi
Dibër
Ohër
Total
28
8
4
9
4
3
3
3
2
3
1
2
2
1
1
1
2
2
1
80
Sales and
Marketing
Department
(For non-life
product)
12
Sales and
Marketing
Department
(For life products)
KOSOVO
BRANCH
Risk
Managment
Department
Assistant of
General Manager/
Secretary of Supervisory Board
Claims
Department
Finance
Department
Branches
and
Agencies
General Manager
SUPERVISORY BOARD
MINISTER
(Shareholder’s Assembly)
Legal
Department
Internal Audit
Department
Human Resources
and
Supporting Services
Department
Secretary of
General Manager
V. ORGANIGRAM
VI. FINANCIAL INDICATORS
INSURANCE ACTIVITY
For 2014 gross written premiums were 1.799.303.465 lekë for life and non life insurance.
The territorial split of premiums for 2014 was: Albania 43%, Kosovo 33 % and Macedonia
24 %. About 80 % gross written premiums were motor insurance, 11 % property insurance,
7 % life insurance, and 2 % life and health insurance.
Distribution of gross written premiums by territory:
Gross written premiums
Albania
Kosovo
Macedonia
Total
% to total /Year 2014
43%
33%
24%
100%
% to total /Year 2013
31%
46%
23%
100%
Distribution of gross written premiums by
territory
50%
GROSS WRITTEN PREMIUMS
45%
46%
43%
40%
35%
31%
33%
30%
24%
25%
23%
20%
15%
10%
5%
0%
Albania
Kosovo
Macedonia
TERRITORIES
2014
13
2013
DISTRIBUTION OF GROSS WRITTEN PREMIUMS BY LINES OF BUSINESS FOR
INSIG GROUP:
% to total /Year
2014
Type of product
Motor vehicle
Property
Life
Health
Total
% to total /Year
2013
80%
11%
7%
2%
100%
75%
14%
9%
2%
100%
Distribution of gross written premiums by lines of
business
90%
80%
80%
75%
70%
60%
50%
40%
30%
20%
11%
10%
0%
Motor vehicles
14%
7%
Property
2014
9%
2%
Life
Health
2013
ALBANIA
Type of product
Motor vehicle
Property
Life
Health
Total
% to total /Year
2014
68%
15%
16%
1%
100%
14
2%
% to total /Year
2013
49 %
21 %
29 %
1%
100%
Gross written premiums in 2014 were 778.132.184 lekë. About 68 % of premiums were
motor insurance, 15 % property insurance and 17 % life and health insurance.
Distribution of gross written premiums by lines of
business in Albania
80%
70%
68%
60%
49%
50%
40%
30%
29%
21%
20%
16%
15%
10%
0%
1%
Motor vehicles
Property
2014
Life
1%
Health
2013
KOSOVO
Gross written premiums in 2014 were 586.239.100 lekë. About 88 % were motor insurance, 12 % property insurance and 0,2 % health insurance.
Type of product
Motor vehicle
Property
Life
Health
Total
% to total /Year
2014
88 %
12 %
0,2%
100 %
15
% to total /Year 2013
84 %
15 %
0%
1%
100 %
Distribution of gross written premiums by lines of
business in Kosovo
100%
90%
88%
80%
84%
70%
60%
50%
40%
30%
20%
12%
10%
0%
15%
0
Motor vehicles
Property
2014
0%
0
Life
1%
Health
2013
MACEDONIA
Gross written premiums in 2014 were 434.932.181 lekë. About 92 % of premiums were
motor insurance, 3 % property insurance and 5 % life and health insurance.
Type of product
Motor vehicle
Property
Life
Health
Total
% to total /Year
2014
92 %
3%
5%
% to total /Year
2013
93 %
2%
0
5%
100%
100%
16
Distribution of lines of business in Kosovo
100%
90%
92%
93%
80%
70%
60%
50%
40%
30%
20%
3%
10%
0%
2%
0
Motor vehicles
Property
2014
0
Life
5%
5%
Health
2013
PAID CLAIMS
During 2014 INSIG s.c. was focused on a qualitative service to the clients through flexible
and quick procedures. The claims paid amount in 2014 was 604.441.496 lekë.
