LPZM-05-POSLOVNO A4 ANG.indd

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					                  P
                               annual
                            report of
                        Zavarovalnica
                         Maribor d.d.
                             for 2005




                  #01       business
                              report




Business report            1
                                                                         P
                                                                                                                       annual
                                                                                                                    report of
                                                                                                                Zavarovalnica
                                                                                                                 Maribor d.d.
                                                                                                                     for 2005




                                                                         #01                                            business
                                                                                                                          report


                                                                         The Annual Report 2005 publication is a summary of important
                                                                         information on the operations referred to in the company’s
                                                                         Annual Report 2005, as adopted by the company’s Man-
                                                                         agement Board and approved by its Supervisory Board on
                                                                         23 May 2006. The complete annual report is available at
                                                                         www.zav-mb.si.




Annual report of Zavarovalnica Maribor d.d. for 2005   Business report
                                                                                                                                                                                                                                                                                                                            K
          Performance highlights in 2005                                                                                                                                                                                                                                                Index




          Introduction to the business report for 2005 ..................................... 4
1         Main activities of the company ........... ............................................... 6
2         Performance highlights of ZM in 2005 ............................................... 8
2.1.      Financial indicators of the company’s operations in 2005                                         8
2.2.      Growth and development of ZM in the 1998 to 2005 period                                         10
2.3.      Our history and development                                                                     11
3         Performance and management in 2005 ........................................... 12
3.1.      Our operations in Slovenia                                                                      13
3.1.1.    Inflation and price growth in 2005                                                               13
3.1.2.    Unemployment                                                                                    13
3.1.3.    Active population in Slovenia                                                                   13
3.1.4.    Salaries                                                                                        13
3.2.      Our operations in the EU and the rest of the world                                              13
3.3.      Insurance industry in Slovenia                                                                  13
3.3.1.    Impact of competition on the insurance industry                                                 14
3.4.      Expectations of strategic partners and buyers                                                   14
4         Weather impacts ............................................................................... 15
5         Report by the Management Board ...... ............................................. 16
6         Report on the work of the Supervisory Board of
          Zavarovalnica Maribor d.d. ................................................................. 18
7         Events that marked 2005 ..................... ............................................. 20
8         Events after the balance sheet date ................................................ 20




              Report on the operations of Zavarovalnica Maribor d.d. for 2005                                                                                                   Sustainable development




9         ZM Business strategy ....................................................................... 24                                               18       Employees and education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   48
9.1.      Mission, vision and values                                                                           24                                       18.1.    Innovation, performance and career development                                                                                                            51
9.2.      Basic goals for 2006 and beyond                                                                      25                                       18.2.    Goals and vision of the insurance company’s development
10        Overview of ZM operations in 2005 ..... ............................................. 26                                                               strategy in the field of boosting future motivation and performance                                                                                        51
10.1.     Market share developments                                                                            28                                       19       Quality of operations and monitoring of customer satisfaction . . . . .                                                                                   52
10.1.1.   Movements of market operatives in insurance companies                                                28                                       19.1.    Quality management system                                                                                                                                 52
10.2.     Overview of insurance classes which account for 95.9%                                                                                         19.2.    Internal audit                                                                                                                                            52
          of the entire portfolio                                                                              28                                       19.3.    Strategic business partners                                                                                                                               54
10.3.     Performance analysis                                                                                 28                                       19.4.    Monitoring customer satisfaction                                                                                                                          54
10.4.     Advantages and benefits by insurance class                                                            29                                       19.5.    Responsibility towards the social environment                                                                                                             54
10.5.     Target groups by insurance class                                                                     29                                       19.6.    Methods of communicating with the target publics                                                                                                          54
10.6.     Corporate business                                                                                   29                                       19.7.    Managing the environment                                                                                                                                  55
10.7.     Retail business                                                                                      29
10.8.     Sales by business unit                                                                               29
10.9.     Sales promotion activities                                                                           29
11        Financial results ................................... ............................................. 30
12        Financial position ................................. ............................................. 34                                                        about Zavarovalnica Maribor d.d.
13        Risk management ................................ ............................................. 36
13.1.     Capital, capital adequacy and ensuring minimum capital                                               36
13.2.     Reinsurance risk                                                                                     36
13.3.     Investment risk                                                                                      36                                       20       Management bodies and organisational chart of the company . . . . . 58
13.4.     Currency risk                                                                                        37                                       20.1.    ZM company profile                                                                        59
13.5.     Risk of changes in interest rate                                                                     37                                       20.2.    ZM Management Board and Supervisory Board                                                59
13.6.     Other market risks                                                                                   37                                       20.3.    ZM Organisational structure                                                              60
13.7.     Liquidity risk                                                                                       37                                       20.4.    Most significant changes in 2005                                                          60
14        Investment policy and structure of investments as                                                                                             20.5.    ZM Sectors and services                                                                  60
          at 31 December 2005 ........................................................................... 38                                            20.6.    ZM Business units in Slovenia                                                            62
15        Shareholder’s equity and shareholders ........................................... 39                                                          20.7.    ZM Business units                                                                        62
16        Investments .......................................... ............................................. 40                                       20.9.    ZM Associated companies                                                                  61
17        Activities in research & development and innovations ................... 42                                                                   20.10.   Authorisation to perform insurance operations                                            61
17.1.     Research                                                                                             42                                       21       Selected financial and accounting indicators to the
17.2.     Development                                                                                          43                                                profit and loss account for 2005 ........................................................ 64
17.3.     Innovations                                                                                          44
17.4.     Information technology                                                                               44
17.5.     Public relations                                                                                     45
17.6.     Understanding customer needs                                                                         45


