vsk insurance house. annual report 2012 eng

T IME TO WORK WITH

LEADER

2012

ANNUALREPORT

MAIN PERFORMANCE PARAMETERS

Assets, billion rubles

2008 2009 2010 2011 2012

18.7 19.324.7

26.632.2

Insurance reserves, billion rubles

2008 2009 2010 2011 2012

12.5 12.5

17.7 18.722.0

Capital, billion rubles

2008 2009 2010 2011 2012

4.45.2 5.3

6.0

7.5

Capital adequacy, %

2008 2009 2010 2011 2012

140

172 164 146

133

Collections, billion rubles

2008 2009 2010 2011 2012

21.6 20.0

25.930.8

34.8

Payments, billion rubles

2008 2009 2010 2011 2012

11.3 12.113.8

17.4 17.6

Share, %

2008 2009 2010 2011 2012

4.0 3.8

4.5 4.5 4.2

2008 2009 2010 2011 2012

Number of customers, million

2.6 2.7

4.75.5

9.6

LEADERSHIPVSK has been working since 1992 and is one of the acknowledged leaders in the insur-ance service market of Russia

RELIABILITYEvery year VSK confirms the highest national rating А++ «Exceptionally high reliability level under Expert RA rating agency version

TRUSTOver 9 million Russians and more than 125 thousand enterprises are under VSK cover-age

MERITSThe President of Russia twice awarded VSK for its contribution into development of the Russian insurance market. (2002 and 2007)

SCOPEVSK regional chain accounts to over 700 branches and divisions in all the constitu-ent entities of Russia, that allows effec-tively support insurance policies all over the country

А++

AnnuAl REPORT 2012

CONTENTS

Message from the Chairman

of the Board of Directors ..................................... 05

Message from the Director General ........................07

VSK Mission and Values ....................................... 08

Insurance market in 2012 .................................... 10VSK Positions in the Insurance Market ..................... 12

Key Performance Indexes ....................................14Capital .......................................................... 14Insurance reserves ............................................ 15Actuarial policy................................................ 15Insurance portfolio coverage ................................ 16Cost control .................................................... 16Assets management .......................................... 16

Results of Insurance Activities ............................ 20Insurance types ............................................... 20Property insurance for Legal entities ........................ 20

• Agricultural risks insurance .............................. 22• Construction and Assembly risks insurance ............. 24• Marine risks insurance .................................... 25• Aviation risks insurance .................................. 26• Space risks insurance ..................................... 28• Cargo insurance ........................................... 30

Legal entities liability and financial risks insurance .......31Motor insurance ............................................... 34Property insurance for Citizens .............................. 35Mortgage insurance ........................................... 36Voluntary Health Insurance .................................. 36Accident and illness insurance ................................37Travel insurance ................................................ 38

6

Sales channels ................................................. 42Direct sales in the corporate segment ...................... 42Retail insurance ............................................... 43Affiliate sales .................................................. 44

• Bank insurance ............................................ 44• leasing companies ........................................ 46• Automotive Dealerships ................................... 46

Insurance technologies....................................... 50Claims settlement............................................. 50Underwriting ...................................................51Legal support .................................................. 52Subrogation activities ....................................... 54HR policy ....................................................... 54

Strategy of Regional development ........................ 60Northwestern Federal District ................................61Central Federal District ....................................... 62Southern Federal District .................................... 63North Caucasian Federal District ............................ 64Volga Federal District......................................... 65Ural Federal District .......................................... 66Siberian Federal District ......................................67Far Eastern Federal District .................................. 68

Information technologies ................................... 69

Charity activities ................................................70

Balance sheet ..................................................... 71

7

Dear ladies and gentlemen !

In 2012 VSK Insurance House demonstrated good dynamics — in our anniversary year we are satisfied to note confident growth of premiums collection in all insurance types. The company managed to keep the leading positions, despite the diffi-culties the Russian insurance market is facing nowadays. Overcoming the 20 year threshold of our development, we paid close attention to the business effectiveness, portfo-lio structure and service component improvement. I can proudly say that the team achieved the set goals.

The jubilee year presented us a lot of events which are likely to be entered into VSK history as important mile-stones. First, a new company record in collections was made — for the first time they exceeded 34 billion rubles. Preparatory work on introduction of law on Obligatory liability Insurance of Owners of Hazardous Facilities brought its fruit — in this sector VSK en-tered TOP-3. We once again confirmed the leader’s ti-tle in bank insurance, mortgage insurance and leasing transactions insurance. We also proved our exclusive reliability once again, having made the largest in the history payment under mortgage insurance policy in Russia.

using professional experience gained for many years, we continue offering the best conditions to our cus-tomers, developing new products and services aimed to protect their ordinary world in accordance with the modern insurance trends. And, like before, VSK professional team all over the country pays special at-tention to creation of comfortable service conditions, adhering to unified high standards.

Having overcome the 20 year threshold we go on de-veloping, perfecting ourselves tirelessly. Our readi-ness for innovations, changes and development allows

us maintain the status of the Russian insurance leader throughout the whole period. We have a lot of ideas to

realize ahead.

Chairman of the Board of Directors IOJSC “VSK”

Sergei Tsikalyuk

9

Dear ladies and gentlemen !

Summing up the results of the past year we are glad to note a consis-tently high level of confidence on the part of our customers and part-ners.

The year 2012 passed under the sign of customer service improve-ment. We made over 4.7 million insurance contracts with the ag-gregate insurance amount of 16.9 trillion rubles. The collections grew 13.2 % as compared to 2011 and made up 34.8 billion rubles. Our largest payments in 2012 were : in personal insurance — 400 million rubles, in property insurance — 175 million rubles, in legal entities liability insurance — 108 million rubles, in space risks insurance — 92 million rubles, and the total payments amount made up 17.6 billion rubles.

VSK expanded regional chain functions as a single system al-lowing us to provide the customers with the services of the same high quality in all the area of the country. The com-pany expanded agents network allows selecting optimal insurance coverage options.

We pay special attention to compliance with the high ser-vice standard and our customers value it. By the results of EPSI RuS research, VSK is one of three leaders in the hull insurance satisfaction rating. In this sphere, our main ef-forts are focused on the reduction of insurance compensa-tion terms and provision of additional services.

Expanding the opportunities to communicate with cus-tomers, we launched a project for customers notification about the stages of settlement via SMS and e-mail.

Innovative approach to customer service is reflected in the company IT-infrastructure development. In 2012 we started working in the Microsoft Dynamics AX system that allowed us to improve business effectiveness due to cash flows mon-itoring, cost optimization of the huge sales and customer service network, unification of key business processes in the

branch-offices.

Business high technological effectiveness in combination with the customer oriented approach of the professional team allows

the company to move ahead fast to achieve new heights in busi-ness.

Director General “VSK” IOJSC Oleg Ovsyanitsky

11

VSK MISSION AND VALUES

MissionWe seek to be a national scale and importance company, which will change the attitude to insurance in Russia, having proved that it may be based on partnership and trust.• We develop the insurance market paying special attention to eco-

nomics of the regions.• We support our corporate customers and partners in their attempt

to build a stable business.• We consider performance of all the undertaken obligations a con-

dition for insurance development in Russia.• We build long-term and mutually beneficial relations giving confi-

dence to people and safeguarding their ordinary world.

VSK MISSIOn AnD VAluES

12

Values

Honesty and opennessWe consider that only open and honest relations may be called part-nership. All the work among the company employees and sub-divi-sions, as well as with all the partners and customers is based on the honesty and openness principles.

Focus on the common resultInteracting with each other, our customers and partners, we base upon the statement that we are doing a common business, we have common purposes, which achievement is beneficial to all the partici-pants.

Respect to each employee, customer and partnerAll our colleagues, customers and partners deserve equal respect.

Professionalism and developmentFor the whole team to be strong, each of its members should share the company philosophy, be a part of the whole and perform the tasks posed to them the most effectively. It is important for us not to stop where we are, but persist in perfection and development. As real pro-fessionals we are always ready to undertake responsibility for our deeds and actions.

Succession and traditionsMaintenance of the established and creation of the new traditions is an integral part of the company corporate culture. Our history is experience and knowledge allowing us to succeed.

VSK MISSIOn AnD VAluES

13

2007 2008 2009 2010 2011 2012

486555 514 558

665

809

42 4556 53

46 46

Premiums collections, billion rubles Payments level, %

INSURANCE MARKET IN 2012By the results of 2012 the total amount of insurance premiums ( ex-cluding obligatory health insurance ) made up 809 billion rubles, the amount of compensations made up 371 billion rubles. Both parame-ters grew 22 % as compared to the similar period of the previous year. On the background of growth of the insurance market main param-eters the compensations ratio remained at the level of 46 % by the re-sults of 2012, same as a year before. Insurance share in the GDP by the year results made up 1.3 % (1 / 2# in 2011 ), and the average premium per capita 21.7 % grew — up to 5.6 thousand rubles.

Collections and payments over the market

The main contribution to the collections amount was ensured by such insurance types as hull insurance (195.3 billion rubles ), property in-surance (177.9 billion rubles ), MTPl (121.2 billion rubles ), health in-surance (108.7 billion rubles ), accident and illness insurance (73.8 billion rubles ) and life insurance (53.8 billion rubles ). Positive collec-tions dynamics may be observed in all the segments.

Among the large segments of the insurance market life insurance (54.6 %) and accident and illness insurance (51.1 %) demonstrate the highest growth. However, despite the significant growth rates, there is still no comprehensive market development. The segments develop mainly for the account of physical persons crediting as the banks are the main sales channel for life insurance and accident and illness in-surance products.

InSuRAnCE MARKET In 2012

14

2007 2008 2009 2010 2011 2012

47.2%48.5% 52.6% 55.0%

56.9%

57.1%

2007 2008 2009 2010 2011 2012

857 786702

618 572469

The market general growth was influenced by the introduction of a new obligatory insurance type — liability insurance of the owners of hazardous facilities in 2012. By the results of the year the collections amount in this sector made up 9 billion rubles.

Number of insurance companies

TOP-10 Companies market share

number of companies operating in the market continues sustainable decline. The trend for the market concentration and consolidation is caused by the market release from the weak players, including due to the requirements of the Federal service for financial markets to the minimal authorized capital amount, entered into force in 2012. Small, most often regional companies had to leave the sector or joined the bigger players. In general, as of the end of 2012 the register of insur-ance subjects included 469 insurers. For the year the sector lost 103 players and the share of TOP-10 largest companies grew up to 57.1 % from 56.9 % in 2011.