Paid claims in lekë (Group)
2014
604.441.496
2013
800.607.335
17
CONSOLIDATED FINANCIAL STATEMENTS
18
Insig Sh.a.
LOSS
- PROFIT
STATEMENT
AND OTHER
COMPREHENSIVE
PASQYRA
E FITIM
HUMBJEVE
DHECONSOLIDATED
E TË ARDHURAVE
TË TJERA PËRMBLEDHËSE E
INCOME
STATEMENT
KONSOLIDUAR
(Të gjitha shumat janë shprehur në Lek, përveçse kur përcaktohet ndryshe)
Shenime
31 dhjetor
2014
31 Dhjetor
2014
Shënime
31Dhjetor
dhjetor2013
2013
31
riparaqitur
riparaqitur
Prime të shkruara bruto
Ndryshimi neto në rezerven e primeve të
pafituara
Primetetëshkruara
shkruaraneto
neto
Prime
29
1,799,303,465
1,792,392,784
20
32,367,118
1,831,670,583
1.831.670.583
142,496,169
1,934,888,953
1.934.888.953
Prime të ceduara risiguruesve
Ndryshimi në rezerven e primeve të
pafituara për pjesën e risiguruesit
Primetetëshkruara
fituara neto
Prime
neto
30
(171,330,591)
(261,763,000)
(24,147,148)
1,636,192,844
1.636.192.844
(17,158,861)
1,655,967,092
1.655.967.092
Të ardhura të tjera nga marrja në sigurim
Shpenzimet e demeve dhe te trajtimit te
demeve
Shpenzimet e marrjes ne sigurim
Shpenzime administrative
Humbje
operative
Humbje
operative
31
19
21,598,790
14,164,602
(825,732,698)
(230,806,339)
(830,149,808)
(228,897,211)
(228.897.211)
(728,708,398)
(304,454,936)
(822,026,654)
(185,058,294)
(185.058.294)
Të ardhurat financiare
Të ardhura/(humbje) nga kurset
këmbimit, neto
Të ardhura financiare neto
35
36
103,142,332
195,072,370
36,448,979
139,591,311
(6,289,371)
188,782,999
(89,305,900)
3,724,705
(30,544,812)
(41,959,396)
(119,850,712)
(38,234,691)
49,817,554
572,554
-
44,678,530
3,668,748
48,244,165
49,245,000
(7,236,625)
(70.033.158)
(70,033,158)
6.443.839
6,443,839
e
32
33
(Humbja)/fitimi para tatimit
Tatimi mbi fitimin
37
Humbja e vitit
Të ardhura përmbledhëse të tjera
Rezerva përkthimi
Rivlerësimi i aktiveve të qëndrueshme
Tatim i shtyre nga rivlersimi i aktiveve të
qëndrueshme
Tatimi i shtyrë nga rezerva e katastrofës
Totali
i (humbjes)/të
ardhurave
përmbledhëse
Totali
i humbjes/te
ardhurave
permbledhese
te vitittë
vitit
2,242
Shënimet shoqëruese në faqet 5 deri 41 janë pjesë përbërëse e këtyre pasqyrave financiare.
