ANNUAL REPORT POISŤOVŇA SLOVENSKEJ SPORITEĽNE, A.S. VIENNA INSURANCE GROUP 2017

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Table of Contents 3 Foreword of the Chairman of the Board of Directors 4 Company Details 5 Selected Indicators 6 Company structure 9 Vienna Insurance Group 11 Supervisory Board Report 12 Corporate Identity 13 Achievements and Awards 14 Product portfolio 15 Report on Business Activity 17 Report on the Financial Situation of the Company 19 Other Key Circumstances 21 Projected Development

Annexes 22 Financial statement compiled in line with IFRS for the year ended 31 December 2017

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Foreword of the Chairman of the Board of Directors

Dear Ladies and Gentlemen,

2017 was a successful year in particular for Poisťovňa

Slovenskej sporiteľne, a.s. VIG, in fact it was the most

successful year in the company’s history. The foundation of

this success is a strong team of professionals who have

identified themselves with the company’s principles such as

quality and efficient work and building a stable and reliable

insurance company representing the Vienna Insurance

Group.

The group has been operating in Central and Eastern Europe

since 1990, and the proximity to customers has been

underlined by around 50 group companies in 25 countries.

The results achieved exceeded our plans. Both in written

premium in the total amount of EUR 154.3 million and the

profit before tax in the total amount of EUR 18.0 million.

Poisťovňa Slovenskej sporiteľne significantly exceeded the

set goals and thus firmly contributed to the position of

market leader of the Vienna Insurance Group in Slovakia.

Thanks to our excellent business results we were awarded

the prize for the most successful insurance company at the

award ceremony of annual prizes of TREND weekly in 2017.

This award has definitely ranked Poisťovňa Slovenskej

sporiteľne, a.s. VIG among the best players on the Slovak

insurance market.

With all these successes, we can start 2018 optimistically. It

will be a year of major changes and new challenges.

We offer our helping hand to clients not only in the form of

insurance claims, but we also help through social

sponsorship. As in previous years, we supported socially

disadvantaged people to give them a chance to find their

place in society.

Finally, I would like to thank our shareholders for their

support, I wish to express my thanks to our partners,

Slovenská sporiteľňa and Prvá stavebná sporiteľňa, last but

not least I want to thank my colleague from the Board of

Directors Viera Kubašová and all our team members, who

have the greatest share in the successful development of

Poisťovňa Slovenskej sporiteľne, a.s. VIG over the past few

years.

Kurt Ebner Chairman of the Board of Directors

Poisťovňa Slovenskej sporiteľne, a. s. Vienna Insurance Group

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Company Details

Business name

Poisťovňa Slovenskej sporiteľne, a. s. Vienna Insurance

Group (hereinafter “Company” or “Poisťovňa Slovenskej

sporiteľne”)

Registered office

Tomášikova 48, 832 68 Bratislava, Slovak Republic

Headquarters

Polus Tower 1, Vajnorská 100/A, 831 04 Bratislava, SR

Legal form

Joint-stock company

Company ID No.: 35851023 / VAT No.: SK2021710064

Objects of Business

� pursuing insurance activities for the area of life

insurance as per the Act on Insurance, in the following

fields of insurance cover:

� insurance payable on death, insurance payable at

maturity or insurance payable on death or at

maturity,

� investment-linked insurance,

� bodily harm or sickness insurance if it is a rider to

the main policy.

� pursuing insurance activities for the area of non-life

insurance as per the Act on Insurance to the scope of

the following fields of cover:

� insurance against bodily harm,

� insurance against illness.

� pursuing activities of an independent financial agent in

the insurance or reinsurance sector.

Establishment

27. 1. 2003, by registration to the Companies Register of the

District Court of Bratislava I., entry ref no. 3085/B

Share capital

EUR 7 011 000

Shareholders

VIENNA INSURANCE GROUP AG

WienerVersicherungGruppe 90 %

KOOPERATIVA poisťovňa, a. s.

ViennaInsuranceGroup 5 %

Slovenská sporiteľňa, a. s. 5 %

Board of Directors

Ing. Martin Kaňa, Chairman to 16.10.2017

Kurt Ebner, Chairman from 16.10.2017

Ing. Viera Kubašová, member

Supervisory board

Dkfm. HansRaumauf - Chairman

Mag. Erwin Hammerbacher - Vice-chairman

Prof. Elisabeth Stadler - member

JUDr. Judit Havasi - member

Mag. Hans Meixner - member

Ing. Daniel Morvay - member

RNDr. Mária Maryniaková - member

Distribution Channel

Branch network of Slovenská sporiteľňa, a. s. .

Retail network of Prvá stavebná sporiteľňa, a. s.

Contact

Sporotel: 0850 111 888

Poisťovňa Slovenskej

sporiteľne, a. s. tel.: 02/5022 9300

ViennaInsuranceGroup fax: 02/4862 7040

Tomášikova 48 web: www.pslsp.sk

832 68 Bratislava 3 e-mail: pslsp@pslsp.sk

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Selected Indicators

Financial indicators 2015 2016 2017

Total assets 366 323 408967 525 752

Shareholders’ equity 44 305 49 683 56 457

Comprising, share capital 7 011 7 011 7 011

Technical provisions 308 617 345 085 447 602

Profit after tax 8 159 9 378 12 959

Business indicators

New business 59 329 55 968 114 628

Gross written premium 86 804 89 202 154 336

Other data

Average payroll 57 63 65

Data are given in thousands of Euros or as quantities, unless stipulated otherwise. The company reports data in line with the IFRS of the EU �. New business is given as annualized premium, including riders.

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Company Structure

The majority shareholder of Poist ̌̌ ̌̌ovn ̌̌ ̌̌a Slovenskej sporitel ̌̌ ̌̌ne, a. s. Vienna Insurance Group is VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe with a 90 % subscription to its share capital. Kooperativa poist ̌̌ ̌̌ovn ̌̌ ̌̌a, a. s. Vienna Insurance Group a Slovenská� sporitel ̌̌ ̌̌n ̌̌ ̌̌a, a. s. each hold 5 % stakes.

VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe

Vienna Insurance Group (hereinafter also “VIG“ or “Group“)

boasts the best rating as part of the main index of the Vienna

stock exchange, the ATX. Vienna Insurance Group is an

international insurance group based in Austria’s capital,

developing insurance solutions in line with personal and local

needs, making it one of the leading insurance companies in

Austria and Central and Eastern Europe (CEE).

On the Austrian market, Vienna Insurance Group is

represented by the companies Wiener Städtische

Versicherung VIG, Donau Versicherung AG and Sparkassen

Versicherung AG.

KOOPERATIVA poisťovňa, a.s. ViennaInsuranceGroup

KOOPERATIVA poisťovňa, a. s. ViennaInsuranceGroup offers

individuals and business entities a range of over 60 products

in life and non-life insurance. It provides its services to 1.5

million clients.

The first private universal insurance company,

KOOPERATIVA poisťovňa, a. s. Vienna Insurance Group was

established on 30 October 1990. The major shareholder is

one of the most significant insurance companies in Austria,

Vienna Insurance Group AG Wiener Versicherung Gruppe

with representation in Central and Eastern Europe.

In 2001, KOMUNÁLNA poisťovňa, a. s. Vienna Insurance

Group was affiliated to the VIG group in Slovakia, and in 2008

also Poisťovňa Slovenskej sporiteľne, when Erste Group Bank

culminated the sale of its insurance companies in Central and

Eastern Europe to Vienna Insurance Group.

Slovenská sporiteľňa, a. s.

Slovenská sporiteľňa is the largest bank in Slovakia with

almost 2.3 million clients. It has long held the leading

position in terms of total assets, personal loans, client

deposits, and in the number of branches and ATMs. It offers

a comprehensive range of services at 270 branch points and 8

regional corporate centers across Slovakia. Slovenská́

sporiteľňa has been generating excellent economic results

for an impressively long time. In 2001, the bank became a

member of Erste Group, one of the largest financial groups in

Central Europe, with over 46,000 employees serving 16

million clients at almost 2,600 branches in seven European

countries (Austria, Czech Republic, Slovakia, Romania,

Hungary, Croatia and Serbia).

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Board of Directors

Kurt Ebner Chairman of the Board of Directors

He holds a degree from the Technical University of Vienna in Insurance Mathematics. He has been

a part of Wiener Städtische Versicherung since 1976, he has since held several management

positions in various companies of Vienna Insurance Group. He performed most of his professional

duties in Austria, Poland Croatia, Hungary and Slovakia.

Kurt Ebner was named the Chairman of the Board of Directors Poisťovňa Slovenskej sporiteľne on

16. October 2017.

Ing. Viera Kubašová Member of the Board of Directors

A graduate of the Slovak University of Technology in Bratislava, she has 20 years of experience in

the insurance and finance business. Her association with Poisťovňa Slovenskej sporiteľne started

while she was still with Slovenská́ sporiteľňa, where she worked on the project to establish the

insurer. Once it was formed, she entered the Company as Head of Finance and as Confidential Clerk

during the period from December 2003 to May 2007. She has been a member of the Board of

Directors of Poisťovňa Slovenskej sporiteľne since 1 May 2007.

In 2010, she became a member of the extended management and from 2014, a member of the

Board of Directors of KOOPERATIVA poisťovňa, a. s. Vienna Insurance group.

CEO

Legal &

Compliance dpt.

Policy Services,

Underwriting and

Claims dpt.

IT dpt.

Sales Managemnt &

Insurance Brokerage

Sales Support &

Marketing dpt.

Organizational structure

Organizational structure as of 31. December 2017

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Supervisory Board

Sales Managemnt &

Insurance Brokerage

Sales Support &

Marketing dpt.

Board of Dire ctors

CFO

Actuarial dpt.

Financial dpt.

Asset

Management dpt.

Organizational structure

31. December 2017

CFO

Risk Management

dpt.

Internal Audit

We focus on providing our customers in Austria and CEE with custom products and services tailored to their needs. Our strategy is geared towards longprofitability and steady earnings growth, changing times.

Over 25,000 employees work for the Vienna Insurance Group (VIG), at around 50 companies in 25 countries. We develop insurance solutions in line with personal and local needs, which insurance industry in Austria and Central and Eastern Europe (CEE

Expertise and stability

The Vienna Insurance Group is an international insurance

group headquartered in the Austrian capital. After the fall of

the Iron Curtain in 1989, VIG expanded rapidly from a purely

Austrian business into an international group. VIG is

synonymous with stability and expertise in providing

financial protection against risks. The Group’s orig

back to 1824. Almost two centuries of experience, coupled

with a focus on our core competence of providing insurance

coverage, forms a solid and secure basis for the Group’s 20

million-plus customers.

Focus on Central and Eastern Europe

Besides Austria, VIG places a clear emphasis on Central and

Eastern Europe as its home market. The Group generates

more than half of its premium income in CEE. VIG’s

operations are also focused on this region. This primarily

reflects the forecasts for economic growth in CEE, which is

predicted to be twice as high as in Western Europe, as well as

the current level of insurance density, which is still well below

the EU average.

9

Insurance Group

We focus on providing our customers in Austria and CEE with custom products and services tailored to their needs. Our strategy is geared towards longprofitability and steady earnings growth, making us a reliable partner in rapidly

Over 25,000 employees work for the Vienna Insurance Group (VIG), at around 50 companies in 25 countries. We develop insurance solutions in line with personal and local needs, which have made us one of insurance industry in Austria and Central and Eastern Europe (CEE

The Vienna Insurance Group is an international insurance

Austrian capital. After the fall of

the Iron Curtain in 1989, VIG expanded rapidly from a purely

Austrian business into an international group. VIG is

synonymous with stability and expertise in providing

financial protection against risks. The Group’s origins date

back to 1824. Almost two centuries of experience, coupled

with a focus on our core competence of providing insurance

coverage, forms a solid and secure basis for the Group’s 20

Focus on Central and Eastern

Austria, VIG places a clear emphasis on Central and

Eastern Europe as its home market. The Group generates

more than half of its premium income in CEE. VIG’s

operations are also focused on this region. This primarily

wth in CEE, which is

predicted to be twice as high as in Western Europe, as well as

the current level of insurance density, which is still well below

Local market presence

For VIG, protecting customers financially against risk is a

responsibility. The Group pursues a multi

based on established local markets as well as local

management. Ultimately, the Group’s success and closeness

to its customers is down to the strengths of each individual

brand and local know-how.

Strong finances and credit rating

VIG has an A+ rating with stable outlook from well

rating agency Standard & Poor’s, meaning that it remains

the top-rated company on the Vienna Stock Exchange’s

index of leading shares, the ATX. The Vienna Insurance

Group is listed in both Vienna and Prague

Versicherungsverein – a stable core shareholder with a long

term focus – owns around 70% of VIG’s shares. The

remaining shares are in free float.

Further information on Vienna

is available at the VIG Group Annual Report.

Vienna Insurance Group

We focus on providing our customers in Austria and CEE with custom products and services tailored to their needs. Our strategy is geared towards long-term

making us a reliable partner in rapidly

Over 25,000 employees work for the Vienna Insurance Group (VIG), at around 50 companies in 25 countries. We develop insurance solutions in line with

the leaders in the insurance industry in Austria and Central and Eastern Europe (CEE).

Local market presence

For VIG, protecting customers financially against risk is a

ibility. The Group pursues a multi-brand strategy

based on established local markets as well as local

management. Ultimately, the Group’s success and closeness

to its customers is down to the strengths of each individual

finances and credit

VIG has an A+ rating with stable outlook from well-known

rating agency Standard & Poor’s, meaning that it remains

rated company on the Vienna Stock Exchange’s

index of leading shares, the ATX. The Vienna Insurance

s listed in both Vienna and Prague. Wiener Städtische

a stable core shareholder with a long-

owns around 70% of VIG’s shares. The

remaining shares are in free float.

Further information on Vienna Insurance Group

is available at www.vig.com or in the VIG Group Annual Report.

10

11

Supervisory Board Report

12

Corporate Identity

Vision

Modern Life Insurance Company.

Mission

Reliable insurer for whole life.

Strategy

Quality, effective, simple, innovative.

13

Achievements and Awards

TREND weekly has awarded the twentieth annual awards for extraordinary business results. Poisťovňa Slovenskej

sporiteľne, a.s. VIG took first place. It has been awarded The Insurance Company of the year 2017 for the second

time. Thus, defending its position as the most successful insurer.

Poisťovňa Slovenskej sporiteľne, a.s. VIG places regularly in the ranking of the best insurance companies. It's

already its seventh placement in the top three, which signifies that it is not a random success but a result of long-

lasting work.

14

Product Portfolio

In line with the strategy, the insurance company offers a lean portfolio of life and non-life insurance. Products are simple and flexible which enables them to cover the customer needs in the scope of life and accident insurance or sickness insurance.

Capital – investment life insurance

ŽIVOT This flexible product combines insurance, saving and

investing. The product adapts to the current possibilities and

needs of clients. Clients can choose between a solely capital

form or combined capital-investment forms, whether they

wish the insurance to be more focused on risk cover or on the

saving element. With progressive payment of premium,

clients have the option of taking out rider insurance for

accidental death, permanent disability, fractures, serious

illness or hospitalization. The insurance policy can cover the

parent with all their children.

Capital life insurance

Funeral insurance A specific purpose form of insurance cover that provides

funds for arranging a dignified final farewell and for easing

the negative financial impact on those left behind. Funeral

insurance offers cover in the event of death up to the age of

85. The premium can be paid progressively or as a lump sum.

Payment protection insurance

Loan protection insurance Insurance cover for the event of death by whatever cause,

total and permanent disability, incapacity to work and loss of

employment. It is offered with consumer loans and loans

secured by real estate when taking out a loan with Slovenská́

sporiteľňa. The loan borrower is the insured person.

Poisťovňa Slovenskej sporiteľne offers this product in co-

operation with Poisťovňa Cardif Slovakia and KOOPERATÍVA

poisťovňa, a. s. Vienna Insurance Group.

Accidental risk insurance

SPOROIstota Insurance of death by whatever cause and for injury that

causes death or leaves the insured with permanent bodily

harm. It is intended for holders of current accounts, natural

persons or persons with account handling rights. Considering

the scope of insurance cover and the low price, it serves as a

good addition to lump sum payment of life insurance.

Group accident insurance

Children savings book insurance It is compulsory risk insurance to the bank product “Children

savings book “. Insurance of death by injury for parents listed

in the child’s birth certificate. The Insurance sum is in the

amount of EUR 7,000 and is paid directly to Children savings

book. This insurance is offered to children in the age 0-18

who own the above bank product.

Individual accident insurance

Children savings book insurance PLUS Individual risk insurance that can be entered into together

with the bank product “Children savings book “. This is

insurance of death by injury of parents listed in the child’s

birth certificate. Alongside Children savings book insurance,

clients can increase the sum paid to the child in case they

lose their parent to EUR 27,000.

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Report on Business Activity

Activities and standing of the Company on the insurance market

After several years of stagnation, the Slovak life insurance

market has come to life, with a volume of 1.25 billion EUR

that represents a year-on-year increase of 6.2%.