                                                                                                 Annual report of Zavarovalnica Maribor d.d. for 2005   Business report
  Introduction
  to the business
  report for 2005




  Performance highlights in 2005                                   • among insurance companies operating in line with the                      What is there to do in these times of change?            One of ZM’s key goals was and remains the provision of ser-
                                                                     Insurance Act ZM’s market share totals 12.17 percent;                               Guarantee performance excellence               vices to our customers, owners and partners that meet their
                                                                   • total assets grew by 10 percent;                                                                   and personal attitude.          expectations. Many things indicate this will not be easy: 1.
                                                                   • the required minimum capital adequacy was exceeded by                                                                              foreign competitors, since Slovenia’s entry to the EU enabled
                                                                     55.3 percent;                                                    2004 and 2005 were characterised by a series of upheavals,        foreign insurance companies to operate in our market (more
                                                                   • an increase in net technical reserves of 7.1 percent;            catastrophes and changes – natural, political, personnel – in     than 100 of them have expressed an interest to the Insurance
                                                                   • investments of premium reserves and premium reserve assets       patterns of behaviour and values. The economy, politics and       Supervision Agency to operate in Slovenia); 2. the expansion
                                                                     rose by 10.9 percent;                                            our usual patterns of behaviour were constantly disturbed by      of premium collection companies; 3. the provision of services
                                                                   • ZM obtained authorisation from the Insurance Supervision         many changes, intensified by their unpredictable nature. All of    that is not in accordance with good business practices and
                                                                     Agency to perform insurance operations in Austria;               this impacted on global (European) operations and negative        the rules of loyal competition among insurance companies; 4.
                                                                   • active preparations for introduction of the euro – the new       consequences could not be avoided since Slovenia became           coping with cost cutting on one hand and increased invest-
                                                                     legal tender of the Republic of Slovenia as of 2007;             a member state of the European Union in 2004. Even though         ments in improved visibility of the company, segmentation
                                                                   • modernisation of automobile insurance – ‘Modri kasko’ – a        we often saw ourselves like a lonely island in a raging ocean,    and development on the other; growing demands by the
                                                                     new programme, 5 different automobile insurance packages         the results of our operations show that in many industries,       insurance company’s shareholders; and 6. the political and
                                                                     featuring several options;                                       including ours, i.e. the insurance business, we are still the     economic position of Slovenia compared to Europe, and
                                                                   • ZM becomes the first in Slovenia to include personal and          ‘slaves of our master’, that is, nature.                          Europe compared to the USA and China etc.
                                                                     legal assistance – ‘OPA!’ in property insurance – complete
                                                                     modernisation of non-life insurance packages;                    Many people say that 2004 and 2005 were the last that             ZM’s main competitive advantages are its well-established
                                                                   • the market is offered a new life insurance product for the       allowed us to ‘sleep peacefully’ as we were about to face         identity, enviable reputation with those who know us, the
                                                                     youngest – Prizma Junior and the guaranteed principal and        mergers, the establishment of financial tiers, the transition to   loyalty of the ZM employees to its employer (ranking 3rd in
                                                                     guaranteed profit unit-linked life insurance product DWS          the International Accounting Standards and the introduction       Slovenia), a high level of motivation, adequate age structure,
                                                                     FlexPension;                                                     of the euro. The ‘Sleeping Beauty’ period has now gone.           a high level of expertise and qualification, excellent asset
• in 2005, 809 days were spent on training, with our employees     • modernisation and upgrading of several insurance products                                                                          management, constant training and education of employees,
  participating 1,875 times;                                         offered by ZM;                                                   This might be hard to accept and face. The fact is that only      good spirit and wish to succeed and build mutual trust and
• premiums written amounted to over SIT 45 billion, representing   • the best unit-linked life insurance products on the market in    those ready for the coming changes will be able to cope           excellence, and owners with a clear vision. We will be able
  a 7 percent increase over 2004;                                    terms of costs, benefits and insurance options (Prizma);          with them, survive and become even more successful than           to benefit from them in the future if we show enough will and
• the company paid out slightly under SIT 27.9 billion in          • establishment of personal relationships with key groups of       before. Looking back we can see that we underwent a series        effort, for the good of all shareholders.
  compensation claims, which is 7 percent less than in 2004;         the public and clients,                                          of changes in the last two years – in the composition of the
• net profit amounted to more than SIT 2.5 billion;                 • ZM organised the 5th mountain run over Pohorje with              Management Board and as regards other jobs and positions.         I am convinced that we must follow this motto: nobody’s
• ZM distributed amongst its life insurance policy holders a         international participants; and                                  Also in terms of preparing new insurance products and the         perfect by himself; still, perfection is possible if you’re in a
  further SIT 1.5 billion in 2005;                                 • the company also awarded cash prizes to the best degree          organisational structure. In our learning methods as well as in   good team. Speaking for the entire Management Board I
• in 2005, ZM collected almost SIT 53.5 million in premiums          essays as part of the project ‘Best papers on entrepreneurship   the ways of recording results and in remuneration. In advertis-   wish that the employees and contractors of ZM represent
  per employee;                                                      in the 2003/2004 study year’.                                    ing methods and in the tone of our communications.                such a team!