15

Hazardous Facilities Insurance (voluntary and obligatory)

Accident and illness insurance

CMlTP

Property insurance (except cars)

Voluntary Health insurance

liability insurance

Motor hull insurance

VSK Market

794.8%

63.6%

29.6%

11.1%

10.5%

6.8%

1.0%

343.1%

51.1%

17.2%

5.4%

11.6%

12.4%

18.6%

VSK Positions in the Insurance MarketBy the results of 2012 VSK demonstrated stable growth in priority in-surance types and took the sixth place by the collections amount in the RF. The greatest collections growth was noted in such insurance types as accidents and illness insurance (63.6 %), liability insurance of owners of water transportation means (39.3 %), MTPl (29.6 %), cargo insurance (12.8 %), VHI (10.5 %).

VSK also showed significant collections in the new sector of obliga-tory insurance — liability insurance of owners of hazardous facilities, having taken the third place in collection of this type with the market share of 10.8 %.

VSK collections growth in relation to market indexes


16

Voluntary motor insurance

CMlTP


legal entities property

VHI

Personal propertyConstruction and assembly operations

and builder responsibilitylegal entities liability

Travel insurance

Marine risks

Aviation insurance

Cargo and non-marine carriages

Green card

Insurance in the space sphere

Other types

30.8%

20.5%

12.4%

8.6%

5.7%

4.7%

4.3%

4.0%

2.2%

1.9%

1.8%

1.6%

0.8%

0.3%

0.3%

VSK takes a confident place among TOP-5 of the RF insurance companies for such insurance types as accident and illness in-surance, CMlTP, hull, property insurance and liability insurance.

The Company insurance portfolio remains one of the most bal-anced in the market and at the same time meets the general structure of collections throughout RF both with regard to cer-tain types and obligatory and voluntary insurance segments.

VSK portfolio structure by types


17

KEY PERFORMANCE INDEXESBy the results 2012, the Company demonstrated confident growth of collections and stability of financial performance indexes :• insurance premium for 34.8 billion rubles was signed as com-

pared to that of 30.8 billion rubles, collected in 2011.• insurance compensations for the amount of 17.5 billion rubles

were paid that is 100 million rubles more than in 2011• net loss ratio, as the main parameter, characterising the insur-

ance portfolio quality and — re-insurance coverage, as well as reasonableness of the tariffs used, made up 53.6

• profit before taxation made up 780 million rubles• profit after tax made up 522 million rubles• return on equity made up 9.1 % ( in 2011-7.8 %)

CapitalThe Company own capital by the results of 2012 exceeded 7.3 billion rubles and made up 23.3 % in the balance liabilities structure. Autho-rized capital is increased by 1.2 billion rubles and makes up 3.2 billion rubles.

Structurally the capital is distributed as follows by the results of 2012 :• authorized capital — 3,200 million rubles (42.6 % own capital )• additional capital — 1,166 million rubles (15.5 % own capital )• reserve capital — 232 million rubles (3.1 % own capital )• undistributed profits — 2,919 million rubles (38.8 % own capital )

Actual solvency margin exceeds the standard by 2.35 billion rubles. The excess makes up 46 % with the standard of 30 %.

KEY PERFORMAnCE InDEXES

18

Insurance reservesThe established structure and amounts of insurance reserves ad-equately reflect the Company insurance liabilities. The insurance re-serves amount makes up 22 billion rubles with the share in the bal-ance liabilities making up 68.3 %.

By the results of 2012, structurally the capital is distributed as follows :• unearned premium reserve — 11.5 billion rubles (52.5 % of the in-

surance reserve amount )• loss reserve — 9.8 billion rubles (44.4 %)• equalization provision — 0.67 billion rubles (3.1 %)

VSK is a profitable Company in all spheres. The result became possible thanks to regular monitoring of tariffs, portfolio quality and balanced reinsurance coverage.

Actuarial policyThe Company actuarial policy is aimed to achieve maximal insurance business profitability in the long-term period via implementation of the tariff policy accepted in VSK with unconditioned performance of the liabilities undertaken by the Company and the standards of the regulatory bodies for solvency and financial stability.

Actuarial service main activities are :• tariffication of new insurance products• the Company portfolio quality monitoring in the available insur-

ance products and business spheres• assessment of the Company insurance liabilities based on the mod-

ern actuarial methods• assessment of reinsurance coverage of the Company portfolio,

determination of optimal self-retention level and fair reinsurance price

• insurance compensations amount, insurance reserves and insur-ance portfolio quality forecast for the purposes of budget plan-ning

Within the frames of the specified spheres original approaches and methods of evaluation of insurance liabilities, statistic forecast of ba-sic financial parameters and portfolio stochastic modelling are being developed.

Dynamic tariff management allows expanding our presence in the market maintaining acceptable portfolio quality.


19

Insurance portfolio coverageRisks reinsurance is one of the key factors to ensure the Company financial stability. One of the most effective risk reinsurance sys-tems in the Russian insurance market is created in VSK. The Com-pany analyses the activities and financial situation of the reinsur-ance companies carefully and cooperates with the most reliable of them.

At the moment VSK has more than 15 obligatory agreements ensur-ing comprehensive and high quality portfolio coverage.

Outgoing reinsurance premiums made up 1 billion 452 million ru-bles. Effectiveness of reinsurance coverage is proved by high vol-ume of compensations received from the re-insurers for large losses, paid by the Company to the insured and to the re-insured. Thus, in 2012 VSK received 849 million rubles as reinsurance compensation.

Cost managementVSK management activities are aimed at ensuring the Company profitability, including through cost management. VSK budget preparation, approval and performance monitoring system seg-mented by business lines, products, sales channels of each regional division, considers peculiarities of various business-processes and ensures due business efficiency. The Company budget system is supported using a software solution based on Hyperion planning.

Cash management system is introduced and is being used in VSK. A corresponding specialized division is established, performing daily monitoring of the Company cash flows and cash budget.

Assets managementThe investment strategy choice is caused by the objectives set to the Company, including the main ones in part of assets manage-ment :• ensuring required solvency and, accordingly, high assets liquid-

ity• ensuring investments recoverability, and, accordingly, minimi-

zation of different risks, accompanying investment activities• ensuring stable growth of investment income

Centralized assets management is being implemented in the Com-pany. By the results of 2012 VSK income from investment activities made up 1.2 billion rubles.


20

Active market portfolio management is performed in the Company, that supposes both high quality fundamental analysis, designed for medium-term and long-term prospect, and current technical analy-sis, allowing to implement short-term speculative strategies.

The Company Bank portfolio is diversified by the number of banks and terms. This ensures its high liquidity and rather low risk of loss-es in case of some banks bankruptcy The portfolio is to 92 % formed of instruments with the banks, listed in TOP-50 by assets amounts and international rating agencies ratings.

VSK has a centralized cash flow management system. All the trans-actions in the Company branches are controlled by the central trea-sury. There established remaining funds limits for the operating ac-counts of each of the branches, daily consolidation of amounts on the head company accounts is performed.

The tasks of receipt of investment income are solved by the assets management department based on the developed key performance indexes system ( KPI ):• via observance of the established standards for risks assessment

based on the methods, agreed and approved by the Company financial committee with the establishment of limits for the amounts and terms of placement with the counter-agent banks

• via assessment of allocation effectiveness from the point of view of the volume and quality of counter-business from banks, leasing companies

• with consideration of building the current liquidity• via centralization of cash flows among the largest network part-

ner-banks• upon achievement of maximum possible profitability rates un-

der the conditions of the current market environment• based on the Insurance centers and branch chain needs and ap-

plications• with consideration of the Regulator’s current standards and lim-

its


21

BAnK SECTOR RElIABIlITY EnSuRES STABlE ECOnOMIC DEVElOPMEnT OF MODERn RuSSIA

Comprehensive coverage of the banks property interests in VSK is an individual approach to formation of insurance coverage, operational risk-management and high service standards

according to Expert RA data, 2012

1 PLACE IN THE MARKET OF BANK RISKS INSURANCE

T IME TO WORK WITH

LEADER

INSURANCE RESULTS

Insurance typesLegal entities property insuranceVSK is holding one of the leading positions in the market of cor-porate customers insurance and enterprises property insurance is one of the Company priority activities during many years.

With the purpose to improve quality of the services rendered and to promote legal entities property insurance products active man-agers trainings at all the Company branches were held last year, remote training programmes were prepared.

Once again VSK became the leader in pledged property insurance, maintaining long-term partnership relations with the largest Rus-sian and foreign banks. Thus, in 2012 the Company was in active cooperation with the leading financial and credit institutions within the frames of immovable property, equipment, commod-ity stocks and specialized machinery insurance, including using automated system of insurance products sale. One of the exam-ples of such cooperation is the successful implementation of the Project “Credit Insurance of Sberbank of Russia OJSC corporate customers”.

For the past year the Company maintained and expanded its coop-eration with the power, petrochemical companies, transport ma-chine building enterprises, pharmaceutical holdings.

Today over 150 key companies of the Russian economy are under VSK insurance cover :• metallurgic, coal, light industry enterprises : Izhorsky Trubny

Zavod ZAO ( Izhora Pipe plant CJSC ), Taganrogsky Metallurgu-chesky Zavod OAO ( Taganrog Metallurgic Plant OJSC ), Ruza-evsky Stekolny Zavod ZAO ( Ruzaevka Glass Plant CJSC )

• agricultural food industry enterprises : Sinergia OJSC, Miratorg APKh, Krasnaya Zarya Confectionery

• bank sector : Sberbank of Russia OJSC, Central Bank of the Rus-sian Federation, Petrocommerce Bank OJSC

• phramaceutical companies : nPF Mate-ria Medica Holding llC, nPF Katren CJSC, ROSTA CJSC

• machine building enterprises : KAMAZ OJSC, uralvagonzavod FGuP, Kirovsky zavod OJSC

InSuRAnCE RESulTS

Premiums, RUB billion

3.0Payments, RUB billion

1.5

24

legal entities property

Commodity stocks

livestock animals

Other insurance types

16.1%

5.9% 1.4%

76.7%

• power, gas, chemical and petrochemical industrial enterprises : Himvolokno Shekinskoe OJSC, SAnORS Petrochemical holding, RAO Energeticheskie sistemy Vostoka ( East Power Systems ) OJSC

The Company large customer also include : Festival llC, Kompania ust-luga OJSC, AlIDI-logistics CJSC, REnDER llC, Everest CJSC and others.

Portfolio structure in legal entities insurance

InSuRAnCE RESulTS

25

Agricultural risks insuranceВVSK is holding stable leading position in the agricultural insur-ance market. Agricultural crops insurance, perennial plantings, animals insurance ( including birds and fish ) are performed with-in the frames of this type of insurance. In 2012 more than 1,700 agricultural enterprises and farmers in 67 regions of the Russian Federation became the Company customers, with which over 3,000 insurance contracts were made. Over 30 leading system-making Russian enterprises and agricultural holdings chose VSK as its in-surer. Many years of cooperation link the Company with such largest enterprises as APKh, Miratorg, AVK Exima CJSC, Russky losos CJSC, Agro-Gard CJSC etc.