Poisťovňa Slovenskej sporiteľne also made a significant

contribution to this growth, which is also evidenced by a 73%

increase in the written premium compared to 2016. The

company thus not only confirmed the excellent results of

previous years but also exceeded them well.

PSLSP achieved a written premium volume of EUR 154 336

thousand. This was higher by EUR 65.1 mil compared to the

volume of written premium in 2016. Written premium in life

insurance achieved a volume of EUR 154 122 thousand.

Thanks to these results PSLSP confirmed its standing among

the top insurers on the Slovak life insurance market and

moved to third place in this ranking.

Thanks to the excellent results of PSLSP, the Vienna

Insurance Group was ranked 1st in the life insurance market

and defended its position from previous years. The market

share of the VIG Group was 37.1%, with a written premium of

EUR 464,587 thousand. This result has also been achieved by

the excellent results of the PSLSP in 2017.

Source: Slovak Insurance Association (SLASPO)

Slovak life insurance market 2015 2016 2017

(Written premium in thousands of EUR) 1 208 497 1 178 041 1 251 569

Poisťovňa Slovenskej sporiteľne, a. s. Vienna Insurance Group

Written premium (in thousands of EUR) 86 804 89 080 154 122 Market share of Company 7,18 % 7,56 % 12,31%

Vienna Insurance Group on the Slovak life insurance market

Written premium (in thousands of EUR) 399 539 399 529 464 587 Market share of Vienna Insurance Group 33,06 % 33,91 % 37,1 % Market ranking of Vienna Insurance Group 1. 1. 1.

68,24%

15,04%

16,70%

risk loan insurance and risk accident insurance

funeral insurance

capital investment life insurance

11,2%

57,2%

0,8% 0,7%

risk loan insurance and accident-oriented risk insurance funeral insurance

capital-investment life insurance

capital life insurance

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Composition of new 2017

The number of new insurances in 2017 was 168 527 pcs. As in the

past years, in 2017, the dominant product in the number of

insurance was credit insurance. 110,556 of this insurance

accounted for 68.2% of the total number of insurances signed in

2017. There was a very significant shift in the number of

insurances the company achieved in the sale of capital

investment insurance. Compared to 2016, the PSLSP recorded a

22.5% increase. In numerical terms, this represents 27,078 units

sold, which is 4,982 more than the previous year. Traditionally,

the company has also been able to rely on a representative for

capital life insurance. It is represented by 24,384 pieces of funeral

insurance. A significant year-on

in capital life insurance. With a total of 24,384 funeral insurance

for 2017, this number is higher by 4,933

Premium written in 2017

Historical results were achieved by PSLSP in written premium in

2017, which is also confirmed by a 73% increase compared to

2016. The dominant share of the overall capital investment policy

is the capital investment life insurance. This carrier product

contributed to the total insured volume of EUR 88,215 thousand,

which is 57.2% of the share of the premium. The increase in

funeral insurance also accounts for 30.1% of this type of

insurance, which was the second highest share in 2017. The third

basic pillar of premiums written is

credit insurance. The company confirmed the results of 2016 with

a premium amounting to EUR 17,333.9 thousand

68,24%

risk loan insurance and risk accident insurance

30,1%

oriented risk

Composition of new business in

The number of new insurances in 2017 was 168 527 pcs. As in the

past years, in 2017, the dominant product in the number of

insurance was credit insurance. 110,556 of this insurance

accounted for 68.2% of the total number of insurances signed in

2017. There was a very significant shift in the number of

insurances the company achieved in the sale of capital

investment insurance. Compared to 2016, the PSLSP recorded a

numerical terms, this represents 27,078 units

sold, which is 4,982 more than the previous year. Traditionally,

the company has also been able to rely on a representative for

capital life insurance. It is represented by 24,384 pieces of funeral

on-year increase was also recorded

in capital life insurance. With a total of 24,384 funeral insurance

for 2017, this number is higher by 4,933.

Premium written in 2017

Historical results were achieved by PSLSP in written premium in

2017, which is also confirmed by a 73% increase compared to

2016. The dominant share of the overall capital investment policy

is the capital investment life insurance. This carrier product

tributed to the total insured volume of EUR 88,215 thousand,

which is 57.2% of the share of the premium. The increase in

funeral insurance also accounts for 30.1% of this type of

insurance, which was the second highest share in 2017. The third

of premiums written is risk insurance and, above all,

credit insurance. The company confirmed the results of 2016 with

a premium amounting to EUR 17,333.9 thousand.

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Report on the Financial Situation of the Company

2017 was the most successful year in Poist ̌̌ ̌̌ovn ̌̌ ̌̌a Slovenskej sporitel ̌̌ ̌̌ne, a. s. Vienna Insurance Group (hereinafter Poist ̌̌ ̌̌ovn ̌̌ ̌̌a or the Company) 15-year history. Poist ̌̌ ̌̌ovn ̌̌ ̌̌a recorded an increase in profit before tax to EUR 18 mil (EUR 12.5 million in 2016), which represents an increase by 44% and a significant increase in written premiums.

The assets of the Company increased by almost 29% in 2017

and as of 31.12.2017 achieved a value of EUR 525.8 million.

Due to the high premium written, the Company also

recorded a significant positive position in the net cash flow

from operating activities at the level of EUR 112 million (EUR

40 million in 2016).

The growth and composition of new premium production,

rigorous cost management and the result of investing

financial assets contributed to these results.

The financial results of the Company depend on the situation

on the financial markets. In recent years the situation,

besides fundamental aspects, has been vastly dependent on

the monetary policy of the main central banks.

During the year 2017, the US Central Bank (FED) acceded

three times to raise its main interest rate, which ended year

at 1.25-1.5%. At the same time, in October, it ended the

quantitative easing program. The gradual departure from the

markedly relaxed monetary policy was due to the good

performance of the US economy and the significant

strengthening of the labor market. On the opposite side of

the Atlantic, the ECB remains at -0.40% for daytime

sterilization operations with commercial banks and 0% for

main refinancing operations. Since April, the ECB has cut the

purchase of assets on the financial market to EUR 60 billion

continued at this pace until the end of the year. Since

January 2018, it has decreased the monthly purchase of

assets to EUR 30 billion and this should last at least until

September 2018. The ECB is driven to slowing down the

quantitative easing with the rising economic growth rate and

declining unemployment. But as inflation is not yet reaching

target value, interest rates will remain at the current levels

even longer, and they will start to decline significantly

beyond the QE program's horizon.

In Europe, a number of elections took place last year (the

Netherlands, France, Austria, and Germany). There were

fears that the anti-European far-right parties could gain

a significant foothold. This eventually did not happen and the

political situation in Europe stabilized and calmed down. The

release of tensions had an impact on the narrowing of

corporate bond spreads, which led to a decline in their yield

to maturity.

The 10-year yield of Slovak government bonds declined

slightly in 2017 from 0.94% at the beginning of the year to

0.89% at the end of the year.

The stock markets had another very successful year.

Profitability of companies on a global scale rose by 1.5%

more than analysts expected. In addition to low interest

expense, future positive expectations are reflected in the

economic activities of companies. The International

Monetary Fund has increased the world economic growth

forecast to 3.9% in 2018 and 2019.

Thanks to a conservative and responsible approach to

investment, the Company maintains a stable financial

position over the long term. An important step for its

preservation is also the management of the technical

interest rate for capital life insurance products in line with

developments on the financial markets. This management is

important for the long-term maintenance of the ability to

repay the Company's liabilities to policyholders.

18

he return on investment of the investment portfolio covering

the traditional technical provisions declined slightly in 2017.

Since the bulk of the portfolio is made up of bonds, debt

purchases in 2017, at the current low yields, have reduced the

average return. On the other hand, the average technical

interest rate of the insurance portfolio fell from 1.98% at the

beginning of the year to 1.71% at the end of the year.

In 2017, the investment appreciation was once again higher

than the average guaranteed technical interest rate, which

allowed the re-allocation of 2.25% share of premiums to the

clients.

In addition to investments serving to cover traditional

insurance and own funds the Company’s portfolio also

includes assets covering technical provisions from managed

investment life insurance and index-linked life insurance with

a predefined investment strategy. These investments

appreciated during the course of the by more than EUR 5.6

million year which represents an average output of 2.5% per

annum.

Proposal for the distribution of profit for 2017

Poisťovňa Slovenskej sporiteľne, a. s. Vienna Insurance

Group ended the year 2017 with a profit after tax of EUR13.0

million. The Company has fulfilled all the legal conditions for

the payment of dividends, therefore the Board of Directors

the company proposes to pay part of the profit in the form of

dividends.

19

Other Key Circumstances

Impact of the accounting entity on employment and the environment

As of 31 December 2016, Poisťovňa Slovenskej sporiteľne

employed 77 full-time employees. The organizational

structure included 2 members of the Board of Directors, 10

employees in management posts and 7 employees on

maternity leave. From the total of 77 employees, 62.3 % are

women and 37.7 % men.

During 2016, the Company recorded a fluctuation rate of 9%,

with an annual decline by more than 7%. The ratio of

employees with higher education to those with a middle

school education was 3:1. The average age of an employee is

39 years old.

Besides the salary, the company offers its employees a

variety of employee benefits divided into 5 basic programs:

Health program, Loyalty program, Family program,

Education and Cafeteria. The most commonly used

employee benefits were the ones from the Cafeteria system,

medical check-ups, injury insurance, pension contributions,

flexible work time, and free time for regeneration.

Poisťovňa Slovenskej sporiteľne employees have in 2017

actively participated on vocational educational programs

organized by companies in Slovakia and other EU countries.

Educational investment in 2017 represented on average EUR

450 per employee.

Poisťovňa Slovenskej sporiteľne, a. s. Vienna Insurance

Group confirmed its market position and was among the top

insurers on the market in 2017.

Risk Management

Based on the activities associated with the insurance

business the Company is exposed to underwriting and

market risks, to general risks, which is the risk of the failure

of a counterpart, concentration risk and operational risks.

Besides this, the Company monitors risks following from

business activity, such as reputation and strategic risk.

Risk management forms an inseparable part of Company

operation. Risk management processes are focused on

securing the financial force and supporting sustainable

growth.

The Company has implemented a complex system of tools

and measures the aim of which is monitoring and

assessment of risks.

In 2017 the company focused on the follow processes

targeted to effective risk management:

� Valuation of assets and liabilities - Calculation of

technical provisions in accordance with the

requirements of the Solvency II (Calculation of technical

provisions)

� Calculation of the Solvency Capital Requirement and

own resources

� Inventory of risks

� System of internal control

� Own risk and solvency assessment, including an

assessment of potential risks affecting the Company's

key indicators

� Submission of information to supervisory authorities –

quantitave statements according to the requirements

of the supervisory authorities.

During 2017, the Company has on quarterly basis analyzed

the possible exceeding of limits for the position of solvency,

capital requirements for solvency and risk bearing capacity

(RBC). Monitoring of limits is an important part of risk

management and serves as early warning of insolvency

danger for the Company.

20

Company satisfies the requirements of solvency in

accordance with valid legislation and throughout the year

has not recorded any significant facts that may endanger the

financial stability of the Company. Therefore, the Company

provides their clients with sufficient security of covering

liabilities following from insurance policies.

Risk management is dealt with in a separate part of the notes

to the financial statements.

Company philanthropy and charity

Company employees actively participate in the long-term

voluntary project Social Active Day with the aim of helping

people living in the crisis center Brána do života in Bratislava.

Both long-term and new projects have been supported by

grants as well. For the 6th year the varied year-round

volunteer activities give space to the staff of Poisťovňa

Slovenskej sporiteľne to be an integral part of philanthropic

projects and activities that share moments of happiness with

a good purpose.

Verifying adequacy of technical provisions

Technical provisions of the Company as of the day the

Financial Statements were compiled were calculated and

established as per the applicable formulas and principles for

their establishment and release, on the basis of the original

actuarial assumptions.

The Company verified the adequacy of technical provisions

by conducting a test of adequacy of the provisions using the

method of discounted cash flows, this with the use of the

best estimates of future development of actuarial and

economic conditions.

All insurance contracts were included in the test, with riders

evaluated together with primary insurance.

The company tests the adequacy of its reserves on its

portfolio individually for three homogeneous groups:

� traditional insurance with shares of surplus,

� traditional insurance without shares of surplus,

� investment insurance.

.

The conducted test of adequacy demonstrated the

sufficiency of reserves for all three monitored groups.

The details are given in the Notes to the Financial

Statements

Information on received bank loans and on other bank loans

As of 31 December 2017, the Company had not taken out any

bank or other loans.

Equity participations

Poisťovňa Slovenskej sporiteľne, a. s. ViennaInsuranceGroup

holds no equity participations in other companies h.

Litigations

In 2017, the Company was a party to seven passive litigations

and is currently a party to one active litigation. The Company

does not anticipate any significant impact on its financial

situation from these litigations.

Acquisition of own shares

Poisťovňa Slovenskej sporiteľne did not acquire any of its

own shares, short-term commercial papers, business stakes

and equities, or short-term commercial papers and business

stakes of the parent company to its portfolio in the 2017

accounting period.

Expenditure on Research & Development

Poisťovňa Slovenskej sporiteľne did not spend any funds on

research and development.

Events of significance occurring after the reporting period

No events occurred after the balance sheet date that could

have a significant influence on the reflection of

circumstances that are the subject of reporting.

21

Projected Development

Poisťovňa Slovenskej sporiteľne is a modern financial institution that also defended its stable position on the life insurance market in 2017.

Key factors for the company remain the same – provide the

clients with high-quality, fast and available services. One of

our main goals is to be a stable partner for our client

throughout their whole life. It currently offers its services to

almost half a million clients. Permanent year on year

increase in the number of clients is a sign of their confidence.

It will start 2018 with all of its successes. 2018 will be a year

of fundamental changes and a number of new challenges.

One of the strategic goals of the Vienna Insurance Group is

the developing of the area of bank insurance.

In order to strengthen its bank insurance position Poisťovňa

Slovenskej sporiteľne, a.s. Vienna Insurance Group is

planning to merge with Kooperativa poisťovňa, a.s. Vienna

Insurance Group in 2018.

The Board of Directors of the company on 27.10.2017

negotiated the intent of merging Poisťovňa Slovenskej

sporiteľne, a.s. Vienna Insurance Group and KOOPERATIVA

poisťovňa, a.s. Vienna Insurance Group (hereinafter

“KOOPERATIVA”) according to which, with effect to

01.04.2018 Poisťovňa Slovenskej sporiteľne voluntarily closes

without liquidation with a legal successor with the company

KOOPERATIVA as the successor and all assets, liabilities and

equity, including the rights and obligations of the PSLSP

company's employment relationships shall pass to the

effective date of the merger to KOOPERATIVA which will

become the universal legal successor of PSLSP.

The National Bank of Slovakia as a financial supervisory

authority, on 19 December 2017 granted a prior consent to

the merger of the companies.

Both the merger and the draft of the merger agreement

were submitted to the Extraordinary General Meeting of the

Company for approval by the Board of Directors on

28.2.2018.

The clients of Slovenská sporiteľňa, the largest bank in

Slovakia, will continue to be offered tailor-made special

products under the brand name of the bank. They will benefit

from a wider product range in the field of insurance, such as

new types of motor insurance and a richer range of services.

By combining the resources and competencies of both

companies implies the creation of a strong, stable, leading-

edge insurance company.

