E.6. Liquidity risk

Liquidity risk arises in the general funding of the Group’s activities and in the management of its positions. It includes both the risk of being unable to fund assets using instruments with appropriate maturities and rates and the risk of being unable to liquidate an asset sufficiently quickly and in the appropriate amount, and the risk of being unable to meet obligations as they become due.

All the business units have access to a diverse funding base. Apart from insurance liabilities, which serve as a main source of financing, funds are raised using a broad range of instruments including deposits, other liabilities evidenced by paper, reinsurance policy, subordinated liabilities and shareholder equity. This enhances funding flexibility, limits dependence on any one source of funds and generally lowers the cost of funds.

The business units strive to maintain a balance between continuity of funding and flexibility through the use of liabilities with a range of maturities; for details see also the section above on asset and liability matching. Further, all the business units hold a portfolio of liquid assets as part of its liquidity risk management strategy. Special attention is paid to the liquidity management of non-life insurance business requiring sufficient funding to meet all the potential obligations in the event of a natural disaster or other extraordinary event.

All the business units as well as the Group as a whole continually assesses the liquidity risk by identifying and monitoring changes in the funding required to meet business goals and the targets set in terms of the overall strategy.

The following table shows an analysis of the Group’s financial assets and liabilities broken down into their relevant maturity bands based on the residual contractual maturities.

Residual contractual maturities of financial assets

31. 12. 2014 (CZK million)	Less than 1 year	Between 1 and 5 years	More than 5 years	Unspecified	Total
Investments	25,021	56,305	74,108	19,613	175,047
Loans	5,000	885	57	–	5,942
Available-for-sale	16,213	52,934	68,950	7,772	145,869
Bonds	16,213	52,934	68,950	–	138,097
Equities	–	–	–	2,319	2,319
Investment fund units	–	–	–	5,453	5,453
Financial assets at fair value through profit or loss	3,808	2,486	5,101	11,841	23,236
Bonds	3,796	2,331	5,041	–	11,168
Equities	–	–	–	228	228
Investment fund units	–	–	–	4,226	4,226
Unit-linked investments	6	11	–	7,387	7,404
Derivatives	6	144	60	–	210
Receivables	5,852	309	694	–	6,855
Cash and cash equivalents	5,050	–	–	–	5,050
Total financial assets	35,923	56,614	74,802	19,613	186,952

XLS

31. 12. 2013 restated (CZK million)	Less than 1 year	Between 1 and 5 years	More than 5 years	Unspecified	Total
Investments	16,630	56,791	66,963	23,475	163,859
Loans	2,127	–	924	–	3,051
Held to maturity	–	–	–	–	–
Available-for-sale	13,494	50,464	60,884	8,334	133,177
Bonds	13,494	50,464	60,884	–	124,843
Equities	–	–	–	2,596	2,596
Investment fund units	–	–	–	5,738	5,738
Financial assets at fair value through profit or loss	1,009	6,327	5,154	15,141	27,631
Bonds	834	6,232	4,974	–	12,040
Equities	–	–	–	393	393
Investment fund units	–	–	–	3,576	3,576
Unit-linked investments	10	6	–	11,172	11,188
Derivatives	165	89	180	–	434
Receivables	6,053	187	876	–	7,116
Cash and cash equivalents	7,272	–	–	–	7,272
Total financial assets	29,955	56,978	67,839	23,475	178,247

XLS

1. 1. 2013 restated (CZK million)	Less than 1 year	Between 1 and 5 years	More than 5 years	Unspecified	Total
Investments	15,433	70,916	59,916	19,476	165,741
Loans	935	1,290	906	–	3,131
Available-for-sale	12,006	56,468	53,384	7,102	128,960
Bonds	12,006	56,468	53,384	–	121,858
Equities	–	–	–	4,202	4,202
Investment fund units	–	–	–	2,900	2,900
Financial assets at fair value through profit or loss	2,492	13,158	5,626	12,374	33,650
Bonds	1,753	8,167	5,106	–	15,026
Equities	–	–	–	36	36
Investment fund units	–	–	–	1,796	1,796
Unit-linked investments	6	11	–	10,542	10,559
Derivatives	733	4,980	520	–	6,233
Receivables	6,481	141	703	–	7,325
Cash and cash equivalents	9,323	–	–	–	9,323
Total financial assets	31,237	71,057	60,619	19,476	182,389