VSK specialists take an active part in development of offers for per-fection of the legal and regulatory base, governing the system of agricultural insurance, performed with the governmental support within the frames of the Federal law dd. July 25, 2011 no. 260 FZ “On State Support in the Sphere of Agricultural Insurance and on Amending the Federal law “On agriculture Development”.

VSK IOJSC is a strategic partner of the banks, providing loans and project financing to the agricultural and food industry enter-prises. The Company provides insurance coverage at all financing stages. VSK partners are : Sberbank of Russia OJSC, Rossiysky Sels-kokhozyastvenny Bank OJSC, Vozrojdenie OJSC, Gasprombank OJSC, Vnesheconombank Group, VTB OJSC etc.

Every year VSK is improving its approaches to assessment quality of the risks accepted for insurance, thus optimizing time and fi-nancial costs of our potential customers. For the purpose of more impartial assessment of the actual condition of crop areas or health and living conditions of farm animals the Company engages specialists from the leading institutes and expert agencies in the sphere of livestock and crop production, including those certified by the RF Ministry of Agriculture.

VSK insurance product line allows ensuring insurance coverage, meeting the requirements of all bank institutions, providing loans to agricultural companies. Here any of the existing insurance prod-ucts may be rapidly adapted to individual needs of the customer or peculiarities of its production.

One of the most important aspects, the Company pays special at-tention to, is reliable reinsurance coverage of risks accepted for insurance. During many years VSK has been cooperating with the world leading reinsurance companies, which reliability was proved not only by the highest ratings, but also by the experience of real compensations paid. Thus, in 2012, obligatory agreements in ani-mals reinsurance, agricultural crops and perennial plantings in-

InSuRAnCE RESulTS



0.18

26

89.0%

11.0%

livestock animals

Agricultural crops

surance, made with the leading European reinsurance companies. In 2012 the Company insurance payments under agricultural risks insurance policies made up 176.8 million rubles.

Portfolio structure in agricultural risks insurance

InSuRAnCE RESulTS

27

Construction and Assembly risks insuranceIn 2012 VSK Insurance House succeeded in holding the positions in the market of construction and Assembly risks and builders liability insurance. Insurance premium collections made up 1,494.8 million rubles in 2012.

VSK provides insurance coverage to the construction and recon-struction facilities in different spheres of economy, such as food, mining, petrochemical industry, infrastructure, public utilities, trade, hotel business, power industry. Insurance of Sochi Olympiad 2014 facilities was continued.

In 2012 VSK branches insured such important facilities as :• construction of multi-functional administration and commer-

cial complex in Moscow• construction of road junction on different levels at the cross

of Moscow-Vladivostok railroad with Montazhnikov st. in Tyu-men c.

• gas treatment unit site of Pokrovsk oil deposit in Orenburg region

• construction of multifunctional complex of Spartak football stadium in Moscow

• construction of novo-nikolskoye improved convenience com-plex in Moscow

• construction of the second phase of a residential micro-dis-trict with a multi-functional sport center in Moscow region

• construction of a complex for poultry slaughter and process-ing with capacity of 12 thousand heads an hour in Bryansk region

We continued an active work for civil liability insurance of con-struction companies — self-regulating organizations members ( SRO ) all over Russia. About 20 % of all construction, design, exploration companies is VSK customers. Most of the self-reg-ulating organization from all the regions trust VSK Insurance House, which agreement terms meet the requirements posed to insurance. VSK specialists take an active part in the work of the committee for financial risks and the national Builders Associa-tion insurance.

InSuRAnCE RESulTS

Payments, RUB billion

0.1


1.5

28

29.0%

41.0%

11.0%

8.0%

6.0%5.0%

Trafficengineering

Social-cultural and office facilities construction

Industrial construction

Power facilities construction and reconstruction

Housing construction

Agricultural facilities construction

Portfolio structure for Construction and Assembly Risks Insurance

Marine risks insuranceVSK has been engaged in watercraft and shipowners liability insur-ance since the day it was established, ranking third in the Russian Federation marine insurance market as of the results of 2012 and accounting for 12.6 % of the market share.

The Company offers to the marine industry a full range of the cor-responding insurance services : hull insurance, shipowner liability ( shipowner liability for crew members can be insured independent-ly of other insurance types ), war risk insurance, insurance of loss of wages risk, insurance of ships under construction.

InSuRAnCE RESulTS


0.7Payments,

RUB billion

0.3

29

32.9%

7.3%

CnC insurance for ships

Shipowners' liability

Shipowner's liability owed to crew members

59.8%

VSK advantages include :• first-class reinsurance coverage of the marine portfolio, place-

able in a first-class international reinsurance market with rein-surance companies whose solvency and financial sustainability rating is at least A

• a precise system of interaction with technical experts with re-gard to claims settlement

• availability of global correspondent network ( with regard to shipowners’ third party liability insurance )

• immediate provision of guarantees to protect customers’ inter-ests against third party claims

• round-the-clock global service ( regarding crew liability insur-ance policies )

• emergency prevention consultancy

VSK “Blue Cards” are recognized by administrations of member countries of the International Convention on Civil liability for Bunker Oil Pollution Damage (2001 ) and of the International Con-vention on Oil Pollution Damage (1992 ).

IOJSC VSK is approved by the Ministry of Transport, land and Infra-structure of Japan as an insurer, authorized to insure shipowners’ liabilities in case of their vessels’ entering Japan inshore waters.

Portfolio structure in marine risks insurance

InSuRAnCE RESulTS

30

Aviation risks insuranceDespite of strong competition and further consolidation of the aviation insurance market, in 2012 IOJSC VSK kept on systematic development steadily retaining the leadership positions in this line of business.

The total volume of insurance premiums for this type amounted to 642 million rubles. The payments made over 75.5 million rubles.

As of today, the Company’s customers include over 150 airlines and aviation enterprises of the Russian Federaion, as well as of the neighbouring countries and beyond. In addition to the Russian airline carriers and domestic aviation enterprises, VSK provides insurance coverage to aircrafts from CIS countries, Baltic coun-tries, Middle East countries, Africa, Australia and a number of other states. The total number of insured aircrafts of various types comes to over 1,000 units.

VSK customers are offered both complex insurance programs, cov-ering property risks for aviation enterprises, and individual insur-ance products intended for all kinds of aviation risks coverage. The Company provides insurance coverage of air flights to almost every region of the world. VSK Insurance Policy is duly recognized by all states where aircrafts of the Company’s customers make flights.

VSK has valid aviation risk reinsurance agreements related to air-crafts hull insurance with up to 20 million euro coverage, as well as liability insurance up to uSD 75 million, including “worldwide coverage”. Thanks to this reinsurance program of ours, other Rus-sian and CIS insurers are provided with an opportunity to reinsure almost any aviation risks in VSK.

The Company’s specialists in aviation risks insurance are known for their high professional qualifications, operational efficiency and precision in all dealings with the customers. Most of them are ex-perienced in different spheres of civil and military aviation. A full set of insurance documents for aviation risks insurance policy is being completed and handed over to a client within an hour, and as for a charter flight insurance policy, this can be made ready in just 15 minutes. The underwriting quality level of the aviation risks being so high, our western partners find no fault with those when accepting them for reinsurance purposes on the Company terms.

The highest professional standards of the Company’s employees are also assured by the fact that no claim has ever been asserted to the quality of the Company’s work during the whole period of its 20-years’ activities in the field of aviation risk insurance, either by clients or by national authorities in charge of civil aviation regula-tions in Russia and other countries.

InSuRAnCE RESulTS


0.6Payments,

RUB billion

0.1

31

11.7%

6.2%

Aviation CnC insurance

Aviation liability

Accident insurance for air crews and air passengers

82.1%

Portfolio structure for aviation insurance

Space risks insuranceFrom the very beginning of its business activity, the Company has been taking part in risks insurance of space industry. According to Expert RA Agency, VSK makes it to the TOP FIVE of the major Russia space insurers, while also being one of the leading insurers involved in insuring launches of all military and civil spacecrafts in Russia. VSK has been a permanent member of the Association of Aviation and Space Insurers since 1995.

A valid proof of the Company leadership position in space risks insurance sector is the fact that 175 space risks insurance agree-ments were signed in 2012. Total collections in this sector exceed-ed 88.7 million rubles for the reporting period. Insurance port-folio’s structure includes 89.9 % of collections attributed to hull insurance agreements for spacecrafts ( satellites ), 9.9 % account-ing for third party liability insurance agreements and 0.2 % — for insurance of rocket-and-space units transportation. Portfolio growth in terms of comprehensive space risks insurance contin-ued in 2012.

The customers who entrusted our Company with insurance cover-age of their high-tech projects include the leading organizations, institutes and production enterprises of aerospace industry, such as : the Russian Space Forces, Strategic Missile Troops, Roskosmos, ISC Kosmotras, OJSC “nPO Energomash” named after V. P. Glushko, FSuE “nPO named after S. A. lavochkin”, OJSC “RSC Energia named after S. P. S. P. Korolev”, OJSC “ISS named after М. F. Reshetnev,

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0.2

32

9.9% 0.2%

CnC insurance of spacecrafts (sattelites)

Third-party liability insurance

Space-rocket transportation Insurance89.9%

FSuE “SPC VnIIEM with the production plant named after A. G. A. G. Iosifiyan”, FSuE “Space Center named after М. M. V. Kru-nichev”, FSuE “Progress Space Center” and others.

An undoubted VSK advantage of insurance coverage at all stages of space units development, production, transportation and opera-tion, as well as insurance of ground infrastructure personnel, third party liability insurance during space activities, along with acci-dent insurance of SRS personnel of Ministry of Emergency Situa-tions of Russia during search and rescue operations.

The Company, with its excellent reputation, stability and reliabil-ity, inclusive that of space insurance sector, became one of the few companies in the Russian market that took part in international space risk insurance in 2012.

Portfolio structure in space risks insurance

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33

78.8%

9.0%

6.1%

4.2% 1.9%

Motor

Combined

Railway

Marine

Aviation

Cargo insuranceBy the results of activities in 2012, VSK share in the cargo insur-ance market made up 2.2 %. Premium collections of the Company amounted to 562 million rubles, having grown by 10.7 % as com-pared to 2011.

The Company is conducting active sales and underwriting policies in such market segments as defence industry, industrial and agrar-ian sectors, food-processing industry, energy complex. Thanks to it, as well as to the active work with the large commercial banks, VSK not only fulfills sales plan in cargo insurance, but also creates a sufficient reserve for claims settlement, including under insur-ance policies, made with negative indexes or high loss ratio. This enables the Company to guarantee compensation of their financial losses to the customers in case of an insured event. Financial and underwriting indexes in 2012 showed payments growth along with the growing portfolio, that allows to form a positive cash flow in cargo insurance as a whole.

In 2012 active work for making cargo insurance agreements with the transport and forwarding companies. The work resulted in sign-ing of agreements with such large companies as ITEKO llC, lTK llC, RTl llC, TES-Yug llC, Solver llC, Evrotech llC, lam-Rus llC and many others.