FINANCIAL STATEMENTSCOMPILED IN COMPLIANCE WITH IFRS AS ADOPTED BY THE EUROPEAN UNION POISŤOVŇA SLOVENSKEJ SPORITEĽNE, A.S. VIENNA INSURANCE GROUP

2017 31.december

Table of Contents Independent Auditor´s Report Financial Statements as of 31. December 2017 1 Balance Sheet 2 Comprehensive Profit and Loss Statement 3 Report of Changes in Equity 4 Report on Cash Flows Note to the Financial Statements 6 General Information 7 Summary of Basic Accounting Policy 17 Critical Accounting Estimates and Judgments in Applying Accounting Policies

18 Application of new Accounting Standards and Interpretations 19 New Reporting Standards that the Company does not apply Prematurely 23 Other Financial and Insurance Assets 25 Other Assets 27 Technical Provisions and Related Insurance Liabilities 28 Trade and Other Accounts Payable

29 Changes in Technical Provisions 31 Share Capital and Other Funds 32 Gross Written Premium 33 Income from Fees and Commissions 34 Result of Reinsurance 35 Profit and Loss from Asset Allocation 36 Claims and Insurance Benefits before Reinsurance 37 Operating and Other Expenses

38 Income Tax and Specific Levy from Profit 40 Insurance Risk Management 45 Financial Risk Management 49 Capital Management 50 Fair Value of Financial Instruments 55 Financial Instruments by Category 57 Transactions with Associates

58 Events after the Reporting Period

1 Notes on pages 5 to 58 comprise an integral part of these Financial statements.

Balance Sheet

In EUR thousands Note 31. December

2017 31. December

2016 ASSETS Loans 20, 22 2 909 2 980 Bonds: - held to maturity 20, 22 44 692 47 652 - at fair value through profit or loss 20, 22 98 596 93 710 - classified as loans and receivables 20, 22 25 484 20 697 - available for sale 20, 22 248 499 178 743 Equity securities: - available-for-sale 20, 22 66 438 36 430 - at fair value through profit or loss 20, 22 22 635 20 452 Other financial and insurance assets 6, 22 2 996 2 508 Other assets 7, 22 1 423 1 259 Corporate income tax receivable - 278 Cash and cash equivalents 20 12 082 4 258 TOTAL ASSETS 525 752 408 967 LIABILITIES Provision for life insurance and related insurance liabilities 8, 10 348 682 247 190 Provision for investment insurance 10 113 859 107 829 Trade and other payables 9 2 305 1 554 Deferred tax liability 18 2 578 2 609 Corporate income tax liability and specific levy from profit 1 871 101 TOTAL LIABILITIES 469 295 359 284 EQUITY Share capital 11 7 011 7 011 Statutory reserves 11 1 402 1 402 Other capital funds 11 4 302 4 302 Difference in valuation from available-for-sale assets 11 16 591 14 799 Retained earnings 27 151 22 169 TOTAL EQUITY 56 457 49 683 TOTAL EQUITY AND LIABILITIES 525 752 408 967

2 Notes on pages 5 to 58 comprise an integral part of these Financial statements.

Comprehensive Profit and Loss Statement

In EUR thousands Note 2017 2016 Gross written premium 12 154 336 89 202 Change in Unearned premium reserve 10 -1 6 Gross earned premium 154 335 89 208 Share of reinsurer in earned premium 10 -2 195 -1 993 Net earned premium 152 140 87 215 Interest income 7 929 6 745 Income from fees and commissions 13 2 435 2 058 Profits minus losses from asset allocation 15 6 459 3 269 Other revenues 593 164 Transaction administration costs for asset allocation -137 -63 Claims and insurance benefit costs before reinsurance 16 -130 901 -72 871 Share of reinsurer on claims and insurance benefit costs 10, 14 380 433 Acquisition costs of insurance contracts 7 -9 864 -6 606 Operating and other expenses 17 -11 010 -7 798 Income before tax 18 024 12 546 Income tax and specific levy from profit 18 -5 066 -3 168 INCOME FOR REPORTING PERIOD 12 959 9 378 Other comprehensive profit / loss: Items that will be reclassified subsequently to profit or loss Financial assets available for sale - Revaluation in year 2 690 3 821 - Losses minus profits reclassified to income upon sale 15 -421 -288 - Deferred tax 18 -476 -590 Other comprehensive income in total, minus tax 1 792 2 943 COMPREHENSIVE INCOME FOR REPORTING PERIOD 14 751 12 321

3 Notes on pages 5 to 58 comprise an integral part of these Financial statements.

Report of Changes in Equity

In EUR thousands Note Share

capital

Statutory reserve

fund

Other capital

funds Revaluation

funds Retained earnings

Own capital in total

As of 1. January 2016 7 011 1 402 4 302 11 856 19 734 44 305 Income for the period - - - - 9 378 9 378 Other comprehensive

income - - - 2 943 - 2 943 Total comprehensive

income - - - 2 943 9 378 12 321 Payment of dividends 11 - - - - -6 943 -6 943 As of 31. December 2016 7 011 1 402 4 302 14 799 22 169 49 683 Income for the period - - - - 12 959 12 959 Other comprehensive

income - - - 1 792 - 1 792 Total comprehensive

income - - - 1 792 12 959 14 751 Payment of dividends 11 - - - - -7 977 -7 977 As of 31. December 2017 7 011 1 402 4 302 16 591 27 151 56 457

4 Notes on pages 5 to 58 comprise an integral part of these Financial statements.

Report on Cash Flows In EUR thousands Note 2017 2016

Cash flows from operating activities Received premium 154 283 79 359 Received commission 877 203 Payments for insurance benefits -25 785 -24 714 Cash flows from guaranteed return on investments 4 935 4 331 Cash flows from reinsurance -785 -454 Commission payments for intermediaries -11 993 -10 178 Payments to employees and suppliers -3 951 -2 430 Other taxes and levies -1 552 -1 413 Other operating cash flows -430 -303 Income tax paid and specific levy from profit -3 511 -4 617 Net cash generated from operating activities

112 088 39 784

Cash flows from investing activities

Interest received 2 658 2 791 Received dividends and other incomes from securities 1 130 921 Cash flows from acquisition of tangible and intangible assets 7 -360 -497 Cash flows from sale of tangible and intangible assets 7 87 19 Cash flows from acquisition of financial investments -124 980 -54 063 Cash flows from sale of financial investments 25 178 19 698 Net cash used in investing activities

-96 287 -31 131

Cash flows from financing activities

Dividends paid 11 -7 977 -6 943 Net cash used in financing activities

-7 977 -6 943

Net growth of cash and cash equivalents

7 824 1 710

Change in cash and cash equivalents

Cash and cash equivalents at beginning of period 4 258 2 548 Cash and cash equivalents at end of period 12 082 4 258

Net change in cash and cash equivalents 20 7 824 1 710

NOTESTO THE FIANANCIAL STATEMENTS POISŤOVŇA SLOVENSKEJ SPORITEĽNE, A.S. VIENNA INSURANCE GROUP 2017 31.december

6

General Information

These financial statements have been compiled as annual

financial statements of the company Poisťovňa Slovenskej

sporiteľne, a. s. Vienna Insurance Group for the year of 2017

in line with International Financial Reporting Standards

(“IFRS”) as adopted by the European Union. The financial

statements were approved by the Board of Directors of the

Company on 27 February 2018. The financial statements for

the preceding reporting period were approved on 21 March

2017 by the General Meeting of the Company.

Poisťovňa Slovenskej sporiteľne, a. s. Vienna Insurance

Group (hereinafter “Company”) was established on 20

September 2002 and commenced operations on 27 January

2003. It is registered in the Companies Register of the District

Court of Bratislava I under entry no. 3085/B. The company’s

identification number is 35851023 and its taxpayer

identification number is 2021710064. The Company is not an

unlimited liability partner in other accounting entities. As of

31 December 2017, Vienna Insurance Group AG Wiener

Versicherung Gruppe was its parent company, with its

registered office at Schottenring 30, 1010 Wien, Austria, and

Wiener Städtische Wechselseitige Versicherungsanstalt –

Vermogensverwaltung was its final controlling entity. The

ownership structure of the Company remained unchanged in

2017 as well as in 2016. From 1 January 2018, the Company's

operations from the accounting point of view are considered

to be operations carried out on behalf of the successor

company, which is KOOPERATIVA poisťovňa, a.s. Vienna

Insurance Group, due to merger (Note 25).

Basic activities of the accounting entity

The Company conducts life and non-life insurance, namely:

� Death insurance cover ,endowment assurance or both

death insurance and endowment cover,

� Investment fund insurance cover,

� Accident and illness insurance, provided that it is

additional insurance,

� Non-life insurance in the segments of accident and

illness insurance,

� Activities of an independent financial agent in the

insurance or reinsurance sector.

The company is active in the Slovak Republic nationwide

through its Slovenská́ sporiteľňa a.s. and Prvá́ stavebná ́

sporiteľňa, a.s branches.

Registered office The company’s registered office is Tomášikova 48, 832 68

Bratislava 3, Slovak Republic.

Currency of financial statements The financial statements are quoted in EUR in thousands,

unless stated otherwise.

As of 31.12.2017 the Company’s Board of Directors was made

up of: Chairman Kurt Ebner (since 23.11.2017 and until

22.11.2017 Ing. Martin Kaňa) and member Ing. Viera

Kubašová. The Supervisory Board was made up of Chairman

Dkfm. Hans Raumauf, Vice-chair Mag. Erwin Hammerbacher

and members Mag. Hans Meixner, Prof. Elisabeth Stadler,

JUDr. Judit Havasi, Ing. Daniel Morvay and RNDr. Mária

Maryniaková. The company maybe be represented as of

31.12.2017 and 31.12.2016 Ing. Anna Samuelová and Ing.

Richard Schiffer.

As of 31 December 2017 the average number of employees

was 74 (in 2016: 69), out of which 10 were management

employees 10 (2016: 10).

7

Summary of Basic Accounting Policy

Basis for preparation of financial statements

These financial statements were compiled under the historical cost convention, with the exception of financial assets available for sale and financial assets at fair value through profit or loss. The following text states the basic accounting principles and methods. These were applied consistently in the current and the previous accounting periods, unless otherwise stated.

Financial instruments – basic terms of measurement

Depending on their classification, financial instruments are

measured at fair value or at amortized cost using the

effective interest method, as described below.

Fairvalue is the price that the owner would have received from the sale

of the asset or that the debtor would have paid for the

transfer of liability in a standard transaction between parties

on the market, on the day of valuation. The best proof of fair

value is the price on the active market. A market is deemed

active if transactions with the said assets or liabilities are

made with sufficient frequency and volume so that it

continually provides the information about the price. The fair

value of financial instruments traded on the active market is

determined as the sum of their quoted prices and their

volumes owned by the Company. This procedure is applied

also where the daily volume traded on the market is not

sufficient to be able to absorb the volume owned by the

accounting entity and the instruction to sell a position within

a single transaction could affect the quoted price.

The quoted price used for valuation of an asset is the quoted

bid price and the quoted price for valuation of liabilities is the

quoted ask price.

When the closing rate is not available for the given day of

valuation, the market price is determined by the market

makers. If the market price cannot be determined even by

the market makers, the closing price of the security is used

not more than 30 calendar days from the day the valuation is

made. If it is not possible to determine the market price

using the price acquired by the above methods, the price is

calculated from the yield produced by interpolation between

the closest points of the yield curve for the given type of

security. Where there is no financial market for the particular

investment, the fair value is determined using valuation

techniques which include reference to the current fair value

of another similar instrument or by analysis of discounted

cash flows.

The fair value is analyzed depending on the level in the fair

value hierarchy as follows: (i) level one represents valuation

of the market price (unadjusted) from the active market for

identical assets or liabilities, (ii) level two represents

valuation using techniques or other models whose

fundamental inputs are observable for the asset or liability,

either directly (i.e. as prices) or indirectly (i.e. derived from

prices), and (iii) level three represents the valuation whose

inputs are not based on observable market data (i.e. there

are subjectively set input parameters). For the purposes of

financial reporting, it is assumed that any shifts between the

levels in the fair value hierarchy always occurred only by the

end of the reporting period.

Transaction costs are costs directly associated with the purchase, issue or sale

of a financial instrument. These costs would not have been

8

incurred if the transaction had not occurred. Transaction

costs include fees and commissions paid to intermediaries

(including employees working as intermediaries), advisors,

brokers and dealers, fees to regulatory agencies and stock

markets, and transfer taxes and fees. Transaction costs do

not include discounts or surcharges, costs of financing or

internal administrative costs.

Amortized costs determined by the effective interest method is the value representing the amount at which the financial

instrument was carried at the time of acquisition, minus

payments of principal, plus accrued interest, and minus any

adjusting entries for impairment of financial assets. Accrued

interests include accrued transaction costs and the difference

between the acquisition cost and the nominal value using the

effective interest method. Interest accrued in this way is part

of the valuation of financial instruments in the balance sheet.

The effective interest method is the method of calculating the redemption value and for

setting interest income and costs for the given period with

the aim of achieving a constant interest rate (effective

interest rate). The effective interest rate is one that precisely

discounts estimated future cash flows (with the exception of

future loan losses) for the period the financial instrument

exists, or for a shorter period, to the net carrying value of the

financial instrument. The effective interest rate discounts

cash flows of instruments with variable interest rate until a

further change of the interest rate is made, excepting a

bonus or discount, which reflects credit risk above the

variable interest rate specified for the financial instrument,

and with the exception of the other variables that do not

change along with the market interest rate. These bonuses

or discounts are accrued throughout the whole expected life

of the financial instrument. Calculation of the current value

includes all fees between the parties, paid or received, which

are an integral part of the effective interest rate.

Initial measurement of financial instruments Financial instruments at fair value through profit or loss are

carried at the fair value at the time of acquisition or creation.

Other financial instruments are measured at the time of

acquisition or creation by the fair value plus transaction

costs. The best evidence of the fair value at the time of

acquisition is the transaction price. The profit or loss at the

time of acquisition is accounted only if the difference

between the transaction price and the fair value could be

supported by the price from other simultaneously executed

transactions on the market with the same financial

instrument or by the valuation model, the inputs of which

only comprise of data from available markets.

Current purchases and sales of financial assets are reported

on the date the deal is financially settled, being the date

when the Company receives or supplies the said asset. This

method is used thoroughly for all purchases and sales of

financial assets.

De-recognition of financial assets The Company derecognizes financial assets in the following

cases: (a) the asset or receivable was paid off or the right to

income from this asset has expired in some other way or (b)

the Company has transferred the right to the cash flows from

the financial asset or has concluded an agreement on the

transfer of income from the said asset immediately after

receipt, which complied with the set conditions, whereby: (i)

in fact it transferred all risks and rewards of ownership of the

asset or (ii) it did not transfer nor retain in essence all risks

and rewards of ownership, but retained control. Control

remains on the side of the Company in the event that the

counterparty is practically not able to sell the said asset as a

whole to an independent party without the sale being

subject to further restrictions.

Securities held to maturity This class of financial instrument represents securities

quoted on the active market with firmly fixed or

determinable payments, which the Company intends and is

able to retain till maturity. The security may not be classified

as held to maturity if the Company or issuer is entitled to

request its premature payment, because the price paid for

such a right is not consistent with the objective to hold the

security to maturity. The company management sets the

classification of securities as held to maturity at the time of

acquisition and revaluates it to the end of each reporting

period. Securities held to maturity are carried at amortized

cost set by the effective interest method.

9

Securities at fair value through profit or loss Securities at fair value through profit or loss are so classified

at the time of acquisition based on how this classification

leads to the limitation of accounting non-compliance, which

would otherwise arise in connection with accounting related

provisions for investment insurance that is covered by these

securities. The risk from changes to the fair value of these

financial assets is borne by the insured, whereby the

respective revaluation of provisions from investment

insurance is accounted with an impact on profit or loss.

These securities are valued at their fair value, whereby all

changes to the fair value in the respective period, including

interest income and realized profits and losses from sale, are

reported as part of the profit or loss from asset allocation.

Securities available for sale These securities represent investment securities that the

Company owns, and which may be sold as required in respect

of liquidity or changes to market interest rates. Securities

available for sale are valued at fair value. Interest income

calculated by the effective interest method at the amortized

cost of these securities is accounted with an impact on profit

or loss. Other changes to the fair value are credited to the

other comprehensive income or loss until the security is

derecognized or until the onset of a loss from impairment,

when cumulative revaluation is reclassified from other

comprehensive income or loss to operating results.

Impairment losses are accounted as an expense to profit or

loss at the moment of creation, if one or more events occur

after acquisition of the securities that have a negative impact

on the amount or time the estimated cash flows are received.

Loss events registered by the Company are the same as

those of financial assets carried at amortized cost, which is

given in the section “Adjusting entries to financial assets

carried at amortized cost”. If, in a subsequent period, the fair

value of a security increases and the increase can be

objectively related to an event occurring after the

impairment loss was recognized, the impairment loss is

derecognized through the income statement in the given

period.

Equity securities available for sale These securities represent investments that the Company

owns, and which may be sold as required in respect of

liquidity or changes to market prices and exchange rates.

Equity securities available for sale are carried at their fair

value.

Dividend income from equity securities is carried with an

impact on income at the time it is approved by the General

Meeting and where it is probable that the Company will

receive it. Other changes to the fair value are carried to the

other comprehensive income or loss until derecognition of

the security or the onset of an impairment loss, when the

cumulative revaluation is reclassified from other

comprehensive income to profit or loss. Losses from

impairment are carried as an expense to income at the time

they occur, i.e. where there is a significant or prolonged

decline in their value below acquisition cost.

In such an event, the cumulative revaluation – set as the

difference between acquisition cost and the current fair value

minus losses already recognized in profit or loss in the past –

is reclassified from other comprehensive income to profit or

loss. Impairment losses are then not derecognized from the

profit or loss and subsequent profits from revaluation are

credited to other comprehensive income.

Equity securities at fair value through profit or loss Equity securities at fair value through profit or loss are so

classified at the time of acquisition based on how this

classification leads to limitation of accounting non-

compliance, which would otherwise arise in connection with

the recognition of related provisions for investment

insurance, which is covered by these securities. The risk of

changes to the fair value of these financial assets is on the

insure, whereby the respective revaluation of provisions from

investment insurance is carried with an impact on profit or

loss.

These securities are carried at their fair value, whereby all

changes to the fair value in the respective period, including

dividend income and realized profits and losses from sale,

are credited as part of profit and loss from asset allocation.