   4                                                                        Annual report of Zavarovalnica Maribor d.d. for 2005      Business report                                                                                                                 5
                                                                                                                                                                                   1
      Main
      activities
      of the company




      Life insurance                                                                  Travel insurance:                                                     Cargo insurance:

      Life insurance products                                                     • travel insurance with assistance services abroad;                   •   motor vehicle insurance;
                                                                                  • insurance against the risk of cancelled travel arrangements;        •   vessel insurance;
    • Unit-linked life insurance – PRIZMA (PRISM) – a type of life insurance        and                                                                 •   aircraft insurance;
      linked to investment funds intended for people from 14 to 70 years          • compulsory and comprehensive motor vessel insurance.                •   cargo insurance;
      of age;                                                                                                                                           •   freight forwarder’s liability insurance;
    • Unit-linked life insurance DWS FlexPension – a type of life insurance                                                                             •   carrier’s liability insurance;
      linked to DWS Investments funds;                                                                                                                  •   comprehensive aircraft insurance;
    • Unit-linked life insurance Prizma junior – a type of life insurance             Non-life insurance                                                •   aircraft liability insurance; and
      linked to investments funds;                                                                                                                      •   watercraft liability insurance (coverage for owner or person
    • Zlata naložba (Golden investment) life insurance – for people between           Business insurance:                                                   authorised for operating the motor vessel).
      14 and 65 years of age;
    • Term life insurance with interval payments;                                 •   fire insurance of business premises;                                   Credit and other financial insurance:
    • Joint life insurance (for two people) – an advantage of this insurance      •   business interruption following fire insurance;
      is the option to insure two people between 14 and 65 years of age           •   earthquake insurance;                                             • insurance of consumers’ credits, housing loans, small
      with a single insurance policy;                                             •   machinery breakdown insurance;                                      businesses credits;
    • Zlata jesen (Golden Autumn) life insurance – tailored for the late          •   business interruption following machinery breakdown               • currency forgery;
      mid-life generation and pensioners;                                             insurance;                                                        • authorised overdraft on bank accounts;
    • Zlati ključ (Golden key) life insurance – insurance for children under      •   insurance of computers;                                           • transport of cash;
      13 years of age;                                                            •   general liability insurance;                                      • credit card receivables, credit card misuse, securities trading
    • Annuity insurance – with the Zlata naložba life insurance, life insurance   •   manufacturer’s liability insurance;                                 status, transaction account overdrafts;
      for a limited period of time with interval payments, and insurance          •   construction liability insurance;                                 • suretyship insurance (e.g. insurance against customs duty
      for two people, a beneficiary may also select the option to receive          •   assembly insurance;                                                 debt); and
      the insurance money or part of it upon maturity or the event of loss        •   insurance against burglary; and                                   • cheque payments receivables.
      in the form of an annuity.                                                  •   professional liability insurance for doctors, designers,
    • In co-operation with NKBM, ZM offers the following products through             supervisors and auditors, management board members,                   Insurance of a house / floor / apartment:
      bank assurance:                                                                 members of supervisory boards, managerial staff of enterprises,
     - Življenjski mir – ‘Life peace’ life insurance; and                             auditing companies, real estate brokers, surveyors, executors     •   OPA! House insurance;
     - Življenje plus – ‘Life plus’ life insurance.                                   etc.                                                              •   OPA! Apartment insurance;
                                                                                                                                                        •   OPA! Personal assistance;
      Accident insurance                                                              Automobile insurance:                                             •   OPA! Legal assistance;
                                                                                                                                                        •   OPA! Household equipment insurance;
    • accident insurance of employees – at work and outside work                  • motor third party liability insurance (TPL);                        •   earthquake insurance;
      (individual accident insurance of people, collective accident insurance,    • comprehensive automobile insurance (‘Modri kasko’)                  •   insurance against burglary;
      accident insurance for pensioners, families, households);                   • ‘No points’ insurance – insurance against the coverage of           •   glass insurance; and
    • accident insurance for people performing specialised activities               costs arising from re-obtaining one’s driver’s licence;             •   condominium insurance.
      (drivers, passengers, sportsmen, firemen, hunters, fishermen ...);            • driver’s liability insurance (TP-plus);
    • accident insurance for children and schoolchildren;                         • Axa automobile assistance – guarantees 24-hour free                     Agricultural insurance:
    • accident insurance for guests, visitors, day-trippers;                        assistance on the road in the case of a car accident,
    • accident insurance for customers and subscribers;                             mechanical defect in the vehicle or theft and in the event of       • livestock insurance; and
    • other types of accident insurance (accident insurance for summer              physical injury, in Slovenia and all countries covered by the       • fruits and field crops insurance.
      course participants, holiday-makers, members of mountaineering                ‘green card’;
      associations...); and                                                       • legal protection as an addition to TPL;
    • compulsory accident insurance covering public transport                     • comprehensive automobile insurance; and
      passengers.                                                                 • partial comprehensive automobile insurance combinations.