Portfolio structure for cargo insurance by types of vehicle

InSuRAnCE RESulTS



0.1

34

Legal entities liability and financial risks insuranceIn 2012 VSK demonstrated a successful project launch in obliga-tory insurance of owners of hazardous facilities liability for dam-age caused by an accident at a hazardous facility. By the results of 2012 the Company took the 3rd place in insurance premiums collection in this market segment.

under the results of the reporting period VSK kept the second place in the professional liability insurance market. The Company kept increasing active contacts with non-commercial partnerships, as-sociations and self-regulating organizations ( SRO ) in different spheres of professional activity, among which notary chambers of the RF constituent entities, appraisers SRO, realtors guilds and many others are worth mentioning. As of today VSK is accredited under many large appraisers SROs, such as : ROO appraisers SRO, Professional experts and appraisers Association, Self-regulating inter-regional association of appraisal specialists.

In 2012 active methodological work was held, new insurance prod-ucts were developed : for example, ports and port services liabil-ity insurance and a number of others. In addition new insurance products were launched under AIZhK OJSC standards, with con-sideration of specifics and each bank crediting mechanisms. The Company continued working on improvement of all its product line aiming at the best compliance with the insurance market needs and trends.

As a member of the All-Russian union of Insurers and national As-sociation of liability Insurers, IOJSC VSK from the very beginning was actively participating in amendment of Regulations and Rules for mandatory insurance of civil liability of owners of hazardous facility for damages inflicted by emergencies at the hazardous facility as well as in the development of other regulatory docu-ments.

The Company kept on actively cooperating with the federal and regional banks on borrowers insurance from loss of hire ( income ). It resulted in successful introduction of individual insurance pro-grammes that allowed improving insurance premiums collections as a whole 2.5 times as compared with 2011.

InSuRAnCE RESulTS


1.4Payments,

RUB billion

0.2

35

MORTGAGE lOAn GIVES An OPPORTunITY TO MAKE THE CHERISHED DREAM TRuE — TO BuY YOuR OWn REAl ESTATE !

VSK Insurance House offers comprehensive mortgage insurance programmes with an opportunity to choose any combination of risks


1 PLACE IN THE MORTGAGE INSURANCE MARKET

T IME TO WORK WITH

LEADER

Premiums, RUB million

10,718Premiums, RUB million

7,134Premiums, RUB million

269Payments, RUB million

7,985Payments, RUB million

3,539Payments, RUB million

21Volu

ntar

y in

sura

nce

CMlT

P

Gree

n ca

rd

Motor insuranceIn 2012, total motor insurance premiums of VSK amounted to ap-prox. 17.8 billion rubles, including 10.8 billion rubles from CnC in-surance and 7 billion rubles from CMTPl insurance.

The Company achieved the greatest insurance premiums collec-tions growth in the CMTPl insurance sector — the collections grew by 28 %. VSK kept on securing its positions in this market, and is still remaining one of the sector leaders. The Company’s market share with regard to CMTPl in the year 2012 made 5.8 % compared to 5.3 % in 2011. Over 70 % of the Russian Association of Motor Insurers ( RAMI ) members entrust VSK with settlement of CMTPl claims.

Availability of well-developed product line, a wide range of services implemented at the federal level, well-developed regional network enable VSK to remain an authorized insurer of such large manu-facturers as : Audi, Volkswagen, Skoda, Seat, Peugeot, Citroen, Ford, Hyundai, KIA.

VSK is linked by strong and long-term partnership relations with the largest autodealer companies, such as : Group of Companies “Rolf”, Auto Holding Major, GC Genser, GC Musa Motors, GC Automir and other.

For the previous year the Company, keeping on perfection of work-ing mechanisms with the autodealers and vehicle service stations, and strengthening its relations with the largest car manufacturers, managed to notably strengthen its positions in the new vehicles insurance sector. VSK achieved the highest growth rate with Hyun-dai, Audi, Volkswagen marks.

VSK is an active participant of state orders tenders. VSK share in the volume of the state orders performance in the motor insurance sector in the RF is constantly growing.

under the results of the open tenders such leading Russian com-panies as RF CB, Sberbank of Russia, Rosselkhozbank OJSC, Petro-commerce Bank OJSC and others became VSK customers in motor insurance sector.

InSuRAnCE RESulTS

38

71.2%

10.9%

9.9%

5.2% 2.4% 0.3%0.03%

Citizens' buildings

Risk of loss of title

Municipal housing

Property of citizens

Domestic premises owner's liability

Pets

CnC insurance for small size vessels

Property insurance for CitizensAs a whole the retail sector of property insurance became another profitable insurance type for VSK Insurance house. The Company improved effectiveness of its activities and increased the volumes all over the geography of presence. Taking into account real estate insurance in case of mortgage crediting which is still in demand, insurance premiums rates were corrected, as well as special condi-tions and insurance products for different bank projects were de-veloped. Property is surely a classic insurance type and to increase the insurance premiums amounts, the current voluntary insurance rules for citizens property insurance were revised, that resulted in expansion of the list of risks covered, a more flexible and individual approach to insurance was developed, enabling to take individual wishes and possible insurance risks of each customer into account.

In 2012 the Company continued to extend the plastic cards insur-ance portfolio, actively interacting with different partner-banks, including new ones, as well as increased the share of agreements for modernized box products, sold via agents network, due to which it expanded its list of customers in the field of countryside real es-tate insurance. Besides, the Company is conducting active market monitoring aiming at detection of public needs on the one hand and financial and non-financial partners on the other hand in order to launch new insurance products in 2013, which will allow increas-ing property insurance share in the Company portfolio.

Portfolio structure in physical persons property insurance

InSuRAnCE RESulTS


1.7Payments,

RUB billion

0.2

39

Mortgage insuranceBased on the year 2012 results, IOJSC VSK remains a leader in terms of mortgage insurance services. The Company retained its first place in collection of insurance premiums exceeding 2 billion ru-bles in 2012.

Year 2012 was marked for VSK and the global insurance market by the largest loss in mortgage borrowers risks insurance : The payment made over 400 million rubles. The faultless claim settlement pro-cedure another time proved effectiveness of the Company inter-nal services and reliability of VSK reinsurance coverage. It was for the second year running that VSK set up a record in the amount of mortgage loss reimbursement ( in 2011-69.8 million rubles due to the borrower’ s death ), demonstrating to the bank community, that it can be confident about insurance coverage of the largest loans, granted to the mortgage borrowers, insured with VSK.

Maintenance of high service quality and customer service in mort-gage insurance was an important activity in 2012. In particular, business-processes in strategic activities were automated, meth-ods of control of compliance with the customer service standards were developed and renewed. The work performed to improve verti-cal effectiveness in the branches, responsible for mortgage insur-ance allowed to shorten costs and improve business performance indexes another time.

The measures taken allow to say with the full responsibility that, based on the results of 2012, VSK total meets the market require-ments with regard to customer service and is in the avant-garde of the mortgage services market development, that enables the Com-pany to remain the mortgage insurance leader.

Voluntary Health insuranceIn 2012 Voluntary Health Insurance Center ( VHI ) continued to im-prove methodological base aimed at achievement of the highest efficiency of this insurance type. Based on the results of 2012, net loss ratio made up 69.6 %.

The work on performance of obligations under the previously concluded General agreement with Sberbank of Russia OJSC was continued. The Company undertook responsibility for health of 80 thousand Sberbank employees (5 regional branches ).

The Agreements were prolonged for service provision to Sberbank of Russia OJSC employees under the Programme “The Russian Medi-cal Assistance”, under the programme “Complex” for the employees of “Consultant Plus” Group of Companies, “FGuP “Rostechinventa-rizatsia-Federalnoye BTI”, “Russky Standart Vodka” llC etc.

InSuRAnCE RESulTS



0.7



1.240

A voluntary health insurance contract is made with FGuP “Kanal im. Moskvy”.

High marginal products were developed and launched in the mar-ket, such as : Migrant 1 ( standard individual ),

Migrant 2 ( special channel ) and the Russian Medical assistance. These are “box” products with simplified underwriting system, fixed conditions for risks, insurance premiums and insurance amounts, with the cost of 400 to 3,600 rubles depending on the list of risks and insurance term.

With consideration of VHI market needs modernization of existing insurance products was performed “Treatment abroad”, Rehabilita-tion treatment”

new Voluntary health insurance rules were developed and put into effect, as well as new underwriting policy, which main purpose is to diversify VHI portfolio and increase premiums collection growth, as well as loss ratio optimization for this insurance type.

Accident and illness insuranceIn 2012 VSK IOJSC VSK share in the accident and illness insurance market made up 6.8 %, that is 0.4 % more than similar index in 2011 and 1.2 % — the index of 2010. Sales volume in 2012 as compared to 2011 increased by 63.6 %, that is higher than the average value in the market, that makes up 51.1 %.

Such indexes were achieved to a large extent due to permanent monitoring of the current needs of both actual and potential cus-tomers, development of new insurance products, the most close to the needs of this or that customers group, and, of course due to the high professional interaction with the customers during all the life-cycle of insurance contract.

In 2012, with the purpose to expand the insurance coverage being offered, much attention was paid to the perfection of the Company regulatory base in accident and illness insurance of loan borrowers. “nS-Car owner” product was developed, designed for the persons operating motor vehicles. amulet box product was amended in part of the procedure of determination of insurance payment amount with regard to a range of insurance risks.

InSuRAnCE RESulTS


4.3Payments,

RUB billion

1.4

41

28.2%

10.5%


VHI

Travellers61.3%

Portfolio structure in personal insurance

Travel insuranceIOJSC VSK remains the leader in the travel insurance market, pro-viding comprehensive coverage for the tourist business. Thanks to the weighted tariff policy and high quality underwriting the Company managed to improve the results in civil liability insurance for tour operators — loss ratio made up 37.7 %, while many of the competitors exceeded this value several times. The Company con-firmed its 1st place in the Russian market in the operators liability insurance. Over 900 tour operators entrust VSK their risks within the frames of implementation of the Federal law “On the basics of tourist activities in the RF”.

In total in 2012 the insurance premium collected in the sphere of travel insurance achieved 780 million rubles, that is more than 50 % exceeds the ratio of 2011. VSK paid over 300 million rubles to the travelling customers for the previous year. Based on the results of 2012 VSK is one of three leaders in travel insurance according to Expert RA data.

The Company leading positions within the frames of the Russian-Chinese project are being strengthened. During 2012 over 550 thousand persons were provided with joint insurance coverage by VSK and China life. VSK was one of the first companies to approve and introduce the data transfer process to Rosturism information system ( SIS ) allowing to obtain the required information about the tourists within the PRC area on-line.