10

Other assets Other assets include tangible and intangible assets (primarily

software), which are carried at acquisition cost minus

correcting and adjusting entries for its impairment. Tangible

assets are subject to straight-line depreciation over the

assumed life of the asset, lasting for 4 to 6 years, with the

exception of furniture, which is depreciated over a 6-to-12-

year period. Intangible assets are amortized over a life of 2 to

5 years. The residual life of the asset is reviewed each year.

Other assets also include timing differences of commissions

for acquisition of insurance contracts. Timing differences of

acquisition commissions are used by the Company for

investment life insurance for current premiums with a

premium payment periodicity other than one year. The

reason for this is to harmonize the time the commission is

paid with the calculated initial costs.

Other financial and insurance assets Other financial and insurance assets comprise of receivables,

including receivables from insurance. Receivables at initial

recognition are carried at nominal value and then their value

is reduced by the value of adjusting entries. Adjusting entries

to receivables from insurance are formed in dependence on

how overdue the receivable is, based on the results of the

analysis of the development of the due date. Where

insurance ceases due to non-payment, an adjusting entry is

generated amounting to 100% of the receivable. The

Company demands payment of the owed premium from

clients and with receivables where the costs of enforcement

would exceed the actual debt, the Company does not pursue

enforcement further. Receivables that were not settled even

after urging clients are assigned by the Company to a third

party, which proceeds to enforce them.

Term deposits term deposits and receivables are financial assets with a

firmly fixed due date. They are accounted at the time the

funds are transferred to the bank. Term deposits are valued

at amortized cost using the effective interest method.

Cash and cash equivalents Cash and cash equivalents include cash in hand, valuables,

deposits held at call with banks, other short-term highly

liquid assets with original maturities of three months or less,

with the exception of short-term term deposits that were

agreed for the purpose of investing. Cash and cash

equivalents are valued at nominal value increased by accrued

interest.

Liabilities from insurance contracts and investment insurance An insurance contract is a kind of agreement on

compensation for the insuree, based on which one party

(insurer) accepts a substantial insurance risk from the other

party (insuree) in the event that a specified uncertain future

event (claim) negatively affects the insured. An insurance

contract is not the kind of contract that exposes the insurer

to a financial risk without the transfer of a significant

insurance risk. The financial risk comprises of the risk of a

possible future change to the interest rate, price of a

security, commodity price, exchange rate, price index or rate,

credit rating or other variable that is independent of the

parties to the contract. The insurance risk is significant if

upon the onset of an insured event the Company is obliged

to pay out a substantial amount of additional benefits (in

excess to payments paid by the policyholder to the

Company). Once the contract is classified as an insurance

contract, it remains so until all rights and obligations arising

thereof cease.

The Company tested the level of risk transfer as the

difference between paid premiums (payments made by the

policyholder to the Company) and claims to insurance

benefits in the case of a claim. Contracts are classified on the

level of portfolios of individual product contracts. If the entire

portfolio in question comprises of contracts that carry

insurance risk, the Company does not examine individual

contracts so as to identify an insubstantial group that carries

insubstantial insurance risk. If even a small number of

contracts fail to satisfy the requirement of being classified as

an insurance contract, the whole portfolio is deemed as

insurance contracts. Some insurance contracts carry riders.

These riders are not classified separately as they constitute

an integral part of the insurance contract.

All contracts with policyholders that the Company issued

were classified as insurance contracts. Some of the insurance

contracts of the Company are entitled to a share in the

surplus of premium and they all contain embedded

derivatives, which are nevertheless closely tied to the main

contract, and thus there is no need to separate them and set

a fair value for them. The amount of the shares in the surplus

is dependent on the decision of the Company.

By their nature, the products of the Company are long-term

insurance contracts with fixed and guaranteed terms. For

each product, the Company issued insurance terms and

11

conditions, defining all rights and obligations of the parties.

Insurance contracts of the Company can be divided into the

following product groups, depending on what insurance risks

they cover: (1) risk insurance, (2) capital insurance, (3)

investment insurance (4) combined insurance and (5) non-life

insurance (accident).

Risk insurance comprises of

(a)Credit life insurance with regular premium, which covers

the risk of death and permanent disability arising from an

accident, whereby it is possible to take out a rider covering

accidental death (this risk covers 17% of insurance contracts;

in 2016: 19%),

(b)Group insurance covering death, a possibility of a rider

for total and permanent disability, and

(c)Accident insurance as part of a regularly paid uniform

premium, covering the compulsory risks: death, permanent

disability and accidental death.

Capital insurance comprises of

(a) Single-premium capital life insurance, covering benefits

on death and endowment assurance,

(b) Single-premium capital insurance with fixed maturity,

which covers the following three compulsory risks:

endowment, permanent disability and serious illness,

(c) Capital life insurance with regular premium, covering

death and endowment; it is possible to arrange the following

riders to this insurance: permanent disability (this risk covers

81% of insurance contracts – 2016:82%) and accidental death

(this risk covers 83% of insurance contracts – 2016:84%),

(d) Capital life insurance with regular premium with a

possibility of a rider covering children (rider insurance of

permanent disability from injury and of serious illness covers

all children of the insured), and

(e) Funeral insurance with single or regular premium with

reduced term for payment of premium, covering the risk of

death.

Investment insurance comprises of

(a) Single-premium investment life insurance,

(b) Investment life insurance with regular premium, and

(c) Single-premium index-linked life insurance.

Investment insurance products as well as index-linked life

insurance cover the risk of death, whereby the insured bears

the risk from investment of the funds. In case of survival to

maturity, the insured is entitled to payment of the capital

value of the insurance contract.

Index-linked life insurance is associated with a security, the

detailed characteristic of which is dependent on a particular

tranche. In addition to insurance of death, this insurance also

contains compulsory rider insurance of permanent accidental

disability. In cases of survival to maturity, the benefits carry

issuer-guaranteed appreciation, the amount of which

depends on the terms of the insurance contract.

The Company does not assume any warranty with this

product for the solvency of the issuer of the security. The

potential risk of insolvency of the issuer and the related risk

of non-payment of any benefits from the investment life

insurance contract is borne by the insured.

Combined insurance comprises of

(a) Single premium capital investment life insurance

(b) Regular premium capital investment insurance

Both products cover the risk of death and endowment,

whereby optional riders can be agreed for this insurance:

� Accidental death

� Permanent accidental disability

� Serious/Civilization illness

� Fractures

� Hospitalization due to illness

� Hospitalization due to injury

There was no fewer than one rider agreed to 59% of single

premium insurance contracts, whereby the number of riders

to a contract was 1.2 on average.

There was no fewer than one rider agreed to 92% of regular

premium insurance contracts, whereby the number of riders

to a contract was 3.9 on average.

In the case when an insurance contract has been concluded

without delay after maturity of any other capital insurance of

12

the Company, or the insurance meets the criteria defined by

the Company, the insurance includes an accidental death

rider, where the obligation to pay for the premium does not

arise on the part of the insured.

Combined insurance incorporates elements of capital and

investment insurance. The policyholder is entitled to

determine the respective percentage shares of capital and

investment components in the insurance.

Risk insurance and capital insurance are referred to by the

common name of traditional insurance, while they contain

also the capital element of combined insurance. The

investment part of combined insurance is reported on under

investment insurance.

Non-life insurance comprises of Group insurance payable at death caused by an accident for

regular Premium

Personal insurance payable at death of a parent caused by an

accident

Unearned premium reserve Unearned premium reserve (UPR) is formed for traditional

insurance and for non-life insurance from gross written

premium and for investment insurance from set fees, while

respecting that part of the premium or fees that are

attributed to future reporting periods. For insurance

contracts with regular premium, the provision is created

using the pro-rata temporize method.

For single- premium insurance this provision is not created.

The provision is not created either for a monthly periodicity

of premium payment, due to the fact that the Company

issues contracts with the inception of insurance always as of

the 1st day of the month. Similarly, the provision is not

created for combined insurance with regular premium: the

risk premium is depleted on a monthly basis and the retained

part of the premium (capital and investment) is immediately

credited to the provision. The change in the balance of the

provision is accounted through expenses and income.

Outstanding claims provision Outstanding claims provision (OCP) is intended for

settlement of claims in the current or future reporting

periods. This provision is made up of two parts: (i) a provision

for insurance claims that have been incurred but not

reported (IBNR), and a provision for claims reported but not

settled (RBNS).

IBNR provision The Company forms this provision following monitoring of

delays in reporting insurance claims using the Chain – Ladder

method, where the monitored period spans a quarter. The

IBNR provision is dissolved in the event of a claim reported in

the current calendar quarter, despite the fact that the

insured event occurred in preceding calendar quarters. The

amount of the dissolved IBNR provision for the particular

reported insurance claim is equal to the total amount of the

RBNS provision for the given insurance claim, including

anticipated costs related to the settlement of the claim. The

respective part of the provision is then dissolved in the

quarter in which the claim was reported.

RBNS provision The Company forms this provision in dependence on the

type of insurance claim to the amount of the estimated

insurance benefits plus costs likely associated with the claim

settlement. When reporting a claim from previous reporting

periods the IBNR provision is dissolved. Where an insurance

contract ceases to exist due to an insurance claim, so does

the provision for life insurance, as well as the fund

investment risk coverage in the name of the insured and also

unearned premium reserve. The RBNS provision is dissolved

as of the date the decision is made on the amount of

insurance benefits for the client.

Life insurance reserve (LIR) For risk and capital insurance, this represents the current

value of the Company’s liabilities toward the insured after

deducting the current value of unearned premium. The

provision is calculated using the same assumptions as for the

calculation of the premium (mortality, interest rate,

administration costs). It is reported in gross amount in the

Company’s accounting. The reserve is calculated on a

monthly basis, by linear interpolation between respective

years, regarding the effective date of each insurance

contract. If the value of the reserve is below zero, the value is

replaced by zero and the incurred difference is carried in

accounting as accrued acquisition costs. For single-premium

capital life insurance, the discounted value of future

insurance administration expenses related to ongoing cover

is also credited to the life insurance reserve. The reserve

includes a provision for riders to single- premium capital

13

insurance contracts with fixed maturity. For capital and

life insurance with regular premium, the value of the

life insurance reserve is reduced by a zillmerised

reserve. Zillmerisation of a reserve takes into account

the fact that in case of a regular premium, the

acquisition costs incurred upon entering into the

insurance contract are paid up (amortized)

progressively, as the unearned premium related to the

insurance contract occurs.

For the capital part of combined insurance, the reserve is

created by the retrospective rating method, (i.e. as the value

of past incomes minus the value of past expenses) with the

monthly gain corresponding to the set technical interest rate

and by applying the same assumptions about mortality and

costs as when calculating the premium.

The reserve for life insurance also includes a profit-sharing

reserve (PSR) – both allocated and unallocated. The sum of

dissolved reserve for life insurance for a specific insurance

contract is equal to the sum of gross reserves and the reserve

for shares in the profit-sharing reserve (allocated and un-

allocated).

The life insurance reserve is dissolved on the day the

insurance ceases to exist. The life insurance reserve is not

formed for investment life insurance, including the

investment component of combined insurance, as in the

event of the risk of death of the insured this constitutes a

natural monthly premium corresponding to the age and sex

of the insured and the current amount of the risk sum (RS).

Provision for investment insurance The provision for investment insurance (PII) is formed to

cover the risk of investing financial resources on behalf of the

insured in the case of investment life insurance policies,

index-linked life insurance policies and for the investment

component of combined insurance.

This provision is generated as the total sum of the current

value of individual accounts of the insured available for active

insurance. The current value of the account corresponding to

the insurance contract of the insured is calculated as the sum

of the number of all current accounts and of the current unit

price on the day the financial statements are compiled. Any

change in the balance of the provision is accounted through

profit and loss.

Embedded derivatives All products of the Company, with the exception of the group

product of loan insurance, contain embedded derivatives.

Embedded derivatives comprise of the right to the

redemption value, right to reduced insurance, right to

indexation, right to change of premium or sum insured, right

to extended insurance life, right to extraordinary withdrawal,

right to extraordinary premium, right to change in the ratio

of capital and investment components of premium, right to

fund transfers between the investment and capital

components of insurance. The test of reserve adequacy

includes the right to redemption value, right to reduction and

right to indexation. Other derivatives are insignificant and

are therefore not included in the adequacy test.

Reserve adequacy test The Company carries out the test of reserve adequacy as of

the balance sheet day. The aim of the test is to verify

whether the amount of provisions calculated according to

the original actuarial assumptions is sufficient in comparison

with the calculation that considers estimated cash flows

while using current actuarial assumptions and the influence

of risk factors.

The applied adequacy test comes from the

recommendations of the Slovak Society of Actuaries and

assumptions defined by the Company either based on its

own experience or based on estimates of development. The

company tests the portfolio of its insurance contracts

separately for traditional insurance contracts and separately

for investment insurance contracts, whereby combined

insurance is tested in the investment insurance grouping. If

the test shows that the amount of provisions is inadequate,

the difference is carried through profit or loss.

Reinsurance contracts The Company provides reinsurance contracts into which the

Company enters with reinsurers and based on which the

Company claims insurance benefits resulting from contracts,

which the Company issued, and which are defined as

insurance contracts thereby.

The Company assigns self-retention that arises from routine

operations to the reinsurer in order to reduce potential net

losses by means of transferring the risk. Items in the balance

sheet and the statement of comprehensive income arising

from reinsurance contracts are presented separately from

balance sheet items and items arising from insurance

14

contracts. The reason is that reinsurance contracts do not

relieve the Company from direct liabilities toward the

insured.

Insurance contracts of the Company are reinsured by surplus

reinsurance on risk basis and by quota share reinsurance.

Reinsured risks are: death, accidental death, persistent

effects of injury, fractures and total and permanent

disability.

Receivables toward the reinsurer and the share of the

reinsurer in technical provisions are registered within other

financial and insurance assets. The premium assigned to the

reinsurer is reported as an expense. Assigned insurance

benefits are charged as an income. The sums of receivables

from reinsurance and liabilities toward the reinsurer

represent the amounts claimed or paid out in compliance

with the terms of the reinsurance contract. Reinsurance has

an impact on the UPR and on provisions for RBNS insurance

claims; it does not apply to other reserves of the insurer. The

Company charges the reinsurer’s share in losses and benefits

once they have been paid out.

Assets arising from reinsurance are assessed in term of

impairment related to the day the financial statements are

compiled, in the same way as when assessing financial assets

at amortized cost.

Trade and other payables Trade payables are accounted at the time delivery by the

counterparty and are carried at amortized cost.

Written and earned premium and share of reinsurer in premium The premium is determined by the value of the payment to

the insured for the provided insurance cover. A regular

premium (i.e. a premium that is specified in the insurance

contract and relates primarily to the scope of insurance cover

and the amount of insured sums) is determined by the

Company based on actuarial methods either by a portfolio

rate (for group insurance, accident insurance), or in

dependence on the sex of the insured (contracts with effect

date before 1.12.2012), age, policy life, times and frequency

of premium payments (for credit life insurance, capital

insurance and investment insurance), alternatively in

dependence on age, ratio of the capital and investment parts

of the premium, policy life, the times and frequency of

premium payments (for combined insurance).

A regular premium determined thereby contains –

depending on a particular product – a surcharge for the

method of paying premium (if the payment of premium is

paid at intervals other than annual intervals), a surcharge for

assumed risk (state of health, occupation, interests) and a

discount for the agreed amount of the sum insured.

The Company’s entitlement to premium results from the

insurance contract and therefore starts on the day when it

comes into force and ends on the day when it ceases to exist.

The Company determines a gross predefined premium, i.e.

regardless of whether the premium was actually paid or not,

regardless of whether the whole or just part of the premium

corresponds to the respective reporting period, with regard

to lapsed insurance contracts, regardless of reinsurance. The

gross written premium is the sum of all individual written

premiums that arose in the given reporting period. That part

of the gross written premium that belongs to the next

reporting period is accrued by the Company by way of

provisions for unearned premium. The earned premium

represents the gross written premium adjusted by the

unearned premium reserve. The share of the reinsurer in the

premium is reported separately.

Interest income Interest yields from assets that are not classified as assets at

fair value through profit or loss are acknowledged using the

effective interest method. The value of the financial

investments carrying the interest income is increased each

month by the proportionate interest income on the last day

of the month.

Dividend income Dividend income is carried providing that the dividend was

approved by the General Meeting and that there is the

likelihood of the dividend being paid to the Company.

Income from fees and commissions Co-insurers and the Company participate in the common

insurance cover at death intended for credit life insurance

and group insurance. The Company is entitled to commission

for administering insurance in the name of co-insurers.

Income from fees represents fees from insurance contracts.

The profit commission concerning reinsurance contracts is

reported in the accounting period in which the right to the

profit commission occurred. The fee for the purchase of units

in funds, paid by the Company to asset management

15

companies usually on a quarterly basis (kick-back fee), is

charged proportionately to revenues from fees.