6             Annual report of Zavarovalnica Maribor d.d. for 2005                    Business report                                                                                                                  7
                                                                                                                                                                              2
Performance
highlights of
ZM in 2005


2.1. Financial indicators
of the company’s operations
in 2005


                                                                                                           The growth in gross insurance premiums in non-life insur-
Gross insurance premiums                       in thousand SIT                             45.117.688
                                                                                                           ance is the result of market growth as the prices of insurance
Increase in comparison to 2004                 Index over 2004                                     107     remained practically unchanged. With a suitable reinsurance
                                                                                                           policy the company recorded 12-percent growth in its net
Increase in non-life insurance                 Index over 2004                                     109
                                                                                                           premiums written for non-life insurance. The total growth in
Increase in life insurance                     Index over 2004                                     101     life insurance net premiums of a mere 1% is the result of a
                                                                                                           high number of paid out insurance policies whose maturity
                                                                                                           had expired.
Gross claims and benefits                       in thousand SIT                             27.924.836
                                                                                                           In 2005, the loss ratio reached 62% which equals the 10-year
Increase in comparison to 2004                 Index over 2004                                       93    average, while the paid out claims were below the 2004 figure
                                                                                                           in absolute terms. The appropriateness of reinsurance was
Increase in non-life insurance                 Index over 2004                                       95
                                                                                                           also reflected in losses, as the index of net non-life insurance
Increase in life insurance                     Index over 2004                                       89    over 2004 was a mere 88.7.


                                                                                                           Total assets grew by 10%, which was 1.1 percent above the
Total assets                                   in thousand SIT                            102.099.442
                                                                                                           plan. Thus, the growth was the result of earned net profit aris-
Increase in comparison to 2004                 Index over 2004                                     110     ing from technical reserves. On the assets side, an increase
                                                                                                           was recorded in deferred income (index 112) and investments
Increase in non-life insurance operations      Index over 2004                                     113
                                                                                                           (index 111), more than in receivables (index 104).
Increase in life insurance operations          Index over 2004                                     109


                                                                                                           With the new written life insurance policies, mathematical
Gross technical provisions                     in thousand SIT                             90.129.040
                                                                                                           provisions have increased (by SIT 3.6 billion) as well as insur-
Increase in comparison to 2004                 Index over 2004                                     109     ance investments, in which the insured assume the investment
                                                                                                           risk (index 1069).
Increase in non-life insurance operations      Index over 2004                                     111
Increase in life insurance operations          Index over 2004                                     108


                                                                                                           Operating expenses remained within the planned range.
Operating expenses in gross premiums written   share in 2005                                       24,8
                                                                                                           The increase in the share of life insurance was mainly due to
                                               share in 2004                                       24,5    commissions for unit-linked insurance products.
Share in non-life insurance operations         share of gross premium written                      26,0
Share in life insurance operations             share of gross premium written                      20,9


                                                                                                           Changes in capital were influenced by net profit. This is
Capital                                        in thousand SIT                             15.444.445
                                                                                                           reflected as a reduced total loss brought forward from pre-
Increase in comparison to 2004                 index over 2004                                     115     vious years in the group of non-life insurance and as the
                                                                                                           establishment of statutory and other reserves in the group
Increase in non-life insurance operations      index over 2004                                     134
                                                                                                           of life insurance products.
Increase in life insurance operations          index over 2004                                     106


                                                                                                           The calculated required minimum capital of the company
Capital Adequacy                               surplus 2005 in ’000 SIT                     3.390.682
                                                                                                           was SIT 6.3 billion, while the disclosed surplus of 84% above
Increase in surplus above minimum capital      index over 2004                                     145     the statutory requirement shows the stable capital position
                                                                                                           of the company.
Surplus in non-life insurance operations       index over requir. 2004                             159
Surplus in life insurance operations           index over requir. 2004                             111