19
2
20
-
-
Korrigjim i gabimit (referoju shenimit 2.e)
Totali i fitim/(humbjeve) përmbledhëse
(riparaqitur)
Rritja e rezervave të tjera
Dividentë te paguar
Transaksione me pronarët, të
rregjistruara direkt në kapital
1,020,000,000
-
-
Dividentë te paguar
Transaksione me pronarët, të
rregjistruara direkt në kapital
Gjëndja më 31 Dhjetor 2014
-
-
180,626,537
-
44,677,559
-
-
-
-
(439,201,903)
-
(488,446,903)
-
Riklasifikim i rezervës së katastrofës
-
-
49,245,000
-
-
-
-
-
-
49,245,000
-
Rritja e rezervave të tjera
-
-
-
439,201,903
-
-
-
2,242
2,242
-
-
Totali i fitim/(humbjeve) përmbledhëse
-
Ndryshime nga kursi i këmbimit
-
-
44,677,559
-
-
-
-
-
-
-
-
-
439,199,661
Rezerva
për katastrofë
49,245,000
-
Të ardhura përmbledhëse të tjera
Riklasifikim i rezervës së katastrofës
180,626,537
-
-
-
-
-
44,677,559
Rezerva
për dëmet
Totali i të ardhura përmbledhëse të tjera
-
Humbja e vitit
1,020,000,000
41,007,540
-
Totali i fitim/(humbjeve) përmbledhëse
Gjëndja më 31 Dhjetor 2013
41,007,540
-
Totali i të ardhura përmbledhëse të tjera
-
-
Të ardhura përmbledhëse të tjera
Ndryshime nga kursi i këmbimit
-
139,618,997
-
1,020,000,000
Rezerva e
rivlerësimit
Humbja e vitit
Gjëndja më 1 Janar 2013
Kapitali
Aksioner
(Të gjitha shumat janë shprehur në Lek, përveçse kur përcaktohet ndryshe)
Insig Sh.a.
PASQYRA
E NDRYSHIMEVE
NË KAPITAL
E KONSOLIDUAR
CONSOLIDATED
EQUITY CHANGES
STATEMENT
3
1,164,171,785
501,499,750
-
488,446,903
13,052,847
-
-
-
-
-
662,672,035
13,081,124
-
13,081,124
-
-
-
-
-
-
649,590,911
Rezerva të
tjera
123,456,413
-
-
-
-
572,555
572,555
572,555
-
-
122,883,858
-
-
-
3,668,748
(219,419)
3,959,167
3,959,167
3,959,167
-
119,215,110
Rezerva e
perkthimit
(308,131,059)
(13,052,847)
-
-
(13,052,847)
(119,850,712)
-
-
-
(119,850,712)
(175,227,500)
(39,127,283)
(26,046,159)
(13,081,124)
(38,234,691)
-
(38,234,691)
-
-
(38,234,691)
(97,865,526)
Fitime të
mbartura
2,224,801,235
-
-
-
-
(70,033,157)
49,817,555
572,555
49,245,000
(119,850,712)
2,294,834,392
(26,046,159)
(26,046,159)
-
6,443,839
40,719,363
(34,275,524)
3,959,167
3,959,167
(38,234,691)
2,314,436,712
Totali
Insig Sh.a.
CASH FLOWECONSOLIDATED
STATEMENT
PASQYRA
KONSOLIDUAR
FLUKSIT TË PARASË
(Të gjitha shumat janë shprehur në Lek, përveçse kur përcaktohet ndryshe)
Për vitin e mbyllur 31 Dhjetor
2014
2013
Fluksi i parasë nga aktivitetet operative
Humbja pas tatimit
Rregullime për:
Zhvlerësimin
Nxjerrja jashtë përdorimit
Shpenzimet e zhvlerësimit
Ndryshime në detyrimet prej humbjeve dhe shpenzimet nga rregullimet
e humbjeve
Ndryshimi në rezervën për primet e pafituara
Ndryshimi në aktivet e risigurimit
Të ardhura nga interesi
Ndryshime nga kursi i këmbimit
Fluksi i mjeteve monetare nga aktivitetet operative para
ndryshimit në aktivet dhe detyrimet operative
(119,850,712)
(38,234,691)
20,125,729
12,176,854
20,311,251
18,798,491
7,668
22,988,331
69,278,542
164,928,667
(32,503,450)
80,423,334
(103,142,333)
(29,032)
(140,565,162)
(131,068,956)
(166,591,303)
3,670,990
42,440,308
(361,716,090)
(71,360,268)
54,961,173
39,570,185
23,137,911
19,620,088
(3,618,648)
(6,359,997)
(14,812,033)
89,834,615
11,779,784
(33,915,037)
20,538,260
(50,900,681)
(20,210,204)
9,259,393
(17,992,363)
83,578,719
(353,322,323)
(6,591,772)
(139,760,328)
(422,522,923)
(12,841,084)
103,142,332
(478,573,775)
(22,529,543)
(858,025,464)
422,045,870
45,595,931
165,432,433
(247,480,773)
(394,995,056)
(26,046,159)
(26,046,159)
(626,849,254)
Mjete monetare dhe ekuivalente me to në fillim të vitit
692,734,970
1,319,584,224
Mjete monetare dhe ekuivalente me to në fund të vitit (Shënimi 8)
297,739,914
692,734,970
Ndryshimi në aktivet dhe detyrimet operative
Ndryshimi në llogaritë e arkëtueshme të sigurimit dhe llogari të tjera të
arkëtueshme
Ndryshimi në shpenzimet e shtyra të marrjes në sigurim
Ndryshimi në aktive të risiguruara
Ndryshimi në detyrime të risiguruara
Ndryshimi në aktive të tjera