InSuRAnCE RESulTS



0.3

42

5.2%

Accident and illness of persons travelling abroad

Tour operators liability94.8%

In 2012 a new edition of insurance of medical and other unpredict-ed expenses of persons, leaving the place of permanent residence, determining important issues of interaction between the insurer and medical institutions and allowing to enter a qualitatively new level of insurance claims settlement.

Portfolio structure in travel insurance

InSuRAnCE RESulTS

43

TOuR OPERATOR’S RESPOnSIBIlITY AnD RElIABIlITY GIVE COnFIDEnCE ABOuT HIGH QuAlITY SESRVICE AnD FAulTlESS PERFORMAnCE OF OBlIGATIOnS

VSK programs for tour operators’ professional liability insurance protect tourists interests in Russia and abroad

1 PLACE IN THE TOUR OPERATORS LIABILITY INSURANCE MARKETaccording to Expert RA data, 2012

T IME TO WORK WITH

LEADER

Sales channelsDirect sales in the corporate segmentDuring all the year 2012, IOJSC “VSK” continued developing direct sales in the corporate segment. Just as in previous years, in the previous year the sales system was based on the industry-specific criteria. The major segments of the Company’s business were :

• Construction complex

In 2012, along with conventional insurance of construction and as-sembly risks during construction of housing, trading and office cen-ters and agricultural facilities, VSK strengthened its positions in in-surance of road construction objects, which total insurance amount exceeded 35 billion rubles. The insured facilities included Kavkaz, ural, lena motor ways construction and reconstruction portions. The biggest insurance contract in the construction complex rightfully in-cludes construction of road junction on different levels at the cross of Moscow-Vladivostok railroad and reconstruction of passenger termi-nal at Roschino airport in Tyumen c.

The large sport facilities insured by VSK include construction of multifunctional complex of Spartak football stadium in Moscow, listed as the World football championship 2018 facility, and con-struction of Big Ice Arena for ice hockey in Olympic Sochi, which is already finished.

• Hazardous facilities

The Federal law no. 225, “On Mandatory Insurance of Civil liability of Owners of Hazardous Facilities for Damages Inflicted by Emer-gencies at Hazardous Facilities” came into force on 01.01.2012. The preparatory work held in 2011 allowed the Company by the re-sults of 2012 to take the 3rd place in this insurance type both in insurance premium collected and number of policies issued. Here the Company share in this market sector made up 13 %. VSK largest insured companies include : Bashkiravtodor OJSC, Aktsionernaya Kompaniya Yakutskenergo OJSC, Syassky pulp and paper plant OJSC, Promsintez OJSC and others.

• Military-industrial complex

last year VSK remained the main insurance partner of “nauchno-Proizvodstvennaya korporatsiya ( Research and production cor-poration ) uralvagonzavod” company, Chelyabinsk Tractor Plant, ulan-ude Aviation Plant, OJSC “Rostvertol”, OJSC “KAMOV”, Moscow Institute of Thermal Engineering, OJSC “Tactical Missiles Corpora-tion”, SSPC “Region”, TMKB “SOYuZ”, OJSC “Salut” ( Samara ), Con-cern “VEGA”, ufa IGO.

InSuRAnCE RESulTS

46

• Agro-industrial complex and food industry

In 2012 VSK not only retained such major partners as AIH “Mira-torg”, OJSC “Synergia”, CJSC “ABK Exima”, “Agropromkomplek-tatsiya” llC, “Russkoye zerno” llC, “Aytax-Invest” llC, but also managed to insure new risks of new customers — that are largest enterprises of the sector : “Prodimex- Holding” llC, “Velikoluksky Meat Processing Plant” llC, “Krasnaya Zarya” Confectionery llC, “Alexeevsky Bekon” CJSC, “Pischevye Ingredienty” llC.

Retail insuranceVSK Retail insurance center ( RIC ) ensures implementation of the full cycle of organization and management of retail sales via agent channel and customers halls. RIC responsibility also includes ser-vice provision to VIP-customers of the Company. RIC share in the insurance premium collections based on the results of 2012 made up 20 %.

The new sales channel “Customers halls” is a system based on the unified corporate standards of service provision to customers com-ing to VSK offices. The insured are offered over 700 sales depart-ments in all the RF constituent entities, qualified staff, a wide prod-uct line and modern technologies of issuing policies.

VSK agents network accounts to over 13 thousand agents. In 2012 the center main task was to improve the network performance : ac-tive agents results growth from 35 thousand to 51 thousand rubles per month and optimization of insurance portfolio structure.

Agents motivation is the basic tool to diversify the portfolio. The motivation basis is dependence of agent’s remuneration on the col-lections amount and structure. The standards allowing to achieve high status are established for every region. There are additional motivation programmes in some insurance types. Seasonal pro-gramme “new business” became annual. Within the frames of the programme increased remuneration is paid for attraction of a new business for insurance of property of citizens. The total number of agents who took part in the programme exceeded 2,300 persons, and the programme participants out of the working agents, spe-cialized in insurance of property of citizens, showed growth rate of over 150 %.

Retail product line development entered a new level in 2012 — RIC started selling financial non-insurance products, which sale allows to implement a more complete complex of services to the target customers.

To involve the agents into sales of the most marginal products VSK introduced and adapted a training system, covering target

InSuRAnCE RESulTS

47

retail products and insurance types, agents may offer to custom-ers — legal entities. The training system combines subsequent theoretical and practical plunge into insurance. unique nature of agents training is in combination of psychological and skill sales methods. The main teaching type is trainings held by professional business-trainers. Skill practical training is held by managers for agent sales organization, ensuring support of all the agents activ-ities. For the persons oriented at independent knowledge acquisi-tion, a distant training system is created on the basis of WebTutor software complex.

RIC agent network became a productive sales channel ensuring VSK portfolio diversification and stability.

In the new year RIC task is to create and introduce internet-sales channel, one of the most rapidly developing channel in the Russian insurance market. On-line sales today are a modern and effective tool to address to the target audience.

InSuRAnCE RESulTS

48

Affiliate sales

Bank insuranceAt the moment banks develop and accept insurance products sales strategies more and more actively and plan significant income growth due to cooperation with insurance companies. Bank sales channel accounts to 20 % of all insurance premiums collections, re-ceived by insurance companies.

Based on the results of 2012 VSK remains the largest bank insurance market player in the sphere of Banks property insurance and insur-ance of legal entities’ property pledged with the banks.

As of the results of 2012 the list of banks -VSK partners grew by 5 % and reached 700 federal and regional banks all over Russia.

In 2012 IOJSC VSK jointly with Sberbank of Russia OJSC became one of the active participants of the “Corporate Insurance” proj-ect, which main objective is to offer corporate customers a full range of insurance products at banks offices. During 2012, num-ber of VSK insurance policies, executed by the bank employees grew more than 5 times from 10.5 thousand to 57.1 thousand policies.

The advantages of comprehensive approach to organization of work in the bank insurance market : professional audit of banks and their customers’, adaptation of insurance products to the custom-ers needs, expansion of customer base of partner-banks for the ac-count of VSK corporate customers, unified conditions and approach to cooperation with the banks all over the Russian area. All of this allows VSK to remain a demanded, all-purpose and highly techno-logical partner for most of the Russian banks.

During many years VSK is a member of Association of the Russian banks and Association of regional banks of Russia and an active participant of discussion of all the innovations in the sphere of banks and their customers risks coverage, that helps to constantly improve insurance products for banks and their customers.

Insurance of consumer loan borrowers was the most rapidly grow-ing sector in the bank insurance market in 2012. During 2012 the sector 77 % grew due to the increase of crediting amount and qual-itative changes in the attitude to insurance among the banking industry management. IOJSC VSK is one of the biggest players in this market sector. In 2012, the Company, being ahead of the mar-ket, showed 104 % insurance premium growth rate in this sector, having reached collections level of 2.2 billion rubles.

An important result of 2012 was further development of the pro-gramme in accident and illness insurance for consumer loans bor-

InSuRAnCE RESulTS

49

rowers from Sberbank of Russia OJSC in the scale of whole Russian area, that allowed VSK to achieve significant increase in net collec-tion amount in 2012.

The accident, illness and loss of income insurance sector for com-mercial banks borrowers also went on developing — in 2012 the work with 25 regional and 7 federal banks was started. The first projects with partner-banks for plastic cards holders were launched, pilot sales of a “box product” for property insurance started. Total collections from the new projects 2012 exceeded 90 million rubles.

Leasing companiesIn 2012 IOJSC VSK retained the leading position in the leasing transactions insurance market, that is confirmed by the “Expert RA” diploma “leader in leasing Transactions Insurance”. Another high market grade is trust on the part of the federal and regional leasing companies, that is the result of many years of work with the market leaders, as well as of individual approach with each partner.

VSK provides a reliable insurance coverage to the projects of the leading leasing companies, such as Sberbank leasing CJSC, CJSC “Europlan”, “Karkade” llC, GC “Baltic leasing”, “Raiffeisen-leas-ing” llC, “FB-lEASInG” llC, CJSC “CEnTER-CAPITAl”, “Element leasing” llC, OJSC “GTlK”, llC “Stone XXI” and many others.

VSK offers partnership programmes and solutions, aimed at each leasing company working specifics :• holding joint actions with the equipment, special machinery man-

ufacturers and suppliers monitoring of property to be leased instal-lation of software developed for optimization of settlement pro-cess and allowing to trace the status of an insurance event on-line from the leasing company office development and introduction of standardized products with scoring methods of decision making based on the prompt underwriting for small and medium business-es As a member of “The Incorporated leasing Association”, VSK is actively participating in key activities of the leasing community directed at search for optimal business solutions for the industry.

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50

Automotive DealershipsBased on the results 2012 VSK retained its leading position in the automotive dealerships insurance sector thanks to introduction of new customer service technologies, active interaction with the automotive manufacturers and banks, as well as provision of com-petitive insurance products both in price and service terms. VSK introduced the “Motor vehicles insurance” system ( with a web-interface ) on all the RF area. This programme allows optimizing of costs and high quality control of compliance with the Company tariff policies, as well as prompt selection of a service meeting the customer’s needs.

During 2012, IOJSC “VSK” continued active development of coop-eration with automotive manufacturers and became one of the de-velopers of “Hyundai Insurance” insurance programme. A special joint action VSK & Hyundai was launched to actively introduce the programme and support Hyundai Solaris sales.

The Company continued to strengthen its positions also in other insurance programmes, launched earlier, via the representations : Volkswagen, Audi, Skoda, Ford, Peugeot / Citroen. Insurance pro-grammes with automotive manufacturers support mean special insurance conditions for those purchasing a new car from an of-ficial dealer. These programmes are developed with the purpose to provide car owners with high quality insurance coverage at ben-eficial prices.

It must be mentioned that VSK holds the leading positions in the automotive dealership market due to its accreditation with all TOP-50 banks — autocrediting market leaders. The Company is an active participant and developer of joint programmes with the banks to provide beneficial insurance conditions.