 8                                                  Annual report of Zavarovalnica Maribor d.d. for 2005   Business report                                                        9
40,0
milijard SIT
10,0                                                    milijard SIT
                                                        10,0
20,0                                                    20,0
30,0
milijard SIT
10,0                                       milijard SIT
                                           10,0
20,0
milijard SIT                               milijard SIT
2.2. Growth and development of ZM in the 1998-2005 period
10,0                                                                                                                                                                    2.3. Our history and development                          1833
                                                                                                                                                                                                                          The town of Maribor had its buildings insured against fire by an
milijard SIT                                                                                                                                                            The history of ZM goes back to the first half of   Austrian insurance institution.
120,0                   total assets
                                                                                                                                                                        the nineteenth century. Below are some of the             1840
                                                                                                                                                                        most important turning points up to 2004:         Karl Denke and Karl Gerdes, the owners of a coffee substitute fac-
100,0                                                                                                                                                                                                                     tory, started operating as insurance agents selling hail insurance.
120,0                     total assets                    120,0                    total assets                                                                                                                           They represented Mariborska vzajemna zavarovalnica (Maribor
80,0                                                                                                                                                                                                                      Mutual Insurance Company).
100,0
120,0                     total assets                    100,0
                                                          120,0                    total assets                                                                                                                                   The period before the first World War
60,0                                                                                                                                                                                                                      Head offices of seventeen insurance agencies from Vienna, Trieste,
80,0
100,0                     total assets                    80,0
                                                          100,0                    total assets                                                                                                                           Graz and London were opened in Maribor. Most of them still oper-
120,0
40,0                                                      120,0
                                                                                                                                                                                                                          ate in Maribor.
60,0
80,0                                                      60,0
                                                          80,0                                                                                                                                                                    1927
100,0
20,0                                                      100,0
120,0                     total assets                                                                                                                                                                                    In Maribor an insurance company ‘Ljudska samopomoč’ (People’s
40,0
60,0                                                      40,0
                                                          60,0                                                                                                                                                            Self-Aid) was established. Its objective was to help relatives cover the
80,0
in billion SIT                                            80,0
100,0                                                                                                                                                                                                                     expenses of medical treatments or funeral services. Already in the
20,0
40,0                                                      20,0
                                                          40,0
Total assets grew by SIT 60.9 billion or 2.5 percent in the period from 2000 to 2005. It now totals SIT 102.2 bil-                                                                                                        first year of its existence the company had 10,000 insured persons,
60,0                                                      60,0
lion. Only a small share of this growth in total assets was due to an increase in capital, while the lion’s share was
80,0                      technical provisions / gross billion SIT                                                                                                                                                        and less than six years after its foundation their number trebled.
80billion SIT
in
20,0                                                      in premiums
                                                          20,0
contributed to by market growth and simultaneous growth in investments and provisions.                                                                                                                                            1937
40,0                                                      40,0
60,0
70                                                                                                                                                                                                                        ‘Ljudska samopomoč’ also started a mutual loan society ‘Ljudska
in billion SIT
20,0                                                      in billion SIT
                                                          20,0                                                                                                                                                            štednja’. The excellent business results led to the construction of a
60
80                        technical provisions / gross premiums
                                                          80                       technical provisions / gross premiums
40,0                                                                                                                                                                                                                      large building located opposite the railway station (today’s address
50billion SIT
in
70                                                        in
                                                          70billion SIT                                                                                                                                                   is Paritzanska c. 47), and at the same time it even expanded its
80
20,0
                          technical provisions / gross premiums
                                                          80                       technical provisions / gross premiums                                                                                                  activities by opening a branch office in Ljubljana.
40
60                                                        60                                                                                                                                                                      1939
70                                                        70
                          technical provisions / gross premiums                    technical provisions / gross premiums
in
30billion SIT
80
50                                                        80
                                                          50                                                                                                                                                              The second Maribor insurance company was ‘Gospodarsko zava-
60                                                        60                                                                                                                                                              rovalna zadruga Drava’, which built its own business premises at
20
70
40                                                        70
                                                          40
                                                                                                                           technical provisions                                                                           today’s Ulica talcev 1, and at the same time also opened a branch
50                                                        50
                          technical provisions / gross premiums
10
60
80
30                                                        60
                                                          30                                                                                                                                                              office in Ljubljana.
40                                                        40                                                               gross premium                                                                                          April 1941
in billion SIT
50
70
20                                                        50
                                                          20
30                                                        30                                                               technical provisions                             technical provisions                          The assets of the ‘Ljudska samopomoč’ insurance company were,
40
60
10                                                        40
                                                          10                                                                                                                                                              due to the German occupation, transferred to the Südmark insur-
20                        simple loss ratio               20                                                                                                                                                              ance company in Graz, Austria.
50billion SIT
30
in                                                        30
                                                          in billion SIT                                         80%       gross premium
                                                                                                                           technical provisions                             gross premium
                                                                                                                                                                            technical provisions
10                                                        10                                                                                                                                                                      1945
45
The ratio between the gross premium written and net 20
20
40                                                         provisions was 1:1.7 in 2005, whereas it was 1:1.3 in 70%                                                                                                      Amid the ruins of the pre-war insurance agencies and branch offices,
                                                                                                                           gross premium
                                                                                                                           technical provisions                             gross premium
                                                                                                                                                                            technical provisions
40billion
in
2000. SIT                 simple loss ratio
                                                          in billion SIT
                                                                                   simple loss ratio                                                                                                                      two branch offices of ‘Državni zavarovalni zavod (DOZ)’ (National
10
30
50                                                        10
                                                          50                                                     60%
                                                                                                                 80%                                            80%
35                                                                                                                                                                                                                        Insurance Institution) were established: DOZ – Maribor town, and
45billion SIT
in
20                                                        45billion SIT
                                                          in                                                     50%       gross premium                                    gross premium                                 DOZ – the surroundings of Maribor.
30                        simple loss ratio                                        simple loss ratio             70%                                            70%
50
40                                                        50
                                                          40                                                     80%       technical provisions                 80%                                                               1962
25
10                                                                                                               40%
                                                                                                                 60%                                            60%
45
35                                                        45
                                                          35                                                     70%                                            70%                                                       ‘Skupna zavarovalnica za okraj Maribor’ (a joint insurance company
20billion SIT
in
50                        simple loss ratio               50                       simple loss ratio             30%
                                                                                                                 80%
                                                                                                                 50%
                                                                                                                           gross premium
                                                                                                                           gross loss                           80%
                                                                                                                                                                50%                                                       for the Maribor district) was established due to the restructuring of
40
30                                                        40
                                                          30
15                                                                                                               60%                                            60%                                                       ‘Državni zavarovalni zavod’ and carried out insurance operations
45
35
25                                                        45
                                                          35
                                                          25                                                     20%
                                                                                                                 70%
                                                                                                                 40%                                            70%
                                                                                                                                                                40%
10                                                                                                               50%       gross premium                        50%                                                       over the territory of the then Maribor District.
40
30
20                        simple loss ratio               40
                                                          30
                                                          20
50
5                                                                                                                10%
                                                                                                                 60%
                                                                                                                 80%
                                                                                                                 30%       gross loss                           60%
                                                                                                                                                                30%         gross loss                                            1968
35
25
15                                                        35
                                                          25
                                                          15                                                     40%                                            40%
45
