Annual Report 2012 Faaliyet Raporu 2012 Faaliyet Raporu World Leader in Credit Insurance Alacak Sigortas覺nda D羹nya Alacak Sigortas覺nda D羹nya LideriLideri
Annual Report 2012 World Leader in Credit Insurance
Contents
Chapter I Introduction 01 Euler Hermes at a Glance 02 Milestones 03 Corporate Profile 04 Summary of Financial Position 04 Explanations of the Board of Directors and the Senior Management on the Shares They Hold 05 Shareholding Structure 05 Financial Rights Provided For the Company Managers 08 The Message of the General Manager 09 General Outlook on the 2012 Insurance Sector 10 Euler Hermes in 2012 11 Euler Hermes Turkey in 2012 12 Credit Insurance 14 Activity Report Compliance Statement 15 Activity Report Compliance View Chapter II Management and Corporate Management Practices 18 20 21 21 22 23 24 25
Organisational Chart Board of Directors Statutory Auditors Senior Management Human Resources Corporate Social Responsibility Research and Development Board of Directors' Report
Chapter III Financial Information and Assessments on Risk Management 28 29 32 34 35 37 40
Audit Risk Management Ordinary General Assembly Agenda Auditor's Report Assessment on Financial Status, Profitability, and Claims Payment Capability Independent Audit Report Financial Report For the Relevant Term
Chapter I Introduction
Euler Hermes at a Glance Euler founded in the USA in 1893 and Hermes founded in Germany in 1917 merged in 2002 creating Euler Hermes and in 2003, it has become the Euler Hermes Group.
Majority shares of Euler Hermes being traded in the Paris Stock Market since April 2000 (ELE.PA) belong to Allianz, one of the biggest insurance groups worldwide.
Allianz
Public
68%
29.21%
Euler Hermes
2.79% “Euler Hermes, the leader company worldwide in Credit Insurance”
Global leader in credit insurance with 34% market share 2.4 billion euros consolidated turnover in 2012 Over 52,000 clients worldwide Over 6,000 employees in more than 50 countries and 5 continents 770 billion euros of global exposure 1,700 claims indemnified per week 40 million companies monitored in our risk database 20,000 credit limit requests received per day 85% of credit limit requests processed in less than 48h 380,000 debt collections handled in 130 countries AA- financial rating by Standard & Poor’s
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EULER HERMES Annual Report 2012
Milestones Euler Hermes Turkey •
18932001
• • • • • •
1893: ACI, U.S. 1917: Hermes, Germany 1918: Trade Indemnity, UK 1927: SFAC, France and SIAC, Italy 1929: COBAC, Belgium 1989: Nederlandsche Kredietverzekering, NL
2002
•
Euler acquires Hermes
2003
•
2004
The group and all its subsidiaries adopt the name Euler Hermes
•
Entering the Turkish market with the fronting agreement signed with Koç Allianz Insurance
2005
International development: Finland, Greece, Portugal, Morocco
•
2006
EH acquires 100% of its subsidiaries in Benelux. Further expansion in Russia, India, Baltic countries and Turkey
•
International development: Ireland, Australia, New Zealand, United Arab Emirates
Euler Hermes Turkey •
Opening the Euler Hermes Turkey Risk Management office
•
2007
•
New operations in Argentina, partnerships with ICIC in Israel and BOCI in China. Acquisition of debt collection companies UMA (U.S.) and R2C (Ireland)
2008
•
Office opening in Colombia. Partnership in the GCC countries Oman, Kuwait, Qatar. Creation of Euler Hermes World Agency
September – Issuance of the Credit Insurance official license by the T.R. Treasury Undersecretariat
2009
•
Creation of Euler Hermes Collections
•
2010
•
Reorganization project: build a customer centric, internationally integrated group. Opening of Chile office
Starting insurance activities in the area of credit insurance
2011
• •
Partnership in China with China Pacific Insurance Group Memorandum of understanding with Mapfre to create joint venture in Spain, Portugal and Latin America
2012
•
•
•
Euler Hermes launches a new product, “Excess of Loss (XoL)” trade credit insurance designed for large and multinational companies Launch of Solunion, Euler Hermes and Mapfre joint venture in Spain and four Latin American Countries Euler Hermes named “Best Trade Credit Insurer” by Global Finance
Chapter I Introduction
Corporate Profile Euler Hermes offering Risk Management – Credit Insurance – Collection Services insures the nonpayment risk of receivables, ensuring customers to securely open to new markets with the correct selection of buyers by the customers, fulfilling an important role in the economic cycle. Euler Hermes offers services with the local customers and exports in all geographies, with the business model developed for international collection services, joint IT infrastructure, with offices in over 50 countries, specialized teams on local laws and vast experience in international collection. In 2012, more than 380,000 collections were made in a total of 130 countries.
Solutions unique for requirements and companies are being developed making the limit decisions for the Credit Insurance customers through Risk Monitoring Services, at the buyer countries or at the closest country office. Risks in international trade are being monitored closely with exclusive information on buyers shared in a continuously updated international database. The highest weight among the solutions offered by Euler Hermes is the Credit Insurance service which constitutes 84.9% of the premium revenues. This is followed by Bonding & Guarantee services with 6.3%, other services with 5.9% and Collection Services with 2.9%.
Turnover by business line ( 2012 in %)
Other Services 5.9% Bonding&Guarantees 6.3%
Debt Collection 2.9%
Credit Insurance 84.9%
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EULER HERMES Annual Report 2012
Summary of Financial Position Financial Indicators (million TL)
2012
2011
Premium income
25,159,947
11,746,034
Total Technical Profit
(1,037,643)
(2,587,112)
Total Assets
16,285,504
11,796,137
Nominal Capital
5,500,000
5,500,000
Equities
1,563,666
3,612,657
Financial Income
(407,996)
896,887
Profit Before Tax
(2,048,991)
(1,713,037)
Main Ratios (%)
2012
2011
(131.04)
(47.41)
154.49
99.58
9.60
30.63
Profit/Equities Before Tax Premium Income/Total Assets Equities/Total Assets
Explanations of the Board Directors and the Senior Management on the Shares They Hold No
Name of Partner
Nominal Value of the Shares (TL)
Share Percentage (%)
1
Euler Hermes SFAC
5,499,996
99.99993
2
Michele Pignotti
1
0.00002
3
Loeiz Pierre Marie Franรงois Limon Duparcmeur
1
0.00002
4
Paolo Cioni
1
0.00002
5
Pascal Frederic Personne
1
0.00002
5,500,000
100.00
Total
Chapter I Introduction
Shareholding Structure There are no changes in the capital structure compared to 2011. Euler Hermes Sigorta A.Ş. shareholding structure is as follows. Adı
Euler Hermes SFAC Other Paid Capital
31 December 2012
31 December 2011
Nominal Value of the Shares (TL)
Share Percentage (%)
Share (TL)
Share (%)
5,499,996
99.99
5,499,996
99.99
4
0.01
4
0.01
5,500,000
100.00
5,500,000
100.00
Financial Rights Provided for the Company Managers For the year ended 31 December 2012, wages and similar benefits provided to the senior management including chairman, members of the board of the directors, general manager, general coordinator, and deputy general managers amounted to TL 431,244 (31 December 2011: TL 932,265).
5
Global leader
credit insurance with 34% market share in
2,4 billion euros
consolidated
turnover in 2012
08 EULER Faaliyet Raporu 2011 8 EULERHERMES HERMES Annual Report 2012
Genel Müdür Mesajı
General Manager’s Message the end of2011 2012,sonunda our Company had a “"At Şirketimiz, toplam
total premium production of 25,159,947 TL,
11.746.034 TL prim üretimi attaining a growth of 114% in comparison to gerçekleştirerek kredi sigortası branşında the previous year." %22,9 pazar payına ulaşmıştır.”
Özlem Özüner Özlem Özüner Yönetim Kurulu Üyesi ve Genel Müdür Executive Board Member and General Manager
Despite a global slowdown led by Europe and a Avrupa Birliği üyesi performance ülkelerin bir kısmında borç krizi ve negative growth postedyaşanan by several countries, the Turkish economy has etmiş, grownEuler by 2.2% büyüme sorunları 2011 yılında da devam Hermes’in and the insurance sector, to which our company also faaliyet gösterdiği birçok ülkede riskof seviyeleri artışTL göstermiştir. belongs, has generated a total 20 billion in premiums. is anticari almost 16% in growth Avrupa kıtası This ile yoğun bağları olanincrease Türkiye ekonomisi compared to 2011. Additionally, the share on total tüm bu olumsuzluklara rağmen %8,5branches oranında büyüme premium production by non-life - inclusive of gerçekleştirmiş bu86%. oran ile dünya genelinde birçok ülkeyi Euler Hermesolup, - was geride bırakarak başarılı bir ekonomik performans sergilemiştir. In 2012 the total premium production of the insurance sector remained almost double that of the inflation rate, yılında a success putting Turkey sektörünün amongst the best 2011 ülkemizde sigortacılık prim üretimi performers in the developing countries group. Due enflasyon oranının bir hayli üzerinde, %21,5 oranında artışto to the level of insurance being low in comparison göstermiştir. Buna rağmen üretim rakamları GNDP, conscious effortssektörümüz are beingprim made to increase the awareness of insurance göre in Turkey. Our is açısından Avrupa sıralamalarına arkalarda yercompany almaktadır. actively taking part in these efforts. Ülkemizde sigorta bilincinin geliştirilmesine yönelik yoğun Credit Şirketimiz insurancedeisiştirak paving the wayKredi for secure trade çabaya etmektedir. Sigortası gibi in Turkey by helping businesses trade on open account ülkelerin gelişmişlik seviyesiand arttıkça faaliyet alanını genişleten in the domestic market in their export activities, birçok uygulaması son yıllarda ülkemizde hizmete while yeni alsosigorta steering them towards the right buyers. Our company’s growth in premium production in 2012 put sunulmuş ve kendi branşlarında hızlı büyüme oranları Euler Hermes Turkey amongst the top 5 companies in yakalamışlardır. 2011 yılında prim üretiminde görülen toplam the non-life segment. büyümede kredi sigortası branşı, %61,6 büyüme oranı ile Gaining our insurance license and commencing finansal branşından sonra ikinci sırada almıştır. activity kayıplar in Turkey in September 2010, ouryer company 2010 yılındaa Euler Hermes Grubu, aralarında Türkiye’nin recorded premium production of 25,159,947 TLde in 2012, signalling a 114% growth from 2011. 80% of this bulunduğu beş bölgeyi stratejik ülke olarak konumlandırmıştır. growth is based on domestic transactions equalling 20 Bu kapsamda Türkiye’de; istihbarat, riskbeen tahsisgenerated ve dağıtım from million TL, while 5 million TL has export focused transactions. of the end kanallarına yönelikinsurance yatırım planını uygulamayaAsgeçiren of 2012, our total asset reached 16,285,504 million Şirketimiz, 2010an Eylül ayında sigorta alarak faaliyetlerine TL signalling increase of 38%lisansını in comparison to our başlamıştır. Şirketimiz, 2011 sonunda toplam 11.746.034 previous year results. TL prim üretimi gerçekleştirerek kredi sigortası branşında The slowdown in economic growth has caused our %22,9 pazar payına ulaşmıştır. Şirket aktiflerinin önemli bir companies to place more importance on the insurance of their receivables and this is coupled with the new kısmını oluşturan ticari alacakların sigortalanması konseptinin Turkish Commercial Code and renewed cheque law ülkemizde yaygınlaşacağını ve önümüzdeki dönemde practices hızla which have generated a greater interest in bu alanda büyüme rakamlarının daha yüksek seviyelerde credit insurance. gerçekleşeceğini öngörmekteyiz. Equipped with the Allianz Group’s strong financial structure and a 34% global share in the credit insurance sector, Euler Hermes is yapı pleased to sigortası be Euler Hermes, sahip olduğu güçlü mali ve kredi utilizing its over 100 years of experience to serve our alanında dünyanın liderbusinesses şirketi olarak with yaklaşık 100 yıllık established Turkish a high level of deneyimini quality. Türkiye’de yerleşik şirketler ile paylaşmaktan memnuniyet duymaktadır. Dünyanın lider kredi sigorta kuruluşu As the world’s leading credit insurer in its third year of olarak Türkiye’deki ikinciI would faaliyet like yılımızda sigortalılarımız, business in Turkey, to express my gratitude to our insured, our employees, our business çalışanlarımız, satış kanallarımız ve iş ortaklarımız ilechannels yüksek iş and business partners with whom I anticipate we will sonuçlarına ulaşacağımız beklentisi ile teşekkürlerimi reach high level business results (going into thesunarım. future).
sigortalatmalarında önemli rol oynama Avrupa ülkesini ve gelişmekte olan ekonomileri geride bırakarak kuvvetli bir büyüme ivmesi yakalamıştır. Türkiye olarak Temmuz 2012’de devreye girme 9 I şirket sigortası ekonomisindeki gelişmelere paralel olarak Türk Sigorta sektörü Ticaret Kanunu ile kredi Chapter Introduction kolaylaşması dolayısıyla müşterilerine d toplam prim üretimi yıllık enflasyonun bir hayli üzerinde, An Outlook on the 2012 vermeleri beklenmektedir. %21,5 oranında artış göstermiştir. Bu reel büyümeye rağmen, hayat dışı branşların bir kısmında yaşanan yoğun fiyat Insurance Sector rekabeti karlılık seviyelerini olumsuz etkilemiştir. Giderek daha Avrupa’nın 2006 yılında yürürlüğe aldığ uygulamalarını Türkiye’nin 2012 yılında karmaşık bir hal alan ticari ve ekonomik ilişkilerde riskler ve planlanmaktadır. II, bankalar açıs buna bağlı olarak korunma ihtiyacı artmaktadır. Kredi Eulersigortası Hermes is participating in variousBASEL activities In a challenging global environment, the Turkish initiated by the Turkish Insurance & Reinsurance economy has remained resilient throughout 2012 in sektörü ihtiyaç duyulan bu korunma mekanizmasını devreye yeterlilikleri ve kredi verme koşulları yö Association, The Union of Chambers and Commodity comparison to its European counterparts. Parallel uygulamaları beraberinde almakta, piyasalarda firmaların güvenle Exchanges of Turkey and the Insurance Division ofgetirmekted the to the soft yerel landingveinyurtdışı the economy, total premium Undersecretariat of the Turkish Treasury, which aim at production of the Turkish Insurance industry has operasyonel risk konusunu da düzenlem ticaret yapmalarına ve satış hacimlerini arttırmalarına olanak increasing the level of insurance awareness. As part of recorded a growth close to 16% to reach total premium these efforts, the credit insurance industry is continuing production of 20 billion Turkish liras. At almost tanımaktadır. şirketlerin faaliyet alanları, mali duruml to introduce its services to companies, to help them to double the inflation rate, this growth rate indicates operasyonları, temerrüt risklerinin tüm trade in a secure manner in local and export markets a performance, placing Turkey among the fastest and to increase their sales turnover. growing countries the area penetrasyonu, of insurance. Additionally, değerlendirilecektir. Türkiye’de krediinsigortası üretilen primlerin the need for seeking protection against trade risks is GSYİH’ye oranla 0,005%’nın altındadır ve gelişmeye açıktır. The introduction of the new Turkish Commercial on the rise in an environment where global trade is Code and the new BASEL Check Law mid-2012 becoming more complex. II’yeingöre krediwere sigorta poliçeleri Türkiye’de şirketler ağırlıklı olarak çek ve banka garantileri important steps in raising local trading practices to olaraknow kabul edilmektedir. ile ticaretthe yapmaktadırlar. beraber the open account system used globally. With Kredi Sigorta In Turkey level of insuranceBununla penetration is low diğer gelişmiş changes, theyaklaşık level of corporate governanceticari and alacakla compared toyaşandığı European gibi, countries. until today %35’ini oluşturan ülkelerde artanUpticaret hacmi ile bu these araçların transparency is improving, increasing cover offered to companies have operated mostly with checks and aldığından bilançoya duyulan yerini kredi sigortası ürününe bıraktığı policyholders due to an easier access to buyer data, güveni ar bank guarantees for domestic trade. In terms görülmektedir. of credit while the Check Law has reduced credit protection on ölçümle insurance penetration, the rate of premium production Sigortaları, şirketler kredi notu post-dated checks and companies are increasingly to GDP in Turkey is below 0.008%. Therefore, there şirketlerin satışlarında aktif kalitesinin ö turning to credit insurance to insure their receivables is room to improve the awareness for insurance and related products in Turkey. and protect their cash flows.sağlayacaktır. kolaylık
“"The Türk prim üretimi yıllık bir hayli ü totalSigorta premium sektörü production toplam of the Turkish insurance sector had enflasyonun an approximate growth of 16%, reaching 20göstermiştir. billion liras." ” oranında artış
10 EULER HERMES Annual Report 2012
Euler Hermes in 2012 Euler Hermes, which is an Allianz company, enjoys the leading position in the world credit insurance market with a share of 34%. As of the end of the year of 2012, the company has offered guarantees for a total of 770 billion Euro commercial receivables worldwide, is also one of the leading companies worldwide in terms of surety insurance, guarantees and collections. The consolidated turnover of Euler Hermes was 2,397 million Euro in 2012. Euler Hermes, founded in 1893, operates with over 6000 employees in more than 50 countries in the present. Euler Hermes offers support for its customers in all areas of credit management. The Company offers insurance services in the area of business to business (B2B) commercial receivables and the insurance and risk specialists of the Company work closely with the customers with a view to offer in depth credit analysis and they warn the customer before possible credit risks turn into losses through constant account monitoring. Euler Hermes assesses an average of 20.000 credit limit requests per day, and responds to 85 per cent of the daily credit requests in a period shorter than 48 hours. With the experience and knowhow acquired since 1893, the Company has a strong database consisting of the financial information of over 40 million companies worldwide, and is capable of easily concluding the credit limit follow-up and requests of customers through its online systems. Customers’ level of satisfaction with the EOLIS online services portal reaches 93.5% whereby they can access current assessments of the companies in the database, monitor the credit limit status, check the policy reports and place new limit requests. With the guarantees offered, Euler Hermes increases the open account sales of companies in domestic and
foreign markets, while reducing risks, and offers risk management and collection services in addition to guaranteeing receivables. Euler Hermes, which offers assurance against the customers not being able to pay their debts in time due to reasons such as bankruptcy and/ or insolvency, aims at preventing the risk before it arises by examining the credibility/ financial performance of buyers by using its database and supports its customers in Professional risk management. The Company has over 52 thousand customers worldwide and collects close to 200,000 receivables in 130 countries every year, and therefore is highly experienced in the field of the collection of receivables. Euler Hermes is preparing to introduce a fresh breath for the Turkish market with its experience and know-how of over a century and its strong research department and operates like a consultant company rather than an insurance company. Euler Hermes offers research and analysis services for customers about the markets they will enter, the companies they intend to work together and their financial outlooks. Companies, which are equipped with this information in advance, are capable of making important strategic decisions to enhance their revenues, beyond the point of merely eliminating risks. Euler Hermes establishes long term relations with its customers with its approach of high quality services. The Company works for a period of 12 years on average with its customers. Euler Hermes, an Allianz company and listed on the Euronext Paris Stock Exchange, has a rating of AA- by Standard&Poors.
BRIEFLY
2012 Financial Indicators
Experience of over 100 years
Euler Hermes Group Consolidated (31 December 2012) 2012
Change
Euro Million
from 2011
2,397,9
+5.4%
World leader in credit insurance Strongest credit insurance company from a financial perspective (S&P Rating: AA-)
Total revenues
Strength received from the Allianz Group
Net technical result
324,2
-9.6%
Expertise in collection services
Net investment income
109,0
-3.5%
Operating income
424,7
-8.4%
Net consolidated result
300,2
-9.1%
Online policy management: EOLIS
Net combined ratio
75.2%
Chapter I 11 Introduction
Euler Hermes Turkey Assessment for 2012 The Company entered the Turkish market in 2005 through a cooperation with Koรง Allianz Sigorta, and it opened the risk management office in Turkey in 2007. The Turkish companies risk analysis studies of the Company, that obtained its insurance license in 2010 and started operating in Turkey as the insurance company, date back to decades ago. Euler Hermes has over 100 customers in Turkey, and its customer portfolio includes various companies from small establishments to major international companies.
AS THE END OF
2012
NUMBER OF AGENCIES
15, BROKERS 12.
REPORTED IS
The Company offers different programs for customers of every scale. The Company that offers lower costs and faster credit allocation for international companies through the World Agency Program, issues policies that secures the domestic and/or international risks of corporate scale companies, prepared in line with the requirements of the companies, and simple and easy to manage policies for small scale companies.
Premiums for 2012 Euler Hermes Sales Channels: 9,140,318 TL - Direct Sales 6,310,148 TL - Agencies 1,986,055 TL - Banks 7,723,426 TL - Brokers
General Distribution (2012, %)
Agency 26%
Direct Sales 38%
Bank 10%
Broker 26%
12 EULER HERMES Annual Report 2012
Credit Insurance What is Credit insurance?
Initially, the financial charts of the companies that apply for credit insurance are examined. Additionally, factors such as the industry that the companies are operating in as well as the commercial history are also taken into account. The turnover development of the companies is examined in addition to assets and receivables such as mortgages, cheques, and promissory notes, and following these inspections, the “insurable turnover” is determined.
Credit Insurance is a type of insurance that secures the risk of non-payment by on due dates due to buyers’ bankruptcy, insolvency and similar reasons in the case of term sales in the country and abroad. Commercial credit insurance or in other words, receivables insurance, offers assurance for establishments against many incidents which may arise from the insolvency of their customers to the non-payment of the debts on due dates.
Credit insurance operates as a risk management system that covers all term sales and regularly follows the performance of the customers. Only including the suspicious buyers under coverage render the insurance programs to run impossible in the long term. More important than that, it is not possible to know in advance which companies’ payments would lead to problems. Accordingly, companies that issue credit insurance requests share the entire customer portfolio with Euler Hermes, with the exception of their financial charts - regardless of for which buyer they wish to get credits. Even if it is an important criterion to have problem-free bad commercial receivables past for those who wish to have insurance, this does not mean that there will not be any problems in the future. Even if some establishments believe that certain customers are not risky, experiences show that almost half of the collection problems arise from sound buyers with whom long term business relations have been established. Under the much changing conditions of the present day, it may become quite difficult for establishments to predict which customers will suffer payment difficulties in the future. Due to all these reasons, Euler Hermes offers insurance on a total turnover basis, and thus offers the highest value for its customers, and supports long term business relations.
