D. Segment reporting
The Board of Directors as the Company’s chief operating decision maker makes decisions on how to allocate resources and assesses performance of these operating segments: life insurance operating segment, non-life insurance operating segment, operating segment of the Branch in Poland (PL branch). These segments represent a component of the Company:
- that engages in business activities from which the Company may earn revenues and incur expenses;
- whose operating results are regularly reviewed by the management of the Company to make decisions about resources to be allocated to the segment and assess its performance; and
- for which discrete financial information is available.
Products offered by operating segments include:
| Gross earned premiums revenue in CZK million, for the year ended 31 December | 2014 | 2013 |
|---|---|---|
| Life | 10,844 | 11,774 |
| Traditional life insurance | 9,327 | 10,164 |
| Unit linked insurance | 1,517 | 1,610 |
| Non-life | 18,347 | 19,038 |
| Motor | 7,987 | 8,564 |
| Personal | 4,044 | 3,997 |
| Hull (cargo, marine and aviation) | 179 | 183 |
| Commercial | 5,595 | 5,718 |
| Non-life accidents – individual | 542 | 576 |
| Branch | 2,526 | 1,523 |
| Motor | 2,328 | 1,413 |
| Personal | 60 | 31 |
| Non-life accidents – individual | 138 | 79 |
| Total | 31,717 | 32,335 |
Note C.3. of the financial statements provides further information about significant terms and conditions of insurance products.
All segment revenues are generated from sales to external customers. There is no single external customer that would amount to 10% or more of the Company’s revenues.
Management has determined the operating segments based on the reports periodically reviewed by the Board of Directors that are used to make main strategic decisions. The Board of Directors assesses the performance of the Branch based on the income statement and in case of other operating segments based on a measure of net technical results. Net financial income is not allocated to segments, as this type of activity is driven by the central treasury function of the Company. Other income and expenses are also not allocated to segments.
The segment information provided to the Board of Directors for the year ended 31 December 2014 is as follows (in CZK million):
| Life | Non-life | Total | Reconciling item | Income Statement ČP | Income Statement PL branch | Income Statement Total | Note | |
|---|---|---|---|---|---|---|---|---|
| Gross | ||||||||
| Insurance premiums | 10,844 | 18,347 | 29,191 | — | 29,191 | 2,526 | 31,717 | |
| Insurance benefits and claims | (6,018) | (9,103) | (15,121) | (1,342) | (16,463) | (1,967) | (18,430) | |
| Total costs | (2,180) | (4,553) | (6,733) | — | — | — | — | |
Commissions and other acquisition costs | (1,468) | (3,419) | (4,887) | — | — | — | — | |
Administration costs | (712) | (1,134) | (1,846) | — | — | — | — | |
| Other technical items | (73) | (87) | (160) | — | — | — | — | |
| Gross technical result | 2,573 | 4,604 | 7,177 | — | — | — | — | |
| Reinsurance | ||||||||
| Premiums ceded to reinsurers | (1,313) | (8,254) | (9,567) | — | (9,567) | (1,047) | (10,614) | |
| Reinsurer´s share on claims | 408 | 3,499 | 3,907 | 15 | 3,922 | 746 | 4,668 | |
| Total costs | 329 | 1,736 | 2,065 | — | — | — | — | |
Commissions and other acquisition costs | 329 | 1,736 | 2,065 | — | — | — | — | |
| Reinsurance technical result | (576) | (3,019) | (3,595) | — | — | — | — | |
| Net | ||||||||
| Insurance premiums | 9,531 | 10,093 | 19,624 | — | 19,624 | 1,479 | 21,103 | |
| Insurance benefits and claims | (5,610) | (5,604) | (11,214) | (1,327) | (12,541) | (1,221) | (13,762) | 1 |
| Total costs | (1,851) | (2,817) | (4,668) | — | (4,668) | (590) | (5,258) | |
Commissions and other acquisition costs | (1,139) | (1,683) | (2,822) | 34 | (2,788) | (241) | (3,029) | 2 |
Administration costs | (712) | (1,134) | (1,846) | (34) | (1,880) | (349) | (2,229) | 2 |
| Other technical items | (73) | (87) | (160) | 160 | — | — | — | 3 |
| Net technical result | 1,997 | 1,585 | 3,582 | (1,167) | 2,415 | (332) | 2,083 | |
| Financial Income | ||||||||
| Net financial result | — | — | 875 | — | — | — | — | |