in billion SIT                                                                                                    0%       simple loss ratio                                                                              After becoming independent, the insurance company was entered
30                                                        30                                                     50%
                                                                                                                 70%
                                                                                                                 20%                                            50%
                                                                                                                                                                20%
20
10                                                        20
                                                          10                                                     30%       gross premium                        30%         gross premium                                 in the register under the title ‘Zavarovalnica Maribor’ (Maribor In-
40                                                                                                                         gross loss                                       gross loss
25
15
5                                                         25
                                                          15
                                                          5                                                      40%
                                                                                                                 60%
                                                                                                                 10%                                            40%
                                                                                                                                                                10%                                                       surance Company) and soon it established more business units in
35                                                                                                               20%                                            20%
20billion SIT             gross premium and employes      20billion SIT                                                    gross loss ratio                                                                               Celje, Ljubljana, Postojna, Piran and Pula.
10
55.000
in
30
                                                          10
                                                          in                                                      900
                                                                                                                 30%
                                                                                                                 50%
                                                                                                                  0%       simplepremium
                                                                                                                           gross loss                           30%
                                                                                                                                                                 0%         gross loss
                                                                                                                                                                            simplepremium
                                                                                                                                                                            gross loss ratio
15                                                        15                                                     10%                                            10%                                                               The end of 1976
5                                                         5                                                       800
25                                                                                                               20%
                                                                                                                 40%                                            20%                                                       Zavarovalnica Sava (Sava Insurance Company) and Zavarovalnica
10billion SIT
in
50.000                                                    10billion SIT
                                                          in                                                      0%       simplepremium
                                                                                                                           gross loss ratio                      0%         simplepremium
                                                                                                                                                                            gross loss ratio
20                        gross premium and employes                               gross premium and employes     700
                                                                                                                 10%                                            10%                                                       Maribor (Maribor Insurance Company) merged to form a joint
55.000                                                    55.000
5 claims ratio of non-life insurance operations in 2005 is far above the ten-year average. Paid insurance amounts
                                                          5                                                      30%
                                                                                                                  900      gross loss                            900
The
15                                                                                                                600                                                                                                     insurance company called Zavarovalnica Triglav (Triglav Insurance
in billion SIT                                                                                                    800      simple loss ratio                      800       simple loss ratio
45.000                    gross premium
                                                          in lower than
                                               due were 12%billion SIT in the previous year in nominal terms.20%
arising from life insurance policies that wereand employes                         gross premium and employes
                                                                                                                  0%                                              0%                                                      Company). On 1 January 1977 a regional office Maribor of the
10
55.000                                                    55.000                                                  500
                                                                                                                  900      gross premium                          900
50.000                                                    50.000                                                  700                                             700                                                     Triglav Insurance Company started to operate, but its operations
5                                                                                                                10%
                                                                                                                  400
                                                                                                                  800                                             800                                                     were solely limited to the Podravje and Koroška regions.
40.000
in billion SIT            gross premium and employes                               gross premium and employes     600      simple loss ratio                      600
55.000
50.000
45.000                                                    55.000
                                                          50.000
                                                          45.000                                                  0%
                                                                                                                  900
                                                                                                                  300                                             900                                                             The end of 1990
                                                                                                                  700                                             700
                                                                                                                  500                                             500                                                     The Maribor regional office split off from the Triglav Insurance
                                                                                                                  800
                                                                                                                  200                                             800
35.000                                                                                                            600      GP per employee                        600
50.000
45.000                                                    50.000
                                                          45.000                                                  400                                             400                                                     Company and started to operate under its previous name ‘Zava-
40.000
55.000                    gross premium and employes      40.000                                                  700
                                                                                                                  900
                                                                                                                  100
                                                                                                                  500
                                                                                                                                                                  700
                                                                                                                                                                  500
                                                                                                                  300                                             300                                                     rovalnica Maribor’ (Maribor Insurance Company). It only had two
ins. gross premium (in billion)                                                                number of employees600
                                                                                                                  800      employees                              600                                                     larger business units: in Slovenj Gradec and Ptuj.
45.000                                                    45.000                                                  400                                             400
40.000
35.000                                                    40.000
                                                          35.000                                                  200                                             200                                                             15 December 2000
50.000                                                                                                            500
                                                                                                                  700      GP per employee                        500       GP per employee
                                                                                                                  300                                             300
                                                                                                                  100                                             100                                                     At the annual general meetings of the Maribor and Tilia Insurance
                                                                                                                  400
                                                                                                                  600                                             400
40.000 premium (in billion)
35.000                     2000        2001        2002 40.000
                                                             2003
                                                          35.000         2004        2005                         200      employees                              200       employees                                     Companies resolutions on a merger were adopted. But on the
ins. gross
45.000                                                    ins. gross premium (in billion)      number of employees         GP per employee        number of employees       GP per employee
                                                                                                                  300
                                                                                                                  500                                             300                                                     grounds of legal proceedings filed by 17 minor shareholders of Tilia,
                                                                                                                  100                                             100
35.000 premium (in billion)                               35.000 premium (in billion)                             200
                                                                                                                  400      employees                              200       employees                                     implementation of the entry of the new company in the Companies
ins. gross                                                ins. gross                           number of employees         GP per employee        number of employees       GP per employee
40.000                     2000        2001        2002      2003        2004        2000
                                                                                     2005        2001        2002                                                                                                         Register was suspended and later revoked at the Annual General
                                                                                                                  100 2003
                                                                                                                  300
                                                                                                                              2004         2005                   100
                                                                                                                                                                                                                          Meetings of both companies in 2002.
ins. gross premium (in billion)                           ins. gross premium (in billion)      number of employees         employees              number of employees       employees
                           2000        2001        2002      2003        2004        2005
                                                                                     2000        2001        2002 200 2003                                                                                                        2000-2004
35.000                                                                                                                     GP 2004
                                                                                                                               per employee2005
At the end of 2005 we had one employee less than at the end of 2004 and 230 more than in 2000. Productivity       100                                                                                                     Successful growth of ZM insurance’s operations, the development of new
measured by gross premium per employee grew by 7.1 percent. Collected premiums per employee totalled SIT 2003 employees
                           2000        2001        2002      2003        2004        2000
                                                                                     2005        2001        2002             2004         2005                                                                           insurance products and provision of safety and security to customers.
ins. gross premium (in billion)                                                                number of employees                                                                                                                2005
53.4 million.
                                                                                                                                                                                                                          The loss incurred in previous years was finally covered and the
                                                                                                            Annual report of
                         2000       2001       2002        2003        2004      2005                                                                                                                                     company set up a reserve fund.
                                                                                                  Zavarovalnica Maribor d.d.
10                                                                                                                 for 2005                                             Business report                                                                                                       11
                                                                                                                                                                                                                                                                      3
Gross domestic product, 4th quarter 2005 (First Release 28 March 2006)                                                                                 3.1 Our operations in Slovenia