Insurance contract acquisition costs Costs for the acquisition of insurance contracts include the

agent commission and other costs related to the acquisition

and administration of new insurance contracts, for example

costs for marketing, medical reports and examinations,

postal costs, printing, training of advisors. These costs are

accrued as set out above.

Claims and insurance benefit costs

Costs of the Company also include payments from claims

(insurance benefits), payments for the redemption value

upon premature cancellation of insurance (termination of

contract), extraordinary withdrawals from investment and

combined insurance and costs for administration of

insurance benefits. The liability from contractual claims

assumed by the Company based on concluded insurance

contracts arises on the effective day.

To cover its liabilities toward its insured that are to be settled

in future, the Company forms the unearned premium

reserve, provision for insurance claims, life insurance reserve

and the reserve to cover the risk of investing on behalf of the

insured. The change in the balance of the reserves is carried

through expenses and income.

Adjusting entries to financial assets carried at amortized cost Adjusting entries are reported in the income statement at

the moment one or more events (“loss event”) occur after

initial accounting of the financial asset and which have an

impact on the amount or time for receipt of estimated cash

flows from the financial asset or group of financial assets that

can be reliably estimated.

Where the Company deems that there is no objective reason

for the formation of an adjusting entry for a separately

valuated financial asset, regardless of the significance, it will

allocate this financial asset to a group of financial assets with

similar credit risk and evaluate the need to form an adjusting

entry for the group as a whole. Primary factors that the

Company regards as key when determining whether there is

objective evidence of impairment, leading to the formation

of an adjusting entry, are as follows:

� A debtor is in arrear or otherwise in breach of contract,

� A debtor is experiencing financial difficulties, which the

Company determines based on financial information

about the debtor;

� A debtor is considering bankruptcy or financial

restructuring;

� A negative change is seen in the credit quality of the

debtor as a result of changes in the business

environment that affect the debtor.

For the purposes of setting an adjusting entry for a group of

assets, the financial asset is grouped according to the

similarity of credit risk. The credit risk is fundamental when

estimating future cash flows from the asset and is an

indicator of the ability to pay all due amounts as per the

contractual terms.

Future cash flows within the group of financial assets that are

jointly evaluated for the purpose of forming adjusting entries

are estimated based on the contracted cash flows of assets

and based on experience of the management with payment

solvency and experience regarding the success of enforcing

overdue amounts. Past information is modified so as to

reflect the current conditions that did not influence previous

periods and so as to remove the influence of previous

conditions that no longer exist.

Impairment of an asset is always carried through the account

of adjusting entries, which reduces the value of the asset to

the present value of estimated future cash flows (excluding

future credit losses that have not been incurred). The present

value is determined by discounting of the asset’s original

effective interest rate. The calculation of the present value of

estimated future cash flows of financial assets reflects cash

flows from hedging receivables (if existing) reduced by costs

for the acquisition and sale of the hedge, regardless of the

likelihood of the hedge being realized.

If, in a subsequent period, the value of an asset increases,

and this is objectively related to an event occurring after the

adjusting entry was formed (such as an improvement in the

debtor’s credit rating), then the adjusting entry is reduced

through the profit and loss statement.

Irrecoverable assets are written off against the

corresponding adjusting entry after all necessary legal

actions have been executed for recovering the receivable and

when the loss amount was set.

16

Income tax Income tax is recognized based on laws that were adopted or

almost adopted to the end of the reporting period. The

income tax expense represents current and deferred tax and

is reported in the income statement, except for cases when it

relates to items accounted in other comprehensive income

or accounted in the asset itself, where by taxes related to the

transaction will as well be accounted in other comprehensive

income or in the asset itself.

Current tax is the amount that the Company expects to pay

or to receive as a tax refund from the competent tax

authority in connection with the tax base for the current or

past period. Current income tax includes also a special levy

on companies in regulated sectors. Taxes other than income

tax are carried to operating costs.

Deferred income tax is measured using the balance sheet

liability method from amortized tax losses on temporary

differences arising between the tax value of assets and

liabilities and their accounts value.

In line with the exception to the accounting of deferred taxes

upon acquisitions, the deferred tax is not charged in the case

of temporary differences existing at the time of acquiring the

asset or the onset of a liability as part of a transaction other

than a business combination, if the acquisition or onset of

liability does not have an impact on the accounting income

or the tax base of the Company. The deferred taxes are to be

charged at rates approved or almost approved before the

end of the reporting period, which will be applied at the time

of clearing the temporary difference or amortizing the tax

loss. Deferred tax receivables and liabilities of the Company

are carried at their net value. A deferred tax receivable from

amortizable tax losses and deductible temporary differences

are charged only to the extent to which it is probable that, in

the future, the Company will achieve a sufficiently high tax

base against which it is possible to apply these deductible

items.

Share capital Ordinary shares are classified as the equity of the Company

and are recognized at their par value.

Dividends The liability from dividends is charged in the period in which

they are approved by the General Meeting of the Company.

After the end of the reporting period and before approval of

the financial statements, the proposal of the Board of

Directors on the payment of dividends for disclosure is

reported in the Notes.

Offsetting assets and liabilities Financial assets and liabilities are offset and reported at net

value in the balance sheet only if there is a legally

enforceable claim to offsetting and the intention to offset

the items or concurrently realize assets and settle liabilities.

Personnel and related expenses Salaries, wages, contributions to state and private pension

and social schemes, paid holidays and sickness benefits,

remunerations and non- pecuniary benefits are charged as

liabilities in the period in which the employee of the

Company acquired entitlement for their work. The Company

does not have a contractual or promissory obligation to pay

additional contributions to Sociálna poisťovňa, state or

private pension funds, over and above the legally prescribed

payments for the time served by employees.

Reporting of assets and liabilities in order of liquidity The Company does not have any clearly identifiable

operating cycle and so does not present assets and liabilities

in the financial statements divided into current and long

term. Assets and liabilities are therefore stated in the

balance sheet in order of their liquidity. Analysis of financial

instruments, insurance and reinsurance contracts according

to anticipated maturity, is given in item 20 of the Notes.

Other assets are of a long-term nature. Long-term liabilities

amounted to EUR 4,490 thousand (2016: EUR 3,934

thousand).

Changes to financial statements after approval The Board of Directors of the Company may amend the

financial statements after they have been approved, but

pursuant to § 16, subsections 9 to 11 of the Act on

Accounting, the re- establishment of ledgers of the reporting

entity is prohibited after compilation and approval of the

financial statements. If it is found after compilation of the

financial statements that the data for the previous reporting

period are not comparable, the reporting entity is to amend

them in the reporting period when they are discovered, and

to state this circumstance in the notes to the financial

statements.

17

Critical Accounting Estimates and Judgments in

Applying Accounting Policies

The company makes estimates that may significantly influence the carrying value of assets and liabilities in the upcoming period. Estimates are revised regularly and are based on experience from the past and other factors, including future events, which may occur to a certain extent and under certain circumstances, while taking into account current conditions on the market. The Company also applies a judgment when applying accounting methods and principles.

Estimates from long-term insurance contracts Estimates, judgments, assumptions and uncertainties of

future development affecting technical provisions are set out

in more detail under item 19 of the Notes.

Financial assets recognized at market value The Company made estimates also in the event of market

prices of category 3 of the fair value classification. These

prices were determined using data that cannot be derived

from market prices, but which result from expert estimates.

More information is given in item 22 of the Notes.

Financial assets recognized at amortized cost In line with the requirements of applicable reporting

standards, the management of the Company has set losses

from impairment based on the “incurred loss” model. These

standards require the reporting of losses from impairment

that arose as a result of previous events and they prohibit the

reporting of losses from impairment that could arise as a

result of future events, including future changes in the

economic environment, regardless of the likelihood of the

events occurring in future. For this reason, the final losses

from impairment of financial assets and the level of adjusting

entries may differ significantly from the current level.

18

Application of New Accounting Standards and

Interpretations

The following new standards and Interpretation the Company applies from 1. January 2017

Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealized Losses - (issued on 19 January 2016 and effective in the EU for annual periods beginning on or after 1 January 2017) The amendment has clarified the requirements on

recognition of deferred tax assets for unrealized losses on

debt instruments. The entity will have to recognize deferred

tax asset for unrealized losses that arise as a result of

discounting cash flows of debt instruments at market

interest rates, even if it expects to hold the instrument to

maturity and no tax will be payable upon collecting the

principal amount. The economic benefit embodied in the

deferred tax asset arises from the ability of the holder of the

debt instrument to achieve future gains (unwinding of the

effects of discounting) without paying taxes on those gains.

The amendments did not have significant impact on financial

statements.

Disclosure Initiative - Amendments to IAS 7 (issued on 29 January 2016 and effective in the EU for annual periods beginning on or

after 1 January 2017) The amended IAS 7 requires disclosure of a reconciliation of

movements in liabilities arising from financing activities. The

amendments did not have significant impact on financial

statements.

Annual Improvements to IFRSs 2014-2016 cycle - amendments to IFRS 12 (issued on 8 December 2016 and effective in the EU for annual periods beginning on or after 1 January 2017) The amendments clarify the scope of the disclosure

requirements in IFRS 12 by specifying that the disclosure

requirements in IFRS 12, other than those relating to

summarized financial information for subsidiaries, joint

ventures and associates, apply to an entity's interests in

other entities that are classified as held for sale or

discontinued operations in accordance with IFRS 5. These

amendments were endorsed on 7 February 2018

retroactively by the EU with effect from 1 January 2017. The

amendments did not have significant impact on financial

statements.

19

New Reporting Standards That the Company does not

Apply Prematurely

The following new standards and interpretations that were issued and are obligatory for the annual reporting period commencing 1 January 2018 onwards were not applied prematurely by the Company.

IFRS 9, Financial Instruments: Classification and Measurement(issued in July 2014 and effective in the EU for annual periods beginning on or after 1 January 2018 except for insurance companies, for which it will be in effect from 2021) The Company expects an increase in valuation allowances for

loan and debt securities upon applying IFRS 9 as this

standard introduces a new model for accounting valuation

allowances, the ECL-model (Expected Credit Losses). Under

the new rules under this model, the Company will be obliged

to book a valuation allowance immediately after a receivable

is originated, i.e. when the receivable is not overdue and

even does not show other indications of being impaired.

However, a reasonable estimate of this increase in valuation

allowances cannot be made as it cannot be reliably foreseen

what information about future events, including

macroeconomic assumptions and probabilities allocated to

alternative macroeconomic forecasts, will be relevant at 1

January 2021 when the effect of applying the standard will be

posted against the opening balance of retained earnings. The

Company is currently assessing other aspects of the new

standard and their impact on its financial statements.

IFRS 15, Revenue from Contracts with Customers (issued on 28 May 2014 and effective in the EU for the periods beginning on or after 1 January 2018) The new standard introduces the core principle that revenue

must be recognized when the goods or services are

transferred to the customer, at the transaction price. Any

bundled goods or services that are distinct must be

separately recognized, and any discounts or rebates on the

contract price must generally be allocated to the separate

elements. When the consideration varies for any reason,

minimum amounts must be recognized if they are not at

significant risk of reversal. Costs incurred to secure contracts

with customers have to be capitalized and amortized over

the period when the benefits of the contract are consumed.

The standard will not have significant impact on the financial

statements.

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB) These amendments address an inconsistency between the

requirements in IFRS 10 and those in IAS 28 in dealing with

the sale or contribution of assets between an investor and its

associate or joint venture. The main consequence of the

amendments is that a full gain or loss is recognized when a

transaction involves a business. A partial gain or loss is

recognized when a transaction involves assets that do not

constitute a business, even if these assets are held by a

subsidiary. These amendments were not yet endorsed by the

EU. The Company is currently assessing the impact of the

amendments on its financial statements.

IFRS 16 "Leases" (issued on 13 January 2016 and effective in the EU for annual periods beginning on or after 1 January 2019) The new standard sets out the principles for the recognition,

measurement, presentation and disclosure of leases. All

20

leases result in the lessee obtaining the right to use an asset

at the start of the lease and, if lease payments are made over

time, also obtaining financing. Accordingly, IFRS 16

eliminates the classification of leases as either operating

leases or finance leases as is required by IAS 17 and, instead,

introduces a single lessee accounting model. Lessees will be

required to recognize: (a) assets and liabilities for all leases

with a term of more than 12 months, unless the underlying

asset is of low value; and (b) depreciation of lease assets

separately from interest on lease liabilities in the income

statement. IFRS 16 substantially carries forward the lesser

accounting requirements in IAS 17. Accordingly, a lesser

continues to classify its leases as operating leases or finance

leases, and to account for those two types of leases

differently. The Company is currently assessing the impact of

the amendments on its financial statements.

Amendments to IFRS 15, Revenue from Contracts with Customers (issued on 12 April 2016 and effective in the EU for annual periods beginning on or after 1 January 2018) The amendments do not change the underlying principles of

the Standard but clarify how those principles should be

applied. The amendments clarify how to identify a

performance obligation (the promise to transfer a good or a

service to a customer) in a contract; how to determine

whether a company is a principal (the provider of a good or

service) or an agent (responsible for arranging for the good

or service to be provided); and how to determine whether

the revenue from granting a license should be recognized at

a point in time or over time. In addition to the clarifications,

the amendments include two additional reliefs to reduce cost

and complexity for a company when it first applies the new

Standard. The amendments will not have a significant

impact on the financial statements.

Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts - Amendments to IFRS 4 (issued on 12 September 2016 and effective in the EU, depending on the approach, for annual periods beginning on or after 1 January 2018 for entities that choose to apply temporary exemption option, or when the entity first applies IFRS 9 for entities that choose to apply the overlay approach)

The amendments address concerns arising from

implementing the new financial instruments Standard,

IFRS 9, before implementing the replacement Standard

that the IASB is developing for IFRS 4. These concerns

include temporary volatility in reported results. The

amendments introduce two approaches: an overlay

approach and a deferral approach. The amended

Standard will give all companies that issue insurance

contracts the option to recognize in other

comprehensive income, rather than profit or loss, the

volatility that could arise when IFRS 9 is applied before

the new insurance contracts Standard is issued. In

addition, the amended Standard will give companies

whose activities are predominantly connected with

insurance an optional temporary exemption from

applying IFRS 9 until 2021. The entities that defer the

application of IFRS 9 will continue to apply the existing

financial instruments Standard—IAS 39. The

amendments to IFRS 4 supplement existing options in

the Standard that can already be used to address the

temporary volatility. The Company has decided to

apply a temporary exception to the application of

IFRS9 until the year 2021. IFRS 17 "Insurance Contracts"(issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2021) IFRS 17 replaces IFRS 4, which has given companies

dispensation to carry on accounting for insurance contracts

using existing practices. As a consequence, it was difficult for

investors to compare and contrast the financial performance

of otherwise similar insurance companies. IFRS 17 is a single

principle-based standard to account for all types of insurance

contracts, including reinsurance contracts that an insurer

holds.

The standard requires recognition and measurement of

groups of insurance contracts at: (i) a risk-adjusted present

value of the future cash flows (the fulfillment cash flows) that

incorporates all of the available information about the

fulfillment cash flows in a way that is consistent with

observable market information; plus (if this value is a

liability) or minus (if this value is an asset) (ii) an amount

representing the unearned profit in the group of contracts

(the contractual service margin).

Insurers will be recognizing the profit from a group of

insurance contracts over the period they provide insurance

21

coverage, and as they are released from risk. If a group of

contracts is or becomes loss-making, an entity will be

recognizing the loss immediately. This standard was not yet

endorsed by the EU. The Company is currently assessing the

impact of the standard on its financial statements.

IFRIC 23 "Uncertainty over Income Tax Treatments" (issued on 7 June 2017 and effective for annual periods beginning on or after 1 January 2019) IAS12 specifies how to account for current and deferred tax,

but not how to reflect the effects of uncertainty. The

interpretation clarifies how to apply the recognition and

measurement requirements in IAS 12 when there is

uncertainty over income tax treatments. An entity should

determine whether to consider each uncertain tax treatment

separately or together with one or more other uncertain tax

treatments based on which approach better predicts the

resolution of the uncertainty. An entity should assume that a

taxation authority will examine amounts it has a right to

examine and have full knowledge of all related information

when making those examinations. If an entity concludes it is

not probable that the taxation authority will accept an

uncertain tax treatment, the effect of uncertainty will be

reflected in determining the related taxable profit or loss, tax

bases, unused tax losses, unused tax credits or tax rates, by

using either the most likely amount or the expected value,

depending on which method the entity expects to better

predict the resolution of the uncertainty. An entity will reflect

the effect of a change in facts and circumstances or of new

information that affects the judgments or estimates required

by the interpretation as a change in accounting estimate.

Examples of changes in facts and circumstances or new

information that can result in the reassessment of a

judgment or estimate include, but are not limited to,

examinations or actions by a taxation authority, changes in

rules established by a taxation authority or the expiry of a

taxation authority's right to examine or re-examine a tax

treatment. The absence of agreement or disagreement by a

taxation authority with a tax treatment, in isolation, is

unlikely to constitute a change in facts and circumstances or

new information that affects the judgments and estimates

required by the Interpretation. This interpretation was not

yet endorsed by the EU. The Company is currently assessing

the impact of the interpretation on its financial statements.

