E.6. Liquidity risk

Liquidity risk arises in the general funding of the Company’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.

The Company has 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 Company strives 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, the Company holds 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.

The Company continually assesses its liquidity risk by identifying and monitoring changes in the funding required to meet business goals and the targets set in terms of the overall Company strategy.

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

Residual contractual maturities of financial assets:

In CZK million, as at 31 December 2014	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
Investments	4,526	793	14,632	28,014	36,681	16,050	100,696
Loans	4,400		582	1,552	—	57	6,591
Available-for-sale	88	771	10,151	24,415	35,384	8,611	79,420
Bonds	88	771	10,151	24,415	35,384	—	70,809
Equities	—	—	—	—	—	2,233	2,233
Investment fund units	—	—	—	—	—	6,378	6,378
Financial assets at fair value through profit or loss	38	20	3,899	2,047	1,297	7,382	14,683
Bonds	—	10	3,908	1,934	1,257	—	7,109
Unit-linked investments	—	6	6	11	—	7,382	7,405
Derivatives	38	4	(15)	102	40	—	169
Other investments	—	2	—	—	—	—	2
Receivables	4,141	1,012	136	347	400		6,036
Cash and cash equivalents	2,504	—	—	—	—	—	2,504
Total financial assets	11,171	1,805	14,768	28,361	37,081	16,050	109,236

XLS

In CZK million, as at 31 December 2013	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
Investments	1,748	2,698	8,236	36,109	37,357	20,738	106,886
Loans	490	1,207	45	180	1,045	58	3,025
Available-for-sale	99	1,449	7,879	30,026	34,614	9,514	83,581
Bonds	99	1,449	7,879	30,026	34,614	—	74,067
Equities	—	—	—	—	—	2,492	2,492
Investment fund units	—	—	—	—	—	7,022	7,022
Financial assets at fair value through profit or loss	980	40	312	5,903	1,698	11,166	20,099
Bonds	890	10	228	5,851	1,628	—	8,607
Unit-linked investments	6	11	—	6	—	11,166	11,189
Derivatives	84	19	84	46	70	—	303
Other investments	179	2				—	181
Receivables	4,257	1,149	461	158	649	—	6,674
Cash and cash equivalents	5,199	—	—	—	—	—	5,199
Total financial assets	11,204	3,847	8,697	36,267	38,006	20,738	118,759

XLS

Residual contractual maturities of financial liabilities:

In CZK million, as at 31 December 2014	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	323	316	473	1,317	267	1,400	4,096
Other financial liabilities	—	3	1	501	—	1,400	1,905
Financial liabilities at fair value through profit or loss	323	313	472	816	267	—	2,191
Payables	3,372	3,526	1,013	64	—	—	7,975
Other liabilities	1,557	224	—	24	—	—	1,805
Total financial liabilities	5,252	4,066	1,486	1,405	267	1,400	13,876

In CZK million, as at 31 December 2013	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	994	163	477	1,335	108	1,400	4,477
Other financial liabilities	960	3	2	503	—	1,400	2,868
Financial liabilities at fair value through profit or loss	34	160	475	832	108	—	1,609
Payables	3,738	3,349	732	—	—	—	7,819
Other liabilities	1,416	244	—	25	—	—	1,685
Total financial liabilities	6,148	3,756	1,209	1,360	108	1,400	13,981

XLS

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

In CZK million, as at 31 December 2014	Less than	Between 1 and 5 years	Between 5 and 10 years	Between 10 and 15 years	Between 15 and 20 years	More than	Total
Non-life insurance liabilities	8,181	3,929	1,938	1,635	1,456	1,133	18,272
RBNS & IBNR	7,894	3,929	1,938	1,635	1,456	1,133	17,985
Other insurance liabilities	287	—	—	—	—	—	287
Life assurance liabilities	7,933	17,176	11,097	6,183	4,067	6,471	52,927
Of which guaranteed liability for investment contracts with DPF	636	1,538	137	(149)	(129)	68	2,101
Total	16,114	21,105	13,035	7,818	5,523	7,604	71,199

In CZK million, as at 31 December 2013	Less than	Between 1 and 5 years	Between 5 and 10 years	Between 10 and 15 years	Between 15 and 20 years	More than	Total
Non-life insurance liabilities	7,485	4,440	1,817	1,635	1,368	1,117	17,862
RBNS & IBNR	7,210	4,440	1,817	1,635	1,368	1,117	17,587
Other insurance liabilities	275	—	—	—	—	—	275
Life assurance liabilities	8,945	19,448	11,238	7,272	4,563	8,500	59,966
Of which guaranteed liability for investment contracts with DPF	31	550	351	313	238	609	2,092
Total	16,430	23,888	13,055	8,907	5,931	9,617	77,828

XLS