Commercial receivables constitute approximately 40% of company assets. Therefore risks are generally defined as commercial risks. However, companies that deal in exports may also protect them against various political risks which may prevent or delay their payments. This may be due to, for instance wars in the country of the buyer, the cancellation of the contract by the country governments, or failure to receive payments due to a government introducing laws that prevent the imports or the exports of goods or that restrict the flow of cash from the buyer’s country. Who can benefit from Credit Insurance? All companies selling to other establishments via open accounts, as well as those operating in different sectors including operational services and trading goods may benefit from commercial credit insurance. How does the system work? Credit insurance activities are being conducted as per the “Credit Insurance General Terms and Conditions” which became effective in Turkey on 01.02.2009.
Company A EH customer/ Supplier of company ad Tr
su ra
e
C
re d
it
it
d re
In
C
Credit insurance secures trade, domestically and around the globe.
nc e
How credit insurance works?
Risk Monitoring Debt Collections
Company B Customer of company A
Chapter I 13 Introduction
Faydaları nelerdir?
• Kredi Sigortası, ticari alacakları teminat altına alarak bilanço aktiflerinde önemli yer tutan bu kalemin güvencesini sağlamaktadır. What are the benefits? • Alıcıların finansal ve mali durumları hakkında devamlı ve • Credit Insurance coverage for güncel bilgi edinilmesine olanakoffer tanımaktadır. Bucommercial sayede, receivables, securing this item which constitutes alıcılar hakkındaabilgi edinmek içininharcanan zaman ve yapılan significant place balance sheet assets. masrafın azalması sağlanmaktadır. Allows the tahsil buyersedilememesi to obtain continuous and • Bir alacağın• zamanında durumunda updated information on the financial and tahsilat yetkisinin sigortacıya devri ile buyers. bu işlemler monetary status of the Thus,için theharcanan time spent, and the expenses made for obtaining zaman ve yapılacak masraflardan kaçınılması sağlanmaktadır. information about the buyers are reduced. • Bürokratik işlemlerin olmadığı, pratik ve aynı zamanda uygun maliyetli bircase alacak riski yönetimi sağlanmaktadır. • In a receivable cannot be collected in time, with the transfer of the collection power to the insurer, the time that would be spent and the expenses that would be made for these procedures are also avoided.
Kredi sigortası maliyetli midir?
Pratikte sigortanın maliyet-etkin olabilmesi için firmanın yıllık satış tutarının yaklaşık 1 milyon Euro’nun üzerinde olması gerekmektedir. Prim oranı; şirketin ticaret geçmişine • A practical and affordable receivables risk ve geçmişteki borçiskayıplarına, ve müşteri management offered with ticaret no red sektörüne tape. portföyüne bağlı olmakla birlikte genellikle %1’in altında bir • Provides fast and reliable service with online seviyede gerçekleşmektedir. Sigorta masraflarına şirketin policy management. verdiği danışmanlık hizmetleri de dahildir. Siyasi risk temina Fast, reliable, and realilave timeprim policy da dahil edildiğinde, sözmanagement konusu olabilmektedir. with Eolis: Şirketler tarafından yaşanan ortalama şüpheli alacak seviyesin satışlarının yaklaşık %0,7’si civarında olduğu göz önünde Euler Hermes offers a policy management system bulundurulduğunda, büyük çoğunluğunun ticari for its customers which işletmelerin they can access online in an easy secure manner. fast decision krediand sigortasına oldukçaEuler etkinHermes’ bir maliyetle sahip olduğu processes allow its customers to make flexible and görülmektedir. Ayrıca, kredi riskini başarılı yönetmiş bir firma reliable sales. With Eolis, clients can place new için hesaplanan hasar geçmişine sahip bir requests for creditprim limits,oranı, may yüksek view their responses simultaneously, policy reports. firmaya kıyaslaand çokmay dahacheck düşüktheir olmaktadır.
• Tahsil edilemeyen alacaklar için • Müşterilerinizden herhangi birinin ödeme aczine düşmesi ihtimaline karşın • Yeni müşterilere ve yeni pazarlara satış yapıldığında ve • Have you ever experienced bad-debt losses? riskin güvence altına alınması • Have any of your istendiğinde customers ever become insolvent? • Do you regularly sell toincelerken new customers & markets? • Müşterilerin finansal yapılarını yardıma • Do you need help in assessing the financial solidity of ihtiyaç duyulduğunda your buyers? • Do you need to improve your cash flow? • Nakit akışının iyileştirilmesi gerektiğinde
Yanıt; Ticari Kredi Sigortası! Answer: Credit Insurance
14 EULER HERMES Annual Report 2012
Annual Report Compliance EULER HERMES SİGORTA A.Ş. EULER HERMES SİGORTA A.Ş. Declaration EULER HERMES SİGORTA A.Ş. 2011 YILI FAALİYET RAPORU 2011 YILI RAPORU 2011 YILIFAALİYET FAALİYET RAPORU UYGUNLUK BEYANI UYGUNLUK BEYANI UYGUNLUK BEYANI
EULER HERMES SİGORTA A.Ş Euler Hermes Sigorta A.Ş. 2012 ACTIVITY REPORT Euler Hermes Sigorta A.Ş. Euler Hermes Yönetim Kurulu Sigorta A.Ş. DECLARATION OF CONFORMITY Yönetim Kurulu Yönetim Kurulu Şirketimizin 2011 yılı faaliyet raporu 07 Ağustos 2007 tarih ve 26606 sayılı Resmi Gazete’de yayımlanarak yürürlüğe giren Sigorta Şirketimizin 2011 yılıyılı faaliyet raporu 0707 Ağustos 2007 tarih veve 26606 sayılı Resmi Gazete’de yayımlanarak yürürlüğe giren Sigorta faaliyet raporu 2007 tarih 26606 sayılı Resmi Gazete’de yayımlanarak yürürlüğe giren Sigorta ve Şirketimizin Reasürans ile2011 Emeklilik Şirketlerinin MaliAğustos Bünyelerine ilişkin Yönetmelik’te belirtilen usul ve esaslar çerçevesinde hazırlanmış veve Reasürans ile Emeklilik Şirketlerinin Mali Bünyelerine ilişkin Yönetmelik’te belirtilen usul ve esaslar çerçevesinde hazırlanmış Euler Hermes Sigorta A.Ş Board of Directors, Reasüranssunulmaktadır. ile Emeklilik Şirketlerinin Mali Bünyelerine ilişkin Yönetmelik’te belirtilen usul ve esaslar çerçevesinde hazırlanmış olup onayınıza olup onayınıza sunulmaktadır. olup onayınıza sunulmaktadır. We hereby submit our Company’s Activity Report for the year 2012, which is prepared in accordance with the procedures and principles stated in the Regulation on the Financial Structure of the Insurance and Reinsurance and Pension Companies, entered into force after being published in the official gazette dated August 7, 2007 and numbered 26606, for your approval. Michele Pignotti Özlem Özüner Michele Pignotti Özlem Özüner Michele Pignotti Özlem ÖzünerÜyesi ve Genel Müdür Yönetim Kurulu Başkanı Yönetim Kurulu Yönetim Kurulu Başkanı Yönetim Kurulu Üyesi veve Genel Müdür Yönetim Kurulu Başkanı Yönetim Kurulu Üyesi Genel Müdür
Michele Pignotti Özlem Özüner Chairman of the Board of Directors Member of the Board of Directors and Yasemin Yücel General Manager Yasemin Yücel Yasemin Yücel Mali İşler Müdürü Mali İşler Müdürü Mali İşler Müdürü
Yasemin Yücel Finance Manager
Chapter I 15 Introduction
Annual Report Compliance Opinion Akis Bağımsız Denetim ve Serbest Muhasebeci Mali müşavirlik A.Ş. Kavacık Rüzgarlı Bahçe Mah. Kavak Sok. No: 29 Beykoz 34805 İstanbul
Tel. : +90 (216) 681 90 00 Fax : +90 (216) 681 90 90 Web : www.kpmg.com.tr
ANNUAL REPORT COMPLIANCE OPINION To the Shareholders of Euler Hermes Sigorta Anonim Şirketi, We have audited the accuracy and the consistency of the financial information in the annual report of Euler Hermes Sigorta Anonim Şirketi (“the Company”) with the audited financial statement as of 31 December 2012. The annual report is the responsibility of the Company’s management. Our responsibility, as independent auditors, is to express an opinion on the annual report based on the compliance of financial information provided in the annual report with the audited financial statements and explanatory notes. Our audit was conducted in accordance with the regulations on preparation and issuance of annual report in “Communiqué on Individual Retirement Saving and Investment System” (“Communique”) issued on 7 August 2007 dates and 26606 numbered. Those regulations require that we plan and perform the audit to obtain reasonable assurance regarding whether the consistency of financial information represented in the annual report with the audited financial statements and explanatort notes is free of material misstatement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opininon. In our opinion, the financial information provided in the accompanying annual report prepared in accordance with the Communiqué is in compliance with the audited financial statements and explanatory notes of Euler Hermes Sigorta Anonim Şirketi, in all material respect, as at 31 December 2012. Istanbul 13 May 2013
Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi
Ruşen Fikret Selamet Partner
20,000 Credit Limit
requests received per day
AA-
Financial rating by
Standard & Poor’s
Chapter II Management and Corporate Management Practices
18 EULER HERMES Annual Report 2012
Organisational Chart
RIC Director
Risk Underwriting
Information & Grading
Risk U/W Group Manager
RIC Back Office
Information& Grading Group Manager
RIC Back Office Specialist
Risk U/W Supervisor
Senior Credit Analyst
Risk U/W Supervisor
Credit Analyst
Credit Analyst
Credit Analyst
Sector Credit Analyst
Claims & Collections
Claims Supervisor
Chapter II 19 Management and Corporate Management Practices
BOD
Internal Auditor
CEO
Exec. Assist.
CFAO
MMCD Director Market Management & Marketing Assist. Manager
Human Resources
Budget & Financial Control Assist. Manager Commercial U/W Assist. Manager
Financial Control Supervisor
Commercial U/W Assist. Supervisor
Policy Administration Supervisor
WA Client Advisor
Policy Administration Assistant Supervisor
Client Advisor Supervisor
Client Advisor Specialist
Sales Manager
Sales Manager
Broker Relations Assist. Manager
Accounting Assist. Supervisor
20 EULER HERMES Annual Report 2012
Board of Directors Michele Pignotti Chairman Graduated from Naples University “Istituto Universitario Orientale” Political Science – Economics course of studies” in 1988, and worked as an assistant in the Statistics Department of the same university, and completed the MBA program in 1989–90. He jointed Euler Hermes in 2004. Since May 2008, he is the General Manager of Euler Hermes Services Italia Srl, and is in charge of the Mediterranean countries, Africa and the Middle East Region. Previous experience: • Euler Hermes SIAC S.p.A. Allianz Group Commercial and Marketing Director • Telecom Italia Corporate Division - Marketing Director • Sara Lee Intimate Apparel - Playtex Italia European Marketing Manager, Sales Director Loeiz Limon Duparcmeur Deputy Chairman He graduated from the University of Paris Dauphine Mathematics Department with honours in 1992. He works with Euler Hermes since 1995. Since March 2010, he is the Chief Financial and Administrative Officer with Euler Hermes Italy (CFAO). Previous experience: • Euler Hermes UK - Finance Director • Euler Hermes Group - Finance Officer • Euler Hermes Netherlands - Finance Director • Euler Hermes Group - Finance Control Team Member • Euler Hermes France (SFAC) - Investment Manager
Paolo Cioni Board Member He graduated from the Roma Technical Institute G. Ferraris Information Technologies Department in 1983. He works with Euler Hermes since 1995. Since January 2010, he is the Information, Claims and Risk Director of Euler Hermes in charge of the Mediterranean countries, Africa and the Middle East region. Previous experience: • Euler Hermes Italy (SIAC) - Project Manager, Organisation Manager, Information Manager, Risk Director • Eurodata Software Spa - Advisor and Project Management Officer • Ministry of Defense, Italy - In charge of Air Forces (1984 -1986) Pascal Personne Board Member He graduated from the Ecole Supérieure de Commerce de Rouen, Technology Transfer Department in 1990. He has been working with Euler Hermes since 1990. Since January 2010, he is the Euler Hermes Marketing Management, Commercial UW and Distribution Department Director in charge of the Mediterranean countries, Africa and the Middle East. Previous experience: • Euler Hermes Spain – General Manager • Euler Hermes Group and France – Risk Unit Audit Departments, Finance Department Project Manager, Coordinator, Group Investment Relations Özlem Özüner Board Member and General Manager She has graduated from the Political Sciences and International Relations Department of the School of Economic and Administrative Sciences, Bosphorus University, in 1991. As of June 2011, she has started working as the General Manager of Euler Hermes Sigorta A.Ş. Previous experience: • HSBC Turkey – Esentepe Corporate Headquarters Group Head • HSBC London – Global Corporate and Investment Banking • Demirbank – Senior Manager • İktisat Bankası – Regional Manager
Chapter II 21 Management and Corporate Management Practices
Statutory Auditors Murat Ece: Universite Louis Pasteur, Faculte des Sciences Economique, Strasbourg Fransa mezunudur. Previous experience: • 2002- devam Murat Ece Denetim S.M.M.M.Ltd.Şirket Ortağı • 1977-2002 Arthur Andersen –Türkiye ve Balkan Ülkelerinden Sorumlu Ortak Hüseyin Dikici: Adana İ.T.İ.A.,Maliye-Muhasebe mezunudur.
Internal Auditor Emel Yücesoy She has graduated from the International Trade Department, Bosphorus University in 2007. She is the Internal Auditor of Euler Hermes Sigorta A.Ş. as of November 2012. Previous experience: • Ray Sigorta A.Ş. – Internal Audit Specialist • Allianz Hayat ve Emeklilik A.Ş. – Internal Audit Specialist • Turkcell Global Bilgi A.Ş. – Internal Auditor
Previous experience: • 1999-Devam Destek Yeminli Mali Müşavirlik Ltd. Sti.-Şirket Ortağı • 2003-Devam Rasyonel Bağımsız Denetim ve Y.M.M. A.Ş.- Sorumlu Ortak,Baş Denetçi
Senior Management Özlem Özüner Board Member and General Manager (please refer to page 20.) Yasemin Yücel CFAO She graduated from the the Middle East Technical University, Department of Economy in 1994. She completed her master’s degree at the Boston College in 1998. She has been working with Euler Hermes since 2010. As of May 2012, she is the Assistant General Manager in Charge of Financial Affairs and Policy Management with Euler Hermes Sigorta A.Ş. Previous experience: • HDI-Gerling International – Manager in charge of Budget, Financial Reporting and Risk Management • TEB/BNPP Türkiye Sigorta ve Faktoring A.Ş.Financial and Administrative Affairs Manager, Financial Reporting Manager • Ak Emeklilik A.Ş. – Assistant Manager in Charge of Budget and Financial Reporting • Başaran Nas SMMM A.Ş. – Assistant Manager in Charge of Audits • A.A.Aktif Analiz SMMM A.Ş. – Senior Auditor Ahmet Ali Bugay RIC Director He has graduated from the Environmental Engineering Department, Civil Engineering, Istanbul Technical
University in 1995. He has completed his Master’s Degree at the Business Administration Department of the Koç University in 1997. He has been working with Euler Hermes since 2011. As of December 2011, he is the Assistant General Manager in Charge of Risk, Information, and Losses with the Risk Director of Euler Hermes Sigorta A.Ş. Previous experience: • Silkroute Financial (UK) Ltd. – Director • Rothschild – Assistant Director • HSBC Bank A.Ş. – Manager • Ak Yatırım Menkul Değerler A.Ş. – Specialist • Demir Yatırım Menkul Değerler A.Ş. – Officer Umut Fırat MMCD Director He has graduated from the Economy Department of the School of Economic and Administrative Sciences of the Dokuz Eylül University in 2000. He has been working with Euler Hermes since 2008. As of September 2012, he is the Assistant General Manager in Charge of Marketing, Distribution Channels, and Commercial Allocations with Euler Hermes Sigorta A.Ş. Previous experience: • Euler Hermes Sigorta A.Ş. - Sales Director • Euler Hermes A.Ş. – Sales Manager • Fortis Faktoring A.Ş. - Sales Manager • Deniz Faktoring A.Ş. - Marketing Supervisor • Yapı Kredi Faktoring A.Ş. - Sales Specialist • Toprak Faktoring A.Ş. - Customer Relations Analyst
22 EULER HERMES Annual Report 2012
Human Resources Yet another noteworthy performance indicator as far as the company is concerned is the commitment and support on the part of our employees for the Company and its practices. “Allianz Engagement Survey” results, conducted by Kenexa Global Research Company across Allianz Group and its affiliates for the purpose of measuring employee satisfaction and trust placed in the Company’s Senior Management is subjected to reviews on a yearly basis and actions to be taken as a consequence of such reviews are then shared – in a transparent manner – with the employees.
training efforts for 2012, in the form of implementing a diverse range of training programs by combining the experience of Euler Hermes and the support of local training companies, to add expert insight to the employees. Efforts geared towards increasing the proficiency of our employees have continued throughout 2012, through the Allianz Academy on a global scale, and by programs developed together with a number of training companies on a local level.
Due to the fact that credit insurance offered by Euler Hermes is a relatively new product for Turkey, there is a need for training in order to increase the credit insurance experience of the majority of our employees in addition to other business activities of Euler Hermes in Turkey. Support has been provided as part of the
Recruitment of internship candidates from a multitude of universities into various company units was also carried out in 2012, to create experienced human resources for the industry, and as part of our corporate social responsibility. In this context, two colleagues who have completed their respective internship programs in 2012 have been hired on a full time basis at Euler Hermes.
Employee Profile
Education Level Profile Postgraduate Degree 30% Senior Management 13%
AA Degree 3%
Other Employees 80% Graduate Degree 64% High School Degree 3% Manager 7%
Graduate Degree Other Employees Senior Management Managers Total
19
24
High School
1
4
Postgraduate
9
2
AA Degree Total
30
Gender Distribution Male 40% Female 60%
Male
12
Female
18
Total
30
1 30
Corporate Social Responsibility Sustainable growth forms one of Euler Hermes’ foundational values. As a company, we have a commitment to serve the needs of people, inclusive of our customers, shareholders and employees, through the implementation of sustainable business strategies and acting responsibly in our area of business. We believe that fulfilling the role of a good corporate citizen is vital to the sustainability of our business, to meeting the expectations of our stakeholders and most importantly to the maintenance of growth within the countries in which we operate. As a company, our area of activity means that we acknowledge the importance of fostering growth and sustainability of global and domestic commercial environments into the future. We endeavor to do this by pursuing business strategies and developing products that will support the stability and growth of businesses in their relevant markets through financial protection and the utilization of financial and local knowledge. In Turkey, this has particularly meant listening to the needs of local businesses in the SME category to initiate a move to expand our product portfolio to include an easy-to-use product for Turkish SMEs which
Chapter II 23 Management and Corporate Management Practices
will contribute to the protection and stability of their own business, as well as the sustainability of local business sectors. Additionally, Euler Hermes strives to advise the relevant authorities on country specific trade sector developments and non-payment risks in order to build the required financial protection mechanisms to support trade and economic growth within the country. Being active in a still developing country, Euler Hermes Turkey has taken this value to also help formulate the initial stage of its local corporate social responsibility (CSR) activities on a societal level. Since the beginning of 2012, our Company has been providing support to children with impaired hearing and has chosen to develop projects in this area. Other CSR elements such as effective corporate governance, transparency and compliance all contribute to a company’s ability to carry out its responsibilities as a good corporate citizen. As Euler Hermes, we are committed to working together to ensure we fulfill these responsibilities not only on a corporate, but also on a societal level.
24 EULER HERMES Annual Report 2012
Research and Development Euler Hermes believes that research and development activities play an important role in ensuring the competitiveness of the company now and into the future, while supporting the profitable growth of the business. Developing products to increase the competitive strength and financial stability of clients forms an integral part of Euler Hermes’ R&D strategy. Euler Hermes also prioritises local engagement in its R&D activities by monitoring market conditions and needs on a country level to both develop unique products for local environments and partake in stakeholder discussions. At a global level continuing business transformation to achieve cost competitiveness has remained a strategic focus for Euler Hermes. In the wake of the global financial crisis, the Group launched a business transformation program aiming to simplify its structure and governance, as well as streamline its worldwide operations to achieve operational efficiency. These developments were based on the program concept “Excellence” and focused on increasing the productivity and flexibility of the company’s cost base. A key part of this program was the use of standardized IT Solutions across the Group. We have already seen the benefits of this program, recording lower expense ratios in 2011 and 2012 and we have further supported it with our Blue Europe project; which has seen the simplification of legal structures in Europe by grouping thirteen subsidiaries into one insurance company, Euler Hermes Europe. In 2013, the Group is set to improve its cost ratio even further by launching the pilot of the Galileo initiative (common policy administration platform) in Germany, a move which follows its launch of IRP (common risk platform), SAP (common financial platform), Convergence (common claims platform), IMX (common collection platform) and Copernicus (common CRM platform). In terms of customer service and product development, Euler Hermes has always put service quality at the centre of its strategy. Emphasizing this priority, in recent years Euler Hermes has developed a new service model which led to an achievement of all-time high client retention in 2012. New business also reached a record level with demand for credit insurance remaining very strong in the uncertain global economic environment. Understanding clients’ needs and concerns and offering the same level of service worldwide will remain determining factors in further strengthening our customer base and increasing our market share. Euler Hermes group, in 2012 launched an XoL (Excess of Loss) policy that completes our product range at a local level. The new policy also supports large and multinational companies seeking additional credit risk mitigation in their balance sheet, or protection from exceptional trade credit losses in a turbulent financial environment. Additionally, a signifcant portion of the Euler Hermes Group business activities is focused on trade credit insurance transactions. Accordingly, the Group places great importance its bonding business arm and having taken into account the growing Turkish economy and market potential, the Group has subsequently identified bonding as one of its development areas for Turkey. Euler Hermes Turkey is working together with the Undersecretariat of the Treasury of the Turkish Republic and the Insurance Association of Turkey to regulate the General Conditions for bonding in the local market.