Prepayment Features with Negative Compensation - Amendments to IFRS 9 (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019) The amendments enable measurement at amortized cost of

certain loans and debt securities that can be prepaid at an

amount below amortized cost, for example at fair value or at

an amount that includes a reasonable compensation payable

to the borrower equal to present value of an effect of

increase in market interest rate over the remaining life of the

instrument. In addition, the text added to the standard's

basis for conclusion reconfirms existing guidance in IFRS 9

that modifications or exchanges of certain financial liabilities

measured at amortized cost that do not result in the

derecognition will result in a gain or loss in profit or loss.

Reporting entities will thus in most cases not be able to

revise effective interest rate for the remaining life of the loan

in order to avoid an impact on profit or loss upon a loan

modification. These amendments were not yet endorsed by

the EU. The Company is currently assessing the impact of the

amendments on its financial statements.

Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28 (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019) The amendments clarify that reporting entities should apply

IFRS 9 to long-term loans, preference shares and similar

instruments that form part of a net investment in an equity

method investee before they can reduce such carrying value

by a share of loss of the investee that exceeds the amount of

investor's interest in ordinary shares. These amendments

were not yet endorsed by the EU. The Company does not

expect a material impact of the amendments on its financial

statements.

Annual Improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 1 and IAS 28 (issued on 8 December 2016 and effective in the EU for annual periods beginning on or after 1 January 2018) IFRS 1 was amended and some of the short-term exemptions

from IFRSs in respect of disclosures about financial

instruments, employee benefits and investment entities

were removed, after those short-term exemptions have

22

served their intended purpose. The amendments to IAS 28

clarify that an entity has an investment-by-investment

choice for measuring investees at fair value in accordance

with IAS 28 by a venture capital organization, or a mutual

fund, unit trust or similar entities including investment linked

insurance funds. Additionally, an entity that is not an

investment entity may have an associate or joint venture

that is an investment entity. IAS 28 permits such an entity to

retain the fair value measurements used by that investment

entity associate or joint venture when applying the equity

method. The amendments clarify that this choice is also

available on an investment-by-investment basis. These

amendments were endorsed on 7 February 2018

retroactively by the EU with effect from 1 January 2017. The

amendments did not have significant impact on financial

statements

Annual Improvements to IFRSs 2015-2017 cycle - amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (issued on 12 December 2017 and effective for annual periods beginning on or after 1 January 2019) The narrow scope amendments impact four standards. IFRS

3 was clarified that an acquirer should re-measure its

previously held interest in a joint operation when it obtains

control of the business. Conversely, IFRS 11 now explicitly

explains that the investor should not re-measure its

previously held interest when it obtains joint control of a

joint operation, similarly to the existing requirements when

an associate becomes a joint venture and vice versa. The

amended IAS 12 explains that an entity recognizes all income

tax consequences of dividends where it has recognized the

transactions or events that generated the related

distributable profits, e.g. in profit or loss or in other

comprehensive income. It is now clear that this requirement

applies in all circumstances as long as payments on financial

instruments classified as equity are distributions of profits,

and not only in cases when the tax consequences are a result

of different tax rates for distributed and undistributed

profits. The revised IAS 23 now includes explicit guidance

that the borrowings obtained specifically for funding a

specified asset are excluded from the pool of general

borrowings costs eligible for capitalization only until the

specific asset is substantially complete. These amendments

were not yet endorsed by the EU. The Company is currently

assessing the impact of the amendments on its financial

statements.

The Company does not expect the following new standards

and amendments to have any impact on its financial

statements. They have not yet been approved by the

European Union.

IFRS 14, Regulatory Deferral Accounts (issued on 30 January 2014 and effective outside the EU for

annual periods beginning on or after 1 January 2016).

Amendment of the standard IFRS 2, Share-based payment (issued on 20 June 2016 and effective for annual periods

beginning on or after 1 January 2018).

IFRIC 22 – Foreign currency transactions and Advance Consideration (interpretation issued on 8 December 2016 and effective for

annual periods beginning on or after 1 January 2018).

Transfers of Investment property – amendment IAS 40 (issued on 8 December 2016 and effective for annual periods

beginning on or after 1 January 2018).

Plan Amendment, Curtailment or settlement – amendments to IAS 19 (issued on 7 February 2018 and effective for annual periods

beginning on or after 1 January 2019)

23

Other Financial and Insurance Assets

In EUR thousands 31. 12. 2017 31. 12. 2016 Receivables from reinsurance 887 640 Share of reinsurer in technical provisions 22 20 Total reinsurance assets 909 660 Receivables from insurance 1 667 1 448 Receivables from commissions 19 16 Other receivables 401 383 Other financial and insurance assets in total 2 996 2 508

Analysis of receivables by credit quality:

Receivables as of 31. December 2017

In EUR thousands ReinsuranceFrom

insurance Commission Other Total Unimpaired non-due receivables - receivables settled after balance sheet date 909 1 503 19 401 2 832 - receivables becoming overdue after the balance sheet date - - - - -

Total unimpaired non-due receivables 909 1 503 19 401 2 832 Unimpaired overdue receivables - up to 30 days overdue - 139 - - 139 - 31 and more days overdue - 25 - - 25 Total unimpaired overdue receivables - 164 - - 164 Gross individual impairment - 235 - - 235 Adjusting entry to individually impaired receivables - -71 - - -71 Other financial and insurance assets in total 909 1 667 19 401 2 996

24

Receivables as of 31. December 2016

In EUR thousands ReinsuranceFrom

insurance Commission Other Total Unimpaired non-due receivables - receivables settled after balance sheet date 660 1 350 16 383 2 410 - receivables becoming overdue after the balance sheet date - - - - -

Total unimpaired non-due receivables 660 1 350 16 383 2 410 Unimpaired overdue receivables - up to 30 days overdue - 70 - - 70 - 31 and more days overdue - 28 - - 28 Total unimpaired overdue receivables - 98 - - 98 Gross individual impairment - 161 - - 161 Adjusting entry to individually impaired receivables - -64 - - -64 Other financial and insurance assets in total 660 1 448 16 383 2 508

Receivables are not secured.

Changes in adjusting entries were as follows:

In EUR thousands 31. 12. 2017 31. 12. 2016

Initial status 64 86 Formations of adjusting entries to costs (item 17 of Notes) 55 55 Write-off receivables and contract cancellations -47 -77 Balance of adjusting entries 71 64

25

Other Assets

In EUR thousands 31. 12. 2017 31. 12. 2016

Long-term tangible assets 409 490 Long-term intangible assets 463 383 Deferred acquisition cost of insurance (“DAC”) 550 386 Total other assets 1 423 1 259

Changes in long-term tangible and intangible assets and in deferred acquisition costs form insurance (DAC) were as follow:

2017

In EUR thousands Automobiles Other

tangibles Software DAC Total Acquisition cost as of 1 January 400 689 1 644 386 3 119 Correcting and adjusting entries -185 -415 -1 261 - -1 860 Carrying value as of 1 January 215 275 383 386 1 259 Accruals 142 21 196 10 028 10 388 Disposal at residual value -87 -5 - - -92 Depreciation -67 -86 -116 -9 864 -10 132 Acquisition cost as of 31 December 382 528 1 821 550 3 281 Accumulated depreciation -179 -322 -1 357 - -1 859 Carrying value as of 31 December 203 206 463 550 1 423

26

2016

In EUR thousands AutomobilesOther

tangibles Software DAC Total Acquisition cost as of 1 January 348 602 1 433 529 2 911 Correcting and adjusting entries -196 -334 -1 179 - -1 708 Carrying value as of 1 January 152 268 254 529 1 203 Accruals 147 102 211 6 463 6 923 Disposal at residual value -28 -1 - - -29 Depreciation -55 -95 -82 -6 606 -6 838 Acquisition cost as of 31 December 400 689 1 644 386 3 119 Accumulated depreciation -185 -415 -1 261 - -1 860 Carrying value as of 31 December 215 275 383 386 1 259

Acquisition costs for insurance contracts were as follows:

In EUR thousands 2017 2016 Commissions for newly acquired policies 8 338 5 210 Marketing expenses 256 215 Administrative expenses 1 434 1 038 Change in deferred acquisition costs -164 143 Acquisition costs for insurance contracts 9 864 6 606

Indirect costs related to acquisition of insurance contracts including marketing expenses are not accrued via DAC.

27

Technical Provisions and Related Insurance Liabilities

In EUR thousands 31. 12. 2017 31. 12. 2016

Payables toward Insured from insured events and redemption values 1 655 1 403 Payables from cancelled contracts and overpayments 2 163 1 664 Payables toward intermediaries 5 275 3 696 Payables from co-insurance 6 425 Payables from prearranged premium income 5 839 2 748 Life insurance reserve (LIR) 330 993 234 970 Provision for insurance claims reported but not settled (RBNS) 1 303 958 Provision for insurance claims incurred but not reported(IBNR) 1 257 1 137 - non-life insurance thereof 16 15 Unearned premium reserve (UPR) 190 189 - non-life insurance thereof 3 2 Reserve for life insurance and related insurance liabilities 348 682 247 190

28

Trade and Other Accounts Payable

In EUR thousands 31. 12. 2017 31. 12. 2016

Trade accounts payable 1 220 334 Obligations toward employees and directors 886 777 Obligations toward insurers 66 55 Obligations from taxes and fees excluding income tax and specific levy 75 100 Other liabilities 58 288 Trade and other accounts payable in total 2 305 1 554

29

Changes in Technical Provisions

Changes in technical provisions in 2017 were as follows:

In EUR thousands LIR PII RBNS IBNR UPR Gross

total Share of

reinsurer Net

amount

Carrying value as of 1 January 234 970 107829 958 1 137 189 345 083 -20 345 063

Written premium (Note 12) - - - - 154 336 154 336 -2 196 152 139

Earned premium - - - - -154 335 -154 335 2 195 -152 140

Costs of claims (Note 16) 117 937 12 964 - - - 130 901 -380 130 521 Reinsurer payments received - - - - - - 380 380 Transfers between provisions - transfers between provisions and claims -21 915 -6 934 27 910 939 - - - - transfer from IBNR when claims reported - - 819 -819 - - -

Settled claims: - death - - -6 296 - - -6 296 - -6 296 - endowment - - -12 993 - - -12 993 - -12 993 - redemption - - -7 633 - - -7 633 - -7 633 - other - - -873 - - -873 - -873 - administration costs - - -588 - - -588 - -588

Carrying value as of 31 December 330 992

113 859 1 304 1 257 190 447 602 -22 447 580

30

Changes in technical provisions in 2016 were as follows:

In EUR thousands LIR PII RBNS IBNR UPR Gross

total Share of

reinsurer Net

amount Carrying value as of 1 January 197 024 109 219 1 122 1 056 195 308 616 -45 308 571 Written premium - - - - 89 202 89 202 -1 986 87 217 Earned premium (Note 12) - - - - -89 208 -89 208 1 993 -87 215 Costs of claims (Note 16) 64 999 7 872 - - - 72 871 -433 72 439 Reinsurer payments received - - - - - - 450 450 Transfers between provisions - transfers between provisions and claims -27 053 -9 262 35 343 972 - - - - - transfer from IBNR when claims reported - - 891 -891 - - - - Settled claims: - death - - -4 979 - - -4 979 - -4 979 - endowment - - -16 297 - - -16 297 - -16 297 - redemption - - -14 070 - - -14 070 - -14 070 - other - - -684 - - -684 - -684 - administration costs - - -368 - - -368 - -368

Carrying value as of 31 December 234 970 107 829 958 1 137 189 345 083 -20 345 063

31

Capital and Other Funds

The Company issued a total of 171 000 ordinary shares at a

par value of EUR 41.00. All issued shares were paid up in full.

Statutory reserves were formed upon establishment of the

Company and continue to be generated from profit in line

with Slovak legislation.

Other capital funds comprise of the monetary subscriptions

of the shareholders.

Differences in valuation represent cumulative changes in the

fair value of a financial asset for sale.

Following the decision of the General Meeting of the

Company from 22 February 2017 a dividend of EUR 7,977

thousand was approved from the 2016 income (2015: 6,943

thousand).

The dividend per share came to EUR 46,65 EUR (2016: EUR

40.60).

32

Gross Written Premium

In EUR thousands 2017 2016 Investment insurance, including the investment component of combined insurance 9 572 5 947

Capital life insurance, including the capital part of combined insurance 80 924 37 759 Loan insurance (life and related risks) 16 973 15 066 Funeral insurance 46 505 30 151 Other insurance 148 157 Non-life insurance 214 122 Total gross written premium 154 336 89 202

In EUR thousands 2017 2016 Single premium 97 528 40 395 Regular premium (including non-life insurance) 56 808 48 807 Total gross written premium 154 336 89 202

33

Income from Fees and Commissions

In EUR thousands 2017 2016 Share in commissions from asset allocation 889 769 Fee from reinsurance 1 270 1 073 Commission from co-insurance (co-insurance and financial procurement) 258 201

Fees from policies 18 15 Total income fees and commissions 2 435 2 058

34

Result of Reinsurance

In EUR thousands 2017 2016 Share of reinsurer in earned premium (item 10 of Notes) -2 195 -1 993 Share of reinsurer in claims (item 10 of Notes) 380 433 Reinsurance commission received (item 13 of Notes) 1 270 1 073 Reinsurance balance -545 -487

35

Profit and Loss from Asset Allocation

In EUR thousands 2017 2016 Realized profits minus losses from financial assets available for sale 421 288 Securities at fair value through profit and loss 6 038 2 981 Total income from asset allocation 6 459 3 269

36

Claims and Insurance Benefits before Reinsurance

In EUR thousands 2017 2016

Settled claims: - death 6 296 4 979 - endowment 12 993 16 297 - redemption 7 633 14 070 - other 875 684 - administration costs 588 367 Change in provisions 102 516 36 474

Total costs of claims and insurance benefits before reinsurance 130 901 72 871

37

Operating and Other Expenses

In EUR thousands 2017 2016 Salaries and bonuses 2 130 1 811 Pension insurance paid to Sociálna poisťovňa and private funds 477 371 Health and other social insurance 208 138 Other staff expenses 107 107 Other long-term benefits – retirement benefit 18 3

Staff expenses total 2 940 2 429 Renewal commission 6 219 5 074 Depreciation of long-term tangible and amortization of long-term

intangible assets 269 232 Expenses for auditing 25 25 Audit services with the exception of auditing the financial statements 8 - Expenses for tax advising - 9 Expenses for property insurance 21 21 Expenses for maintaining insurance software 357 370 Adjustments for receivables 55 55 Commissions and fees 148 154 Other expenses 2 977 815

- The cost of the merger (Note 25) 1 961 - Reallocation from operating costs to technical accounts -2 009 -1 385

Total operating and other costs 11 010 7 798

38

Income Tax and Specific Levy from Profit

(a) Cost of income tax and specific levy from profit:

In EUR thousands 2017 2016

Current income tax 3 990 2 771 Withholding tax (settled tax) 24 8 Tax – specific levy from profit or regulated sectors 1 555 416 Previous periods tax 2 -55 Deferred tax -505 27

Cost of income tax and specific levy from profit in total 5 066 3 168

(b) Consistency between cost of income tax and specific levy from profit and the tax rate applied to the book profit:

In 2017 an income tax rate of 21% was applicable in Slovakia. The rate of the specific levy in regulated sectors was 8.712%, whereby

the levy is deductible in the determination of income tax.

2017 2016 Income tax rate 21,0% 22,0% Specific levy in regulated sectors (2016: from profit over EUR 3 million, after admitting the levy expense in calculating income tax) 6,9% 3,4%

Tax rate in total 27,9% 25,4%

Consistency between cost of income tax and specific levy from profit and the tax rate applied to book profit:

39

In EUR thousands 2017 2016

Profit before tax 18 024 12 546

Income tax and specific levy (2017: 27,9%; 2016: 25,4%) 5 029 3 187 Tax effects of permanent differences - Inadmissible expenses 41 40 - Non-taxable income -114 -101

Effect of tax rate change on deferred tax - 63 Specific levy not applied to profit under EUR 3 million a year - -132 Previous periods tax 2 -19 Other 108 130

Cost of income tax and specific levy from profit 5 066 3 168

(c) Uncertainty in tax legislation

Considering the fact that many areas of Slovak tax legislation have so far not been attested in practice, there is a certain degree of

uncertainty about how the tax authorities will apply them. The Company may therefore be exposed to the risk of additional

taxation. The management of the Company is not aware of any circumstances thereof that could lead to a significant additional tax

expense in future.

(d) Change in deferred tax

Deferred tax was accounted from the following temporary differences between IFRS and the tax values of assets and liabilities.

In EUR thousands 1. 1.