| Eliminations | — | — | 510 | — | — | — | — | |
| Total financial investments income | — | — | 1,385 | 135 | 1,520 | (21) | 1,499 | 4 |
| Total other income and expenses | — | — | (189) | 1,032 | 843 | (58) | 785 | 5 |
| Income taxes | — | — | (731) | — | (731) | — | (731) | |
| Net profit for the year | — | — | 4,047 | — | 4,047 | (411) | 3,636 |
The main reconciling items between the Management Report and the Income Statement report are:
- The reconciling item of insurance benefits and claims are changes of unit-linked provisions in the amount of CZK 1,327 million which are reported in the Income Statement as insurance benefits and claims while it is presented within financial income in the Management Report.
- Different classification of acquisition costs and administration costs – mainly service costs in the amount of CZK 34 million.
- Other income and Other expenses as reported in the Income Statement are split in the Management Report between other technical items and total other income and expenses.
- The aggregate effect of Note 1, 3 and 5.
- Significant part of the total difference in the amount of CZK 1,032 million is represented mainly by valuation of AFS instruments in the amount of CZK 1,187 million which is reported in the Income Statement as total other income and expenses while in the Management Report they are presented in the financial income section.
The segment information provided to the Board of Directors for the year ended 31 December 2013 is as follows (in CZK million):
| Life | Non-life | Total | Reconciling item | Income Statement ČP | Income Statement PL branch | Income Statement Total | Note | |
|---|---|---|---|---|---|---|---|---|
| Gross | ||||||||
| Insurance premiums | 11,774 | 19,038 | 30,812 | — | 30,812 | 1,523 | 32,335 | |
| Insurance benefits and claims | (6,613) | (10,866) | (17,479) | (1,879) | (19,358) | (1,225) | (20,583) | 1 |
| Total costs | (2,392) | (4,786) | (7,178) | — | — | — | — | |
Commissions and other acquisition costs | (1,657) | (3,653) | (5,310) | — | — | — | — | |
Administration costs | (735) | (1,133) | (1,868) | — | — | — | — | |
| Other technical items | (65) | 69 | 4 | — | — | — | — | |
| Gross technical result | 2,704 | 3,455 | 6,159 | — | — | — | — | |
| Reinsurance | ||||||||
| Premiums ceded to reinsurers | (1,332) | (8,757) | (10,089) | — | (10,089) | (515) | (10,604) | |
| Reinsurer´s share on claims | 385 | 5,060 | 5,445 | — | 5,445 | 407 | 5,852 | |
| Total costs | 332 | 1,902 | 2,234 | — | — | — | — | |
Commissions and other acquisition costs | 332 | 1,902 | 2,234 | — | — | — | — | |
| Reinsurance technical result | (615) | (1,795) | (2,410) | — | — | — | — | |
| Net | ||||||||
| Insurance premiums | 10,442 | 10,281 | 20,723 | — | 20,723 | 1,008 | 21,731 | |
| Insurance benefits and claims | (6,228) | (5,806) | (12,034) | (1,879) | (13,913) | (818) | (14,731) | 1 |
| Total costs | (2,060) | (2,884) | (4,944) | — | (4,944) | (530) | (5,474) | |
Commissions and other acquisition costs | (1,325) | (1,751) | (3,076) | 44 | (3,032) | (250) | (3,282) | 2 |
Administration costs | (735) | (1,133) | (1,868) | (44) | (1,912) | (280) | (2,192) | 2 |
| Other technical items | (65) | 69 | 4 | (4) | — | — | — | 3 |
| Net technical result | 2,089 | 1,660 | 3,749 | (1,883) | 1,866 | (340) | 1,526 | |
| Financial Income | ||||||||
| Net financial result | — | — | 1,122 | — | — | — | — | |
| Eliminations | — | — | 155 | — | — | — | — | |
| Total financial investments income | — | — | 1,277 | 97 | 1,374 | (15) | 1,359 | 4 |
| Total other income and expenses | — | — | (140) | 1,786 | 1,646 | (53) | 1,593 | 5 |
| Income taxes | — | — | (751) | — | (751) | — | (751) | |
| Net profit for the year | — | — | 4,135 | — | 4,135 | (408) | 3,727 |
The main reconciling items between the Management Report and the Income Statement report are:
- The most significant reconciling item of insurance benefits and claims (within total of CZK 1,879 million) are changes in unit-linked provisions of CZK 1,881 million which are reported in the Income Statement as insurance benefits and claims while it is presented within financial income in the Management Report.