Chapter II 25 Management and Corporate Management Practices
Board of Directors’ Report Board Of Directors' Report Submitted to the Ordinary General Assembly of Euler Hermes Sigorta A.Ş. held on 29/05/2013 Esteemed Partners, Welcome to the 3rd General Assembly Meeting of Euler Hermes Sigorta A.Ş. We hereby submit for your review the 2012 balance sheet and the profit and loss statements of our Company. The year 2012 was quite a troublesome year for the world economy. Particularly, risks of European origin have caused the decline of growth rates in many countries, the world trade has decelerated, and corporate bankruptcies have increased in many countries. Both the increasing risk perception across the markets, and the weak economic performance of developed countries have had a negative effect on developing countries as well; causing the growth rates to demonstrate a trend that is below expectations. Despite all these negative factors the Turkish economy grew by 2.2% in 2012. We believe that creating a growth structure that is low in comparison to the previous year, but sustainable, is the right model for countries like Turkey with a high current deficit risk. The total premium production in the Turkish insurance sector has increased by approximately 16% in comparison to 2011, reaching 20 billion TL. The share of the non-life branches, in which Euler Hermes is included as well, was 86% in total production. Considering that the non-life segment grew by 22% on average in the last decade, it is possible to achieve a premium production of 63 billion TL, which is the target for 2023. In 2012, the increase rate of the total premium production in the insurance industry was approximately twice the inflation rate, and currently, the rate of premiums to the GDP is very low, which provides an opportunity for growth in Turkey for all insurance companies like Euler Hermes. Operating in the field of Credit Insurance, our Company paves the way for secure trading through open accounts for our Policy Holders, and guides them in working with the right buyers. The year 2012 was a year when our company demonstrated a leap forward in the Turkish market, and when, due to the high demand for credit insurance, the Euler Hermes brand and product awareness among the insured increased. By the end of 2012, our company has demonstrated a total premium production of 25,159,947 TL, with a growth of 114% in comparison with the previous year. As of the end of 2012, our total assets reached 16,285,504 TL with an increase of 38% compared to the end of the previous year. Our gross technical losses reached (1,037,643) TL decreasing by 60% in comparison with the previous year. During the same period, our equities were 1,563,666 TL. In our third activity year in Turkey, we shall continue our activities with confidence, through our financial strength derived from the Allianz Group, and our new investments in Turkey, which is our strategic market. Respectfully,
Michele Pignotti Chairman
770 Million euros of global exposure
40 Million companies
monitored in our
risk database
Chapter III Financial Information and Assessments on Risk Management
28 EULER HERMES Annual Report 2012
Audit Internal Audit Activities Internal audit activities are being conducted by the Internal Audit Department reporting directly to the Board of Directors as per the “Regulations on the Internal Systems of Insurance and Reinsurance, and Pension Companies” published on the Official Journal of June 21, 2008, no. 26913, by the Treasury Undersecretariat. As of the end of 2012, the Internal Audit Department consists of one Internal Auditor. Mr Paolo Cioni has been appointed as the Board of Directors Member in Charge of Internal Systems with the resolution of our Company Board of Directors, dated March 13, 2012, no. 2012/4. Internal audit activities cover the processes to ensure that • the Company assets are protected, • the activities conducted are in compliance with the legislation, • the accounting information is accurate and reliable, • the resources are used economically and efficiently, and • the targets and objectives set by the management are attained. The Internal Audit activities provide assurance and consultancy for the Senior Management about the effectiveness and the adequacy of the Internal Control and Risk Management Systems and the Compliance Program. The reports prepared within the scope of the Internal Audit activities prepared in compliance with the legislation in effect, and the minimum audit standards of Euler Hermes and the Allianz Group are submitted to the Board of Directors of our Company.
The General Management Departments and agencies are included in the main areas of responsibility of the Internal Audit Department. The works conducted with the agencies are restricted to the business and transactions of our Company. The objective, scope, standards, as well as the duties, powers and responsibilities, structure, activities, and principles of operation are set forth in the Internal Audit Regulations. Internal Audit Department conducts its activities in an objective and independent manner as per the legal regulations and international internal audit standards. The Internal Audit Department prioritizes the activities of our Company with a risk based approach, creates annual and five-yearly internal audit plans, and submits them for the approval of the Board of Directors. Furthermore, the actions that are deemed necessary to be taken by our Company pursuant to the recommendations set forth in the internal audit reports are regularly being monitored by the Internal Audit Department. The Internal Audit Department has conducted three department audits, one compliance program audit, and two agency audits within the internal audit plan for 2012.
Chapter III 29 Financial Information and Assessments on Risk Management
Risk Management Pursuant to the “Regulations on the Internal Systems of Insurance and Reinsurance, and Pension Companies” (Internal Systems Regulations) published on the Official Journal of June 21, 2008, no. 26913, by the Treasury Undersecretariat, and with the Board of Directors resolution of March 12, 2012, no. 2012/02, our Company Internal Systems activities were grouped as Internal Audit, Risk Management, and Internal Control. The Internal Audit Department conducts the Internal Audit Activities of our Company within the scope of the Internal Audit Procedure approved in the meeting of our Board of Directors on November 22, 2012 no. 2012/10. Our Risk Management and Internal Control activities are conducted by the Risk Department and the Finance Department within the scope of the Risk Management System Procedures and Internal Control Procedures approved in the meeting of our Board of Directors on November 22, 2012 no. 2012/10. Risk Management Practices Pursuant to Article 4 of the “Regulations on the Internal Systems of Insurance and Reinsurance, and Pension Companies” (Internal Systems Regulations) published on the Official Journal of June 21, 2008, no. 26913, by the Treasury Undersecretariat, and with the Board of Directors resolution of March 12, 2012, no. 2012/02, our Company’s Assistant General Manager in charge of Risks, Intelligence and Damages Mr. Ahmet Ali Bugay was appointed as the member in charge of risk activities. Furthermore, a “Risk Committee” (RICO) has been created, consisting of the senior management of our Company and the representatives of the Euler Hermes Group, in order to make decisions about the level of risks that our Company may undertake, and the risk limits in line with the Euler Hermes global risk strategy. The Risk Management Practices are conducted by the General Manager and other Assistant General Managers of Departments, as well as the process owners in the coordination of our Company’s Assistant General Manager in charge of Risk, Information, and Losses. Within the scope of Risk Management Practices, premiums, reserves and underwriting risks are being managed, in addition to measuring, monitoring and reporting financial risks such as market, credits, and liquidity.
Within the scope of Management Practices, the following reports are regularly submitted to our Senior Management, Board of Directors, and the Risk Department of Euler Hermes Group: • Risk Report – the general risk situation of our Company (monthly) • Risk Committee (RICO) meeting presentation, and minutes of meeting following the presentation (monthly) • Asset Adequacy Test (quarterly) • Capital Adequacy Test (every 6 months) The asset adequacy test is conducted every quarter as required by the Treasury Undersecretariat in order to provide technical provisions in the quantities to meet the existing and probable liabilities of insurance and reinsurance companies, and to govern the procedures and principles for the assets to invest such provisions in. Company capital adequacy is being measured taking as the basis the provisions of “Regulations for Measuring and Assessing the Capital Adequacy of Insurance and Reinsurance, and Pension Companies” issued by the Treasury Undersecretariat in order to determine the adequacy of the Company capital, and the assessments on the outcome are first reported to the Risk Committee, and upon being assessed by the Risk Committee, they are reported to the Board of Directors. The coefficient based method used as per the abovementioned Regulations is a method that determines the capital amount defined in the same regulations for each risk type of the Company, thus allowing the calculation of the total capital needed. In addition to the above mentioned reports, the risk and check points have been determined in the processes of our Company, and the necessary actions were taken in line with the missing check points, with the Risk Assessment study conducted within the scope of the “Risk Management System Procedure”. With the help of the Risk map that is created as a result of the Risk Assessment study, it has been ensured that our priority risks are identified with the “Risk openness” and “Effect” matrix, and that they are shared with the Company Senior Management, Board of Directors, and the Risk Department of the Euler Hermes Group. In 2012, 12 RICO meetings were held, 4 Tests on Asset Adequacy to Meet Provisions were conducted, 2 Tests on Capital Adequacy were conducted, and 1 Risk Report has been prepared.
30 EULER HERMES Faaliyet Annual Report Raporu2012 2012
Types of Risks and the Risk Management Policies Applied The risks of our Company have been classified in order to set the basis for the modelling to be used within the scope of Risk Management Practices. The risks of our Company are examined under the categories of Market risk, Liquidity risk, Credit risk, Underwriting risk and Operational risks. Market Risk Market risk covers risks on financial instruments, share certificates, other securities, and all foreign exchange assets and liabilities which are in our Company’s portfolios, and which represent borrowing the yield of is linked with interest rates. Market risk expresses the loss risk created by possible factors such as “interest rate risk”, “share certificate risk”, and “exchange risk”, which may occur due to fluctuations in the value of positions regarding contracts for the above mentioned instruments, interest rates, share certificate prices, and foreign exchange rates. Within the scope of Risk Management practices, the risk policies concerning the investment portfolio as well as the relevant control systems are created. The methods for measuring and limiting risks are identified, stress tests are designed, and solutions are developed for matters requiring updates. The “Investment Committee” held with the attendance of Euler Hermes Group Treasury Management to assess the investment portfolio of our Company convenes quarterly, and the terms and currency types of our investments, the entities to which the investments are directed, and the revenue issues are resolved in this committee.
The amount and the term discrepancies between the assets and the liabilities of our Company are monitored regularly to reduce the liquidity risk. As a result of this, actions are taken to ensure that adequate liquid assets or assets that can easily be converted into liquid are kept in portfolio, and to eliminate the term discrepancies between our assets and liabilities. Credit Risk Credit Risk is defined as the possibility of our Company to encounter losses when our Policy Holders, the related parties, reinsurance partners or other parties with material relations with our Company do not comply with their contractual requirements, and fail to partially or entirely fulfil their liabilities in a timely fashion. The necessary controls are being carried out with the Commercial Allocation, Finance, Internal Audit, and Distribution Channels Departments for the management of credit risk. Before starting working with Policy Holders, a scoring system is used for measuring the financial and fiscal status. The Company works with financially strong international reinsurance companies. No problems have been encountered until the present in terms of the reinsurance entities fulfilling their liabilities, and it is believed that the risk is low. “Investment Committee”, held with the attendance of Euler Hermes Group Treasury Management, makes decisions on the parties with which our Company has investment relations, covering its investment activities, and the basis for the assets that constitute the subject matter of investment is distribution based on the credibility and the financial strengths of parties. Underwriting (Underwriting) Risk
Liquidity risk is defined as not having cash at a quantity and quality to fully and timely meet the cash outflows as a result of the imbalance in the cash flow, or not being able to close the positions with suitable prices, and at adequate amounts due to the barriers in the market.
When accepting risks in the course of our Credit Insurance activities, it is essential to provide insurance without losing sight of the principle of being cautious, in line with the target of technical profit. The policy’s coverage scope, conditions and pricing are created in line with the technical profit targets. Assessments on risk analysis are made both by Commercial Allocation and Risk Analysis teams in the process from the offer stage to policy issuance.
When the Company liquidity situation is examined, the existing and the expected asset quality, the present and future profit creation capacity, funding requirements demonstrated by previous experience, current liquidity position, funding requirements expected in the future, and fund resources are taken into consideration.
Sensitive buyer limits, sector limits and buyer rating limits are constantly monitored within the scope of underwriting risk studies in order to prevent the intensification of risk on certain buyers and sectors, and to optimise our capital in line with the risk and revenue profiles of our Company.
Liquidity Risk
Chapter III 31 Financial Information and Assessments on Risk Management
Our Company has created various underwriting strategies depending on the accepted risks and the nature of damages that have occurred, and manages probable risks with these strategies and reinsurance agreements. Actuary Risk The possible financial losses due to the insufficiency of the premiums collected for the guarantees provided in the course of our Credit Insurance activities, and the insufficiency of the provisions allocated, or the unpredictability of damages during major economic crisis periods are defined as our actuary risks. Actuary risks are can be listed as premium risks, reserve risks, and catastrophic loss risks. Premium risk means the risk where technical profitability during the course of an insurance period falls below the expected level. This risk‌ Reserve risks are those resulting from the failure of the loss provisions set aside for a certain insurance period to meet the damages occurring during that period. Euler Hermes manages actuarial risks by utilizing a number of simulation models. Operational Risk Operational Risk is the risk of the company to be exposed to material loss, directly or indirectly, due to insufficient or unsuccessful internal processes, employee and information technologies infrastructure, or other external events or factors. The objective of Operational Risk Management is avoiding losses through assessing and preventing potential operational risks within the Company by defining such risks ahead of time, while contributing to the establishment of a
strong capital base through mitigating the exposure to operational risk at the same time. Efforts in terms of continuing reviews of Operational Risks per identified risk scenarios are carried out by those responsible for Internal Control at Euler Hermes. Internal Control management is a process that is conducted as part of our daily activities by the Board of Directors, Senior Management of our Company, and all employees; providing assurance about the effectiveness and efficiency of our operations, the reliability of our financial reporting system, and compliance with the legislation. Within this scope, the current Risk Assessment our Company was prepared in 2012 in cooperation with the Company Senior Management, process owners (Commercial Allocation, Risk Allocation, Losses, Policy Management, Finance, Accounting and Internal Audit employees) and the representatives of the Deloitte company, and our Risk Management System Procedure has become effective with the Board of Directors resolution of November 22, 2012, no. 2012/10. Flow process charts have been crated, risk and control points have been established and a Risk Map has been drafted with the detailed information obtained from the process owners in the course of the assessment process. Risk Assessment process and Risk Map documents have been shared with the Company Senior Management, process owners and Mr Paolo Cioni, the Board of Directors member in charge of Internal Systems. Follow up on the risks defined as a result of the risk assessment process and tasks geared towards the establishment of control points in terms of risks have been assigned to the respective process owners by those in charge of Internal Control activities.
32 EULER HERMES Annual Report 2012
Ordinary General Assembly Agenda EULER HERMES SİGORTA ANONİM ŞİRKETİ BOARD OF DIRECTORS RESOLUTION
Resolution Date: : March 14, 2013 Resolution No : 2013/3 Attendees : Michele Pignotti Loeiz, Pierre, Marie, François Limon Duparcmeur Paolo Cioni Pascal Frederic Personne Özlem Özüner Subject of Resolution : Invitation to the Ordinary General Assembly for the year 2012 Resolution : The Board of Directors of our Company has convened and made the below resolutions: 1.
The 2012 Ordinary General Assembly Meeting of our Company is to be held at the Company headquarters on May 29, 2013 at 15:00 hours,
2.
The Ordinary General Assembly meeting is to be announced to the shareholders,
3.
A ministry representative is to be required from the T.R. Ministry of Science, Industry, and Technology, and
4.
The 2012 Ordinary General Assembly agenda is to consist of the below items.
Chapter III 33 Financial Information and Assessments on Risk Management
Agenda 1. Opening and the formation of the Council; 2. Authorising the Council to sign the minutes of meeting; 3. Reading, discussing and accepting the 2012 Board of Directors activity report; 4. Reading, discussing and accepting the 2012 Auditors’ report; 5. Reading, discussing and accepting the 2012 balance sheet, and profit and loss statements; 6. Acquittal of the members of the Board of Directors and Auditors for 2012; 7. Discussion and approval of capital increase; 8. Discussion and acceptance of the amendment of the following articles of the Articles of Association: 7. (Company Capital), 10. (Board of Directors Meetings) and 16. (Meeting Place); 9. Appointing independent auditors; 10. Approval of the General Assembly Internal Directives; 11. Wishes and requests; 12. Closing.
Michele Pignotti
Loeiz, Pierre, Marie, François Limon Duparcmeur
Paolo Cioni
Pascal Frederic Personne
Özlem Özüner
34 EULER HERMES Annual Report 2012
Auditor's Report EULER HERMES SİGORTA A.Ş. Büyükdere Cad. No: 100 - 102 Maya Akar Center Kat: 7 Esentepe 34394 İstanbul Türkiye Tel :+90 212 290 76 10 Fax :+90 212 290m 76 11 A Company of
AUDITORS’ REPORT To Euler Hermes Sigorta A.Ş. Ordinary General Assembly; We have examined the books and documents of Euler Hermes Sigorta A.Ş. for the 2012 activity year. It was observed that the entries were made in the books and the auxiliary accounts in compliance with the documents kept in the files. It was also seen that the resolutions of the Board of Directors meetings bearing the signatures of the participating members were orderly posted in the Board of Directors Resolution Book, and that the relevant implementations are carried out as per the resolutions. It has been observed that the 2012 Balance Sheet, Profit/Loss statements presented for your approval by the Board of Directors are prepared in line with the accounting records and documents, and that the works done and the transactions effected are as per the Turkish Commercial Code and the Articles of Association. As per our opinion, the Balance Sheet and the Profit/Loss Statement of 31/12/2012, the contents of which we have adopted reflect the actual activity results for the mentioned period. We hereby submit for your votes the approval of the Balance Sheet and the Profit/Loss Statement, and the acquittal of the Board of Directors.
Hüseyin Dikici Murakıp
Halis Murat Ece Murakıp
Chapter III 35 Financial Information and Assessments on Risk Management
Assessment on Financial Status, Profitability and Claims Payment Capability According to Article 4 of the “Communiqué on Relating to Financial Structure of Insurance, Reinsurance and Individual Pension Companies” which regulates necessary guarantee amount, minimum guarantee fund for capital adequacy calculation cannot be less than one third of the minimum initial capital and the minimum guarantee fund is blocked for the related capital adequacy calculation period. As of December 31, 2012 and 2011, minimum guarantee fund of the Company amounts to TL 1,833,333. As of December 31, 2012 and 2011, bank deposits blocked in favour of the Treasury Undersecretariat amount to TL 2,450,650 and TL 2,062,922 respectively.
Amount of insurance guarantees per branches
Premium Production and Profitability The premium production of our Company at the end of 2012 was 25,159,947 TL (2011:11,746,034 TL). Due to the fact that our Company is a newly built company in the process of growing, and that it operates with a high protection policy, we have had losses totalling 2,048,991 TL at the end of 2012. Power to Pay Claims At the end of 2012, our Company has paid gross claims of a total of 4,840,297 TL (2011: 27,069 TL) at the end of 2012. Due to the fact that the company has generated its first policy in 2011, and that it has recently started its activities, and there were no policies issued for 2010, no claims were paid. December 31, 2012
December 31, 2011
Credit
405,514,223
225,639,904
Exports
152,712,446
165,995,151
Total
558,226,669
391,635,055
As of December 31, 2012, the paid capital of our Company is 5,500,000 TL. In 2012, our Company’s main activities are as follows: 3,132,384 TL (2011: 1,205,693 TL) revenues, and 4,170,027 TL (2011: 3,792,805 TL) expenses, and technical losses were 1,037,643 TL (2011: 2,587,112 TL). The size of the balance sheet has reached 16,285,504 TL (2011: 11,796,137 TL) as of December 31, 2012. As of the present, the sum of the cash values and the securities is 7,179,679 TL. (2011: 5,475,393 TL). The 2012 end of the year activity expenses were reduced by 56%, reaching 1,690,505 TL. The most important factor in the decrease of activity expenses was the 323% increase in the reinsurance commission revenues due to the increasing production volume. A capital requirement has arisen for the Company in the capital adequacy calculations for the fiscal year that has ended on December 21, 2012, pursuant to the “Regulations on the Measurement and Assessment of Capital Adequacies of Insurance and Reinsurance, and Pension Companies” published by the T.R. Prime Ministry, Treasury Undersecretariat. The Company management has taken the necessary measures to improve the current financial situation, and the capital requirement shall be met by a capital increase by the Company main partner.
Pursuant to the “Regulations on the Measurement and Assessment of Capital Adequacies of Insurance and Reinsurance, and Pension Companies” published by the Treasury Undersecretariat in the Official Journal of January 19, 2008, no. 26761, the minimum equity amount necessary for the Company has been calculated as 6,830,982 TL (December 31, 2011: 3,443,339 TL) in the capital adequacy chart calculated based on the financial statements for the accounting term that has ended on December 31, 2012. As of December 31, 2012, the equity of the Company is 2,397,282 TL (December 31, 2011: 3,612,657 TL), and there is a capital requirement of 4,433,700 TL. The Company management has started to take the measures necessary for improving the current financial situation. As per the Board of Directors resolution of March 14, 2013, it was decided to increase the Company capital by 6,854,000 TL in cash, and that the capital need until the Ordinary General Assembly to be held on May 29, 2013 be paid by the Company main partner.
36 EULER HERMES Annual Report 2012
37
Euler Hermes Sigorta Anonim Şirketi Financial Statements As at 31 December 2012 With Independent Auditors’ Report
38
EULER HERMES Sigorta Anonim Şirketi Independent Auditors’ Report as of 31 December 2012
INDEPENDENT AUDITORS’ REPORT
To the Board of Directors of Euler Hermes Sigorta Anonim Şirketi We have audited the accompanying balance sheet of Euler Hermes Sigorta Anonim Şirketi (“the Company”) as of 31 December 2012, and the related statements of income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the accounting principles and standards in force as per the insurance legislation. This responsibility includes: designing, implementing and maintaining internal systems relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Independent Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the audit standards in force as per the insurance legislation. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal systems relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal system. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
EULER HERMES Sigorta Anonim Şirketi Financial Statements as of 31 December 2012
Chapter III 39 Financial Information and Assessments on Risk Management
Independent Auditors’ Opinion In our opinion, the accompanying financial statements give a true and fair view of the financial position of Euler Hermes Sigorta Anonim Şirketi as at 31 December 2012, and of its financial performance and its cash flows for the year then ended in accordance with the accounting principles and standards (see Note 2) in force as per the insurance legislation. Emphasis of matter Without qualifying our audit report, we draw attention to the following matter: The accompanying financial statements are prepared assuming that the Company will continue as a going concern. The Company incurred a net loss amounting to TL 2,048,991 for the year ended 31 December 2012. As at 31 December 2012, prior periods’ losses of the Company amounted to TL 1,887,342 resulted accumulated losses by TL 3,963,334 in total. Total equity of the Company amounting to TL 1,563,666 in the accompanying financial statements is below one third of the Company’s share capital. As a result of these losses in the current and prior periods, the Company’s financial position has been seriously affected and in accordance with Undersecreteriat of Treasury (“Treasury”) regulation regarding “Communiqué on Measurement and Assessment of Capital Adequacy for Insurance, Reinsurance and Individual Pension Companies”, a capital need for TL 4,433,700 has been arisen in the solvency calculation for the period ending as at 31 December 2012. Related matters indicate a significant uncertainty in the Company’s going concern, however, as explained detailly in Note 4.2, the management has started taking the necessary precautions to improve the financial position and has stated that the need for capital will be met with a capital increase from the Company’s main shareholder and the solvency calculation table and payment plan related to the amount will be presented to the Treasury. On the other hand, the Company’s main shareholder has committed to provide the necessary financial support for the capital that the Company may require in order to continue its operations without interruptions in the upcoming periods
Akis Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi
Ruşen Fikret Selamet Sorumlu Ortak, Başdenetçi
Additional paragraph for convenience translation to English: As explained in Note 2.1.1, the accompanying financial statements are not intended to present the financial position and results of operations of the Company in accordance with the accounting principles and practices generally accepted in countries and jurisdictions other than Turkey and IFRS.