XLS

Of which relates to Transformed fund

31. 12. 2014 (CZK million)	Less than 1 year	Between 1 and 5 years	More than 5 years	Unspecified	Total
Investments	7,235	31,649	45,256	2,676	86,816
Loans	300	–	–	–	300
Available-for-sale	6,956	31,057	41,662	1,893	81,568
Bonds	6,956	31,057	41,662	–	79,676
Equities	–	–	–	82	82
Investment fund units	–	–	–	1,811	1,811
Financial assets at fair value through profit or loss	(21)	592	3,594	783	4,948
Bonds	–	550	3,574	–	4,124
Equities	–	–	–	223	223
Investment fund units	–	–	–	560	560
Derivatives	(21)	42	20	–	41
Receivables	727	–	–	–	727
Cash and cash equivalents	1,132	–	–	–	1,132
Total financial assets	9,094	31,649	45,256	2,676	88,675

XLS

31. 12. 2013 (CZK million)	Less than 1 year	Between 1 and 5 years	More than 5 years	Unspecified	Total
Investments	5,826	27,179	39,882	2,057	74,944
Loans	1,001	–	–	–	1,001
Available-for-sale	4,802	26,525	36,415	1,145	68,887
Bonds	4,802	26,525	36,415	–	67,742
Equities	–	–	–	103	103
Investment fund units	–	–	–	1,042	1,042
Financial assets at fair value through profit or loss	23	654	3,467	912	5,056
Bonds	–	580	3,328	–	3,908
Equities	–	–	–	385	385
Investment fund units	–	–	–	527	527
Derivatives	23	74	139	–	236
Receivables	585	–	–	–	585
Cash and cash equivalents	1,239	–	–	–	1,239
Total financial assets	7,650	27,179	39,882	2,057	76,768

XLS

Residual contractual maturities of financial liabilities

31. 12. 2014 (CZK million)	Less than 1 month	Between 1 and 3 months	Between 3 months and 1 year	Between 1 and 5 years	More than 5 years	Non specified	Total
Financial liabilities	1,856	1,323	996	1,881	1,324	1,400	8,780
Financial liabilities at fair value through profit or loss	493	316	660	1,117	519	–	3,105
Other financial liabilities	1,363	1,007	336	764	805	1,400	5,675
Payables	3,625	3,791	1,089	69	–	–	8,574
Other liabilities	1,425	205	–	22	–	–	1,652
Total financial liabilities	6,906	5,319	2,085	1,972	1,324	1,400	19,006

XLS

31. 12. 2013 restated (CZK million)	Less than 1 month	Between 1 and 3 months	Between 3 months and 1 year	Between 1 and 5 years	More than 5 years	Non specified	Total
Financial liabilities	2,168	178	679	3,205	171	1,400	7,801
Financial liabilities at fair value through profit or loss	37	175	677	1,093	171	–	2,154
Other financial liabilities	2,131	3	2	2,112	–	1,400	5,648
Payables	3,980	3,565	779	–	–	–	8,324
Other liabilities	1,449	250	–	26	–	–	1,725
Total financial liabilities	7,597	3,993	1,458	3,231	171	1,400	17,850

XLS

1. 1. 2013 restated (CZK million)	Less than 1 month	Between 1 and 3 months	Between 3 months and 1 year	Between 1 and 5 years	More than 5 years	Total
Financial liabilities	435	155	658	7,700	953	9,901
Financial liabilities at fair value through profit or loss	9	66	233	5,318	700	6,326
Other financial liabilities	426	89	425	2,382	253	3,575
Payables	7,887	5	726	–	–	8,618
Other liabilities	2,104	315	–	–	–	2,419
Total financial liabilities	10,426	475	1,384	7,700	953	20,938