2016

Carried to income

Carried to other

comprehensive income

31. 12. 2016

Carried to

income

Carried to other

comprehensive income

31. 12. 2017

Tax effects of deductible/(taxable) temporary differences IBNR provision 230 9 - 239 25 - 264 Other provisions

270 24 - 295 1 262 1 557 Adjusting entries to receivables

17 -5 - 12 1 - 13 Financial assets 32 -2 - 30 -30 - 1 Revaluation to fair value

-3 344 - -590 -3 934 - -476 -4 410 Depreciation/amortization

-25 -2 - -27 16 - -12 Deferred tax from unsettled commissions 773 3 - 776 -767 - 9 Net deferred tax liability -2 047 27 -590 -2 609 507 -476 -2 578

The deferred tax receivables and liabilities are offset in the balance sheet, as there is a legal right to compensation of related

current tax receivables against current tax liabilities.

The deferred tax receivables and liabilities as of 31 December 2017 are calculated by the tax rate of 21% and as of 31 December

2016 by the tax rate of 21%.

40

Insurance Risk Management

The Company issues insurance contracts covering the following insurance risks: death, endowment, accidental death, permanent bodily injury, serious illness, civilization diseases, fractures, hospitalization due to illness and total and permanent disability. When measuring the mortality risk in the premium and in provisions, the Company applies the mortality tables published by the Statistical Office of the Slovak Republic in 1995 (with the exception of combined insurance and funeral insurance taken out from 1 November 2012 onwards). The tables have been modified based on experience of the reinsurer Sparkassen Versicherung AG, Vienna, Austria.

For combined insurance and funeral insurance taken out

after 1.11.2012 including, the Company applies the mortality

tables published by the Statistical Office of the Slovak

Republic in 2005. The tables have been adapted so as to

ignore the sex factor, resulting in the so-called unisex

mortality tables which are calculated (and then modified to

remove fluctuations) for the ratio of men and women that

corresponds to the current ratio of the insured of the

Company and to the product to which they are being

applied.

When measuring the risk of accident in premiums and

provisions, the Company applies an estimate based on

observations from how the Czech and Slovak insurance

markets function and also based on experience of the

reinsurer.

The insurance risks that the Company is exposed to also

include the risk of serious illness, which relates to an insured

child. When measuring the risk included in premiums and

provisions, the Company used the reference materials for the

monitored period of 2000 – 2013 compiled by the Health

Information and Statistics Institute.

When measuring the risks of civilization diseases (the insured

is aged over 18), the Company applied data acquired from

the reinsurer (incidence tables dependent on age) as well as

from the insurance group of Vienna Insurance Group.

When measuring the risk of hospitalization due to illness or

injury, the Company drew also on the experience of the

insurance group of Vienna Insurance Group and available

statistics.

The risk arising from an extending mean life expectancy is

insignificant for the Company, as the Company enters into

only fixed-term policies where the longevity risk is linked to

the mortality risk.

The Company applies the following strategies and programmes to the management of insurance risk

Underwriting risk Underwriting risk is a risk management tool linked to the life

and health of the insured, which the Company assumes when

concluding an insurance contract. When assessing the

assumed risk related to the health, occupation or hobbies of

the insured, the Company applies the following degrees of

underwriting: (i) without examining risks, (ii) health

declaration, (iii) health questionnaire, (iv) health

questionnaire and examination by the contractual doctor of

the Company, and (v) health questionnaire, examination by

the contractual doctor of the Company and a financial

41

questionnaire. The applied degree of underwriting depends

on the age of the insured, the sum insured and the type of

insurance.

Reinsurance The Company has its insurance contracts reinsured by

surplus reinsurance on a risk basis and by quota share

reinsurance. Reinsurance is used to manage insurance risk,

but that does not waive the Company of its liabilities as the

primary insurer. If a reinsurer fails for whatever reason to pay

for a claim, the Company remains responsible for payment of

benefits to the beneficiary. The risk that the Company is

exposed to in connection with reinsurance is, for the purpose

of its operation, regarded by the Company management as

insignificant.

Other risks A key factor contributing to the value of future liabilities

arising from insurance contracts is also the valuation that is

achieved from the financial asset. This parameter is set

based on current market yields, as well as on anticipated

future economic and financial development. The

development of this risk factor is dealt with and managed as

part of Asset liability management (ALM).

Another risk linked to the insurance business for the

Company is the rate of cancellations due to premature

cessation of the insurance contract on the side of the client

or due to non- payment of premium. The cancellation rate is

monitored and evaluated regularly. The Company sets the

projected cancellation rate once a year (to the end of the

current calendar year) based on its own experience from the

2003 to 2017 period, this for each product separately. The

Company monitors the development of the cancellation rate

and takes various steps to reduce it, e.g. by reminders,

communication with intermediaries, change in the method

of paying premium etc.

Other risks of the Company include an estimate of the

amount and future changes in costs relating to the

acquisition and administration of insurance and costs for the

adjustment of claims. The Company sets the value of these

costs always by the end of the current calendar year. As of 31

December 2017 the Company set the value of costs based on

its own data, namely the data about insurance stock, written

premium, amount of acquisition and operating costs, and

number of settled claims. The amount of costs is set for each

product separately. The Company monitors the level of costs

and if the development indicates a substantial excess to the

expected value, it intervenes with measures to reduce them.

The Company regularly monitors these risk factors and

evaluates their actual development compared to estimates.

If there is a significant deviation between the best estimates

and the actual status that would point to potential future

adverse development, the Company adopts measures to

eliminate this.

The Company took all of the said risk factors into account in

its adequacy testing and also in its test of sensitivity to a

change in their forecasts.

Adequacy test of provisions The test of the adequacy of provisions is performed by the

Company with the aim of assessing the adequacy of its

technical provisions. The Company tests all of its traditional

and investment insurance contracts. Alongside the principal

insurance, the Company also tests accompanying riders,

since due to the nature of the policies it is not possible to

divide them from the principal insurance cover and test them

separately.

If partial inadequacies are discovered in the stated test

groups, these are compensated by a surplus in other parts of

the same group. The test of adequacy determines the

minimum value of liabilities from insurance before

reinsurance. The minimum value of insurance liabilities is

compared with technical provisions in life insurance (with

first tier actuarial assumptions before reinsurance) adjusted

by the corresponding unamortized part of the acquisition

costs to accrual accounts.

The basic method of testing the adequacy of provisions is the

discounted cash flow method (DCF). Cash flows are to be

understood as: (i) for traditional insurance: premiums,

expenses, payments of benefits (including shares in excess

premium and redemption values), payment of commissions

and (ii) for investment insurance: premiums, trailer fee,

expenses, payments of benefits, including redemption values

and payment of commissions.

42

When testing the adequacy of its provisions, the Company used the following assumptions:

31 December 2017 31 December 2016 In EUR thousands Forecast Allowance Forecast Allowance Mortality 25% - 60% 10% 30% - 60% 10% Loss ratio: permanent bodily injury 20% 10% 20% - 30% 10% Loss ratio: accidental death 20% - 21,5% 10% 20% - 30% 10% Loss ratio: serious illness 10% - 20% 10% 10% - 30% 10% Loss ratio: total and permanent disability 20% 10% 20% 10% Cancellation rate in first policy year 2% - 35% 25% 2% - 35% 25% Cancellation rate in second policy year 0,5% - 30% 25% 0,5% - 30% 25% Cancellation rate in third policy year 0,5% - 30% 25% 0,5% - 30% 25% Cancellation rate in fourth policy year 0,3% - 25% 25% 0,5% - 25% 25% Cancellation rate in subsequent years 0,3% - 30% 25% 0,5% - 30% 25% Reduction 0,01% - 3,00% 0% 0,02% - 3,00% 0% Initial costs (EUR/contract) 2 – 28 10% 2 – 22 10% Administrative costs (EUR/ contract) 3 – 20 10% 3 – 18 10% Claim adjustments costs (EUR/ contract) 12 – 50 10% 12 – 50 10% Investment income for next year 2,25% 0,10 bp 2,45% 0,10 bp Investment income for subsequent years 0,43% - 2,27% 0,10 bp 0,23% - 1,65% 0,10 bp Discount rate 0,43% - 1,66% 0,10 bp 0,23% - 1,07% 0,10 bp Investment fund performance 0,43% - 2,27% 0,10 bp 0,23% - 1,65% 0,10 bp Trailer fee 0 - 0,012 - 0 - 0,012 - Inflation 2,00% - 2,10% 10% 1,10% - 1,80% 10%

The applied assumptions are modified in the test by

allowances for adverse development. The amount of the

allowances is set according to the percentage increase or

decrease in the said assumption. The investment income and

discount rate are adjusted as a change to the basis point

(hereinafter “bp “).

When testing, the sufficiency of technical provisions is

determined at their carrying value compared to the amount

of a provision as a result of applying the DCF method. The

test of adequacy in the case of investment insurance

considers risks other than the investment risk. The

investment risk is fully covered by the financial assets carried

through profit or loss.

Sensitivity analysis of technical provisions to the change of selected parameters The Company used the same algorithm for the sensitivity

analysis as with the adequacy test of provisions. For the

purposes of the sensitivity analysis, the Company divided its

portfolio into traditional insurance (risk insurance, capital

insurance and combined insurance) and investment

insurance. All traditional and investment insurance contracts

were included to the analysis.

43

31 December 2017 Change in current value of future cash flows

Change of parameter

For traditional insurance For investment

insurance Without shares in

surplus With shares in

surplus

Mortality – growth 10% 1 199 2 959 21 Mortality – decline -10% -1 201 -3 140 -21 Loss ratio – growth 10% 313 6 0 Loss ratio – decline -10% -313 -6 0 Cancellations – growth 10% 2 084 2 024 17 Cancellations – decline -10% -2 327 -2 181 -19 Expenses – growth 10% 245 3 459 102 Expenses – decline -10% -245 -3 459 -102 Discount rate and investment income – growth + 0,5 bp 584 -9 505 18

Discount rate and investment income – decline - 0,5 bp -610 19 118 -18

Reference year:

31 December 2016

Change in current value of future cash flows

Change of parameter

For traditional insurance For investment

insurance Without shares in

surplus With shares in

surplus

Mortality – growth 10% 971 1 892 27 Mortality – decline -10% -972 -1 979 -27 Loss ratio – growth 10% 294 7 - Loss ratio – decline -10% -294 -7 - Cancellations – growth 10% 2 251 823 23 Cancellations – decline -10% -2 535 -897 -26 Expenses – growth 10% 244 3 490 129 Expenses – decline -10% -244 -3 490 -129 Discount rate and investment income – growth + 0,5 bp 651 -15 971 20

Discount rate and investment income – decline - 0,5 bp -683 20 185 -21

Even if the value of the tested parameters was about to

change according to the stated scenarios, the amount of

technical provisions for all risk groups at carrying value is still

adequate to cover all liabilities from insurance, and so none

of the tested changes would individually have an impact on

the expenses and income of the Company.

Concentration of mortality risk An important element of the insured risk is the scope of

concentration of insured risk. Concentration of risk may exist

if a certain event can significantly impact the Company’s

liabilities. With the insured risk of death, the concentration of

the sums insured could impact the amount of insurance

benefits within the portfolio. The table below shows the

concentration of mortality risk according to the sums in the

risk, whereby the said percentage shows the number of

policies belonging to the said band.

44

31 December 2017 31 December 2016

Before

reinsurance % after

reinsurance % before

reinsurance % after

reinsurance % EUR 0 – 9 960,00 78,70% 80,91% 78,87% 81,10% EUR 9 960,01 – 16 600,00 9,65% 10,93% 9,92% 11,21% EUR 16 600,01 – 24 900,00 5,10% 5,55% 4,90% 5,26% EUR 24 900,01 – 33 200,00 2,29% 1,61% 2,33% 1,58% EUR 33 200,01 – 99 600,00 4,06% 0,99% 3,82% 0,85% EUR 99 600,01 – 166 000,00 0,18% 0,00% 0,15% 0,00% EUR 166 000,01 – 332 000,00 0,01% 0,00% 0,01% 0,00% Over 332 000,01 EUR 0,00% 0,00% 0,00% 0,00% Total 100,00% 100,00% 100,00% 100,00%

45

Financial Risk Management

The Company is exposed to financial risk by way of its

financial assets, financial liabilities and liabilities from

insurance contracts. The most important components of

financial risk are market risk, liquidity risk and credit risk.

Market risk includes interest, share and currency risks. These

risks arise from the open position in interest, currency and

equity products, which are all exposed to general and specific

market movements.

The Company is predominantly exposed to liquidity risk and

interest risk. Both risks arise out of the fact that income from

financial assets may not be sufficient to finance liabilities

from insurance contracts. The Company manages its

position by way of the asset liability management (ALM).

The basic technique of the ALM is to adapt the maturity of

assets to liabilities from insurance contracts.

Credit risk The Company is exposed to credit risk owing to the fact that

the counterparty will not be able to satisfy its liabilities by the

due date. The maximum exposure to credit risk equals to the

carrying value of the financial asset and assets from

insurance and reinsurance contracts. The Company did not

grant any financial warranties.

Credit risk is limited by internal limits contained in the

Investment and Risk Strategy approved by the Supervisory

Board.

Outstanding premium is monitored progressively and the

method of forming adjusting entries is described in Note 3.

The Company manages outstanding premium using the

reminder process of overdue receivables, which is conducted

at regular intervals. If a client is entitled to a claim for the

redemption value or insurance benefits, their debt is offset

against the respective claimed amount. The enforcement of

receivables from insurance is carried out in co-operation with

an external company. The debts of other contractual parties

did not arise in the reporting period.

Receivables of the Company are not secured, are not

overdue nor were there a need to form adjusting entries for

impairment, with the exception of receivables from

insurance. Receivables from financial investments are

monitored according to their rating, which represents the

second best rating for the issuer given by one of the three

most prestigious rating agencies (Standard &Poor’s,

Moody’s, Fitch). If none of these agencies gives a rating for

the issuer, the issuer is given an internal rating. The internal

rating of an issuer in the VIG group is given by the VIG Asset

Risk Management department. If an issuer is not given an

internal rating, then the issuer is considered to be without

rating. For all mortgage bonds, a rating of AA- is used. An

exception are the mortgage bonds issued by Všeobecná

úverová banka, a.s., which were assigned the rating of AA2

by Moody’s rating agency in June 2016, and mortgage bonds

issued by Slovenská sporiteľňa, a.s., which were assigned the

rating of A+ by Fitch in 2017.

46

Analysis of individual types of assets exposed to credit risk by credit rating:

Carrying value of assets as of 31. 12. 2017 In EUR thousands AA A BBB BB No rating To maturity and not showing impairment Debt securities

- held to maturity 9 396 35 295 - - - - for sale 13 177 179 192 40 307 12 782 3 041 - at fair value through profit and loss - 12 247 86 349 - - - loans and receivables - 24 834 650 - - Granted loans - - - - 2 909 Other assets 467 442 - - 2 087 Cash and cash equivalents - 12 081 1 - -

Total asset bearing credit risk 23 041 264 090 127 307 12 782

8 036

Carrying value of assets as of 31. 12. 2016 In EUR thousands AA A BBB BB No rating To maturity and not showing impairment Debt securities

- held to maturity 9 941 37 711 - - - - for sale 12 676 126 510 33 464 3 072 3 021 - at fair value through profit and loss - - 93 710 - - - loans and receivables - 19 885 812 - - Granted loans - - - - 2 980 Other assets 339 322 - - 1 847 Cash and cash equivalents - 4 257 1 - -

Total asset bearing credit risk 22 957 188 684 127 987 3 072

7 848

Interest risk Interest risk is the only financial risk that has a different impact on the assets and liabilities categorized in the ALM system. The

Company manages this risk by monitoring the sensitivity of profit to the risk. The sensitivity test evaluated the impact of parallel

growth / decline in the yield curve by 50bp on profit and on other comprehensive income before tax.

31 December 2017 31 December 2016

In EUR thousands Impact on profit

Impact on other comprehensive

income Impact on profit

Impact on other comprehensive

income Impact of change by + 50 bp -121 -11 210 -124 -6 563 Impact of change by - 50 bp 121 11 210 124 6 563

47

Price risk Price risk is a risk that may lead to a change in the fair value

of financial assets for reasons other than a change of interest

rate or foreign currency. The company is exposed to price

risk due to investment in equity securities, whereby the risk is

largely influenced by development on the stock markets. The

company manages this risk by following sensitivity of profit

to the risk.

The results of the sensitivity analysis express the impact on

profit and equity of the Company in the event that market

prices of equity securities change. The total balance of equity

securities held as of 31 December 2017 amounted to EUR

89,073 thousand (2016: EUR 56,882 thsnd). With a drop or

hike in market prices by 10%, the impact on equity would

produce a drop or growth by EUR 6,514 thousand (2016: EUR

3,514 thsnd). The impact of the price risk on profit is

insignificant for equity securities intended for sale, as well as

for equity securities carried at fair value through profit or

loss, covering investment life insurance, because the related

liabilities arising from these contracts are affected to the

same extent as part of changes to provisions for investment

insurance.