40
EULER HERMES Sigorta Anonim Şirketi Financial Statements as at 31 December 2012 (Currency:Turkish Lira(TL))
EULER HERMES SİGORTA ANONİM ŞİRKETİ FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2012 We confirm that the financial statements and related disclosures and footnotes as at 31 December 2012 which were prepared in accordance with the accounting principles and standards in force as per the regulations of Turkish Republic Prime Ministry Undersecretariat of Treasury are in compliance with the “Code Related to the Financial Reporting of Insurance, Reinsurance and Private Pension Companies” and the financial records of our Company. İstanbul, 14 March 2013
Özlem Özüner Yönetim Kurulu Üyesi Genel Müdür
Orhun Emre Çelik Aktüer
Yasemin Yücel Mali İşler Direktörü
Murat Ece Kanuni Denetçi
Hüseyin Dikici Kanuni Denetçi
EULER HERMES Sigorta Anonim Ĺžirketi
Chapter III 41 Financial Information and Assessments on Risk Management
Balance Sheet as at 31 December 2012 (Currency: Turkish Lira (TL))
ASSETS Note
Audited Current Period 31 December 2012
Audited Prior Period 31 December 2011
A- Cash and cash equivalents
14
7,179,679
5,475,393
1- Cash
14
2,639
3,255
I- Current Assets
2- Cheques Receivable 3- Banks
14
-
-
7,177,040
5,472,138
4- Cheques Given and Payment Orders
-
-
5- Other Cash and Cash Equivalents
-
-
B- Financial Assets and Financial Investments with Risks on Policyholders
11
1- Available-for-Sale Financial Assets 2- Held to Maturity Investments
1,028
-
-
-
-
-
1,028
-
4- Loans and Receivables
-
-
5- Provision for Loans and Receivables
-
-
6- Financial Investments with Risks on Life Insurance Policyholders
-
-
7- Company’s Own Equity Shares
-
-
8- Impairment in Value of Financial Assets
-
-
3- Financial Assets Held for Trading
11
C- Receivables from Main Operations
12
6,675,699
4,614,326
1- Receivables from Insurance Operations
12
6,835,735
4,614,326
2- Provision for Receivables from Insurance Operations
12
(160,036)
-
3- Receivables from Reinsurance Operations
-
-
4- Provision for Receivables from Reinsurance Operations
-
-
5- Cash Deposited to Insurance & Reinsurance Companies
-
-
6- Loans to the Policyholders
-
-
7- Provision for Loans to the Policyholders
-
-
8- Receivables from Private Pension Operations
-
-
9- Doubtful Receivables from Main Operations
-
-
10- Provision for Doubtful Receivables from Main Operations
-
-
1,155,553
873,789
-
136,906
D- Due from Related Parties
12,45
1- Due from Shareholders
45
2- Due from Associates
-
-
823,511
736,883
4- Due from Joint Ventures
-
-
5- Due from Personnel
-
-
3- Due from Subsidiaries
45
6- Due from Other Related Parties
45
332,042
-
7- Rediscount on Receivables from Related Parties
-
-
8- Doubtful Receivables from Related Parties
-
-
9- Provision for Doubtful Receivables from Related Parties
-
-
50,899
18,382
1- Finance Lease Receivables
-
-
2- Unearned Finance Lease Interest Income
-
-
3- Deposits and Guarantees Given
-
-
50,899
18,382
5- Rediscount on Other Miscellaneous Receivables
-
-
6- Other Doubtful Receivables
-
-
7- Provision for Other Doubtful Receivables
-
-
E- Other Receivables
12
4- Other Miscellaneous Receivables
12
F- Prepaid Expenses and Income Accruals
17
637,251
307,668
1- Deferred Acquisition Costs
17
637,251
307,668
2- Accrued Interest and Rent Income
-
-
3- Income Accruals
-
-
4- Other Prepaid Expenses and Income Accruals
-
-
12
83,392
47,990
-
-
12
50,779
32,223
-
-
12
2,649
-
12,45
29,964
15,767
6- Inventory Count Differences
-
-
7- Other Miscellaneous Current Assets
-
-
8- Provision for Other Current Assets
-
-
15,783,501
11,337,548
G- Other Current Assets 1- Stocks to be Used in the Following Months 2- Prepaid Taxes and Funds 3- Deferred Tax Assets 4- Job Advances 5- Advances Given to Personnel
I- Total Current Assets
The accompanying notes are an integral part of these financial statements.
42
EULER HERMES Sigorta Anonim Ĺžirketi Balance Sheet as at 31 December 2012 (Currency: Turkish Lira (TL))
ASSETS II- Non-Current Assets
Note
A- Receivables from Main Operations 1- Receivables from Insurance Operations 2- Provision for Receivables from Insurance Operations 3- Receivables from Reinsurance Operations 4- Provision for Receivables from Reinsurance Operations 5- Cash Deposited for Insurance and Reinsurance Companies 6- Loans to the Policyholders 7- Provision for Loans to the Policyholders 8- Receivables from Individual Pension Business 9- Doubtful Receivables from Main Operations 10- Provision for Doubtful Receivables from Main Operations B- Due from Related Parties 1- Due from Shareholders 2- Due from Associates 3- Due from Subsidiaries 4- Due from Joint Ventures 5- Due from Personnel 6- Due from Other Related Parties 7- Rediscount on Receivables from Related Parties 8- Doubtful Receivables from Related Parties 9- Provision for Doubtful Receivables from Related Parties C- Other Receivables 1- Finance Lease Receivables 2- Unearned Finance Lease Interest Income 3- Deposits and Guarantees Given 4- Other Miscellaneous Receivables 5- Rediscount on Other Miscellaneous Receivables 6- Other Doubtful Receivables 7- Provision for Other Doubtful Receivables D- Financial Assets 1- Investments in Equity Shares 2- Investments in Associates 3- Capital Commitments to Associates 4- Investments in Subsidiaries 5- Capital Commitments to Subsidiaries 6- Investments in Joint Ventures 7- Capital Commitments to Joint Ventures 8- Financial Assets and Financial Investments with Risks on Policyholders 9- Other Financial Assets 10- Impairment in Value of Financial Assets E- Tangible Assets 1- Investment Property 2- Impairment on Investment Property 3- Owner Occupied Property 4- Machinery and Equipments 5- Furniture and Fixture 6- Motor Vehicles 7- Other Tangible Assets (Including Leasehold Improvements) 8- Tangible Assets Acquired Through Finance Leases 9- Accumulated Depreciation (-) 10- Advances Paid for Tangible Assets (Including Construction in Progress) F- Intangible Assets 1- Rights 2- Goodwill 3- Pre-operating Expenses 4- Research and Development Costs 6- Other Intangible Assets 7- Accumulated Amortization 8- Advances Paid for Intangible Assets G- Prepaid Expenses and Income Accruals 1- Deferred Acquisition Costs 2- Income Accruals 3- Other Prepaid Expenses and Income Accruals H- Other Non-Current Assets 1- Effective Foreign Currency Accounts 2- Foreign Currency Accounts 3- Stocks to be Used in the Following Years 4- Prepaid Taxes and Funds 5- Deferred Tax Assets 6- Other Miscellaneous Non-Current Assets 7- Amortization on Other Non-Current Assets 8- Provision for Other Non-Current Assets II- Total Non-Current Assets Total Assets
9
9
6
6 6
6 8 8
8 17 17
21
21
Audited Current Period 31 December 2012 152,527 152,527 51,720 59,123 7,190 (14,593) 2,281 2,360 (79) 69 69 295,406 295,406 502,003 16,285,504
The accompanying notes are an integral part of these financial statements.
Audited Prior Period 31 December 2011 152,527 152,527 9,863 10,046 826 (1,009) 793 793 295,406 295,406 458,589 11,796,137
EULER HERMES Sigorta Anonim Şirketi
Chapter III 43 Financial Information and Assessments on Risk Management
Balance Sheet as at 31 December 2012 (Currency: Turkish Lira (TL))
LIABILITIES III- Short-Term Liabilities
Note
Audited Current Period 31 December 2012
Audited Prior Period 31 December 2011
A- Financial Liabilities
-
-
1- Borrowings from Financial Institutions
-
-
2- Finance Lease Payables
-
3- Deferred Leasing Costs
-
-
4- Current Portion of Long Term Debts
-
-
5- Principal Installments and Interests on Bonds Issued
-
-
6- Other Financial Assets Issued
-
-
7- Valuation Differences of Other Financial Assets Issued
-
-
8- Other Financial Liabilities
-
-
B- Payables Arising from Main Operations
19
2,865,090
5,157,899
1- Payables Arising from Insurance Operations
19
2,865,090
5,157,899
2- Payables Arising from Reinsurance Operations
-
-
3- Cash Deposited by Insurance and Reinsurance Companies
-
-
4- Payables Arising from Pension Operations
-
-
5- Payables Arising from Other Operations
-
-
6- Discount on Payables from Other Operations
-
-
19,45
122,076
38,988
-
-
2- Due to Associates
19,45
-
29,440
3- Due to Subsidiaries
19,45
120,215
-
C-Due to Related Parties 1- Due to Shareholders
4- Due to Joint Ventures
-
-
19,45
1,861
9,548
-
-
19
61,255
51,159
-
-
19
61,255
51,159
-
-
E-Insurance Technical Provisions
17
8,821,071
1,236,991
1- Reserve for Unearned Premiums - Net
17
7,113,064
643,353
5- Due to Personnel 6- Due to Other Related Parties D- Other Payables 1- Deposits and Guarantees Received 2- Other Miscellaneous Payables 3- Discount on Other Miscellaneous Payables
2- Reserve for Unexpired Risks- Net
-
-
3- Life Mathematical Provisions - Net
-
-
4- Provision for Outstanding Claims - Net
17
1,688,918
593,638
5- Provision for Bonus and Discounts – Net
17
19,089
-
6- Provisions for Policies Investment Risks of Which Belong to Life Insurance Policyholders – Net
-
-
7- Other Technical Provisions – Net
-
-
F- Provisions for Taxes and Other Similar Obligations
19
267,547
106,394
1- Taxes and Funds Payable
19
228,033
81,548
2- Social Security Premiums Payable
19
39,514
24,846
3- Overdue, Deferred or By Installment Taxes and Other Liabilities
-
-
4- Other Taxes and Similar Payables
-
-
5- Corporate Tax Payable
-
-
6- Prepaid Taxes and Other Liabilities Regarding Current Year Income
-
-
7- Provisions for Other Taxes and Similar Liabilities
-
-
53,776
26,949
1- Provision for Employee Termination Benefits
-
-
2- Provision for Pension Fund Deficits
-
-
G- Provisions for Other Risks
23
3- Provisions for Costs
23
53,776
26,949
H- Deferred Income and Expense Accruals
19
1,613,348
1,325,599
1- Deferred Income
19
1,221,348
1,135,599
2- Expense Accruals
19
392,000
190,000
3- Other Deferred Income and Expense Accruals
-
-
I- Other Short Term Liabilities
-
-
1- Deferred Tax Liabilities
-
-
2- Inventory Count Differences
-
-
3- Other Various Short Term Liabilities III – Total Short Term Liabilities
-
-
13,804,163
7,943,979
The accompanying notes are an integral part of these financial statements.
44
EULER HERMES Sigorta Anonim Şirketi Balance Sheet as at 31 December 2012 (Currency: Turkish Lira (TL))
LIABILITIES IV- Long-Term Liabilities
Note
Audited Current Period 31 December 2012
Audited Prior Period 31 December 2011
A- Financial Liabilities
-
-
1- Borrowings from Financial Institutions
-
-
2- Finance Lease Payables
-
3- Deferred Leasing Costs
-
-
4- Bonds Issued
-
-
5- Other Financial Assets Issued
-
-
6- Valuation Differences of Other Financial Assets Issued
-
-
7- Other Financial Liabilities
-
B- Payables Arising from Operating Activities
-
-
1- Payables Arising from Insurance Operations
-
-
2- Payables Arising from Reinsurance Operations
-
3- Cash Deposited by Insurance and Reinsurance Companies
-
-
4- Payables Arising from Pension Operations
-
-
5- Payables Arising from Other Operations
-
-
6- Discount on Payables from Other Operations
-
-
C- Due to Related Parties
-
1- Due to Shareholders
-
-
2- Due to Associates
-
-
3- Due to Subsidiaries
-
4- Due to Joint Ventures
-
-
5- Due to Personnel
-
-
6- Due to Other Related Parties
-
-
D- Other Payables
-
-
1- Deposits and Guarantees Received
-
2- Other Miscellaneous Payables
-
-
3- Discount on Other Miscellaneous Payables
-
-
E-Insurance Technical Provisions
17
880,187
220,307
1- Reserve for Unearned Premiums - Net
17
46,571
34,051
2- Reserve for Unexpired Risks- Net
-
-
3- Life Mathematical Provisions - Net
-
-
4- Provision for Outstanding Claims - Net
-
-
5- Provision for Bonus and Discounts – Net
-
-
6- Provisions for Policies Investment Risks of Which Belongs to Life Insurance Policyholders – Net
-
-
7- Other Technical Provisions – Net
833,616
186,256
F-Other Liabilities and Accruals
17
-
-
1- Other Liabilities
-
-
2- Overdue, Deferred or By Installment Taxes and Other Liabilities
-
-
-
-
G- Provisions for Other Risks
3- Other Liabilities and Expense Accruals 23
37,488
19,194
1- Provisions for Employment Termination Benefits
23
37,488
19,194
2- Provisions for Pension Fund Deficits
-
-
H-Deferred Income and Expense Accruals
-
-
1- Deferred Income
-
-
2- Expense Accruals
-
-
3- Other Deferred Income and Expense Accruals
-
I- Other Long Term Liabilities
-
-
1- Deferred Tax Liabilities
-
-
2- Other Long Term Liabilities IV - Total Long Term Liabilities
-
-
917,675
239,501
The accompanying notes are an integral part of these financial statements.
EULER HERMES Sigorta Anonim Ĺžirketi
Chapter III 45 Financial Information and Assessments on Risk Management
Balance Sheet as at 31 December 2012 (Currency: Turkish Lira (TL))
EQUITY Note
Audited Current Period 31 December 2012
Audited Prior Period 31 December 2011
5,500,000
5,500,000
15
5,500,000
5,500,000
2- Unpaid Capital
-
-
3- Positive Capital Restatement Differences
-
-
4- Negative Capital Restatement Differences
-
-
B- Capital Reserves
-
-
V- Equity A- Paid in Capital 1- (Nominal) Capital
1- Share Premiums
-
-
2- Cancellation Profits of Equity Shares
-
-
3- Profit on Asset Sale to be Transferred to Equity
-
4- Currency Translation Differences
-
-
5- Other Capital Reserves
-
-
-
-
C- Profit Reserves 1- Legal Reserves
15
2- Status Reserves 3- Extraordinary Reserves
15
4- Special Funds
-
-
-
-
-
-
-
-
5- Revaluation on Financial Assets
-
6- Other Profit Reserves
-
-
D- Retained Earnings
-
-
-
-
E- Accumulated Losses
1- Retained Earnings
(1,887,343)
(174,306)
1- Accumulated Losses
(1,887,343)
(174,306)
F- Profit for the period
(2,048,991)
(1,713,037)
1- Net Profit for the Year
-
-
2- Net Loss for the Year
(2,048,991)
(1,713,037)
V- Total Equity Total Equity and Liabilities
1,563,666
3,612,657
16,285,504
11,796,137
The accompanying notes are an integral part of these financial statements.
46
EULER HERMES Sigorta Anonim Şirketi Statement of Income For the Year Ended 31 December 2012 (Currency: Turkish Lira (TL))
Audited Current Period 31 December 2012
Audited Prior Period 31 December 2011
A- Non-Life Technical Income
3,132,384
1,205,693
1- Earned Premiums (Net of Reinsurer Share)
2,684,106
988,651
9,166,337
1,666,055
I-TECHNICAL SECTION
Note
1.1- Written Premiums (Net of Reinsurer Share)
17
1.1.1- Written Premiums, gross
17
25,159,947
11,746,034
1.1.2- Written Premiums, ceded
10,17
(15,993,610)
(10,079,979)
1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward)
17,29
(6,482,231)
(677,404)
1.2.1- Reserve for Unearned Premiums, gross
17
(2,633,728)
(4,634,377)
1.2.2- Reserve for Unearned Premiums, ceded
10, 17
(3,848,503)
3,956,973
1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward)
-
-
1.3.1- Reserve for Unexpired Risks, gross
-
-
1.3.2- Reserve for Unexpired Risks, ceded
-
-
336,953
217,042
3- Other Technical Income (Net of Reinsurer Share)
9,858
-
3.1- Other Technical Income, gross
9,858
-
3.2- Other Technical Income, ceded
-
-
2- Investment Income - Transferred from Non-Technical Section
4- Accrued Salvage and Subrogation Income
2.15
101,467 (4,170,027)
(3,792,805)
1- Incurred Losses (Net of Reinsurer Share)
17
(1,813,073)
(597,810)
1.1- Claims Paid (Net of Reinsurer Share)
17
(717,793)
(4,172)
1.1.1- Claims Paid, gross
17
(4,840,297)
(27,069)
B- Non-Life Technical Expense
1.1.2- Claims Paid, ceded
10,17
4,122,504
22,897
1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward)
17,29
(1,095,280)
(593,638)
1.2.1- Change in Provisions for Outstanding Claims, gross
17
(9,199,355)
(4,239,926)
1.2.2- Change in Provisions for Outstanding Claims, ceded
10, 17
8,104,075
3,646,288
2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward) 2.1- Provision for Bonus and Discounts, gross 2.2- Provision for Bonus and Discounts, ceded 3- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward) 4- Operating Expenses
(19,089)
-
(170,518)
-
151,429
-
17,29
(647,360)
(186,256)
32
(1,690,505)
(3,008,739)
5- Change in Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward)
-
-
5.1- Mathematical Provisions
-
-
5.2 – Reinsurer Share in Mathematical Provisions
-
-
6- Other Technical Expenses
-
-
6.1- Other Technical Expenses, gross
-
-
6.2- Reinsurer Share in Other Technical Expenses, gross
-
-
(1,037,643)
(2,587,112)
C- Net Technical Income-Non-Life (A – B) D- Life Technical Income
-
-
1- Earned Premiums (Net of Reinsurer Share)
-
-
1.1- Written Premiums (Net of Reinsurer Share)
-
-
1.1.1- Written Premiums, gross
-
-
1.1.2- Written Premiums, ceded
-
-
1.2- Change in Reserve for Unearned Premiums (Net of Reinsurer Shares and Less the Amounts Carried Forward)
-
-
1.2.1- Reserve for Unearned Premiums, gross
-
-
1.2.2- Reserve for Unearned Premiums, ceded
-
-
1.3- Change in Reserve for Unexpired Risks (Net of Reinsurer Share and Less the Amounts Carried Forward)
-
-
1.3.1- Reserve for Unexpired Risks, gross
-
-
1.3.2- Reserve for Unexpired Risks, ceded
-
-
2- Investment Income
-
-
3- Unrealized Gains on Investments
-
-
4- Other Technical Income (Net of Reinsurer Share)
The accompanying notes are an integral part of these financial statements.
EULER HERMES Sigorta Anonim Şirketi
Chapter III 47 Financial Information and Assessments on Risk Management
Statement of Income For the Year Ended 31 December 2012 (Currency: Turkish Lira (TL))
I-TECHNICAL SECTION
Note
Audited Current Period 31 December 2012
Audited Prior Period 31 December 2011
E- Life Technical Expense
-
-
1- Incurred Losses (Net of Reinsurer Share)
-
-
1.1- Claims Paid (Net of Reinsurer Share)
-
-
1.1.1- Claims Paid, gross
-
-
1.1.2- Claims Paid, ceded
-
-
1.2- Change in Provisions for Outstanding Claims (Net of Reinsurer Share and Less the Amounts Carried Forward)
-
-
1.2.1- Change in Provisions for Outstanding Claims, gross
-
-
1.2.2- Change in Provisions for Outstanding Claims, ceded
-
-
2- Change in Provision for Bonus and Discounts (Net of Reinsurer and Less the Amounts Carried Forward)
-
-
2.1- Provision for Bonus and Discounts, gross
-
-
2.2- Provision for Bonus and Discounts, ceded
-
-
3- Change in Life Mathematical Provisions (Net of Reinsurer Share and Less the Amounts Carried Forward)
-
-
3.1- Change in Life Mathematical Provisions, gross
-
-
3.2- Change in Life Mathematical Provisions, ceded
-
-
4- Change in Provisions for Policies Investment Risks of Life Insurance Policyholders (Net of Reinsurer Share and Less the Amounts Carried Forward)
-
-
4.1- Change in Provisions for Policies Investment Risks of Life Insurance Policyholders, gross
-
-
4.2- Change in Provisions for Policies Investment Risks of Life Insurance Policyholders, ceded
-
-
5- Change in Other Technical Reserves (Net of Reinsurer Share and Less the Amounts Carried Forward)
-
-
6- Operating Expenses
-
-
7- Investment Expenses
-
-
8- Unrealized Losses on Investments
-
-
9- Investment Income Transferred to the Non-Technical Section
-
-
F- Net Technical Income- Life (D – E)
-
-
G- Pension Business Technical Income
-
-
1- Fund Management Income
-
-
2- Management Fee
-
-
3- Entrance Fee Income
-
-
4- Management Expense Charge in case of Suspension
-
-
5- Income from Private Service Charges
-
-
6- Increase in Value of Capital Allowances Given as Advance
-
-
7- Other Technical Expense
-
-
H- Pension Business Technical Expense
-
-
1- Fund Management Expense
-
-
2- Decrease in Value of Capital Allowances Given as Advance
-
-
3- Operating Expenses
-
-
4- Other Technical Expenses
-
-
I- Net Technical Income - Pension Business (G – H)
-
-
The accompanying notes are an integral part of these financial statements.