XLS

Of which relates to Transformed fund

31. 12. 2014 (CZK million)	Less than 1 month	Between 1 and 3 months	Between 3 months and 1 year	Between 1 and 5 years	More than 5 years	Non specified	Total
Financial liabilities	199	8	172	387	289	–	1,055
Financial liabilities at fair value through profit or loss	199	8	172	387	289	–	1,055
Other financial liabilities	–	–	–	–	–	–	–
Payables	294	–	–	–	–	–	294
Other liabilities	–	–	–	–	–	–	–
Total financial liabilities	493	8	172	387	289	–	1349

XLS

31. 12. 2013 (CZK million)	Less than 1 month	Between 1 and 3 months	Between 3 months and 1 year	Between 1 and 5 years	More than 5 years	Non specified	Total
Financial liabilities	–	10	128	176	63	–	377
Financial liabilities at fair value through profit or loss	–	10	128	176	63	–	377
Other financial liabilities	–	–	–	–	–	–	–
Payables	350	–	–	–	–	–	350
Other liabilities	159	27	–	3	–	–	189
Total financial liabilities	509	37	128	179	63	–	916

XLS

The following table shows the amount of insurance liabilities and financial liabilities for investment contracts broken down by contractual maturity.

Estimated cash flows of insurance liabilities and liabilities fo investment contracts with DPF

31. 12. 2014 (CZK million)	Less than 1 year	Between 1 and 5 years	Between 5 and 10 years	Between 10 and 15 years	Between 15 and 20 years	More than 20 years	Total
Non-life insurance liabilities	8,180	3,929	1,938	1,635	1,456	1,133	18,271
UPR	–	–	–	–	–	–	–
RBNS & IBNR	7,894	3,929	1,938	1,635	1,456	1,133	17,985
Other insurance liabilities	286	–	–	–	–	–	286
Life insurance liabilities	7,957	17,241	11,169	6,247	4,123	6,638	53,375
Financial liabilities from investment contracts	29,402	14,512	9,665	7,632	7,115	12,359	80,685
Total	45,539	35,682	22,772	15,514	12,694	20,130	152,331

XLS

31. 12. 2013 (CZK million)	Less than 1 year	Between 1 and 5 years	Between 5 and 10 years	Between 10 and 15 years	Between 15 and 20 years	More than 20 years	Total
Non-life insurance liabilities	7,481	4,440	1,817	1,635	1,368	1,117	17,858
UPR	–	–	–	–	–	–	–
RBNS & IBNR	7,210	4,440	1,817	1,635	1,368	1,117	17,587
Other insurance liabilities	271	–	–	–	–	–	271
Life insurance liabilities	8,999	19,497	11,300	7,331	4,618	8,646	60,391
Financial liabilities from investment contracts	28,169	13,682	7,930	6,623	5,621	10,595	72,620
Total	44,649	37,619	21,047	15,589	11,607	20,358	150,869

XLS

Of which relates to Transformed fund

31. 12. 2014 (CZK million)	Less than 1 year	Between 1 and 5 years	Between 5 and 10 years	Between 10 and 15 years	Between 15 and 20 years	More than 20 years	Total
Life insurance liabilities	4	10	10	8	7	10	49
Financial liabilities from investment contracts	29,388	14,513	9,665	7,632	7,115	12,359	80,672
Total	29,392	14,523	9,675	7,640	7,122	12,369	80,721

XLS

31. 12. 2013 (CZK million)	Less than 1 year	Between 1 and 5 years	Between 5 and 10 years	Between 10 and 15 years	Between 15 and 20 years	More than 20 years	Total
Life insurance liabilities	2	6	7	6	4	7	32
Financial liabilities from investment contracts	28,169	13,682	7,930	6,623	5,621	10,595	72,620
Total	28,171	13,688	7,937	6,629	5,625	10,602	72,652

XLS