Liquidity risk The Company is exposed to daily demands on liquidity

resulting from insurance benefits and from liabilities towards

other companies. The liquidity risk is a risk that sufficient

cash may not be available to meet liabilities on time at

reasonable cost. The requirement for liquidity is perpetually

monitored and an increased requirement is reported in

advance to ensure sufficient resources. In the space of one-

year, projected income greatly exceeds forecast expenses.

The analysis of financial instruments, insurance and reinsurance contracts as of 31 December 2017 by expected maturity are as

follows:

In EUR thousands Less than 6 months

6 months to 1 year

1 to 5 years

5 to 10 years

Over 10 years Total

Assets Debt securities:

- held to maturity - 504 7 666 23 722 12 800 44 692 - at fair value through profit and loss - 23 225 57 030 18 341 - 98 596 - classified as loans - - 650 8 878 15 955 25 483 - available for sale 1 048 439 34 907 100 786 111 319 248 499

Equity securities: - available for sale 66 438 - - - - 66 438 - at fair value through profit and loss 22 635 - - - - 22 635

Loans granted - - - 2 909 - 2 909 Other financial and insurance assets 2 996 - - - - 2 996 Cash and cash equivalents 12 082 - - - - 12 082 Total financial and insurance assets 105 199 24 168 100 253 154 636 140 074 524 330 Liabilities Provision for life insurance and related insurance liabilities 26 285 10 746 90 133 82 244 139 274 348 682 Provision for investment insurance 1 914 22 944 76 919 6 627 5 454 113 859 Trade accounts payable 1 220 - - - - 1 220 Liabilities toward employees and directors 886 - - - - 886 Liabilities toward insurers 66 - - - - 66 Other liabilities 133 - - - - 133 Total financial and insurance liabilities 30 504 33 690 167 052 88 871 144 728 464 846 Difference - deficit or surplus of liquidity 74 695 -9 522 -66 799 65 765 -4 654 59 484

48

A liquidity forecast is produced on a monthly basis and

contains operating cash flow, cash flow from investing

activities and cash flow from financing activities. In this way,

the Company compares income and expenditures, the most

relevant of which are received premiums, expected

payments from insurance contracts, due dates and income

from financial investments. The maturity of new investments

is adapted to the structure of the insurance portfolio and

expected payments from insurance contracts in future. The

Company owns liquid financial investments which may be

sold quickly in the event of insufficient liquidity in order to

cover the deficit.

The analysis according to expected maturity represents the

carrying value of assets and liabilities analyzed by their

maturity, or the term of their expected realization, provided

the given item has no maturity, e.g. in the case of equity

securities, it is reported with the maturity date under six

months or according to the investment horizon of the fund.

The analysis of financial instruments, insurance and reinsurance contracts as of 31 December 2016 by expected maturity are as

follows:

In EUR thousands Less than 6 months

6 months to 1 year

1 to 5 years

5 to 10 years

Over 10 years Total

Assets Debt securities: - held to maturity 2 901 - 7 157 20 067 17 528 47 652 - at fair value through profit and loss - - 49 726 43 983 - 93 710 - classified as loans - - 812 8 946 10 939 20 697 - available for sale 1 096 - 34 082 79 518 64 047 178 743 Equity securities: - available for sale 36 430 - - - - 36 430 - at fair value through profit and loss 20 452 - - - - 20 452 Loans granted - - 2 980 - - 2 980 Other financial and insurance assets 2 508 - - - - 2 508 Cash and cash equivalents 4 258 - - - - 4 258 Total financial and insurance assets 67 645 - 94 757 152 514 92 514 407 430 Liabilities Provision for life insurance and related insurance liabilities 20 927 5 912 66 727 54 978 98 646 247 190 Provision for investment insurance 1 999 2 453 51 817 46 901 4 659 107 829 Trade accounts payable 334 - - - - 334 Liabilities toward employees and directors 777 - - - - 777 Liabilities toward insurers 55 - - - - 55 Other liabilities 387 - - - - 387 Total financial and insurance liabilities 24 479 8 365 118 544 101 879 103 304 356 572 Difference - deficit or surplus of liquidity 43 166 -8 365 -23 787 50 634 -10 791 50 858

49

Capital Management

The Company applies capital management to ensure

solvency, maximize the return for shareholders and generate

financial stability.

When setting required solvency margin rates, the Company

applies standard formula. Based on the information provided

to the management internally, as of 31.12.2017, the value of

the Company’s capital and reserves amounts to EUR 93,440

thousand (as of 31.12.2016: EUR 77,700 thousand). All capital

and reserves are of the highest quality – tier1 and in both the

years 2016 and 2017the Company fulfilled all the external

prescribed solvency requirements.

More detailed information on Company’s solvency will be

compiled in the Solvency and financial condition report for

2017 in accordance to Act No 39/2015 on Insurance and on

amendments and supplements to certain acts from 3

February 2015 with effect from 1 January 2016.

50

Fair Value of Financial Instruments

The fair value is analyzed according to its level in the fair

values hierarchy as follows: (i) level one represents the

quoted prices (unadjusted) in active markets for identical

assets and liabilities, (ii) level two represents quotations

using techniques or models whose all relevant input

parameters are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices),

and (iii) level three represents inputs for the asset or liability

that are not based on observable market data (i.e.

subjectively set input parameters exist). The judgment is

applied in the categorization of financial instruments

according to the fair values hierarchy. If the measurement

Systematic measurements at fair value are those where the

reporting standards either require or enable measurement at

fair value in the balance sheet to the end of each reporting

period.

(a) Systematic fair value measurement

Systematic measurements at fair value are those where the

reporting standards either require or enable measurement at

fair value in the balance sheet to the end of each reporting

period.

These measurements are analyzed according to the fair value hierarchy as follows:

31 December 2017 31 December 2016

In EUR thousands Level 1 Level 2 Level 3

Total carrying

value Level 1 Level 2 Level 3

Total carrying

value Assets at fair value Debt securities: - available for sale 226 839 17 963 3 697 248 499 158 494 15 323 4 926 178 743 - at fair value through profit

and loss - 63 124 35 472 98 596 - 58 708 35 001 93 710 Equity securities: - available for sale 65 144 - 1 294 66 438 35 136 - 1 294 36 430 - at fair value through profit

and loss 22 635 - - 22 635 20 452 - - 20 452

Total assets systematically measured at fair value 314 618 81 088 40 463 436 168 214 082 74 031 41 222 329 335

51

A description of the valuation technique and input parameters for level 2 measurement:

In EUR thousands Fair value Valuation technique Input parameters Assets valued at level 2

Securities available for sale 17 963 (2016: 15 323) Discounted cash flows

Interest rate applicable to debtor borrows as of balance

sheet date

During the year there were no changes to the valuation technique for securities with a level 2 fair value. (2016: no change).

The description of the valuation technique and input parameters for level 3 measurement:

In EUR thousands

Fair value

Valuation technique

Input parameters -

description Input

parameters

Potential parameter

change Fair value sensitivity

Assets systematically measured at fair value in level 3 as of 31 December 2017 Debt securities: - available for sale

3 697 Discounted cash flows

Est. Rate applicable to debtor borrowing on

the balance sheet day 3,6% ± 50 bp ± 139,4 - at fair value through

profit and loss 35 472

Discounted cash flows

Est. Rate applicable to debtor borrowing on

the balance sheet day 1,0% ± 50 bp ± 424,0 Equity securities: - available for sale

1 294 Share in equity Shareholder equity Shareholder

equity ± 10% ± 129

52

In EUR thousands

Fair value

Valuation technique

Input parameters -

description

Input parameters

(weighted average)

Potential parameter

change Fair value sensitivity

Assets systematically measured at fair value in level 3 as of 31 December 2016 Debt securities: - available for sale

4 926 Discounted cash flows

Est. Rate applicable to debtor borrowing

on the balance sheet day 3,70% ± 50 bp ± 178

- at fair value through profit and loss

35 001 Discounted cash flows

Est. Rate applicable to debtor borrowing

on the balance sheet day 0,58% ± 50 bp ± 585

Equity securities: - available for sale 1 294 Share in equity Shareholder equity Shareholder equity ± 10% 116

During the year there were no changes to the valuation

technique for securities with a level 3 fair value. (2016: no

change).

The sensitivity of the fair value in the table above represents

a change in value due to the increase or decrease of the

relevant input parameter. For equity securities, an increase in

ratios would mean an increase in fair value. Increasing the

discount due to non-tradability would lead to a decrease in

value. For debt securities, the increase in the discount rate

and the probability of default would together lead to a

decrease in value. Relationships between input parameters

that were not derived from market prices have not been

identified, except that the increase in the probability of non-

payment of the security is generally accompanied by the

related increase in the discount rate.

Changes in valuation 3 for each class of security:

At fair value through profit

and loss Available for sale

In EUR thousands Equity

securities Debt

securities Equity

securities Debt

securities Fair value as of 1 January 2017 - 35 002 1 295 4 926 Revaluation to profit and loss - 471 - - Revaluation to the other comprehensive income - - - -68

Purchase - - - - Sale, payment of principal and interest - - - -153 Transfers from level 3 (to level 2) - - - -1 009 Fair value as of 31 December 2017 - 35 472 1 295 3 697 Unrealized profit and loss as of 31 December 2017

- carried through profit and loss - 471 - - - carried in other comprehensive income - - - -68

53

The company reclassified securities that were originally valuated by the internal model from level 3 measurement to level 2 based

on the grounds of the price available from the non-active market, which is considered more accurate than the internal model.

At fair value through profit and

loss Available for sale

In EUR thousands Equity

securities Debt

securities Equity

securities Debt

securities Fair value as of 1 January 2016 - 33 934 1 159 9 344 Revaluation to profit and loss - 1 068 - Revaluation to the other comprehensive income

- - - 155

Purchase - - 135 1 007 Sale, payment of principal and interest - - - -206 Transfers from level 3 (to level 2) - - - -5 374 Fair value as of 31 December 2016 - 35 002 1 294 4 926 Unrealized profit and loss as of 31 December 2016

- carried through profit and loss - 1 068 - - - carried in other comprehensive income - - 155

(b) Processes in recognizing financial assets at level 3 fair

value

The measurement of financial assets at level 3 fair values

uses inputs that are not observable from market data and

which are determined by expert estimate. For debt securities

in the portfolio of the Company measured at level 3 as an

input not observable from market data, the credit spread of

the securities issuer was used.

The shares of the company VIG FUND uzavřený investiční

fond, a.s. are appreciated by the proportionate share in the

fund equity.

The valuation of securities in the assets of the Company is

carried out by companies that provide PSLSP with securities

management. The percentage change to the price is

evaluated according to the criteria set separately for debt

securities and for equity securities.

The valuation of securities provided by external parties is

also compared with the prices of securities imported to the

investments administration system from the system of

Reuter’s, Bloomberg or with theoretically calculated prices. If

the deviation between the acquired and the internal

valuation is more than the internally set limit, the given price

is justified by the employee of the Asset Management

Division.

(c) Assets and liabilities not carried at fair value for which

fair value is disclosed.

54

Disclosure of fair value of financial instruments analyzed by level in fair value hierarchy:

31 December 2017 31 December 2016

In EUR thousands Level 1 Level 2 Level 3 Carrying

value Level 1 Level 2 Level 3 Carrying

value Assets Debt securities held to maturity 40 596 12 381 - 44 692 32 323 24 223 - 47 652 Debt securities classified as loans and receivables 10 742 14 333 6 207 25 484 11 104 14 544 866 20 697 Credits granted - - 2 909 2 909 - - 2 980 2 980 Cash and cash equivalents - 12 082 - 12 082 - - 4 258 4 258

The fair value of financial instruments on level 2 was set

using the technique of discounted cash flows. The discount

rate was estimated as the interest rate applicable for a

debtor when borrowing as of the balance sheet date.

The fair value of financial instruments on level 3 was set by

the technique of discounted cash flows. The credit spread as

the input factor of valuation is not commonly obtainable

from the market, therefore for the purposes of valuation the

credit spread on the level of the emission spread is used. In

the event of a transaction executed with the said security or

of a real quotation to buy/sell the security, the credit spread

arising from the quoted price is used.

55

Financial Instruments by Category

For the purposes of measurement, IAS 39, Financial Instruments: Recognition and Measurements, sets out the following categories of financial instruments:

(a) Loans and receivables;

(b) Financial assets available for sale;

(c) Assets held to maturity;

(d) Assets at fair value through profit or loss (“FVTPL”).

Financial assets at fair value through profit or loss are subcategorized as follows:

(i) Assets voluntarily designated to this category at the time

of acquisition and

(ii) assets held for trading.

Insurance and reinsurance contracts are not financial

instruments and are subject to standard IFRS 4, Insurance

contracts.

The following table provides the classification as of 31 December 2017 between classes of assets for the purpose of reporting as per

IFRS 7, Financial instruments: Disclosures, and measurement categories set as per IAS 39, Financial instruments: Recognition and

measurement.

In EUR thousands Loans and

receivables

Assets available

for sale

FVTPL classified

optional at acquisition

Assets held to

maturity

Insurance and

reinsurance contracts Total

Debt securities: - held to maturity - - - 44 692 - 44 692 - at fair value through profit and

loss - - 98 596 - - 98 596 - classified as loans and

receivables 25 484 - - - - 25 484 - available for sale

- 248 499 - - - 248 499

Equity securities: - available for sale - 66 438 - - - 66 438 - at fair value through profit and

loss - - 22 635 - - 22 635 Loans granted 2 909 - - - - 2 909 Other financial and insurance

receivables: - - 2 996 - - 2 996 - net receivables from reinsurance - - - - 887 887 - share of reinsurer in unearned

premium reserve - - - - 22 22 - receivables from insurance - - - - 1 667 1 667 - receivables from commissions 19 - - - - 19 - other receivables 401 - - - - 401 Cash and cash equivalents 12 082 - - - - 12 082

56

As of 31 December 2017, and 31 December 2016 all financial

liabilities of the Company were measured at amortized cost

by the effective interest method.

The reason for classifying securities upon acquisition into

FVTPL category is the elimination of the difference in

valuation and accounting due to differing methods of the

measurement of assets and liabilities or due to different

ways of showing a profit and deficit.

The following table shows approvals as of 31 December 2016 between asset classes for the purpose of disclosure as per IFRS 7,

Financial Instruments: Disclosure and categories of measurement laid down by IAS 39, Financial Instruments: Recognition and

Measurement.

In EUR thousands Loans and

receivables

Assets available

for sale

FVTPL classified

optional at acquisition

Assets held to

maturity

Insurance and

reinsurance contracts Total

Debt securities: - held to maturity - - - 47 652 - 47 652 - at fair value through profit and

loss - - 93 710 - - 93 710 - classified as loans and

receivables 20 697 - - - - 20 697 - available for sale - 178 743 - - - 178 743 Equity securities: - available for sale - 36 430 - - - 36 430 - at fair value through profit and

loss - - 20 452 - - 20 452 Loans granted 2 980 - - - - 2 980 Other financial and insurance

receivables: - net receivables from

reinsurance - - - - 640 640 - share of reinsurer in unearned

premium reserve - - - - 20 20 - receivables from insurance - - - - 1 448 1 448 - receivables from commissions 16 - - - - 16 - other receivables 383 - - - - 383 Cash and cash equivalents 4 258 - - - - 4 258

57

Transactions with Associates

The Company conducted transactions with companies under joint control, with the Board of Directors and the Supervisory Board.

The balance of receivables and liabilities with associates were as follows:

31 December 2017 31 December 2016

In EUR thousands Parent

company

Companies under joint

control Company

management Parent

company

Companies under joint

control Company

management Receivables from commissions - - - - - - Receivables from reinsurance - 449 - - 326 - Share of reinsurer in provisions 9 6 - 9 6 - Loans granted - 2 909 - - 2 980 -

Payables from insurance - 4 - - 6 - Payables from reinsurance 16 - - 16 - - Payables from services 17 - - 27 - -

Expense and income from associates were as follows:

2017 2016

In EUR thousands Parent

company

Companies under joint

control Company

management Parent

company

Companies under joint

control Company

management Commissions from reinsurer -8 626 - -25 538 - Revenue from other commissions - 3 - - 5 - Reinsured claims 8 182 - 25 200 - Received dividends - 32 - - 23 - Costs for IT services 86 - - 99 - - Share of reinsurer in written premium 0 1 076 - - 973 - Other services 27 24 - 99 - - Interests charged from loans - 216 - - 14 - Salaries and remunerations to directors - - 456 - - 339 Levies to health and social insurance for board members - - 87 - - 37 Remunerations for Supervisory Board 11 19 9 12 18 10 Other - - 2 - - 5

58

Events after the Reporting Period

The Board of Directors of the Company approved the draft merger agreement of the Company with KOOPERATIVA poisťovňa, a.s.

Vienna Insurance Group on 27 October 2017. The General Meeting approved the merger on 28 February 2018. Date of effective

merger is on 1 April 2018.

No other events occurred after the reporting period that would have a significant impact on the financial situation of the Company.