48
EULER HERMES Sigorta Anonim Şirketi Statement of Income For the Year Ended 31 December 2012 (Currency: Turkish Lira (TL))
II-NON-TECHNICAL SECTION
Note
C- Net Technical Income – Non-Life (A-B)
Audited Current Period 31 December 2012 (1,037,643)
(2,587,112)
-
-
F- Net Technical Income – Life (D-E) I - Net Technical Income – Pension Business (G-H) J- Total Net Technical Income (C+F+I) K- Investment Income 1- Income from Financial Assets
4.2
Audited Prior Period 31 December 2011
-
-
(1,037,643)
(2,587,112)
336,953
1,114,938
336,953
217,042
2- Income from Disposal of Financial Assets
-
-
3- Valuation of Financial Assets
-
-
-
897,896
4- Foreign Exchange Gains
4.2
5- Income from Associates
-
-
6- Income from Subsidiaries and Joint Ventures
-
-
7- Income from Property, Plant and Equipment
-
-
8- Income from Derivative Transactions
-
-
9- Other Investments
-
-
10- Income Transferred from Life Technical Section
-
-
(744,949)
(218,051)
L- Investment Expense 1- Investment Management Expenses (inc. interest)
-
-
2- Impairment in Value of Investments
-
-
3- Loss from Disposal of Financial Assets 4- Investment Income Transferred to Non-Life Technical Section
-
-
4.2
(336,953)
(217,042)
-
-
4.2
(394,333)
-
6
(13,663)
(1,009)
5- Loss from Derivative Transactions 6- Foreign Exchange Losses 7- Depreciation and Amortization Expenses 8- Other Investment Expenses M- Income and Expenses From Other and Extraordinary Operations
-
-
(603,352)
(22,812)
1- Provisions
47
(437,121)
(232,061)
2- Rediscounts
47
(85,061)
6,836
3- Specified Insurance Accounts
-
-
4- Monetary Gains and Losses
-
-
-
295,406
5- Deferred Taxation (Deferred Tax Assets)
21
6- Deferred Taxation (Deferred Tax Liabilities)
-
-
589
6
(33,313)
(16,674)
7- Other Income 8- Other Expenses and Losses 9- Prior Year’s Income 10- Prior Year’s Expenses and Losses
-
-
(48,446)
(76,325)
N- Net Profit for the Year
(2,048,991)
(1,713,037)
1- Profit for the Year
(2,048,991)
(1,713,037)
2- Corporate Tax Provision and Other Fiscal Liabilities 3- Net Profit for the Year
-
-
(2,048,991)
(1,713,037)
-
-
4- Inflation Adjustment Differences
The accompanying notes are an integral part of these financial statements.
EULER HERMES Sigorta Anonim Ĺžirketi
Chapter III 49 Financial Information and Assessments on Risk Management
Statement of Cash Flows For the Year Ended 31 December 2012 (Currency: Turkish Lira (TL))
Note
Audited Current Period 31 December 2012
Audited Prior Period 31 December 2011
27,336,453
17,185,382
A. Cash flows from operating activities 1. Cash provided from insurance activities 2. Cash provided from reinsurance activities
-
-
3. Cash provided from private pension business
-
-
(23,055,316)
(16,937,650)
4. Cash used in insurance activities 5. Cash used in reinsurance activities
-
-
6. Cash used in private pension business
-
-
4,281,137
247,732
7. Cash used in operating activities 8. Interest paid
-
-
9. Income taxes paid
-
-
10. Other cash inflows 11. Other cash outflows 12. Net cash used in operating activities
292,053
52,934
(1,127,792)
(858,205)
3,445,398
(557,539)
-
-
B. Cash flows from investing activities 1. Proceeds from disposal of tangible assets 2. Acquisition of tangible assets
6
(57,801)
(10,872)
3. Acquisition of financial assets
9
-
(152,527)
4. Proceeds from disposal of financial assets 5. Interests received
-
-
336,953
217,042
6. Dividends received
-
-
7. Other cash inflows
-
686,575
8. Other cash outflows
(2,016,098)
(446,708)
9. Net cash provided by / (used in) investing activities
(1,736,946)
293,510
C. Cash flows from financing activities 1. Equity shares issued
-
-
2. Cash provided from loans and borrowings
-
-
3. Finance lease payments
-
-
4. Dividends paid
-
-
5. Other cash inflows
-
-
6. Other cash outflows
-
-
7. Net cash provided by / used in financing activities D. Effect of exchange rate fluctuations on cash and cash equivalents E. Net increase /(decrease) in cash and cash equivalents
-
-
(394,333)
-
1,314,119
(264,029)
F. Cash and cash equivalents at the beginning of the year
14
3,406,758
3,670,787
G. Cash and cash equivalents at the end of the year
14
4,720,877
3,406,758
The accompanying notes are an integral part of these financial statements.
-
2 – From reserves
B- Purchase of own shares
C- Gains or losses that are not included in the statement of income
D- Change in the value of financial assets
E- Currency translation differences
F- Other gains or losses
G- Inflation adjustment differences
H- Net profit for the year
I – Other reserves and transfers from retained earnings
J – Dividends paid
II – Balance at the end of the year – 31 December 2011
5,500,000
-
J – Dividends paid
-
-
-
F- Other gains or losses
G- Inflation adjustment differences
H- Net profit for the year
-
-
D- Change in the value of financial assets
E- Currency translation differences
I – Other reserves and transfers from retained earnings
-
-
C- Gains or losses that are not included in the statement of income
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Inflation Differences
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Currency Translation Differences
Revaluation of Financial Assets -
-
-
-
-
-
-
-
-
-
-
-
-
-
Inflation Differences -
-
-
-
-
-
-
-
-
-
-
-
-
-
Currency Translation Differences
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Legal Reserves
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Legal Reserves
Statutory
Statutory
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,713,037)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
585,031
(1,713,037)
-
-
-
-
-
-
-
-
-
(585,031)
(2,048,991)
-
1,713,037
(2,048,991)
-
-
-
-
-
-
-
-
-
(1,713,037)
Other Reserves Net Profit for and Retained the Year Earnings
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other Reserves Net Profit for and Retained the Year Earnings
The accompanying notes are an integral part of these financial statements.
-
-
-
-
-
-
-
2 – From reserves
B- Purchase of own shares
-
-
1 – In cash
-
-
5,500,000
Own Shares of the Company
Revaluation of Financial Assets
Audited Changes in Equity – 31 December 2012
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Own Shares of the Company
A – Capital increase
I – Balance at the end of the previous year – 31 December 2010
Note Paid-in Capital
5,500,000
-
1 – In cash
II – Balance at the end of the year – 31 December 2011
-
5,500,000
Paid-in Capital
A – Capital increase
I – Balance at the end of the previous year – 31 December 2010
Note
Audited Changes in Equity – 31 December 2011
(1,887,343)
-
(1,713,037)
-
-
-
-
-
-
-
-
-
-
(174,306)
Retained Earnings
(174,306)
-
(585,031)
-
-
-
-
-
-
-
-
-
-
410,725
Retained Earnings
1,563,666
-
-
(2,048,991)
-
-
-
-
-
-
-
-
-
3,612,657
Total
3,612,657
-
-
(1,713,037)
-
-
-
-
-
-
-
-
-
5,325,694
Total
50
EULER HERMES Sigorta Anonim Şirketi
Statement of Changes in Equity For the Year Ended 31 December 2012
(Currency: Turkish Lira (TL))
EULER HERMES Sigorta Anonim Şirketi
Chapter III 51 Financial Information and Assessments on Risk Management
Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Audited Current Period 31 December 2012
Audited Prior Period 31 December 2011
(2,048,991)
(1,713,037)
-
-
1.2.1. Corporate Tax (Income Tax)
-
-
1.2.2. Income Tax Deductions
-
-
1.2.3. Other Taxes and Legal Duties
-
-
A. CURRENT PERIOD PROFIT (1.1 – 1.2)
(2,048,991)
(1,713,306)
1.3. ACCUMULATED LOSSES (-)
(1,887,343)
(174,306)
1.4. FIRST LEGAL RESERVES (-)
-
-
1.5. OTHER STATUTORY RESERVES (-)
-
-
Note I. DISTRIBUTION OF THE PERIOD PROFIT 1.1. PERIOD PROFIT 1.2. TAXES AND DUTIES PAYABLE
B. NET PROFIT AVAILABLE FOR DISTRIBUTION [ (A - (1.3 + 1.4 + 1.5) ] 1.6. FIRST DIVIDEND TO SHAREHOLDERS (-)
-
-
1.6.1. To owners of ordinary shares
-
-
1.6.2 To owners of privileged shares
-
-
1.6.3 To owners of redeemed shares
-
-
1.6.4 To holders profit sharing bonds -
-
1.7. DIVIDENDS TO PERSONNEL (-)
1.6.5 To holders of profit and loss sharing certificates
-
-
1.8. DIVIDENDS TO FOUNDERS (-)
-
-
1.9. DIVIDENDS TO BOARD OF DIRECTORS (-)
-
-
1.10. SECOND DIVIDEND TO SHAREHOLDERS (-)
-
-
1.10.1. To owners of ordinary shares
-
-
1.10.2. To owners of privileged shares
-
-
1.10.3. To owners of redeemed shares
-
-
1.10.4. To holders profit sharing bonds
-
-
1.10.5. To holders of profit and loss sharing certificates
-
-
1.11. LEGAL RESERVES (-)
-
-
1.11. STATUTORY RESERVES(-)
-
-
1.13. EXTRAORDINARY RESERVES
-
-
1.14. OTHER RESERVES
-
-
1.15. SPECIAL FUNDS
-
-
II.
-
-
2.1. APPROPRIATED RESERVES
-
-
2.2. SECOND LEGAL RESERVES (-)
-
-
2.3. DIVIDENDS TO SHAREHOLDERS (-)
-
-
2.3.1. To owners of ordinary shares
-
-
2.3.2. To owners of privileged shares
-
-
2.3.3. To owners of redeemed shares
-
-
2.3.4. To holders of profit sharing bonds
-
-
2.3.5. To holders of profit and loss sharing certificates
-
-
2.4. DIVIDENDS TO PERSONNEL (-)
-
-
2.5. DIVIDENDS TO BOARD OF DIRECTORS (-)
-
-
III. EARNINGS PER SHARE
-
-
3.1. TO OWNERS OF ORDINARY SHARES
-
-
3.2. TO OWNERS OF ORDINARY SHARES (%)
-
-
3.3. TO OWNERS OF PRIVILEGED SHARES
-
-
3.4. TO OWNERS OF PRIVILEGED SHARES (%)
-
-
IV. DIVIDEND PER SHARE
-
-
4.1. TO OWNERS OF ORDINARY SHARES
-
-
4.2. TO OWNERS OF ORDINARY SHARES (%)
-
-
4.3. TO OWNERS OF PRIVILEGED SHARES
-
-
4.4. TO OWNERS OF PRIVILEGED SHARES (%)
-
-
DISTRIBUTION OF RESERVES
The accompanying notes are an integral part of these financial statements.
52
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
1 General Information 1.1 Name of the Company and the ultimate parent of the group As at 31 December 2012, the shareholder having direct or indirect control over the shares of Euler Hermes Sigorta Anonim Şirketi (“the Company”) is Euler Hermes SFAC with 99.99% of shares. 1.2 Domicile and the legal structure of the Company, country and the address of the registered office (address of the operating center if it is different from the registered office) The Company was registered in 2008, in the status of joint stock Company established in accordance with regulations of Turkish Commercial Code (“TCC”). The address of the headquarter and registered office of the Company is Büyükdere Cad. No:100-102 Maya Akar Center Kat:7 Esentepe İstanbul. 1.3 Business of the Company The Company was established on 2 July 2008 and received credit insurance branch operation license with the 44474 numbered and 21 September 2010 dated approval of the Prime Ministry Undersecretariat of Treasury of the Turkish Republic (“the Turkish Treasury”). The main business of the Company is to operate in credit branch. The Company can enter into credit insurance, coinsurance, reinsurance and retrocession agreements and can perform related activities both in Turkey and abroad unless there is a legal restriction. 1.4 Description of the main operations of the Company The Company conducts its operations in credit branch as stated in note 1.3 - Business of the Company in accordance with the Insurance Law No.5684 (the “Insurance Law”) issued in 14 June 2007 dated and 26552 numbered Official Gazette and the communiqués and other regulations in force issued by the Turkish Treasury based on the Insurance Law. 1.5 The average number of the personnel during the year in consideration of their categories The average number of the personnel during the year in consideration of their categories is as follows:
Top management personnel Other personnel Total
31 December 2012 1 29 30
31 December 2011 2 13 15
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Chapter III 53 Financial Information and Assessments on Risk Management
1 General information (continued) 1.6 Wages and similar benefits provided to the senior management For the year ended 31 December 2012, wages and similar benefits provided to the senior management including chairman, members of the board of the directors, general manager, general coordinator, and deputy general managers amounted to TL 431,244 (31 December 2011: TL 932,265). 1.7 Keys used in the distribution of investment income and operating expenses (personnel, administrative, research and development, marketing and selling, services rendered from third parties and other operating expenses) in the financial statements Procedures and principles related to keys used in the financial statements of the companies are determined in accordance with the 4 January 2008 dated and 2008/1 numbered “Communiqué Related to the Procedures and Principles for the Keys Used in the Financial Statements Being Prepared In Accordance With Insurance Accounting Plan” issued by the Turkish Treasury. In accordance, income from the assets invested against non-life technical provisions is transferred to technical section from non-technical section; remaining income is transferred to the non-technical section. 1.8 Information on the financial statements as to whether they comprise an individual company or a group of companies The accompanying financial statements comprise only the financial information of the Company. As further discussed in Note 2.2, the Company did not prepare consolidated financial statements as at and for the year ended 31 December 2012. 1.9 Name or other identity information about the reporting entity and the changes in this information after previous reporting date Trade name of the Company
: Euler Hermes Sigorta Anonim Şirketi
Registered address of the head office
: Büyükdere Cad. No:100-102 Maya Akar Center Kat:7 Esentepe/İstanbul
The website of the Company
: www.tr.eulerhermes.com
The company has made a change in the head office address subsequent to the prior reporting period. The head office address as at the end of prior reporting period was as follows: Registered address of the head office
: Iz Plaza Giz, Ayazağa Yolu No: 9 Kat:14 Maslak/İstanbul
1.10 Subsequent events Explanations related to subsequent events are disclosed in Note 46 – Subsequent events.
54
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
2 Summary of significant accounting policies 2.1 Basis of preparation 2.1.1 Information about the principles and the special accounting policies used in the preparation of the financial statements The Company maintains its books of account and prepares its financial statements in accordance with the provisions of ‘’Communiqué on Financial Reporting of Insurance and Reinsurance Companies and Pension’’ which is published by Treasury Department on the basis on article 18 of the Insurance Law, Turkish Accounting Standards (“TAS”), Turkish Financial Reporting Standards (“TFRS”), and other accounting and financial reporting principles, statements and guidance (collectively “the Reporting Standards”) as promulgated by the Turkish Treasury. Article 4 of the relevant regulation dictates that insurance contracts, subsidiaries, subsidiaries and affiliates under common control accounting and consolidated financial statements, publicly disclosed financial statements and related notes and disclosures related to the organization to identify the principles and procedures also be specified by communiqués which is published by the Undersecretariat of Treasury. Although the 4th standard of the Turkish Accounting Standards Board (“TASB”) for the ‘Insurance contracts’ became effective on 25 March 2006 for the accounting periods that begin on or after 31 December 2005, it is stated that TFRS 4 will not be implemented at this stage since the second phase of the International Accounting Standards Board project about the insurance contracts has not been completed yet. In this context, “Communiqué on Technical Reserves for Insurance, Reinsurance and Individual Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” (“Communiqué on Technical Reserves”) is published in the Official Gazette dated 7 August 2007, numbered 26606 and became effective on 1 January 2008. Subsequently, some other circulars and sector announcements which contain explanations and regulations related to the application of the Communiqué on Technical Reserves are published. Accounting policies applied based on these communiqués, circulars and other sector announcements are summarized on their own captions in the following sections. In the calculation of technical provisions, the updates made to the Technical Provisions Legislation on 17 July 2012 and 28 July 2010 are considered. In accordance with the Legislative Decree numbered 660 and published in the Official Gazette on 2 November 2011, the first amendment to the law numbered 2499, which is the establishment clause of Turkish Financial Reporting Standards (“TFRS”), has been cancelled and the Administration has decided to form the Public Oversight, Accounting and Audit Standards Association (“Association”). Pursuant to the temporary first clause of this Legislative Decree, until the standards and regulations published by the Association take effect, the current regulations regarding these issues will be applied. In accordance with the “Communiqué Regarding the Presentation of Financial Statements” published in the Official Gazette dated 18 April 2008 and numbered 26851 and the “Sector Announcement Regarding the Presentation of Financial Statements with the New Account Codes” published by the Treasury on 31 May 2012, the format and the content of financial statements have been organized to provide for the comparison of financial statements with previous periods and the financial statements of other firms. Accounting for subsidiaries, associates and joint ventures is regulated with 28 December 2007 dated and 2007/26 numbered “Circular Related to the Accounting of Subsidiaries, Associates and Joint Ventures”, issued by the Turkish Treasury. It is stated that, the companies will continue to apply the principles of the related standards of TFRSs for the accounting of subsidiaries, associates and joint venture until the publication of another regulation on this issue by the Turkish Treasury. “Circular Related to the Preparation of the Consolidated Financial Statements of Insurance, Reinsurance, and Individual Pension Companies” issued by the Turkish Treasury in the 31 December 2008 dated and 27097 numbered (4th repeat) Official Gazette, constituted the basis of consolidation to be effective on the dates that circular specifies.
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Chapter III 55 Financial Information and Assessments on Risk Management
2 Summary of significant accounting policies (continued) 2.1 Basis of preparation (continued) 2.1.1 Information about the principles and the special accounting policies used in the preparation of the financial statements (continued) Additional paragraph for convenience translation to English The differences between the accounting principles, as described in the preceding paragraphs, and the accounting principles generally accepted in countries, in which the accompanying financial statements are to be distributed, and International Financial Reporting Standards (“IFRS”), may have significant influence on the accompanying financial statements. Accordingly, the accompanying financial statements are not intended to present the financial position and results of operations in accordance with the accounting principles generally accepted in such countries other than Turkey 2.1.2 Other accounting policies ap propriate for the understanding of the financial Information regarding other accounting polices is disclosed above in “2.1.1 - Information about the principles and the special accounting policies used in the preparation of the financial statements” and under on its own caption in the following sections of this report. 2.1.3 Functional and presentation currency The accompanying financial statements are presented in TL, which is the Company’s functional currency. 2.1.4 Rounding scale of the amounts presented in the financial statements Financial information presented in TL has been rounded to the nearest TL values. 2.1.5 Basis of measurement used in the preparation of the financial The accompanying financial statements are prepared on the historical cost basis 2.1.6 Accounting policies, changes in accounting estimates and errors Any error or change on accounting policies has not been detected. Explanations relating accounting estimations 3 – is given in the note "Significant Accounting Estimations and Judgments".
56
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
2 Summary of significant accounting policies (continued) 2.2 Consolidation Insurance, reinsurance and pension companies are demanded to issue consolidated financial statements beginning from 31 March 2009, along with ‘’ Communiqué on Regularization of Financial Statements of Insurance, Reinsurance and Pension Companies’’ published on 31 December 2009 decision dated and 27097 numbered Official Gazette, by Undersecretariat of Treasury. In this context, financial statements of subsidiary of Euler Hermes Sigorta A.Ş. (Euler Hermes Risk Yönetimi ve Danışmanlık Limited Şirketi), is going to be consolidated considering full consolidation method and consolidated financial statements are going to be prepared. In the decision dated 12 August 2008 and numbered 2008/37 ‘’ Sector Announcement related to Reflection of Investments of Insurance, Reinsurance and Pension Companies to the Individual Financial Statements’’ which is published by Under secretariat of Treasury, it is mentioned that in the process of financial statement preparation, it is possible that investments of subsidiaries, jointly controlled affiliates and partnerships to be accounted according to TAS 27- Cost method which is stated on 37th paragraph of the Standard of Consolidated and Individual Financial Statements and TAS 39- standards of Financial Instruments: Accounting and Measurement. In parallel with the related announcements, at the end of the reporting term, the Company keeps account of subsidiaries and provision of impairment, according to the cost method. 2.3 Segment reporting An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components, whose operating results are reviewed regularly by the Board of Directors (being the chief operating decision maker) to make decisions about resources allocated to each segment and assess its performance, and for which discrete financial information is available. Since the main economic environment where the Company operates is Turkey, a geographical segment reporting has not been presented. Also because the Company operates in only credit branch, a business segment reporting has not been presented, either. 2.4 Foreign currency transactions Transactions are recorded in TL, which is the Company’s functional currency. Transactions in foreign currencies are recorded at the rates ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date and all exchange differences, except for those arising on the translation of the fair value change of available-for-sale financial assets, are offset and are recognized as foreign exchange gains or losses.
EULER HERMES Sigorta Anonim Şirketi
Chapter III 57 Financial Information and Assessments on Risk Management
Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
2 Summary of significant accounting policies (continued) 2.5 Tangible assets Tangible assets are recorded on the basis of their costs. Depreciation is calculated by using linear depreciation method based on tangible assets’ useful life via their costs or revaluated amounts. Gains and losses arising from disposals of tangible fixed assets are calculated as difference between net disposal revenue and tangible asset’s value per book and reflected in the related term’s income statement. Maintenance and repair of tangible assets are recorded as expenses. Any restrictions such as pledges, mortgages do not exist on tangible assets. Accounting estimates that has a significant impact to the current period or expected to have to later periods remain unchanged. Depreciation shares of tangible assets are calculated by using linear depreciation method based on their useful life via their recorded values. Rates that are used in depreciation of tangible assets and projected times as estimated economic lives are below: Tangible Assets
Estimated Economic Life
Depreciation Rate (%)
4
25
Machinery and Equipment 2.6 Investment property The Company does not have any investment property. 2.7 Intangible assets
The Company’s intangible assets comprise of IT systems and computer software. Intangible assets are recorded at cost in compliance with “TAS 38 – Accounting for intangible assets”. The intangible assets are amortized based on straight line method through their useful lives (3-5 years).