Ndryshimi në detyrime të tjera
Ndryshimi në provigjione te tjera
Tatimi mbi fitimin i paguar
Flukset monetare të gjeneruara/(te perdorura) nga aktivitetet
operative
Flukset monetare nga aktivitetet investuese
Blerje paisjesh dhe aktivesh jo materiale
Ndryshim në depozitat me afat
Blerje e bonove të thesarit
Blerje e Investime të mbajtura për tregtim
Interesa të marra
Flukset monetare të gjeneruara nga aktivitetet investuese
Flukset monetare nga aktivitetet financuese
Dividend i paguar
Flukset monetare të përdorura në aktivitetet financuese
Ulje neto në mjetet monetare dhe ekuivalente me to
Shënimet shoqëruese në faqet 5 deri 41 janë pjesë përbërëse e këtyre pasqyrave financiare.
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NOTES ON FINANCIAL STATEMENTS
Included here in is some brief information on the audited financial statements.
Basis of compliance
These consolidated financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS), adopted by the International Accounting Standards
Board (IASB).
Basis of preparation
The financial statements are prepared on the historical cost basis except, property and
equipment as well as, investment for trading that are presented with the right value.
Operational currency
These consolidated financial statements are presented in LEK, the Albanian currency,
that is the operational currency of the Group.
Correction of the previous year
During 2014, the Group decided to revaluate part of property and equipment based on
evaluation reports dated September 2013. The effect of this revaluation is reflected on
the financial statements as a correction of a material mistake of the previous period,
representing the opening balances of stable assets, other incomes, revaluation reserve
and deferred tax liability for the year ended 31 December 2013. Besides this, the Group
corrected some non material mistakes of the previous period identified during 2014,
representing the opening balances for the year ended 31 December 2013.
Basis of consolidation
Subsidiaries
Subsidiaries are those entities controlled by the Group. Control exists when the Group has
direct or indirect power, to govern the financial and operating policies of an entity so as to
obtain benefits from its activities. The financial statements of the subsidiaries are included
in the consolidated financial statements from the date that the control commences until
the date that this control ceases.
Eleminated transactions during consolidation
The balances and transactions, incomes or unrealized expense (besides loss and profit
transactions in foreign currency) within the group, are eleminated at the moment the
consolidated financial statements are drafted. Unrealized profit and loss is eleminated at
the same way, but with the condition not to have an evidence for the depriciation amount.
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Financial Risk Management
The Group monitors and manages the financial risk of its operation through internal risk
analyses that describe the importance of risks level. These include market risk, (currency
risk, interest rate risk) credit risk and liquidity risk. The Group does not use derivative
financial instruments to be protected by such risk exposure
Market risk
Market risk is the negative financial influence as a result of changes in the market, such as
exchange rates, other fluctuations in prices. Market risks derives from changes in values
assets and liabilities. The interest rates and group has it own policies and procedures
derives from regarding market risk administration.
Currency Risk
The company undertakes transactions in the local currency and foreign currency as
well; that is why there is risk in exchange rate fluctuation. Due to this foreign exchange
fluctuations may affect the level of shareholder’s equity as a result of the change into local
currency.