                                                            1 quarter 2 quarter
                                                             st               nd
                                                                                                 3 quarter
                                                                                                  rd
                                                                                                                   4 quarter
                                                                                                                    th
                                                                                                                                            2005       According to preliminary estimates real GDP growth was 3.9
Non-seasonally adjusted                                                                                                                                percent in 2005, while economic growth in the last quarter
                                                                                                                                                       was 3.7 percent. GDP at current prices amounted to SIT
Same period of the previous year = 100                             102,8           105,4                103,6             103,7            103,9       6,557,698 mill. or 4.9 percent more than in 2004. Domestic
Seasonally and working days adjusted                                                                                                                   consumption rose less than in the previous year; by quarters
                                                                                                                                                       it grew slowly and only increased in a more pronounced way
Previous quarter=100                                               101,1           102,3                100,7             101,0               ----     in the last quarter. The main reason for the slow growth is the
Same period of the previous year = 100                             102,9           104,9                104,0             105,1            104,2       real decrease in gross capital formation. (source: http://www.stat.
                                                                                                                                                       si/novice_poglej.asp?ID=838 )
                                                                                                Source: http://www.stat.si/novice_poglej.asp?ID=984
                                                                                                                                                       According to the Institute for Macroeconomic Analysis and
                                                                                                                                                       Development (‘IMAD’), exports of services in the first nine
Inflation in December (First Release) /Consumer and retail price indices, December 2005 /9 March 2006                                                   months of 2005 rose by 15.2% and imports by 10.7% in
                                                                                                                                                       nominal terms, compared to the same period of 2004. Both on
                                       XII 05
                                       ______               XII 05
                                                            ______      XII 05-I 05
                                                                        ___________                I-XII 05
                                                                                                   _______               XII 05
                                                                                                                         ______            XII 05
                                                                                                                                           ______      the exports and imports sides, fastest growth was recorded in
                                        XI 05               XII 04      XII 04-I 04                I-XII 04               Ø 00              Ø 92       other services (all other services except transport and travel-
                                                                                                                                                       ling), with the highest increase being recorded in exports of
CPI - total                            100,0                102,3             102,5                 102,5                131,7             356,3       agency services (up by 134.7%) and imports of construction
                                                                                                                                                       and communication services (up by 24.5%). Compared to
                                                                                                                                                                                                                                                           Performance
                                                                                                                                                                                                                                                       and management
Goods                                   99,8                102,0             102,2                 102,2                127,1                 ---
                                                                                                                                                       the same period of the previous year, the service balance
Services                               100,3                103,0             103,2                 103,2                143,7                 ---     surplus was higher because of the good results recorded in
HCPI - total                            99,9                102,4            102,5 *                102,5                132,0                 ---     transport and tourism.                                                                                    in 2005
RPI - total                            100,0                102,7                  ---              103,5                   ---            371,6       3.1.1. Inflation and price growth in 2005                                  3.1.4. Earnings
Goods                                   99,8                102,3                  ---              103,6                   ---            337,3
                                                                                                                                                       In 2005, inflation kept falling. Interim growth in consumer                The average monthly gross salary for the period from January
Services                               100,4                103,6                  ---              103,4                   ---            535,3       prices was 2.3% (3.2% in 2004), and average inflation was                  to December 2005 was SIT 277,279, which is 4.8% more
*EMU convergence price index                                                                    Source: http://www.stat.si/novice_poglej.asp?ID=880    2.5% (3.6% in 2004). Based on provisional data provided by                than in the same period of 2004. The average monthly net
                                                                                                                                                       Eurostat and the available explanations concerning calcula-               salary for the period from January to December 2005 was
                                                                                                                                                       tion of the Maastricht criteria, its December value stood at              SIT 176,311, which is 6.1% more than in the same period
Registered unemployment rate1), December 2005                                                                                                          2.5% so that Slovenia also met this criterion at the end of               of 2004.
                                                                     XI 05                               XII 05                          I-XII 05      2005. Prices that are not regulated rose by 1.2% in 2005.
                                                                                                                                                       The slowing down of their growth was the result of the strict             3.2 Our operations in the EU and the rest of the
Total                                                                10,3%                              10,2%                             10,2%        implementation of measures of the Bank of Slovenia and the                world
Men                                                                  8,6%                                8,6%                               8,6%       government and the tougher competition in certain markets
                                                                                                                                                       following entry to the EU.                                                According to Eurostat, the rate of unemployment in the
Women                                                                12,4%                              12,2%                             12,1%
                                                                                                                                                                                                                                 twelve member states with the euro as legal tender rose
1) The data on the registered unemployed persons are from                                       Source: http://www.stat.si/novice_poglej.asp?ID=954    The volume of net retail borrowing in 2005 reached SIT                    for the first time after more than two years in December
the Employment Service of Slovenia.
                                                                                                                                                       200.1 billion and thus exceeded the previous record volume                2005. It grew by one-tenth of a percentage point to 8.4%.
                                                                                                                                                       recorded in 1999, upon the introduction of VAT, by 15.6% in               (source: Finance-on.net, 2.2.2006)