58
EULER HERMES Sigorta Anonim Ĺžirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
2 Summary of significant accounting policies (continued) 2.8 Financial assets A financial asset is any asset that is cash, an equity instrument of another entity, a contractual right to receive cash or another financial asset from another entity; or to exchange financial assets or financial liabilities with another entity under conditions that are potentially favorable to the entity. Financial assets are classified in four categories; as financial assets held for trading, available-for sale financial assets, held to maturity financial assets, and loans and receivables. Financial assets held for trading are valued at their fair values and gain/loss arising is recorded in the profit or loss. Interest income earned on trading securities and the difference between their acquisition costs and fair values are recorded as interest income in the statement of operations. In case of disposal of such financial assets before their maturities, the gains/losses on such disposals are recorded under trading income/losses. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of trading the receivable. Loans and receivables those are not interest earning are measured by discounting of future cash flows less impairment losses, and interest earning loans and receivables are measured at amortized cost less impairment losses. Subsidiaries are the entities which the Company has the power to manage their financial and operation policies in order to benefit. Subsidiaries are reflected to the non-consolidated financial statements after the provision related to impairment is deleted if there is any. As at the end of reporting period, the Company’s available for sale financial asset is TL 1,028 (31 December 2011: None). A financial asset is derecognized when the control over the contractual rights that comprise that asset is lost. This occurs when the rights are realized, expired or are surrendered.
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Chapter III 59 Financial Information and Assessments on Risk Management
2 Summary of significant accounting policies (continued) 2.9 Impairment of Assets Impairment of financial assets Financial assets or group of financial assets are reviewed at each reporting date to determine whether there is objective evidence of impairment. If any such indication exists, the Company estimates the amount of impairment. A financial asset is impaired if, and only if, there is objective evidence that the expected future cash flows of financial asset or group of financial assets are adversely affected by an event(s) (“loss event(s)”) incurred subsequent to recognition. Receivables are shown with net balances after specific provisions were deducted in case of a collection risk. Specific provisions are classified for collectable amounts if it is noticed that loan and receivable amounts are not going to be collected by proper control of the collectables Re-earnable amount of capital tools is the real value of that tool. Regainable amount of borrowing tools measured by real values means the reduced value of estimated cash flows in future by current market interest rates to the day. Loans and receivables are presented net of specific allowances for uncollectibility. Specific allowances are made against the carrying amounts of loans and receivables that are identified as being impaired based on regular reviews of outstanding balances to reduce these loans and receivable to their recoverable amounts. The recoverable amount of an equity instrument is its fair value. The recoverable amount of debt instruments and purchased loans measured to fair value is calculated as the present value of the expected future cash flows discounted at the current market rate of interest. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognized directly in equity. Impairment of Fixed Assets Company evaluates in every reporting period if its assets might be depreciated and if there is a sign of a possible depreciation, company estimates re gainable amount of related asset in accordance with TAS 36- Turkish Accounting Standards for Depreciation in Assets and if the amount is under its book value, classifies a provision for this depreciation. Rediscount and provision expenses for the period is presented in note 47-Other in detail. 2.10 Derivative financial instruments As at the reporting date, the Company does not have any derivative financial instruments (31 December 2011: None). 2.11 Offsetting of financial assets Financial assets and liabilities are offset and the net amount is presented in the balance sheet when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the Reporting Standards, or for gains and losses arising from a group of similar transactions included in the Company’s trading activities.
60
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
2 Summary of significant accounting policies (continued) 2.12 Share capital As of 31 December 2012, Euler Hermes SFAC, who owns 99.99% shares has direct or indirect control in the Company’s capital. As of 31 December 2012 and 2011, the share capital and ownership structure of the Company is as follows: 31 December 2012 Name Euler Hermes SFAC
Nominal Value of the Shares (TL)
Share Percentage (%)
Nominal Value of the Shares (TL)
Share Percentage (%)
5,499,996
99.99%
5,499,996
99.99%
4
0.01%
4
0.01%
5,500,000
100%
5,500,000
100%
Others Paid-in Capital
31 December 2011
As at 31 December 2012, paid-in capital of the Company is TL 5,500,000 and the share capital of the Company consists of 5.500.000 issued shares with TL 1 nominal value each. Capital increase during the period and sources None. (31 December 2011 : None.) Registered capital system in the Company None. (31 December 2011 : None.) Registered capital system in the Company None. (31 December 2011 : None.) Repurchased own shares by the Company None. (31 December 2011 : None.) 2.13 Insurance and investment contracts - classification An insurance contract is a contract under which the Company accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. Insurance risk covers all risk except for financial risks. All premiums have been received within the coverage of insurance contracts recognized as revenue under the account caption “written premiums”. Investment contracts are those contracts which transfer financial risk with no significant insurance risk. Financial risk is the risk of a possible future change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided, that it is not specific to a party to the contract, in the case of a non-financial variable. As at the reporting date, the Company does not have a contract which is classified as an investment contract.
EULER HERMES Sigorta Anonim Ĺžirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Chapter III 61 Financial Information and Assessments on Risk Management
2 Summary of significant accounting policies (continued) 2.14 Insurance contracts and investment contracts with discretionary participation feature Discretionary participation feature (“DPF�) within insurance contracts and investment contracts is the right to have following benefits in addition to the guaranteed benefits. (i) that are likely to comprise a significant portion of the total contractual benefits, (ii) whose amount or timing is contractually at the discretion of the Issuer; and (iii) that are contractually based on: (1) the performance of a specified pool of contracts or a specified type of contract; (2) realized and/or unrealized investments returns on a specified pool of assets held by the Issuer; or (3) the profit or loss of the Company, Fund or other entity that issues the contract. As at the reporting date, the Company does not have any insurance or investment contracts that contain a DPF. 2.15 Investment contracts without DPF As at the reporting date, the Company does not have any insurance contracts and investment contracts without DPF. 2.16 Liabilities Financial liability; is any liability that is a contractual obligation to deliver cash or another financial asset to another entity. Financial liabilities of the Company are measured at their discounted values. A financial liability is derecognized when it is extinguished. 2.17 Taxes Corporate tax Statutory income is subject to corporate tax at 20%. This rate is applied to accounting income modified for certain exemptions (like dividend income) and deductions (like investment incentives), and additions for certain non-tax deductible expenses and allowances for tax purposes. If there is no dividend distribution planned, no further tax charges are made. Dividends paid to the resident institutions and the institutions working through local offices or representatives are not subject to withholding tax. The withholding tax rate on the dividend payments other than the ones paid to the non-resident institutions generating income in Turkey through their operations or permanent representatives and the resident institutions is 15%. In applying the withholding tax rates on dividend payments to the non-resident institutions and the individuals, the withholding tax rates covered in the related Double Tax Treaty Agreements are taken into account. Appropriation of the retained earnings to capital is not considered as profit distribution and therefore is not subject to withholding tax. The prepaid taxes are calculated and paid at the rates valid for the earnings of the related years. The payments can be deducted from the annual corporate tax calculated for the whole year earnings. According to Turkish Tax Legislation, fiscal losses presented on declaration can be deducted from corporation gain but with a condition of not to pass over 5 years. The company has TL 3,006,519 amount of deductible fiscal loss as of 31 December 2012. (31 December 2011: TL 2,088,456). In Turkey, there is no procedure for a final and definite agreement on tax assessments. Companies file their tax returns with their tax offices by the end of the 25th day of the fourth month following the close of the accounting period to which they relate. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings.
62
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
2 Summary of significant accounting policies (continued) 2.17 Taxes Deferred tax In accordance with TAS 12 – Income taxes, deferred tax assets and liabilities are recognized on all taxable temporary differences arising between the carrying values of assets and liabilities in the financial statements and their corresponding balances considered in the calculation of the tax base, except for the differences not deductible for tax purposes and initial recognition of assets and liabilities which affect neither accounting nor taxable profit. The deferred tax assets and liabilities are reported as net in the financial statements if, and only if, the Company has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity. If Valuation differences occurred by asset valuation were accounted in income statement, related current period corporate tax and deferred tax or income or loss is also accounted in income statement. If valuation differences are accounted directly in equity capital accounts, related tax effects are also accounted in equity capital accounts. Transfer pricing In Turkey, the transfer pricing provisions have been stated under the Article 13 of Corporate Tax Law with the heading of “disguised profit distribution via transfer pricing”. The General Communiqué on disguised profit distribution via Transfer Pricing, dated 18 November 2007 sets details about implementation. If a taxpayer enters into transactions regarding sale or purchase of goods and services with related parties, where the prices are not set in accordance with arm's length principle, then related profits are considered to be distributed in a disguised manner through transfer pricing. Such disguised profit distributions through transfer pricing are not accepted as tax deductible for corporate income tax purposes. 2.18 Employee benefits Employee termination benefits In accordance with the existing Turkish Labour Law, the Company is required to make lump-sum termination indemnities to each employee who has completed one year of service with the Company and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. The computation of the liability is based upon the retirement pay ceiling announced by the Government. The applicable ceiling amount as at 31 December 2012 is TL 2,917 (31 December 2011: TL 2,732). The Company accounted for employee severance indemnities using actuarial method in compliance with the TAS 19 – Employee Benefits. The major actuarial assumptions used in the calculation of the total liability as at 31 December 2012 and 2011 are as follows: 31 December 2012
31 December 2011
Discount rate
4.66%
4.66%
Expected rate of salary / limit increase
5.10%
5.10%
Estimated employee turnover rate
2.34%
2.34%
Indicated rates above for salary/limit increase are identified according to Central Bank yearly inflation estimates. Other The Company provides provision for undiscounted short-term employee benefits earned during the year as per services rendered in compliance with TAS 19 in the accompanying financial statements.
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Chapter III 63 Financial Information and Assessments on Risk Management
2 Summary of significant accounting policies (continued) 2.19 Provisions A provision is made for an existing obligation resulting from past events if it is probable that the commitment will be settled and a reliable estimate can be made of the amount of the obligation. Provisions are calculated based on the best estimates of management on the expenditure to be incurred as of the reporting date and, if material, such expenditures are discounted to their present values. If the amount is not reliably estimated and there is no probability of cash outflow from the Company to settle the liability, the related liability is considered as “contingent” and disclosed in the notes to the financial statements. A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognized in financial statements since this may result in the recognition of income that may never be realized. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements of the period in which the change occurs. If an inflow of economic benefits has become probable, the Company discloses the contingent asset. 2.20 Revenue recognition Written premiums Written premiums represent premiums on policies written during the year net of taxes, premiums of the cancelled policies which were produced in prior years. Premiums revolved to reassurance firms are accounted in gain/loss accounts in “premiums revolved to reassurance firms “section. Expense is booked as of the damages are paid. At the end of the period, damages reported but not paid or realized but not reported damages are recognized as expense with the condition of suspense damage and compensation allowance is made. Suspense and paid damage reassurance portions are being net-off in these allowances. Subragation Income According to the Circular 2010/13 dated 20 September 2011, the Company can account for income accrual for subrogation receivables up to the guarantee limit of insurance companies without any voucher for insurance companies after the completion of the claim payments made to the insuree and receipt of voucher (bank statement related to the claim payment) from third parties other than insurance companies and notice of the insurance companies or third part parties. If the amount cannot be collected from the counterparty insurance company, the Company provides provision for uncollected amounts due for six months. If the counter party is not an insurance Company, the provision is provided after four months. On the other hand, if there is an agreement with the insurance company and third parties; where there is a payment plan up to one year, or receipt of cheques, bills or similar documents, the Company does not provide provision for subrogation receivables that are under the installment plan, but uncollected for six months from insurance companies and four months for other counter parties after the payment date to the insure. As directed by the related notice, the Company has made provisions amounting TL 160,036 as of 31 December 2012, for the recourse and salvage receivables deemed doubtful (31 December 2011: None). As at 31 December 2012, the Company has collected or accrued subrogation and salvage income of TL 152,172 (31 December 2011: None). If there is a payment installment or cheques and bills received, provision should be accounted for the amounts due above one year. In addition, provision for all undue installments is provided, if there is unpayment for the twelve month period after the payment to the insuree.If the recourse request is made through litigation, the amount will be accrued on the date the request is made and as of that same that bad debt provision will be made for that amount.
64
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
2 Summary of significant accounting policies (continued) 2.20 Revenue recognition (continued) Subragation Income (continued) When the subrogation is subject to a court case, the amount is recorded on the date of the transaction and the same amount of provision is provided on the same day. It has been decided to apply the 12 month period specified in the Treasury Circular “Regarding Recourse and Salvage Incomes” numbered 2011/13 and dated 20 September 2011 as 36 months after considering the Treasury Circular “Additional Clarifications for Recognition of Uncollectable Recourse and Salvage Incomes in the Loan Branch and Provision for Outstanding Claims in the Liability Branch” numbered 2011/6 and dated 25 February 2011 and the specific structure of the loan branch. In addition, since the 36 month period is too long, it is necessary to follow the financial position of the borrower and if it is determined that the borrower cannot abide by the protocol conditions, provision must be made as directed by the conservatism principle with regards to the size of the risk. As at 31 December 2012, the Company has used the 36 month period mentioned above in calculating the provisions for recourse and salvage incomes for which protocols had been signed. In order to accrue income from salvage, if the insured amount of partly damaged goods are compensated and these goods are either passed to the insurance company’s ownership or accessory possession, the possible income from the sale of these goods must be accrued in the related periods like recourse receivables. In such a case, if the goods in the company’s accessory possession are sold through a third person or left to the policyholder or if they are sold directly by the company, income from salvage must be accrued and not deducted from compensations paid or outstanding claims. Commission Commission expense paid to intermediaries related to insurance policies’ production and taken commissions from reinsurer in turn of transferred are reflected to operational results during the lifetime of policy considering deferred commission expenses and deferred commission income respectively. Interest income and expense Interest income and expenses are recognized using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or liability. The effective interest rate is established on initial recognition of the financial asset and liability and is not revised subsequently. The calculation of the effective interest rate includes all fees and points paid or received transaction costs, and discounts or premiums that are an integral part of the effective interest rate. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or liability. Commercial income and expense Commercial income and expense includes loss and profits resulting from disposal of financial assets at fair values that reflected to profit or loss and financial assets which are ready for disposal. Commercial income and expense are shown in the financial statements, at the attachment, named ‘’Profit resulting from cash conversion of financial investments’’ and ‘’Losses resulting from cash conversion of investments’’ Dividends Dividend incomes are recorded when the Company has the right of having related dividend.
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Chapter III 65 Financial Information and Assessments on Risk Management
2 Summary of significant accounting policies (continued) 2.21 Leasing transactions As at 31 December 2012 and 2011, the Company does not have tangible assets acquired through leasing transactions. 2.22 Dividend distribution Since the Company has reported a loss for the period, there are no dividends to be distributed (31 December 2011: None). 2.23 Provision for Unearned Premiums According to “Regulation for Technical Provisions and to which Assets to Invest for Insurance, Reassurance and Retirement Companies” published in Gazette in 7 August 2007 with no of 26606 and came into force by 1 January 2008, unearned premiums provision consists of gross amount of recurring insurance policies’ accrued premiums according to the portion which lied over to next financial year or years. Unearned premiums allowances are classified for agreements other than insurance agreements for which mathematical provision has been classified. For the premiums for insurance agreements for more than a year time which consists of yearly or more than once in a year renewals of insurance guarantees, unearned premiums allowance is being calculated. According to “Code of Changes for Code for Technical Provisions and to which Assets to invest these provisions for Insurance, Reassurance and Retirement Companies”, published in Gazette on 28 July 2010 with no of 27655 and came into force by September 30, during the calculation of unearned premiums provisions company considers the beginning and end day of the guarantees as half-day. According to Technical Provisions Code ,for foreign currency indexed insurance policies ,the calculations for unearned premiums provision is made in accordance with Central Bank foreign exchange selling rates of the day for related premium accrual date if any exceptional note was not included in related insurance agreement.
66
EULER HERMES Sigorta Anonim Ĺžirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
2 Summary of significant accounting policies (continued) 2.24 Provision for Unexpired Risks Within the scope of the regulation of Technical Provisions; companies, when they make provisions for unearned premiums, have to practice a test of proficiency as each accounting period, which includes the last 12 months, in case the damages and compensations due to effective insurance contracts, may be greater than the provision for unearned premium, which is devoted for the related contracts. During the test, provision for net unearned premiums has to be multiplied by the expected net loss. The expected net loss of Premium rate is found by dividing occurred damage loss (net outstanding claims + net paid compensations- net transferred outstanding claims) to earned premiums (net written premiums+ transferred provision for unearned premiums- provision for unearned premiums). In the calculation of earned premiums; commissions paid to the agents and deferred portions of the commissions received from reinsurers, which are shown in the provision for unearned commissions of the term related to transferred provision for unearned premiums, are not considered. In case of, the rate of expected damage premium for every branch is greater than 95%, the amount, which comes from multiplication of the rate that above 95% by provision of net unearned premiums, recorded as net provision for unexpired risks, the amount, which comes from multiplication of the rate that above 95% by provision for gross unearned premiums, is recorded as gross provision for unexpired risks to the financial statements. Difference between the net and gross amounts is considered as reinsurer’s share. Provision for unexpired risks is not calculated because the Company started the Premium production in the current period. (31 December 2011: None ) In accordance with the Treasury circular dated 10 December 2012 and numbered 2012/15, calculation for the unexpired risks is based on main branches.
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Chapter III 67 Financial Information and Assessments on Risk Management
2 Summary of significant accounting policies (continued) 2.25 Provision for Outstanding Claims Provision for Outstanding Claims is made for compensation costs which are accrued and identified, however not paid in previous or current accounting periods or realized for the estimation cost but unreported compensation costs, if the compensation cost could not be calculated. Compensation costs, which occurred before accounting period but notified after related dates, are recognized as incurred but not reported costs. According to ‘’Regulation to Modify the Communiqué on the Technical Provision of Insurance, Reinsurance and Pension Companies and Assets in which Technical Provisions will be Invested'', which is published on the decision date 28 July 2010 and numbered 27655 and takes effect on 30 September 2010, in calculations relating to branches, which started the operation recently, incurred but not reported ( IBNR ) provision for outstanding claims is calculated according to the Actuary’s computations, for five years from the beginning of the activity. As December 2011, the actuary of the Company decided, incurred but not reported provision for outstanding claims, until a rational damage data is formed, to identify the damage premium rate via earned premium, with the assumption of 60%. The related rate is the average of so many years which is accepted by the countries, particularly France, that have high Premium production in the branch of credit insurance. Based on the assumption, as 31 December 2012, incurred but not reported provision for outstanding claims amount of TL 445,418 (31 December 2011: TL 338,329) is reflected to the financial statements. 2.26 Equalization Provisions With the ‘’Regulations of Technical Provisions’’ which takes effect on the date 1 January 2008, the Company has to make provision for earthquake and credit commitments to prevent the fluctuation in the compensation rates, which might occur in following accounting periods of the companies and to encounter catastrophic risks. This provision which was firstly performed in 2008 is calculated with the rate of 12% of earthquake and credit net premiums which correspond to every year. In the calculation of net premiums, the amounts paid for non-proportional reinsurance treaties are considered to be transferred to the premium. Until the highest amount of net premiums in the last five financial years reach to 150%, provision making continues. If the provision amount lowers than the previous year’s amount related to premium production for the following five years, the equity difference between two years recorded as profit reserves. This amount is transferred to equity may be kept as a backup or used in compensation payments. In the event of damage, amounts which fall to the reinsurer and amounts which are below the limit of indicated exemption limit are not reduced from equalization provisions. If there is paid compensation caused by commitments given, they are declined from equalization payments according to first in first out method, starting from first year provisions. As at 31 December 2012, the amount of calculated equalization provisions is TL 833,616 (31 December 2011: TL 186,256) and it is shown in other technical provisions account which is in the financial statements’ long term liability part at the attachment. 2.27 Provision for bonuses and discounts Provisions for bonuses and discounts are the amount of reserves for policies in case of making a commitment of bonus or discount regardless of renewal of the policy. In case of the company decide to give bonuses and discounts, provisions for bonuses and discounts consist of amount of bonuses and discounts reserved for endorsee and insured according to current year’s technical results. Bonuses and discounts comprise all accrued and paid or payable amounts on behalf of insured or endorsee in current year. The aforementioned payment occurs with deducting the future premium amounts of insured or increasing the insurance technical provision. The company must indicate the committed amount of bonuses and discounts in the contract. As at 31 December 2012, the calculated provision for bonuses and discounts is TL 19,089 (31 December 2011: None).
68
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
2 Summary of significant accounting policies (continued) 2.28 Related parties For the purpose of the accompanying financial statements, shareholders, key management and members of board of directors together with their families and companies controlled by or affiliated with them, and associated companies are considered and referred to as related parties. 2.29 Earnings/ (losses) per share Earnings/ (losses) per share are determined by dividing the net income/ (loss) by the weighted average number of shares outstanding during the year attributable to the shareholders of the Company. In Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“Bonus Shares”) to existing shareholders from retained earnings. For the purpose of earnings per share computations, such bonus shares issued are regarded as issued shares. 2.30 Subsequent events Post-balance sheet events that provide additional information about the Company’s position at the reporting dates (adjusting events) are reflected in the financial statements. Post-balance sheet events that are not adjusting events are disclosed in the notes when material.
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Chapter III 69 Financial Information and Assessments on Risk Management
2.31 New standards and interpretations not yet adopted As of 31 December 2012, a number of new standards and amendments to existing standards and interpretations which are not adopted in the preparation of accompanying financial statements and are not yet effective for the period ended 31 December 2012. These new standards and interpretations are not expected to have any significant effect on the accompanying financial statements with the exception of some matters of “Communiqué on Technical Reserves for Insurance, Reinsurance and Pension Companies and the Related Assets That Should Be Invested Against Those Technical Reserves” which has been published on 17 July 2012 and numbered 28356 and TFRS 9 – Financial Instruments published by the Turkish Accounting Standards Board in the Official Gazette no. 27564 dated 27 April 2010, revised TFRS 13 – Fair Value Measurement, TAS 19 – Employee Benefits and TFRS 12 – Disclosure of Interests in Other Entities. According to the related communiqué of Turkish Treasury, companies are obliged to set an actuarial department in accordance with the portfolio and structure of the company in order to perform correct technical provisioning and pricing. Companies should employ adequate number of actuary, associate actuary and personnel with required professional experience and provide required technical software and hardware. The minimum requirements of the actuarial department will be determined by Turkish Treasury. The related regulation will be effective on 1 January 2015. TFRS 9 – Financial Instruments has been published to replace IAS 39- Financial Instruments: Accounting and Measurement by International Accounting Standards Board in November 2009 as a part of a wider project aiming to bring new regulations. Developing a new standard for the financial reporting of financial assets that is principle-based and less complex is aimed by this project. The objective of TFRS 9, being the first phase of the project, is to establish principles for the financial reporting of financial assets that will present relevant and useful information to users of financial statements for their assessment of amounts, timing and uncertainty of the entity’s future cash flows. With TFRS 9, an entity shall classify financial assets as subsequently measured at either amortised cost or fair value on the basis of both the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The guidance in TAS 39 on impairment of financial assets and hedge accounting continues to apply. An entity shall apply TFRS 9 for annual periods beginning on or after 1 January 2015. Revised TFRS 13 “Fair Value Measurement” replaces the fair value measurement guidance contained in individual TFRSs with a single source of fair value measurement guidance. It defines fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements. It explains how to measure fair value when it is required or permitted by other IFRSs. It does not introduce new requirements to measure assets or liabilities at fair value, nor does it eliminate the practicability exceptions to fair value measurements that currently exist in certain standards. An entity shall apply TFRS 13 for annual periods beginning on or after 1 January 2013.