InSuRAnCE RESulTS

51

PuRCHASE OF A MOTOR VEHIClE, SPECIAl MACHInERY AnD OTHER PROPERTY unDER lEASInG COnDITIOnS IS A MODERn AnD EFFECTIVE BuSInESS TOOl

VSK provides the leading leasing companies projects with insurance coverage and offer optimal conditions for leasing transactions financing with consideration of the customer’s business specifics


1 PLACE IN THE MARKET OF LEASING TRANSACTIONS INSURANCE

T IME TO WORK WITH

LEADER

INSURANCE TECHNOLOGIES

Claims settlementIn 2012 VSK continued perfecting claims settlement system. The Company main efforts were focused on reduction of insurance payments term and provision of customers with additional service support.

Since September 2012 the Company started a pilot project for cus-tomers notification of the stages of a case settlement via SMS and e-mail. Thanks to the service the customer receives notifications of the following stages : assignment of a unique number to the case, sending a referral to the vehicle service station with indication of the address and telephone of the station where the vehicle is sup-posed to be repaired, a message about transfer of money to the details, specified by the customer in the application.

In 2012 an additional service for customer was organized in case of vehicle glasses damage. The customer is provided with the op-portunity immediately to go to the service station specialized on glasses replacement to replace the damaged glass. Thus, docu-ments submission and glass replacement are performed within one customer’s visit to the specialized vehicle service station.

VSK partnership relations in the sphere of claims settlement are also being improved. The Company partners and counter-agents in-clude over 37 representations of vehicle manufacturers in the RF, 1,850 vehicle service stations ( most of which are official dealers ), 320 independent expert organization and 130 international and Russian survey companies.

In total in 2012 over 440 thousand insurance cases for the total amount of over 17.55 billion rubles were settled in property, per-sonal, hull, CMTPl and liability insurance types.

InSuRAnCE TECHnOlOGIES

54

The largest payments of claims in 2012

Month Object Reason

Payment amount, million rubles

January wood processing plant fire 133.7

February food industry enterprises fire 11.9

March liability insurance under state contract non-perfor-mance 108

April grain crop drought 64.4

May production equipment fire 87.3

June grain crop drought 20

July cash theft 10.9

August aircraft collision 18.7

Septem-ber cargo general ac-

cident 36.9

October cash theft 10.8

november food industry enterprises fire 175

December life and health of mortgage borrower death 417

In 2012 over 70 % of the Russian Association of Motor Insurers ( RAMI ) members entrusted VSK with settlement of CMTPl claims within the frames of representation agreements, including 6 motor CnC cases.

A claim settlement system within the framework of “The Green Card” International Bureau VSK provided services to 90 foreign companies, including members of the largest insurance groups, such as Allianz, Zurich, IF P&C, Generali, PZu.


55

UnderwritingVSK policy in the sphere of underwriting is aimed to ensure high quality of insurance contracts and their support and subsequently to improve customer service quality.

The weighted underwriting policy enables the Company to form suf-ficient insurance reserves, provides high profitability of insurance transactions and financial stability for precise and timely fulfil-ment of obligations to the customers in insurance payments.

Professional VSK underwriting is based on the carefully developed product policy aimed at maximal diversification of insurance portfo-lio for the account of a wide range of insurance products, as well as of high quality risks reinsurance with the first-rank western companies.

The product line in the corporate sector allows to work not only with small and medium businesses, but also form insurance pro-grammes with risk-auditing by the largest production holdings, which business covers all the spheres of economics — from house-hold services to external trade, from agriculture to space industry.

The Company offers physical persons a wide range of box products, allowing to execute any contract in mass insurance types the most promptly and conveniently for the customer.

One of the Company main tasks in the reporting period was per-fection of methodological base for insurance types, development and optimization of insurance products. The key emphasizes in the products policy implementation are made on radical expansion of customer base and increase of cross sales amounts.

Legal supportWith the purpose of insurants’ legal rights and interests coverage, as well as in order to exercise insurance activities in strict com-pliance to legislation requirements, VSK established and has been successfully operating for over 20 years the legal support system. That includes

personnel of the legal Dept. of VSK head office and more than 120 lawyers of the Company’s far-flung affiliate network, most of whom have extensive experience of working in the insurance market.

Main lines of legal support work, it being a significant component of economic security and potential legal risks minimizing, are as follows :• ensuring an appropriate legal status for the whole regional net-

work of VSK, including over 700 branches, divisions and addi-tional Company’s offices for all territorial subjects of the Rus-sian Federation


56

• ensuring legitimacy and justifiability of insurance payments• legal review of the proposed rules of insurance and insurance

agreements, with respect to their compliance with the legisla-tion requirements, mutual interests of the insurants and the Company

• timely and high-quality preparation of responses to applica-tions and addresses of citizens and legal entities regarding in-surance procedures

• identification and enforcement of legal claims in respect of persons liable for damnification

• management of overdue accounts receivable• identification and prevention of insurance fraud cases• legal assistance to ensure the Company’s compliance with legis-

lative requirements related to coverage of clients personal data• representation and coverage of the Company’s interests in reg-

ulatory, supervisory and judicial authorities• participation in activities of expert councils and working

groups of national authorities, the national Association of Mo-tor Insurers, the Russian Association of Motor Insurers and the national Association of liability Insurers

• legal support to the Company whilst participating in tenders related to voluntary and mandatory insurance types

The Company would not stand still. We proceed to set up legal de-partments in all major branches having extensive customer net-works.

When entering into insurance agreements with loyal customers, it is a common practice for a legal department employee to visit the insured party so that to assist in puzzling out legal peculiarities of insurance business and to offer recommendations on selection of the optimal insurance coverage option.

At the stage of insurance event settlement the Company lawyers take all measures to solve the disputable issues, and VSK clients can receive qualified legal support in any region of Russia.

This and other measures help VSK to ensure giving maximum con-sideration to insured parties’ interests and consecutively reducing the number of disputable situations over the years. The fundamen-tal principle of the Company’s legal Service is to do its best in order to prevent any judicial disputes with clients and amicably settle any potential conflicts proceeding from principles of law and re-spect for rights of an insured party as an insurance services con-sumer.


57

Subrogation activitiesOne of the Company’s top priorities in 2012 was activity aimed at improvement of detection quality and execution efficiency of sub-rogation rights.

As an outcome of all-inclusive comprehensive approach towards these tasks, total subrogation-related proceeds in 2012 amounted to 1.25 billion rubles, which is 1.1 times higher than same indica-tors of 2011.

One of the factors contributing to this gain was application of a new technique of subrogation debts recovery, which, in a nutshell, has to do with directing main legal efforts and focusing at the prejudicial stage, thus improving financial outcome, inclusive of reduction of legal expenditures.

An essential role in dealing with a range of issues arising from sub-rogation debts recovery was also played by our long-time partners, whose involvement made it possible for us to recover about 20 % of the total VSK accounts receivable in this field. VSK regular long-term partners in this line of business include GC “Center of Debts Management”, “nIKA” llC, “national Collection Service” llC and “Morgan & Stout” llC.

HR PolicyVSK Human Resources Policy is aimed to increase capitalization of the Company by means of improvement of labour resources ef-fectiveness. It is designed to promote implementation of VSK strategic development plan and to solve the current business tasks, ensure stability and development of the Company staff po-tential.

As of December 31, 2012, 6,970 persons were employed with IO-JSC VSK branches. Staff reduction as compared to 2011 with the growth of earned insurance premium and improvement of insurance portfolio structure was accompanied by the increase of average salary, growth of output per a staff employee per sal-ary ruble, that is a significant result of the work by the Head company and branches management for improvement of labour resources effectiveness in VSK.


58

2012

2011

2010

under 30 years old

30 to 40 years old

40 to 55 years old

over 55

6,970

7,211

7,027

3,670 (49%)

1,952 (26%)

1,445 (20%)

371 (5%)

Distant learning

Corporate training

Training seminars

9,104

9,611

110

VSK staff number dynamics

VSK Demographic structure as of December 31, 2012

In 2012, measures on improvement of the Company staff training were carried on. To improve the service quality, in 2012 it was de-cided to perform reorganization of the training system based on standardization of the requirements to the position competences, implementation of annual programmes of basic certification train-ing for employees on mass positions and the branches management staff, organizational and methodical preparation for those changes was carried out. VSK training system main objective is to maintain and develop competences of the Company insurance centers and managerial staff.

During the second half of the year the trainings for the Company partners’ employees were held, that affected strengthening of part-nership relations, ensured positive sales dynamics and helped im-prove VSK brand awareness.

VSK specialists training in 2012


59

2012

2011

Transferred from staff reserve External candidates

61%

55%

39%

45%

In 2012, Microsoft Dynamics AX automated management system was introduced. The software allowed to build the staff records system and staff settlements in accordance with the sectoral spe-cifics, modern requirements to staff records, helped to optimize business-processes of HR management. Within the frames of the measures for preparation and introduction of Axapta software complex, trainings for over 1,100 users were organized and carried out.

In the 20th anniversary year one of the largest awarding campaigns in VSK history was held. For the outstanding personal contribution to VSK Insurance House development, high professionalism, many years of commitment to the Company interests 811 employees of the branches and the Head company were awarded commendations by the Board of Directors Chairman and Director General.

In 2012 the project “Golden staff reserve” project was started, par-ticipated by 11 heads of branches functional divisions. The project participants — highly qualified heads of the Company branches divisions, passed through a selection process and listed in the re-serve. During the second half of the year a targeted training and internship were held at the Head company.

Based on the project results seven new appointments to the posi-tions of the branches directors were made, including in connection with career promotion in VSK system of the acting branch directors, who were replaced by the project reserve members with high level of readiness for the work in the capacity of branch director, that is the main objective of the “VSK Golden Staff Reserve” project.

As a whole, for the year 2012, more than 61 % of vacant manage-rial positions of all levels were occupied by the employees from the Company staff reserve.

Staff recruitment and positions in 2012


60

During 2012 the Key Performance Indexes system ( KPI ) was devel-oped and introduced with decomposition by the Head Company di-visions and the branches system. Its introduction allowed to make serious steps in the development of employees material and non-material motivation system, allowed to solve important tasks in the sphere of staff management. The new system ensured mobilization of staff resources for the achievement of the Company business-objectives, ensured staff commitment to highly effective work and professional interaction.

An anniversary project “Excellent VSK 20-2012 !”, based on the rat-ing of branches employees for each functional field by the results of KPI target values performance was an important event in 2012. The project allowed to involve employees of all functional verti-cals of VSK branches for the achievement of high financial indexes of the Company, increase personal interest about performance of target indexes of common success, provide everyone with an op-portunity to show high professionalism, obtain acknowledgement of personal achievements at the Company level.

The project winners included 297 best employees and branch heads in 16 professional groups.