- Different classification of acquisition costs and administration costs – mainly service costs in the amount of CZK 44 million.
- Other income and Other expenses as reported in the Income Statement are split in the Management Report between other technical items and total other income and expenses.
- The aggregate effect of Note 1, 3 and 5.
- Significant part of total difference in the amount of CZK 1,786 million is represented mainly by valuation of AFS instruments in the amount of CZK 1,642 million which is reported in the Income Statement as total other income and expenses while in the Management Report they are presented in the financial income section.
The following table shows key figures per operating segment:
| In CZK million, for the year ended 31 December 2014 | Non-life | Life | PL Branch | Total |
|---|---|---|---|---|
| Capital expenditure * | (205) | (78) | (16) | (299) |
| Depreciation and amortisation | (259) | (154) | (21) | (434) |
| Impairment losses recognised | (208) | (209) | (38) | (455) |
| Reversal of impairment losses | 199 | 35 | — | 234 |
| Total segment assets | 39,385 | 72,883 | 3,184 | 115,452 |
| In CZK million, for the year ended 31 December 2014 | Non-life | Life | PL Branch | Total |
|---|---|---|---|---|
| Capital expenditure * | (377) | (109) | (35) | (521) |
| Depreciation and amortisation | (320) | (178) | (17) | (515) |
| Impairment losses recognised | (447) | (215) | (45) | (707) |
| Reversal of impairment losses | 252 | 11 | — | 263 |
| Total segment assets | 36,090 | 81,075 | 2,203 | 119,368 |
* Additions to non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets and rights arising under insurance contracts.
Total segment assets do not match exactly to the total assets in the financial statements in 2014 and 2013 because of the intercompany transactions between the Company and the Branch which are eliminated in the financial statements.
Segment assets and liabilities are not regularly included in the reports provided to the Board of Directors.
Geographical information
The Company operated in 2014 mainly in the Czech Republic and in EU countries. In 2012 the Company acquired an insurance portfolio and related assets and liabilities in Poland and starting 2013 it extended its foreign operations. For the year 2014 7.96% of the income from insurance was generated by this branch in Poland. More than 99% of the remaining income from insurance contracts came from clients in the Czech Republic.
Geographical information about non-current assets:
| In CZK million, for the year ended 31 December 2014 | Czech Republic | Poland |
|---|---|---|
| Investments to subsidiaries | 7,887 | — |
| Intangible assets | 1,059 | 487 |
| Tangible assets | 223 | 36 |
| Investment properties | 63 | — |
| Total | 9,232 | 523 |
| In CZK million, for the year ended 31 December 2013 | Czech Republic | Poland |
|---|---|---|
| Investments to subsidiaries | 6,285 | — |
| Intangible assets | 1,289 | 504 |
| Tangible assets | 453 | 40 |
| Investment properties | 63 | — |
| Total | 8,090 | 544 |