70
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
2 Summary of significant accounting policies (continued) 2.31 New standards and interpretations not yet adopted (continued) The amended TAS 19 “Employee Benefits” is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted. With very few exceptions retrospective application is required. Numerous changes or clarifications are made under the amended standard. Among there numerous amendments, the most important changes are removing the corridor mechanism and making the distinction between short-term and other long-term employee benefits based on expected timing of settlement rather than employee entitlement. The Company is in the process of assessing the impact of the new standard on the financial position or performance of the Company. TFRS 12 – Disclosure of Interests in Other Entities; disclosure requirements for entities that have interests in subsidiaries, joint arrangements. Related standard will be adopted starting from 1 January 2013 and following annual reporting periods. TAS 27 – Separate Financial Statements; carries forward the existing accounting and disclosure requirements for separate financial statements, with some minor clarifications. Related change will be adopted starting from 1 January 2013 and following annual reporting periods. The Company is in the process of evaluating the effects of this standard on the financial position and performance of the Company. New standards and interpretations not yet adopted and have not material effect on the Company’s financials • TFRS 10 – Consolidated Financial Statements; new approach to determining which investees should be consolidated and provides a single model to be applied in the control analysis for all investees. Related standard will be adopted starting from 1 January 2013 and following annual reporting periods. • TFRS 11 – Joint Arrangements; supersedes IAS 31 – Interests in Joint Ventures; focuses on the rights and obligations of joint arrangements, rather than the legal form. Related standard will be adopted starting from 1 January 2013 and following annual reporting periods. • TAS 28 – Investments in Associates and joint Ventures; changes related to jointly controlled entities. Related change will be adopted starting from 1 January 2013 and following annual reporting periods.
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Chapter III 71 Financial Information and Assessments on Risk Management
3 Critical accounting estimates and judgments in applying accounting policies The notes given in this section are provided to addition/supplement the commentary on the management of insurance risk (Note 4.1) and management of financial risk (Note 4.2). The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas at estimation uncertainty and critical judgment in applying accounting policies that have the most significant effect on the amount recognized in the financial statements are described in the following notes: Note 4.1 Note 4.2 Note 9 Note 10 Note 12 Note 17 Note 19
– Management of insurance risk – Management of financial risk – Investments in subsidiaries – Reinsurance assets and liabilities – Loans and Receivables – Insurance liabilities and reinsurance assets – Deferred tax
72
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
4 Management of insurance and financial risk 4.1 Management of insurance risk The risk in any insurance contract is the probability of occurrence of the event that the insurance issues and the uncertainty of the damage amount issued. That risk is probable and unpredictable by nature. The basic risk that the Company confronted is the probability of actual damage amount and right and benefits for the policy owners, to occur above technical provisions that are shown in financial statements. Insurance, in a risk management philosophy, is a vessel that transfers sudden and unexpected risks. The most important stage of this philosophy is to consider the possibilities of to identify the risk to the max and resolve, control or insure the risk. Risk management is operated, in the Company, by the Department of Risk. Risk Committee gathers periodically with the attendance of General Manager, Risk Director and Director of Commercial Operations and Customer Relations. As directed by the “Regulation Regarding the Internal Systems of Insurance and Reinsurance Companies”, Board of Directors member Paolo Cioni serves as the member responsible for internal systems. On the one hand, the Company produces policies within the context of risk assessment, on the other hand, transfers the risks it takes to reinsurers within the frame of reinsurance contracts. The Company controls its risks via quota share treaty which is from Euler Hermes Reinsurance AG and excess of loss agreements. In some projects, optional reinsurance is used by technical units. Reinsurance companies that the Company works with and current grading notes are shown below: Standard & Poor’s Reinsurer Euler Hermes Reinsurance AG
Grading
Prospect
Date
AA-
Stable
8 August 2012
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Chapter III 73 Financial Information and Assessments on Risk Management
4 Management of insurance and financial risk (continued) 4.2 Management of financial risk Introduction and overview This note presents information about the Company’s exposure to each of the below risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. The Company has exposure to the following risks from its use of financial instruments: • credit risk • liquidity risk • market risk The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment, in which all employees understand their roles and obligations. Credit risk Credit risk is basically defined as the possibility that counterparty will fail to meet its obligations in accordance under agreed terms of a contract. The balance sheet items that the Company is exposed to credit risk are as follows: • • • • • • • •
banks cash and cash equivalents premium receivables from policyholders receivables from intermediaries (agencies) receivables from reinsurance companies related to commissions and claims paid reinsurance shares of insurance liability receivables from related parties other receivables
The most popular way to manage insurance risk is forming a reinsurance contract. However passing the insurance risk by forming reinsurance contract does not make the liabilities of the Company as the first contractor disappear. If the reinsurer does not pay for the insured’s damage, the responsibility of the Company to the policy owner continues. The Company considers credibility of reinsurer by analyzing reinsurer’s financial condition before the annual contract.
74
EULER HERMES Sigorta Anonim Ĺžirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
4 Management of insurance and financial risk (continued) 4.2 Management of financial risk (continued) Credit risk (continued) Net carrying value of the assets that are exposed to credit risk is shown in the table below: 31 December 2012
31 December 2011
Banks (Note 14)
7,177,040
5,472,138
Receivables from operations (Note 12)
6,675,699
4,614,326
11,750,363
3,646,288
1,155,553
873,792
Prepaid taxes and reserves (Note 12)
50,779
32,223
Other receivables (Note 12)
50,899
18,382
Advances given to employees (Note 12), (Note 45)
32,613
15,767
26,892,946
14,672,916
Reinsurer’s share in the provision for outstanding claims(Note 10), (Note 17) Due from related parties (Note 12), (Note 45)
Total
As 31 December 2012 and 31 December 2011, the aging of receivables from operations is shown below: 31 December 2012
Receivables not due
Gross Amount
Provision
5,851,581
-
1-30 days overdue
545,752
-
31-60 days overdue
438,402
(160,036)
61-180 days overdue
-
-
181-365 days overdue
-
-
Overdue more than a year
-
-
6,835,735
(160,036)
Total
31 December 2011 Gross Amount
Provision
3,462,555
-
1-30 days overdue
242,789
-
31-60 days overdue
148,021
-
61-180 days overdue
749,515
-
181-365 days overdue
11,446
-
-
-
4,614,326
-
Receivables not due
Overdue more than a year Total
As at 31 December 2012, the Company has a bad debt amount of TL 160,036 (31 December 2011: None).
EULER HERMES Sigorta Anonim Şirketi
Chapter III 75 Financial Information and Assessments on Risk Management
Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
4 Management of insurance and financial risk (continued) 4.2 Management of financial risk (continued) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet cash commitments associated with financial instruments. Managing liquidity risk The Company considers the maturity match between assets and liabilities for the purpose of avoiding liquidity risk and ensures that it will always have sufficient liquidity to meet its liabilities when due. The following table provides an analysis of monetary assets and monetary liabilities into relevant maturity groupings based on the remaining periods to maturity: 31 December 2012
Book value
Up to 1 1 – 3 months 3 – 6 months month
6 – 12 months
Over 1 year
Assets: Cash and cash equivalents
7,179,679
7,179,679
-
-
-
-
Receivables from main operations
6,675,699
6,397,333
278,366
-
-
-
50,899
-
50,899
-
-
-
1,155,553
-
-
1,155,553
-
-
32,613
2,649
-
29,964
-
-
15,094,443
13,579,661
329,265
1,185,517
-
-
2,865,090
255,324
1,039,184
1,570,582
-
-
122,076
-
-
1861
120,215
-
61,255
20,418
40,837
-
-
-
Other receivables Due from related parties Other current assets Total monetary assets
Liabilities: Payables from main operations Due to related parties Other payables Insurance technical provisions (*)
1,688,918
619,880
501,167
567,871
-
-
Tax payable and other provisions for payables
267,547
267,547
-
-
-
-
Provision for other risks and expense accruals
483,264
-
392,000
-
53,776
37,488
5,488,150
1,163,169
1,973,188
2,140,314
173,991
37,488
Total monetary liabilities 31 December 2011
Book value
Up to 1 month
1–3 months
3–6 months
6 – 12 months
Over 1 year
Assets: Cash and cash equivalents
5,475,393
5,475,393
-
-
-
-
Receivables from related parties
4,614,326
1,822,195
1,187,394
1,235,771
368,966
-
15,767
-
-
15,767
-
-
10,105,486
7,297,588
1,187,394
1,251,538
368,966
-
5,157,899
323,821
2,510,039
2,324,039
-
-
38,988
-
-
9,548
29,440
-
Other current assets Total monetary assets
Liabilities: Payables from main operations Due to related parties Other payables
51,159
17,053
34,106
-
-
-
593,638
217,882
176,155
199,601
-
-
Provision tax and other similar Liabilities
106,394
106,394
-
-
-
-
Provisions for other risks
236,143
-
190,000
-
26,949
19,194
6,184,221
665,150
2,910,300
2,533,188
56,389
19,194
Insurance technical provisions(*)
Total monetary liabilities
(*)Aging of provisions for outstanding claims is calculated considering the expected payment dates.
76
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
4 Management of insurance and financial risk (continued) 4.2 Management of financial risk (continued) Market risk Market risk is the risk that changes in market prices, such as interest rate, foreign exchange rates and credit spreads will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on risk. Foreign currency risk The company is exposed to foreign currency risk caused by insurance and reinsurance operations based on foreign currency. Foreign exchange gains and losses arising from foreign currency transactions are recorded at transaction dates. At the reporting dates, foreign currency assets and liabilities evaluated by the Central Bank of the Republic of Turkey’s spot purchase rates and the differences arising from foreign currency rates are recorded as foreign exchange gain or loss in the statement of income. The Company’s exposure to foreign currency risk in the current period is as follows: 31 December 2012
USD
Euro
GBP
Total
Cash and cash equivalents
818,337
3,392,516
-
4,210,853
Receivables from operations
387,498
488,493
-
875,991
1,205,835
3,881,009
-
5,086,844
Assets:
Total foreign currency assets Liabilities: Payables from main operations
-
217,397
-
217,397
Provision for outstanding claims
414,082
590,636
-
1,004,718
Total foreign exchange liabilities
414,082
808,033
-
1,222,115
Net balance sheet position
791,753
3,072,976
-
3,864,729
The Company’s exposure to foreign currency risk in the prior period is as follows: 31 December 2011
USD
Euro
GBP
Total
41,650
5,304,088
-
5,345,738
Receivables from operations
1,114,417
2,258,400
-
3,372,817
Total foreign currency assets
1,156,067
7,562,488
Payables from main operations
2,324,039
690,822
-
3,014,861
Provision for outstanding claims
1,476,460
1,881,074
-
3,357,534
Total foreign exchange liabilities
3,800,499
2,571,896
(2,644,432)
4,990,592
Assets: Cash and cash equivalents
8,718,555
Liabilities:
Net balance sheet position
6,372,395 -
2,346,160
EULER HERMES Sigorta Anonim Şirketi
Chapter III 77 Financial Information and Assessments on Risk Management
Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
4 Management of insurance and financial risk (continued) 4.2 Management of financial risk (continued) Market risk (continued) Foreign currency risk (continued) TL equivalents of the related monetary amounts denominated in foreign currencies are presented above. Foreign currency transactions were recorded at the foreign exchange rates ruling of the dates of the transactions. As at the reporting date, foreign currency items of assets and liabilities were converted into TL of 31 December 2012 dated buying foreign exchange rates of Central Bank of the Republic of Turkey (“CBRT”). Foreign exchange rates used for the translation of foreign currency denominated monetary assets and liabilities as at the reporting dates are as follows: USD
Euro
31 December 2012
1,7826
2,3517
31 December 2011
1,8889
2,4438
Exposure to foreign currency risk A 10 percent depreciation of the TL against the following currencies as at 31 December 2012 and 2011 would have increased or decreased equity and profit or loss (excluding tax effects) by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. In case of a 10 percent appreciation of the TL against the following currencies, the effect will be in opposite direction but at the same amount. 31 December 2012
31 December 2011
Profit or loss
Equity (*)
Profit or loss
Equity (*)
USD
79,175
79,175
(264,443)
(264,443)
Euro
307,298
307,298
499,059
499,059
Total, net
386,473
386,473
234,616
234,616
(*) Equity effect also includes profit or loss effect of 10% depreciation of TL against related currencies.
Exposure to interest rate risk The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair values of financial instrument because of a change in market interest rates. Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for reprising bands. As the Company does not have financial assets classified as held for trading and available for sale and does not have financial asset and liabilities with variable interest rates, there is not any exposure to interest rate risk (31 December 2011: None). As at 31 December 2012 and 2011; the interest rate profile of the Company’s interest earning financial assets and interest bearing financial liabilities are detailed below: 31 December 2012
31 December 2011
3,709,296
4,552,442
None.
None.
1,028
None.
Financial assets with fixed interest rates: Cash at banks (Note 14) Financial asset and liabilities with variable interest rate: Financial assets with variable income: Financial assets held for trading (Note 11)
78
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
4 Management of insurance and financial risk (continued) 4.2 Management of financial risk (continued) Market risk (continued) Capital management The Company’s capital management policies include the following: • To comply with the insurance capital requirements required by the Turkish Treasury • To provide sufficient return to the shareholders by safeguarding the Company’s ability to continue as a going concern • To provide sufficient return to the shareholders by determining pricing of the insurance policies proportional to the level of insurance risk assumed In accordance with the “Communiqué on Measurement and Assessment of Capital Adequacy for Insurance, Reinsurance and Individual Pension Companies” issued by the Turkish Treasury on 19 January 2008 dated and 26761 numbered Official Gazette; minimum equity amount as at 31 December 2012 is calculated as TL 6,830,982 (31 December 2011: TL 3,443,339) in the capital adequacy statement. As at 31 December 2012, the Company’s equity is TL 2,397,282 (31 December 2011: TL 3,612,657) and a need for TL 4,433,700 in equity has arised. The management has started taking precautions to improve present financial position. It has been decided to increase the capital by TL 6,854,000 by cash and in accordance with the Board of Directors decision dated March 14, 2013. It has been decided the capital increase will be paid by the main partner until the Ordinary General Meeting on 7 May 2013. Gain and losses from financial assets
31 December 2012
31 December 2011
336,953
217,042
-
897,896
336,953
1,114,938
Foreign exchange losses
(394,333)
-
Investment expenses
(394,333)
-
(57,380)
1,114,938
None.
None.
Gains and losses recognized in the statement of income: Interest income from bank deposits Foreign exchange gains Investment income
Investment incomes, net Gains and losses recognized in equity:
EULER HERMES Sigorta Anonim Ĺžirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Chapter III 79 Financial Information and Assessments on Risk Management
5 Segment reporting A segment is a distinguishable component of the Company that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments Business segment As of the reporting date the Company operates only in credit insurance segment, so the Company does not disclose business segment reporting. Geographical segment The main geographical segment the Company operates is in Turkey, so the Company does not disclose geographical segment reporting.
80
EULER HERMES Sigorta Anonim Ĺžirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
6 Tangible assets Movements of tangible assets between the dates of 1 January and 31 December 2012 are below: 1 January 2012
Additions
Disposals
31 December 2012
10,046
49,077
-
59,123
826
6,364
-
7190
10,872
55,441
-
66,313
(945)
(13,139)
-
(14,084)
(64)
(445)
-
(509)
(1,009)
(13,584)
-
(14,593)
Cost: Machines and articles Inventories and installments Provision for depreciation: Machines and articles Inventories and installments Book Value, net
9,863
51,720
Movements of tangible assets between the dates of 1 January and 31 December 2011 are below: 1 January 2011
Additions
Disposals
31 December 2011
10,046
-
10,046
-
826
-
826
-
10,872
-
10,872
(945)
-
(945)
-
(64)
-
(64)
-
(1,009)
-
(1,009)
Cost: Machines and articles Inventories and installments Provision for depreciation: Machines and articles Inventories and installments Book Value, net
-
9,863
7 Investment property As at 31 December 2012 and 2011, the Company does not have any investment property.
8 Intangible assets Movements of intangible assets between the dates of 1 January and 31 December 2011 are below (1January31December 2011: None): 1 January 2012
Additions
Disposals
31 December 2012
-
2,360
-
2,360
-
2,360
-
(79)
-
(79)
Cost: Rights
Amortization: Rights
-
Book value, net
-
(79)
2,281
EULER HERMES Sigorta Anonim Şirketi
Chapter III 81 Financial Information and Assessments on Risk Management
Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
9 Investments in associates 31 December 2012 Recorded Value
Participation Share %
Euler Hermes Risk Management
152,527
99.95
Subsidiaries
152,527 31 December 2011 Recorded Value
Participation Share %
Euler Hermes Risk Management
152,527
99.95
Subsidiaries
152,527
Name
Total Assets
Total equity
Profits from previous years
Profit for the period
Independence Audit Status
Period
2,924,833
1,461,456
517,999
893,458
Not audited
31 December 2012
Subsidiaries Euler Hermes Risk Management
In the current period, there’s no bonus share caused by capital increase of the subsidiaries’ internal sources.
82
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
10 Reinsurance assets / liabilities As 31 December 2012 and 2011, the Company’s assets and liabilities caused by reinsurance contrast that are signed by the Company with the title of ceding company, are shown below: Reinsurance Assets
31 December 2012
31 December 2011
11,750,363
3,646,288
Reinsurer’s share in the provision for unearned premiums (Note 17)
108,470
3,956,973
Reinsurer’s share in the provision for bonuses and discounts (Note 17)
151,429
-
12,010,262
7,603,261
31 December 2012
31 December 2011
Payables related to the premiums recorded to reinsurance companies, net (Note 19)
1,429,851
4,830,994
Deferred commission income (Note 17)
1,221,348
1,135,599
Total
2,651,199
5,966,593
Reinsurer’s share in the provision for outstanding claims (Note 4.2), (Note 17)
Total There is no impairment recorded related to reinsurance assets Reinsurance Assets
Gains and losses which are recorded to income statement cause of reinsurance contracts of the company are shown below:
Premiums assigned to reinsurer during the period (Note 17)
31 December 2012
31 December 2011
(15,993,610)
(10,079,979)
Reinsurer’s share in the provision for unearned premiums ( Period start ) (Note 17)
(3,956,973)
-
Reinsurer’s share in the provision for unearned premiums ( Period end ) (Note 17)
108,470
3,956,973
(19,842,113)
(6,123,006)
4,122,504
22,897
Reinsurer’s share in the provision for outstanding claims ( Period start ) (Note 17)
(3,646,288)
-
Reinsurer’s share in the provision for outstanding claims ( Period end ) (Note 17)
11,750,363
3,646,288
Reinsurer’s share in losses (Note 17)
12,226,579
3,669,185
Commission income accrued from reinsurers during the period (Note 32)
5,499,881
2,808,159
Deferred commission income ( Period start) (Note 19)
1,135,599
-
Deferred commission income ( Period End ) (Note 19)
(1,221,348)
(1,135,599)
5,414,132
1,672,560
(2,201,402)
(781,261)
Premiums assigned to reinsurer (Note 17) Reinsurer’s share in paid losses during the period (Note 17)
Commission income from reinsurers (Note 32) Total, net
EULER HERMES Sigorta Anonim Ĺžirketi
Chapter III 83 Financial Information and Assessments on Risk Management
Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
11 Financial assets As at 31 December 2012 and 2011, the financial assets are as follows: 31 December 2012
31 December 2011
1,028
-
Financial assets available for sale
-
-
Held to maturity financial assets
-
-
1,028
-
Financial assets held for trading
Total As at 31 December 2012, financial assets held for trading are as follows:
31 December 2012 Cost
Fair Value
Book Value
Securities
1,000
1,028
1,028
Total financial assets held for trading
1,000
1,028
1,028
Other financial assets with variable income
There is not any financial asset held by the Company issued by the related parties. There is no debt security issued during the period or issued before and paid during the period by the Company. There is no financial asset that is overdue but not impaired among the Company’s financial investments portfolio. The movement of financial assets during the period is as follows: 31 AralĹk 2012 Held for trading
Available for sale
Held to maturity
Total
Balance at beginning of period
-
-
-
-
Unrealized exchange differences in financial assets
-
-
-
-
1,028
-
-
1,028
Disposals (amortization or sale)
-
-
-
-
Changes in the fair value of financial assets (Note 15)
-
-
-
-
Changes in income from the amortized cost of financial assets
-
-
-
-
1,028
-
-
1,028
Additions during the period
Balance at end of period
84
EULER HERMES Sigorta Anonim Ĺžirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
12 Loans and receivables
31 December 2012
31 December 2011
Receivables from operations (Note 4.2)
6,835,735
4,614,326
Receivables from related parties (Note 4.2) , (Not 45)
1,155,553
873,789
Prepaid taxes and reserves (Note 4.2)
50,779
32,223
Other receivables (Note 4.2)
50,899
18,382
Advances given to employees (Note 4.2)
32,613
15,767
Provision for receivables from insurance operations
(160,036)
-
Total
7,965,543
5,554,487
Short term receivables
7,965,543
5,554,487
Medium and Long term receivables Total
- - 7,965,543
5,554,487
As at 31 December 2012, TL 6,581,986 of receivables from operations are from policyholders and TL 253,749 is from recourse and salvage receivables. As 31 December 2012 and 2011, the Company does not have any security or other assurances for receivables. Doubtful provisions for overdue receivables and receivables not yet due a) Provision for receivables from agencies under legal or administrative follow up (due): None (31 December 2011: None). b) Provision for premiums receivables (due): None (31 December 2011: None). c) Provision for recourse receivables: TL (106,036) (31 December 2011: None). d) Provision for recourse in litigation: None (31 December 2011: None). Related party transactions of the Company are presented in Note 45 in detail. The receivables and payables denominated in foreign currencies and detailed analysis of foreign currency balances is presented in Note 4.2.