61

CREDITInG PROVIDES An EnTREPREnEuR WITH An OPPORTunITY FOR DYnAMIC BuSInESS DEVElOPMEnTVSK offers a full range of services for corporate customers insurance at the bank site, that makes a credit product more attractive and convenient


1 PLACE IN THE MARKET OF INSURANCE OF LEGAL ENTITIES PROPERTY, DEPOSITED TO BANKS

T IME TO WORK WITH

LEADER

45.5%

11.0%

13.2%

8.4%

7.7%

7.1%

6.1% 1.0%

Central Federal District

Volga Federal District

northwestern Federal District

ural Federal District

Siberian Federal District

Southern Federal District

Far Eastern Federal District

north Caucasian Federal District

STRATEGY OF REGIONAL DEVELOPMENTIn 2012, as part of a regional development strategy VSK paid great at-tention to the optimization of the structure of the regional network and the cost of maintenance of branches, divisions and additional of-fices, aimed at increasing the efficiency of business in the regions. In addition, the activity on improving the standards of structural units, a methodological framework for the management of branches and additional offices continued.

20 years ago VSK started business development in the regions from the opening of the first branches : in Rostov, nizhny novgorod and Mordovia. nowadays, the Regional network of the Company has more than 700 branches and offices throughout the Russian Federation.

Portfolio structure by districts

STRATEGY OF REGIOnAl DEVElOPMEnT

64

Voluntary insuranceCMlTP

legal entities propertyAccident and illness insurance

Property of citizensCAR and constructors liability

legal entities liabilityGreen card

VHIMarine risks

Cargo and non-marine carriagesTravel insurance

Aviation insuranceCompulsory personal insurance for passengers

43.1% 17.5% 8.2% 6.1% 4.5% 4.4% 3.9% 3.6% 3.2% 2.1% 1.8% 1.4% 0.3%0.004%

Northwestern Federal Districtnorthwestern Federal District is one of the leaders in volume of products produced by processing industries.

northwestern district basic industries are forestry, woodworking, pulp and paper, shipbuilding, instrumentation, metallurgy and fish-ing.

There are 11 branches, 90 divisions and additional offices operat-ing in the district.

As of the end of 2012 VSK share in the insurance market in north-western Federal District amounted to 4.6 %, the Company takes the 6th place in collections.

The major customers of VSK in the region include :

State unitary Enterprise “Rosmorport”, JSC “Center of ship repair “Zvezdochka”, Group of Companies ulC, JSC “Severstal-metiz”, llC “Vohtozhsky Woodworking Plant”, JSC “Group of Companies “Vologda Timber Merchants”, JSC “SOVEX”, JSC Holding “EvroRos”, Research ROSRAO Murmansk branch, JSC “123 Aircraft Repair plant”, JSC “Akron”, JSC “Borovichsky Refractories”, JSC “Production Asso-ciation “Quantum”, JSC “Karel-KCD”, JSC “Karelian meat process-ing plant”, JSC “Quarry “Goloday mountain”, JSC “PSKOVVTORMET”, llC “Idavang”, JSC “Velikoluksky meat processing plant”, JSC Shipbuilding Plant “Severnaya Verf”, JSC “Transport and logistics complex”, JSC “Machine-Building Plant “Arsenal”, llC “Syktyvkar Plywood Mill, llC “luzales”, JSC “Syktyvkar Tissue Group”.

Portfolio structure of VSK branches in Northwestern Federal District



3.8Payments,

RUB billion

2.0

65


Accident and illness insuranceProperty of legal entities

VHIProperty of citizens

CAR and constructors liabilityTravel insurance

legal entities liabilityMarine risks

Aviation insuranceCargo and non-marine carriages

Green cardOther types

Insurance in the space sphereCompulsory personal insurance for passengers

34.0% 16.1% 10.9% 8.9% 8.5% 4.8% 3.6% 3.3% 2.8% 2.6% 1.6% 1.2% 0.7% 0.7%0.2%0.01%

Central Federal DistrictThe Central Federal District is a leader in basic macroeconomic indi-cators. The share of the Central Federal District is about 40 % of the total gross regional product of the country and about half of Rus-sia’s foreign trade. The most developed areas of the economy of the region include : aeronautics and space-rocket industry, electronic and radio industry, engineering industry, defense industry, chemi-cal and petrochemical industry, machine building.

There are 19 branches, 214 divisions and additional offices operat-ing in the Central Federal District.

As of the end of 2012 VSK share in the insurance market in Central Federal District amounted to 3.3 %.


APH “Agribusiness”, CJSC “Management Company “EFCO”, “Man-agement Company “Prioskolye”, Group of companies “AlFI”, Invest-ment-financial Company “BInVEST”, CJSC MC “Bryansk Engineering Plant”, JSC Plemzavod “Starodvorskiy”, JSC “RB Group”, JSC “VA Degtyarev Plant”.

Portfolio structure of VSK branches in Central Federal District




8.6

66

Voluntary insurance CMlTP

Accident and illness insurance legal entities property

legal entities liability CAR and constructors liability

Property of citizens VHI

Marine risks Cargo and non-marine carriages

Travel insurance Aviation insurance

Green card Compulsory personal insurance for passengers

28.4% 26.7% 17.8% 7.2% 5.1% 4.2% 3.1% 2.1% 1.9% 1.3% 0.8% 0.8% 0.7%0.003%

Southern Federal DistrictSouthern Federal District holds the first place in the scale and de-velopment rate of the health resort and tourist industries, it is also a leader in the production of mineral waters. The district develops agro-industrial complex, agricultural machinery, food processing, metallurgy, chemical and petrochemical industries.

There are 7 branches, 62 divisions and additional offices operating in the Southern Federal District.

In SFD VSK occupies 6.4 % of the market, being the third insurance company for collections in 2012.


Public Corporation for the construction of Olympic Venues and De-velopment of Sochi as a mountain resort “Olympstroy”, llC “Sochi-morstroy”, llC “Stonetrackservice”, JSC “Energy and Electrification of Kuban”, JSC “Tuapse Commercial Sea Port”, JSC “Independent Power Company of Krasnodar krai”, llC “Alania Oil”, llC “Eurobuild”, JSC na-tional Enterprise “Confil”, JSC “Agro Invest, Cossack holding company llC “Krasnodonskoye”.

Portfolio structure of VSK branches in Southern Federal District



2.4Payments,

RUB billion

1.1

67


Accident and illness insurancelegal entities property

legal entities liabilityProperty of citizens

CAR and constructors liabilityMarine risks


Green cardAviation insurance

VHICompulsory personal insurance for passengers

33.7% 22.1% 11.2% 10.9% 7.8% 5.6% 5.5% 1.1% 1.0% 0.9%0.1%0.1%0.1%0.01%

North Caucasian Federal Districtnorth Caucasian Federal District has favorable conditions for the development of tourism, health resort industry, electric power indus-try and the mining industry, but the instability of the economic and social-political situation does not allow us to use the full potential of the region. Today, the most developed sectors of the economy in the area are agricultural sector and manufacturing.

There are 9 branches, 18 divisions and additional offices operating in the Southern Federal District.

As of the end of 2012 VSK share in the insurance market in nCFD amounted to 3.4 %.


FSuE “Makhachkala International Sea Commercial Port”, JSC “MO-STOOTRYAD-99”, JSC “Stavropol Broiler”, JSC “Vis-ma”, JSC “Milk Fac-tory “Stavropolsky”, JSC “International Airport of Stavropol”.




0.1

Portfolio structure of VSK branches in North Caucasian Federal District

68


Accident and illness insurancelegal entities property

Property of citizenslegal entities liability

VHICargo and non-marine carriages

CAR and constructors liabilityTravel insurance

Marine risksAviation insurance

Green cardCompulsory personal insurance for passengers

30.2% 30.2% 11.4% 7.0% 5.5% 4.8% 4.7% 2.7% 1.9% 0.7% 0.5%0.2%0.1%0.004%

Volga Federal DistrictVolga Federal District is the leader in the volume of agricultural pro-duction, it holds the second place in the volumes of manufacturing and mining industry in Russia.

Main sectors of the economy of the district are : engineering and oil and gas production. In the district there are large aerospace, automo-tive and instrument-making enterprises, chemical and petrochemical industry, developed shipbuilding, power engineering, machine build-ing enterprises.

There are 15 branches, 135 divisions and additional offices operating in the district.

As of the end of 2012 VSK took the 4th place in the district, and the company’s market share was 4.5 %.


JSC “Izhevsk Radio Plant”, JSC “Sarapulsk Electric Plant”, JSC “Kupol”, The group of companies “nEFIS”, Closed company “Center-Capital”, S. P. Gorbunov JSC KAPO, JSC “Kirov Plant “Mayak”, JSC “Institute for the survey and design of construction projects and infrastructure “Kirovvodproekt”, llC “Mariisky refinery”, JSC “Mariisky pulp and paper mill”, JSC “Mariisky Machine Building Plant”, JSC “Orenburg minerals”, llC “Gas Industrial company”, Ministry of Internal Affairs of the Oren-burg region, GBu “Depot Office of the Governor and Government of the Orenburg region”, “Management Company “SamaranefteOrgSintez”.

Portfolio structure of VSK branches in Volga Federal District



4.5Payments,

RUB billion

2.3

69

CMlTPVoluntary insurance

CAR and constructors liabilityAccident and illness insurance

legal entities propertylegal entities liability

Property of citizensVHI


Green cardMarine risks

Compulsory personal insurance for passengersAviation insurance

29.3% 27.8% 10.7% 10.2% 6.7% 4.8% 4.7% 2.8% 2.2% 0.9%0.03%0.03%0.01%0.01%

Ural Federal Districtural Federal District is a leader in volumes of the mining industry in Russia, providing about 40 % of the volume of goods shipped in this sector of economy. A lot of mineral resources of the country are con-centrated in the district. The leading sectors of the economy of the re-gion are power engineering, metallurgy and mechanical engineering.


Market share of VSK in uFD in 2012 was 4.8 %, which allowed the Com-pany to take the 6th place among insurers in the district.


JSC “Kurgan Machine Building Plant”, Agro Holding “Kurgansemena”, Meat industrial complex “VElES”, JSC “Magnitogorsky metallurgy industrial complex”, FSuE “Magnitogorsk airline”, llC “OMIA ural”, llC “Mostostroy-12”, llC “SpetsAutoTrans” JSC “urengoydorstroy”, JSC “Scientific and production Corporation” uralvagonzavod”, JSC “Mikhail Kalinin Machine-Building Plant, Ekaterinburg city”, JSC “ural Works of Civil Aviation”, JSC “uzhuralzoloto Group of Compa-nies”, Federal State unitary Enterprise “Instrument-Making Plant Trechgorny city, Closed company “Production Association “Track”.