Currency risk in the investment portfolio is managed using assets/liabilities matching
principle.
Credit Risk
Credit risk refers to risk that third parties will not meet their contractual obligations and
resulting in financial loss for the company. In the normal course of its activity, while
premiums received, funds are invested to pay future obligations to policyholders. The
Group is exposed to credit risk through maturity debts, term deposits, deposits and
receivables from reinsurers. The group has established internal procedures by which the
reinsurer should be rated BBB or higher and comply the Group’s requirements related
with Reinsurance Safety Rules. The Group manages its credit risk exposure by regularly
monitoring the exposure to debt instruments and term deposits.
Sensitivity Analysis
The following table details the Group’s sensitivity to the growth and collapse of the national
currency (ALL) against the relevant foreign currencies. Changes in the exchange rates are
used to report to the Group’s Management and represents the evaluation of Management
to possible changes in exchange rates. For each sensitivity analysis the change of a single
factor is taken into account, assuming that other factors are constant.
Sensitivity Analysis for the year ended 31 December 2014 and 31 December 2013 (in ‘000
ALL):
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Sensitivity Analysis for the year ended 31 December 2014:
Amount
Effect
EUR grows by 10% to Lek EUR drops by 10% to Lek
Profit Loss
USD grows by 10% to Lek Profit
USD drops by 10% to Lek Loss
MKD grows by 10% to Lek
MKD drops by 10% to Lek 209,466
(209,466)
34,703
(34,703)
Profit 75,675
Loss (75,675)
Sensitivity Analysis for the year ended 31 December 2013:
Amount
Effect
EUR grows by 10% to Lek
Profit 219,389
EUR drops by 10% to Lek
Loss
USD grows by 10% to Lek
Profit
23,925
USD drops by 10% to Lek
Loss (23,925)
MKD grows by 10% to Lek
Profit
61,553
MKD drops by 10% to Lek Loss (61,553)
(219,389)
Interest rate risk
Interest rate risk is composed of the risk that the value of future cash flows of a financial
instrument will fluctuate due to changes in the interest rates in the market and the risk
that the maturity of financial assets with interest bearing, will vary from those financial
with interest used to finance these assets. The duration for which the interest rate is fixed
on a financial instrument is an indicator of exposure to interest rate risk liabilities.
Group assets and liabilities include the risk of market interest rates changes. On December
31, 2014 and 2013 the Group has no significant values in interest bearing financial
liabilities, but it has an important concentration of interest rate risk in three months and
one year term deposits and treasury bills.
Liquidity Risk
Liquidity risk is the risk that the Group cannot pay financial obligations on time. Liquidity
risk is unavoidable for the Group’s business because certain acquired assets and sold
liabilities could have special features of liquidity. If the Group would need significant
amounts in short time, exceeding cash limits, held during normal activity, it may have
difficulties to secure favourable prices. However, the Group has access on loan on 31
December 2014 and 2013. The Group manages liquidity risk by continuously monitoring
the actual and forecasted cash flows matching the maturities of financial assets and
liabilities.
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Assumptions and Sensitivity
Risks related to non life insurance contracts are complex and they complicate the
quantitative analyze of sensitivity. The company uses statistical and actuarial technics
including factors such as expected loss ratio.
The Group considers as sufficient, the liability on non life insurance that is known in
the financial position statements. However, the actual experience will change from the
expected result.
A general view of losses and combined ratio for 2014 and 2013 is presented below:
2014 2013
Loss ratio 51% 41%
65% 63%
115% 104%
Expenses ratio
Combined ratio
Effect 2014 2013
Loss ratio
5% increase in loss ratio Loss
5% decrease in loss ratio (41,326) (36,427)
Profit (41,326) (36,427)
5% increase in expenses ratio Loss (52,935)
(56,331)
5% decrease in expenses ratio Profit
(52,935) (56,331)
5% increase in combined ratio Loss
(94,261) (92,757)
5% decrease in combined ratio Profit
(94,261) (92,757)
Expenses raport
Combined ratio
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