13 Derivative financial instruments As of 31 December 2012 and 2011, the Company does not have any derivative financial instruments.
EULER HERMES Sigorta Anonim Şirketi
Chapter III 85 Financial Information and Assessments on Risk Management
Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
14 Cash and cash equivalents As of 31 December 2012 and 2011, cash and cash equivalents are as follows: 31 December 2012
Cash Cash at banks Blocked amounts (Note 17) Bank deposits-income accruals Cash and cash equivalents in the statement of cash flows
31 December 2011
Ending
Beginning
Ending
Dönem başı
2,639
3,255
3,255
-
7,177,040
5,472,138
5,472,138
5,391,427
7,179,679
5,475,393
5,475,393
5,391,427
(2,450,650)
(2,062,922)
(8,152)
(5,713)
(5,713)
(3,494)
4,720,877
3,406,758
3,406,758
3,670,787
(2,062,922) (1,717,146)
As at 31 December 2012 and 2011, bank balances are detailed as follows: 31 December 2012
31 December 2011
- time deposits
1,988,159
4,512,426
- demand deposits
2,222,694
832,513
- time deposits
1,721,137
40,016
- demand deposits
1,245,050
87,183
Cash at banks
7,177,040
5,472,138
Foreign currency denominated bank deposits
TL denominated bank deposits
As at 31 December 2012, bank deposits blocked in favor of the Turkish Treasury amounts to TL 2,450,650 (31 December 2011: TL 2,062,922). Time deposits consist of TL with maturities less than 1 month and Euro basis bank placements. The interest rate applied to time deposits amount to TL 1,720,000 is 8% , amounting to EUR 844,145 is 3,9% ( 31 December 2011 : TL 40,007, 8% ; EUR 1,844,145 , 4.20%).
86
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
15 Equity Paid in Capital As at 31 December 2011, the issued share capital of the Company is TL 5,500,000 (31 December 2010: TL 5,500,000) and the share capital of the Company consists of 5.500.000 (31 December 2010: 5.500.000 shares) issued shares with TL 1 nominal value each. As of 31 December 2010, Euler Hermes SFAC, who owns 99.99% shares has direct or indirect control in the Company’s capital. The Company, subsidiaries or affiliates do not have stock. The Company does not have stock for the purpose of stock sale for future delivery or contracts. Legal reserves The legal reserves consist of first and second legal reserves in accordance with the Turkish Commercial Code. The first legal reserve is appropriated out of the statutory profits at the rate of 5%, until the total reserve reaches a maximum of 20% of the entity’s share capital. The second legal reserve is appropriated at the rate of 10% of all distributions in excess of 5% of the entity’s share capital. The first and second legal reserves are not available for distribution unless they exceed 50% of the share capital, but may be used to absorb losses in the event that the general reserve is exhausted. As at 31 December 2011 and 2010, the Company does not have legal reserves. Extraordinary reserves As at 31 December 2011 and 31 December 2010, the Company does not have extraordinary reserves
16 Other reserves and equity component of Discretionary Participation Feature None.
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Chapter III 87 Financial Information and Assessments on Risk Management
17 Insurance liabilities and reinsurance assets One of the most important estimations for the Company is to be able to estimate the liabilities related to loss payables, which come from valid policies. Estimation of liabilities about insurance involves consideration of high number of uncertainty. The Company explains the calculation of related insurance technical provisions in the note of the Summary of Important Accounting Policies and calculate related provisions within the frame of related legislation and reflect those calculations to the financial statements. As at 31 December 2012 and 2011, the Company does not have insurance technical provisions.
31 December 2012
31 December 2011
Provision for unearned premiums, gross
7,268,105
4,634,377
Reinsurer’s share of provision for unearned premiums (Note 10)
(108,470)
(3,956,973)
Provision for unearned premiums, net
7,159,635
677,404
13,439,281
4,239,926
(11,750,363)
(3,646,288)
1,688,918
593,638
170,518
-
(151,429)
-
19,089
-
833,616
186,256
Total technical Provisions
9,701,258
1,457,298
Short Term
8,821,071
1,236,991
880,187
220,307
9,701,258
1,457,298
Provision for outstanding claims, gross Reinsurer’s share of provision for outstanding claims (Note 10) Provision for outstanding claims, net Provision for bonuses and discounts Reinsurer’s share for provision for bonuses and discounts Provision for bonuses and discounts, net Equalization Provision, net
Medium and Long Term Total Insurance Technical Provisions
As at 31 December 2012 and 2011, insurance liabilities and movements of reinsurance assets are shown below:
88
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
17 Insurance liabilities and reinsurance assets (continued) Provision for unearned premiums
Provision for unearned premiums ( Period Beginning ) Premium recorded during the period Earned premiums during the period Provision for unearned premiums (Period End ) Provision for unearned premiums
31 December 2012 Gross
Reinsurer’s share
Net
4,634,377
(3,956,973)
677,404
25,159,947
(15,993,610)
9,166,337
(22,526,219)
19,842,113
(2,684,106)
7,268,105
(108,470)
7,159,635
31 December 2011 Gross
Reinsurer’s share
Net
-
-
-
Premium recorded during the period
11,746,034
(10,079,979)
1,666,055
Earned premiums during the period
(7,111,657)
6,123,006
(988,651)
4,634,377
(3,956,973)
677,404
Provision for unearned premiums ( Period Beginning )
Provision for unearned premiums (Period End )
Provision for outstanding claims
31 December 2012 Gross
Reinsurer’s share
Net
4,239,926
(3,646,288)
593,638
Damages stated in the current period and changes in the period-start provision for outstanding claims
14,039,652
(12,226,579)
1,813,073
Losses paid at the current period
(4,840,297)
4,122,504
(717,793)
Provisions for outstanding claims at the end of the period
13,439,281
(11,750,363)
1,688,918
Provision for outstanding claims at the beginning of the period
Provision for outstanding claims
Provision for outstanding claims at the beginning of the period Damages stated in the current period and changes in the period-start provision for outstanding claims Losses paid at the current period Provisions for outstanding claims at the end of the period
31 December 2011 Gross
Reinsurer’s share
Net
-
-
-
4,266,995
(3,669,185)
597,810
(27,069)
22,897
(4,172)
4,239,926
(3,646,288)
593,638
Since the company started producing premiums last year, a claim development table is not presented.
EULER HERMES Sigorta Anonim Şirketi
Chapter III 89 Financial Information and Assessments on Risk Management
Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
17 Insurance liabilities and reinsurance assets (continued) Total amount of guarantee that should be placed by the Company for life and non-life branches and guarantees placed for the life and non-life branches in respect of related assets 31 December 2012 Should be placed
Placed
31 December 2011 Should be placed
Placed
Non-life: Bank deposits(Note 14) Total
2,450,650 1,833,333
2,450,650
2,062,922 1,833,333
2,062,922
According to the 4th article of the “Communiqué on Relating to Financial Structure of Insurance, Reinsurance and Individual Pension Companies” which regulates necessary guarantee amount, minimum guarantee fund for capital adequacy calculation cannot be less than one third of the minimum initial capital and the minimum guarantee fund is blocked for the related capital adequacy calculation period. As at 31 December 2012 and 2011, minimum guarantee fund of the Company amounts to TL 1,833,333. As at 31 December 2012 and 2011, bank deposits blocked in favor of the Turkish Treasury amount to TL 2,062,922 and TL 2,450,650 Distribution of guarantees with regards to branches 31 December 2012
31 December 2011
Loan
405,514,223
225,639,904
Export
152,712,446
165,995,151
Total
558,226,669
391,635,055
Distribution of mathematical reserves for life insurance policyholders who left the Company’s portfolio as individual or group during the period None. (31 December 2011: None) Distribution of new life insurance policyholders in terms of numbers and gross and net premiums as individual or group during the period None. (31 December 2011: None) Distribution of mathematical reserves for life insurance policyholders who left the Company’s portfolio as individual or group during the period None. (31 December 2011: None)
90
EULER HERMES Sigorta Anonim Ĺžirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
17 Insurance liabilities and reinsurance assets (continued) Deferred commission expenses The Company capitalizes commissions paid to the intermediaries related to policy production under short-term and long-term prepaid expenses. As at 31 December 2012, short-term prepaid expenses amounting to TL 637,251 (31 December 2011: TL 307,668) consist of deferred commission expenses. Long-term prepaid expenses amounting TL 69 (31 December 2011: TL 793) are composed of other prepaid expenses. As at 31 December 2012 and 31 December 2011, the movements of deferred commission expenses are presented below: 31 December 2012 31 December 2011 Deferred commission expenses at the beginning of the period Commissions accrued during the period (Note 32) Commissions expensed during the period (Note 32) Deferred commission expenses at the end of the period (Note 32)
307,668
-
2,593,194
877,390
(2,263,611)
(569,722)
637,251
307,668
Individual pension funds None.
18 Investment contract liabilities None (31 December 2011: None).
19 Trade and other payables, deferred income 31 December 2012
31 December 2011
Payables
2,865,090
5,157,899
Income relating to future months and accrued expenses
1,613,348
1,325,599
267,547
106,394
61,255
51,159
122,076
38,988
Total
4,929,316
6,680,039
Short-term payables
4,929,316
6,680,039
-
-
4,929,316
6,680,039
Tax payables and other liabilities Other payables Due to related parties (Note 45)
Medium and long-term payables Total
As at 31 December 2012 and 2011, other payables comprise payables for outsourced services. Income relating to future months and accrued expenses’ TL 1,221,348 (31 December 2011: TL 1,135,599) amount consists of deferred tax income (Note 10), TL 373,000 (31 December 2011: TL 190,000) amount consists of the accrual of employee bonus payables and TL 19,000 (31 December 2011: None) consists of other expenses and provision for liabilities.
EULER HERMES Sigorta Anonim Ĺžirketi
Chapter III 91 Financial Information and Assessments on Risk Management
Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
19 Trade and other payables, deferred income (continued) As at 31 December 2012 and 2011, details of payables are shown below: 31 December 2012
31 December 2011
Due to reinsurance companies (Not 10), (Not 45)
1,416,244
4,872,506
Due to Agencies, Brokers and Intermediaries
1,435,239
326,905
13,607
(41,512)
2,865,090
5,157,899
Rediscount of Reinsurance Companies Payables Insurance operations liabilities
Total amount of investment incentives that will be benefited in current and forthcoming periods None (31 December 2011: None).
20 Financial liabilities None (31 December 2011: None).
21 Deferred taxes As at 31 December 2012 and 2011, the detailed analysis of the items giving rise to deferred tax assets and liabilities are as follows:
Tax losses carried forward Provision for Bonus
31 December 2012
31 December 2011
Deferred tax
Deferred tax
assets/
assets/
(liabilities)
(liabilities)
601,324
417,691
74,600
38,000
166,723
37,251
18,253
9,229
Financial asset valuation differences
(15,645)
1,367
Provision for bonuses and discounts
3,818
-
VUK (Taxation Procedure Law) - Treasury amortization difference
(559)
-
Other
3,800
-
852,314
503,538
(556,908)
(208,132)
295,406
295,406
Equalization provision Provision for employee termination benefits
Deferred tax assets, net Unrecognized deferred tax asset Recognized deferred tax asset, net
The Company has found it acceptable to recognize probable amounts of deductable financial loss according to following years’ budgets and current year performance. As of December 31, 2012 recorded deferred tax is TL 295,406. After considering the current and previous year performance, since the trading and financial loss conditions continue and with regards to the conservatism principle, the Company has transferred deferred tax amount of December 31, 2011 to financial statements of December 31, 2012.
92
EULER HERMES Sigorta Anonim Ĺžirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
21 Deferred taxes (continued) As at 31 December 2012 and 31 December 2011 the Company's unused tax losses, and expiration dates are as follows: Year
Expiration Date
31 December 2012
31 December 2011
2010
31,12,2015
603,955
603,955
2011
31,12,2016
1,722,950
1,484,501
2012
31,12,2017
679,714
-
3,006,619
2,088,456
Total
22 Retirement benefit obligations None (31 December 2011: None).
23 Provisions for other liabilities and charges As 31 December 2011 and 2010, the details of provision for other risks are below: 31 December 2012
31 December 2011
Provision for severance pay
37,488
19,194
Provision for unused vacation
53,776
26,949
Total provisions for other risks
91,264
46,143
31 December 2012
31 December 2011
19,194
4,082
-
-
Provision during the period
18,294
15,112
Provision for severance pay at the end of the year
37,488
19,194
Movements of provisions for severance pay for the current period are below:
Provision for severance pay at beginning of year Payments During Period
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
Chapter III 93 Financial Information and Assessments on Risk Management
24 Net insurance premium Net insurance premium revenue is presented in detailed in the accompanying statement of income.
25 Fee revenue None (31 December 2011: None).
26 Investment income Net realized gains on financial assets are presented in Note 4.2 – Financial Risk Management.
27 Net realized gains on financial assets Net realized gains on financial assets are presented in Note 4.2 – Financial Risk Management.
28 Net fair value gains on assets at fair value through profit or loss Net realized gains on financial assets are presented in Note 4.2 – Financial Risk Management.
29 Insurance rights and claims 31 December 2012
31 December 2011
Change in the provision of unearned premiums, (without reinsurer’s share )
(6,482,231)
(677,404)
Change in the provision of outstanding claims, (without reinsurer’s share )
(1,095,280)
(593,638)
(647,360)
(186,256)
(19,089)
-
(8,243,960)
(1,457,298)
Change in the equalization provision, (without reinsurer’s share ) Change in the provision of bonuses and discounts (without reinsurer’s share) Total
94
EULER HERMES Sigorta Anonim Ĺžirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
30 Investment contract benefits None (31 December 2011: None).
31 Other expenses The allocation of the expenses with respect to their nature or function is presented in Note 32- Expenses by Nature below.
32 Expense by nature For the years ended 31 December 2012 and 2011, the details of operating expenses are as follows: 31 December 2012
31 December 2011
Commission Expenses (Note 17)
(2,263,611)
(569,722)
Accrued Commissions to Intermediaries During the Period (Note 17)
(2,593,194)
(877,390)
329,583
307,668
Changes in Deferred Production Commissions (Note 17) Employee Benefit Expenses (Note 33)
(2,697,586)
(2,375,454)
Commission Income Earned from reinsurers (Note 10)
5,414,132
1,672,560
Accrued Commission Income from Reinsurers During the Period (Note 10)
5,499,881
2,808,159
(85,749)
(1,135,599)
Consulting Expenses
(812,754)
(639,563)
Office and Car Rental Expenses
(701,082)
(379,642)
Technical Expenses
(305,921)
(242,063)
Tax, Duty and Levy Expenses
(124,023)
(119,163)
Publicity and Public Relations expenses
(34,035)
(61,401)
Office Expenses
(50,536)
(24,721)
-
(17,902)
(115,089)
(251,668)
(1,690,505)
(3,008,739)
Change in Deferred Commission Income (Note 10)
IT Expenses Other Expenses Total
33 Employee benefit expenses For the years ended 31 December 2012 and 2011, the details of employee benefit expenses are as follows:
Wages and salaries Social security premium employer share Other fringe benefits Bonus, Premium and Sales Commissions(*) Total employee benefit expenses (Note 32)
31 December 2012
31 December 2011
(2,392,559)
(2,172,187)
-
(145,588)
(80,875)
(54,995)
(224,152)
(2,684)
(2,697,586)
(2,375,454)
(*)As of reporting period, the bonuses, premiums and sales commissions have been recognized under provision expenses.
34 Finance costs Finance costs are presented in Note 4.2 – Financial Risk Management above. There are no finance costs classified in production costs or capitalized on tangible assets. All of financial expenses are reflected to income statement.
EULER HERMES Sigorta Anonim Şirketi
Chapter III 95 Financial Information and Assessments on Risk Management
Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
35 Income tax expenses As 31 December 2012 and 2011 there are no income tax expenses or income in the financial statements. Income tax provision which is calculated with legal tax rate via operating profit before tax which occurs in the Company’s financial statements and the provision of calculated actual income tax which is calculated via the Company’s effective tax rate, and their commitments, related to the end of the current periods of 2012 and 2011, are shown below: 31 December 2012 Profit/(Loss) before Taxes
31 December 2011
(2,048,991)
Tax Rate (%)
(2,008,443)
Tax Rate (%)
409,798
(20.00)
401,689
(20.00)
Unrecognized deferred tax assets
(135,943)
6.63
(208,132)
(10.36)
Disallowable expenses
(273,855)
13.36
(488,963)
5.07
-
-
(295,406)6
14.70
Income tax provision at statutory tax rate
Total income tax expense in the statement of income
36 Net foreign exchange gains Net foreign exchange gains are presented in Note 4.2 – Financial Risk Management above.
37 Earnings / (Loss) per share Earnings / (Loss) per share for the periods ended 31 December 2012 and 2011 are calculated by dividing net earnings/ (loss) for the period into weighted average number of shares of the Company.
Net earnings / (loss) for the year Weighted average number of shares outstanding Earnings / (Loss) per share (TL)
31 December 2012
31 December 2011
(2,048,991)
(1,713,037)
5,500,000
5,500,000
(0,3725)
(0,3115)
38 Dividends per share Net loss of the Company as at and for the year ended 31 December 2012 amounted to TL 2,048,991(31 December 2011: TL 1,713,037) calculated in accordance with the prevailing accounting policies applicable for the reporting period. Since the Company did not have distributable profits, no dividend was distributed.
39 Cash generated from operations The cash flows from operating activities are presented in the accompanying statement of cash flows.
40 Convertible bonds None (31 December 2011: None).
41 Redeemable preference shares None (31 December 2011: None).
42 Risks In the normal course of its operations, there are not any lawsuits against the Company (31 December 2011: None).
96
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
43 Commitments The details of the commitments, which are given by credit insurance branch due to the Company’s operations, are shown in Note 17. The sum of minimum leasing payables within the frame of operating lease for the real estates rented for general management and rented cars is shown below: 31 December 2012
31 December 2011
635,848
448,297
3,795,657
513,917
-
-
4,431,505
962,214
Less than 1 year Between 1 and 5 years More than 5 years Total leasing payables
44 Business combinations In accordance with the decision of Board of Directors, dated January 7th, 2011 and numbered 2011/1; the Company has been decided to take over 1,999 units, representing 99.95% of the Euler Hermes Risk Management capital, totally 49,975 TL nominal value from the company Euler Hermes SFAC. This acquisition process was for the price 69,832 EUR. According to the stock transfer contract signed between Euler Hermes SFAC and Euler Hermes Insurance Company, on the date of January 13th, 2011; 1,999 units recorded in the share registry of Euler Hermes Risk Management, which represent 99.95% of and with a nominal value 49,975 TL out of the capital 50,000 TL of Euler Hermes Risk Management, which is divided 2,000 units per 25 TL each is irrevocably transferred with all rights and liabilities to Euler Hermes Insurance Company with the value of 69,832 EUR.
45 Related party transactions Euler Hermes SFAC, the Company's main shareholder who owns 99.99% of shares and the groups to which they are related and the subsidiaries and associates of these groups are defined as related parties. As at 31 December 2012 and 2011, related party balances are as follows: 31 December 2012
31 December 2011
Euler Hermes Risk Yönetim AŞ – trade receivables
823,511
736,883
Due from related parties (Note 12)
823,511
736,883
Euler Hermes Stac
-
136,909
Due from shareholders (Note 12)
-
136,909
293,218
-
38,824
-
Due from other related parties
332,042
-
Euler Hermes Risk Yönetimi AŞ – trade payables
120,215
29,440
Due to subsidiaries
120,215
29,440
Êuler Hermes Service Euler Hermes World Agency
Payables to personnel
1,861
9,548
Due to related parties (Note 19)
1,861
38,988
Euler Hermes Reinsurance AG
627,280
4,409,023
Euler Hermes SIAC
706,308
400,308
Euler Hermes SFAC
82,656
63,175
1,416,244
4,872,506
Payables from operations (Note 19)
EULER HERMES Sigorta Anonim Ĺžirketi
Chapter III 97 Financial Information and Assessments on Risk Management
Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
45 Related party transactions (continued) No guarantees have been taken for the receivables from related parties. As at 31 December 2012, there is no bad doubt amount and debt for receivables from subsidiaries, affiliates and shareholders. As at 31 December 2012, there are no liabilities such as guarantee, undertaking, bail, advance and endorsement for subsidiaries, affiliates and shareholders. For the years ended 31 December 2012 and 2011, related party transactions are as follows: 31 December 2012
31 December 2011
15,400,488
11,247,922
Euler Hermes Siac
101,006
431,612
Euler Hermes Sfac
105,136
66,500
15,606,630
11,746,034
5,375,632
2,783,253
Euler Hermes Siac
5,257
21,581
Euler Hermes Sfac
4,088
3,325
5,384,977
2,808,159
Euler Hermes Reinsurance AG
Premiums Euler Hermes Reinsurence AG
Commissions
46 Subsequent events It has been decided to increase the capital by TL 6,854,000 by cash and in accordance with the Board of Directors decision dated 14 March 2013. It has been decided the capital increase will be paid by the main shareholder until Ordinary General Meeting 7 May 2013.
98
EULER HERMES Sigorta Anonim Şirketi Notes to the Financial Statements As at 31 December 2012 (Currency:Turkish Lira(TL))
47 Others Items and amounts classified under the “other” account in financial statements either exceeding 20% of the total amount of the group to which they relate or 5% of the total assets in the balance sheet They are presented in the notes above each in its own disclosure note, except specified below. Total amount of each of due to/from personnel items classified under “Other Receivables” and “Other Short and Long Term Payables” exceeding one percent of total assets in the balance sheet None (31 December 2011: None). Subrogation receivables followed under the off-balance sheet accounts None (31 December 2011: None). Description and amount of in kind rights on property None (31 December 2011: None). Descriptive disclosure in relation to amounts and resources of income, expenses, and losses for the prior periods None. For the years ended 31 December 2012 and 2011, details of rediscount and provision expenses are as follows:
31 December 2012
31 December 2011
(373,000)
(190,000)
Provisions for unused vacations
(26,827)
(26,949)
Provisions for employee termination benefits
(18,294)
(15,112)
Other
(19,000)
-
(437,121)
(232,061)
31 December 2012
31 December 2011
Rediscount Expense/Income
(85,601)
6,836
Rediscount Account
(85,601)
6,836
Provision for Bonus
Provisions Account
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