Portfolio structure of VSK branches in Ural Federal District




1.3

70

Accident and illness insuranceCMlTP

Voluntary insurancelegal entities property

Property of citizensVHI

legal entities liabilityCAR and constructors liability

Aviation insuranceTravel insurance

Cargo and non-marine carriagesMarine risks

Green cardCompulsory personal insurance for passengers

23.9% 21.6% 19.8% 7.9% 6.2% 5.0% 4.1% 4.1% 3.4% 2.4% 1.4% 0.1%0.02%0.002%

Siberian Federal DistrictСSiberian Federal District is a major transportation hub, providing transit transportation between the European and Asian parts of the country. The district occupies the leading position on the length of inland waterways, railways and highways. The leading sectors of the economy of the district are : ferrous and non-ferrous metallurgy, pow-er engineering and fuel, forestry and wood processing, chemical and petrochemical industry, machine-building and metalworking.


As of the end of 2012 VSK holds the 4th place by collections in the Siberian Federal District. The company’s share in the insurance market in SFO is 5.1 %.


JSC “Altai-Koks”, Closed company “Barnaul Dairy “Dairy Tale”, Closed company “Altai Broiler”, JSC “ulan-ude Aviation Plant”, JSC “Bridge engineering squad #34”, JSC “Huzhir Enterprise”, llC “Ikat-plus”, CJSC “InK-service”, JSC “Agrodor-Spetsstroy”, JSC “Kuzbass fuel Company”, JSC “Kuzbass Food Factory”, JSC “Energy Holding”, JSC “Aerogeo”, State Enterprise of the Krasnoyarsk krai “KraiDEO”, JSC “Sib-neftegeofizika”, JSC “Tolmachevo Airport”.

Portfolio structure of VSK branches in Siberian Federal District



2.6Payments,

RUB billion

1.2

71

Accident and illness insuranceCMlTP

Voluntary insurancelegal entities property

legal entities liabilityCAR and constructors liability

Property of citizensMarine risks

VHITravel insurance

Cargo and non-marine carriagesAviation insurance

Compulsory personal insurance for passengersGreen card

23.2% 23.1% 15.2% 11.5% 5.6% 4.7% 4.2% 3.9% 3.1% 3.1% 1.1% 1.1%0.003%0.001%

Far Eastern Federal DistrictFar Eastern Federal District is an important section in the economy of the country and the interest to its development from Government of the Russian Federation isn’t random. The leading industries of the Far Eastern Federal District include : mining, gold mining, fishing and forestry, shipbuilding and non-ferrous metallurgy. The ports of the Far Eastern basin account about 20 % of the turnover of Russian seaports. The district is rich in deposits of hydrocarbons, ferrous, non-ferrous and rare metals.

11 branches, 34 branches and sub-branches are operating in the dis-trict.

As of the end of 2012 in terms of insurance premiums VSK is on the 2nd place in the district, taking up 12.1 % of the market.


JSC “Diamonds of Anabara”, JSC “Yakutia” Airline, JSC “nizhnelens-koye”, closed company “Island Fish Factory”, llC “Rosstroy”, Group of Companies “Transbunker”, closed company “universal leasing Holding Company “Vladivostok Development”, JSC “Far Eastern Center of Ship-building and repair”, “north-eastern Shipping Company”, Joint-Stock Company “Eurasia nakhodka Commercial Sea port” ( JSC “Evraz nCSP”), Federal State institution “Administration of seaports of the Primorsky Krai” ( FSI “ASPof the Primorsky Krai”), JSC “Eastern Stevedore Com-pany”, JSC “Bamstroymechanization”, closed company “Hergu”, closed company “Asphalt”.

Portfolio structure of VSK branches Far Eastern Federal District




0.6

72

INFORMATION TECHNOLOGIESIJSC VSK is one of the technological leaders in the insurance industry and it pays serious attention to the development of IT technology, as the earnest of the dynamic development of the company.

Over the past year, in the framework of the adopted IT strategy, sever-al large-scale projects for the introduction of new and modernization of existing information technologies were implemented.

One of the major achievements of 2012 was the full-scale implemen-tation of the ERP-system based on Microsoft Dynamics AX in commer-cial operation. The transition to commercial operation of the system was carried out simultaneously in all the 80 branches of the company with a complete shutdown of the old accounting systems.

Implementation of the ERP-system allowed to increase business ef-ficiency by controlling cash flows, optimize operating costs of the sales network and unify main business processes in all branches of the company. At the end of 2012 the number of concurrent users in the system was about 775 people who carry out automated processing of millions of transactions per month.

In 2012, the development of electronic document management sys-tem in the way of supporting the process of routing documents not related to the core business of the company had been completed. Document management system was developed on the platform of Mi-crosoft SharePoint 2010.

During the financial year, a qualitative change in the interaction with external partners was carried out — the system Web-Auto was intro-duced, and it allows to input documents directly at the sales points. The active Web-based technologies usage allowed to significantly cut the cost of car insurance service policies and establish smooth inter-action with the partners to the highest standards.

InFORMATIOn TECHnOlOGIES

73

CHARITABLE ACTIVITYIn 2012, VSK following the long time tradition, provided support to social vulnerable groups of people and carried out targeted ac-tions aimed at the development of spirituality, patriotism and a healthy lifestyle.

There was doled charitable assistance for purchasing of medicines, products and essential means for flood victims in Krasnodar krai, improving the equipment of the boarding houses for the elderly in Moscow suburbs, as well as for a number of veterans’ organizations.

Soldiers of the border guards were handed over the new Year’s greetings and gifts.

Families of FSS officers killed in the course of duty performance received financial assistance from VSK. And their children entering the first grade were given a set of clothes, shoes and school tools.

Since 1997 the Company has been a regular partner of the regional public foundation “Illustrated Books for Blind Children”, and in 2012 for the needs of children with disabilities a few dozen sets of specialized books were purchased.

Significant funds have been directed to the development of chil-dren’s and youth sports groups in the club “Dynamo”.

Representatives of VSK proactively were involved in carrying out the actions of charity in many regions of Russia.

In 2013, VSK Insurance House will continue to fulfill its social re-sponsibilities by providing all possible assistance to the needy, and taking an active part in the cultural and spiritual life of the society.

CHARITABlE ACTIVITY

74

BALANCE SHEETOf Insurance Open Joint Stock Company VSK as of 31.12.2012

ASSETS

As of 31.12.2012,

million RuB

As of 31.12.2011,

million RuB

As of 31.12.2010,

million RuB

I. Assets

Intangible assets 21 20 18

Fixed assets 4,860 4,963 4,595

Income yielding investments into tangible assets

– – –

Financial investments ( excluding cash equivalents )

18,094 12,438 10,710

Deferred tax assets 78 56 38

Reserves 462 363 215

Value-added tax on acquired assets – – –

Reinsurers’ share in insurance reserves for life insurance

– – –

Reinsurer’s share in insurance reserves other than life insurance

2,742 2,919 3,447

Accounts receivable 5,452 5,030 4,654

Depot reinsurance premiums – – –

Cash and cash equivalents 501 649 1,101

Other assets 5 6 5

Total in section I 32,215 26,444 24,783

BALANCE SHEET 32,215 26,444 24,783

lIABIlITIES

As on 31.12.2012,

million RuB

As on 31.12.2011,

million RuB

As on 31.12.2010,

million RuB

II. Capital and reserves

Authorized capital 3,200 2,000 1,700

Own shares (pies) of treasury stock (members)

– – –

Revaluation of property 1,166 1,146 1,187

Added capital (without revaluation) – – –

Reserve capital 232 210 210

Retained profit (retained loss) 2,919 2,403 2,315

Total in section II 7,517 5,759 5,412

BAlAnCE SHEET

75

BAlAnCE SHEET

lIABIlITIES

As on 31.12.2012,

million RuB

As on 31.12.2011,

million RuB

As on 31.12.2010,

million RuB

III. Liabilities

Insurance reserves for life insurance – – –

Insurance reserves other than life insurance 21,989 18,681 17,731

Borrowed funds 450 – –

Deferred tax liabilities 6 5 4

Provisions 196 – –

Premium deposits reinsurers – – –

Accounts payable 1,979 1,924 1,564

Deferred revenues – – –

Other liabilities 78 75 72

Total in section III 24,698 20,685 19,371

BALANCE SHEET 32,215 26,444 24,783

Profit and loss statement of insurance company in 2012

IndicatorIn 2012,

million RuBIn 2011,

million RuB

II. Insurance other than life insurance

Insurance premiums — net reinsurance 31,996 27,807

Insurance premiums under contracts of insurance, co-insurance, reinsurance — total

34,817 30,753

Transferred to reinsurers (1,452) (1,528)

Change of unearned premium reserve — total (1,314) (1,801)

Change of reinsurers’ share in reserve (55) 383

Claims incurred — net reinsurance (17,151) (15,187)

Payments of claims under contracts of insurance, co-insurance, reinsurance — total

(15,703) (15,807)

Change of loss reserve — total (570) (544)

Change of reinsurers’ share in loss reserve 849 1 905

Change of loss reserve — total (1,605) 170

Change of reinsurers’ share in loss reserve (122) (911)

Change of other insurance reserves (389) 681

Change of other insurance reserves – –

76

BAlAnCE SHEET

IndicatorIn 2012,

million RuBIn 2011,

million RuB

Allocations of insurance premiums (263) (191)

Expenses on insurance operations — net reinsurance (8,174) (7,030)

Acquisition costs (7,540) (6,056)

other costs of insurance operations (711) (1,049)

Reinsurance commission and profit from reinsurance contracts

77 75

Investment income 7,174 4,628

Investment costs (5,984) (4,061)

Other income from insurance other than life insurance 631 241

Other costs for insurance other than life insurance (1,546) (435)

Result of insurance operations other than life insurance

6,294 6,453

III. Other revenues and expenses, not included in sections I and II

Administrative costs (4,334) (5,473)

Other income 522 2,268

Other costs (1,702) (2,903)

Pretax profit (loss) 780 345

Current income tax (257) (186)

Including:

Permanent tax liabilities (assets) (81) (100)

Change in deferred tax liabilities (2) (1)

Change in deferred tax assets 22 19

Other (21) 13

net profit (loss) 522 190

Reliability of the accounting statement of Insurance open joint stock company VSK for the period January 01 to December 31, 2012 is confirmed by JSC “AF “Marillion”. PSRN 1027700190253 dated 05.09.2002. Member of SRO NP “Audit Chamber of Russia”, PNRE 10301026781.

77

T IME TO WORK WITH

LEADER

CEnTER OF CORPORATE InSuRAnCEFrolov Roman N.Deputy Director General, Head of the [email protected]

CEnTER OF RETAIl InSuRAnCEKameneckii Sergey A.Deputy Director General, Head of the [email protected]

CEnTRE OF PARTnERSHIP SAlESBoychenko Iliya A.Deputy Director General, Head of the [email protected]

CEnTER OF MOTOR InSuRAnCEGoncharov Oleg V.Deputy Director General, Head of the [email protected]

CEnTER OF VOlunTARY HEAlTH InSuRAnCEAbramov Andrey N.Deputy Director General, Head of the [email protected]

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