Labour force (according to the labour force survey), 4th quarter 2005 (First Release)                                                                  real terms. At the interim level, net flows grew by as much as             In the new EU member states, the prices of real estate have
                                                                                                                                                       45.1%. The only reason for such growth was FX borrowing                   doubled in the last two years while analysts expect even
in ‘000                                                            TOTAL                                  Men                            Women         which represented as much as 46.0% of total retail borrow-                more profits. Although Bulgaria, Romania and Croatia will
Population (total)                                                   2001                                  980                              1021       ing in domestic banks and was as much as 5.6-times higher                 have to wait until 2007 to enter the EU, profit hunters are
                                                                                                                                                       than in 2004. Also in 2005 the most widespread type of retail             buying holiday houses in these countries en masse. Foreign
Labour force                                                         1028                                  556                                472      borrowing from banks was tolar loans, even though their net               investment which is the most important factor of economic
People in employment                                                  953                                  519                                435      flows have dropped by 11.8% since 2004 in real terms.                      growth in the areas concerned is also attracted by the non-
                                                                                                                                                                                                                                 expensive labour there which is making foreign multinationals
Unemployed people                                                      74                                     37                               37      3.1.2. Unemployment                                                       relocate their production units to those areas.
Inactive people                                                       689                                  278                                411                                                                                According to Eurostat, the deficit in the current account of
                                                                                                Source: http://www.stat.si/novice_poglej.asp?ID=968
                                                                                                                                                       In the first eleven months of 2005, the employment services                the balance of payments of the European Union was EUR
                                                                                                                                                       deleted 26.5% fewer unemployed people from their records                  26.1 billion in the last quarter of 2005 and thus totalled EUR
                                                                                                                                                       so that the comparison with the previous year is distorted.               88 billion at the end of 2005. Compared to 2004 when the
Average gross earnings index                                                                                                                           There were also 15.7% fewer first-time job-seekers while                   EU recorded a deficit in the current account of the balance of
                                                                                                                                                       the share of those who had lost a job fell by 1.9%. What is               payments in the amount of EUR 18.5 billion, this represented
                                                                                                         Index
                                                                                                                                                       more worrying is the fact that 0.9% fewer unemployed people               an almost five-fold increase. In the foreign trade of services,
Slovenia                                                                                               XII 05                                          found employment in the second half of the year. On the other             the EU recorded a surplus of EUR 44.9 billion in 2005.
                                                                                                       ______                              104,8       hand, the number of those employed rose by 0.7% in the
                                                                                                   Ø I–XII 05
                                                                                                                                                       first nine months, according to the national accounts, while               3.3. Insurance industry in Slovenia
                                                                                   Source: http://www.stat.si/novice_poglej.asp?ID=951 9.3.2006        the number of employees in service activities and construc-
                                                                                                                                                       tion is also increasing. (source:http://www.vecer.si/vecer2006/default.   According to the survey ‘Trends in the use of insurance
                                                                                                                                                       asp?jezik=SLO&kaj=6&id=2006011104078875&iskanje=inflacija%20%20)          products in the period from 2001 to 2005’ (Gral-Iteo,
Average monthly net earnings
                                                                                                                                                                                                                                 June 2005), people (i.e. those who participated in the survey)
                                                 SIT                                                          Indices                                  3.1.3. Active population in Slovenia                                      decide to take out new insurance on the basis of the following
                                                                                                                                                                                                                                 important factors: long-term experience or long-term presence
                                                                                     XII 05
                                                                                     ______            XII 05
                                                                                                       ______           Ø I-XII 05
                                                                                                                        __________         XII 05
                                                                                                                                           ______      According to the IMAD, the number of formally active people               in the market, good price/quality of service ratio and low prices
                                  XII 05     Ø I-XII 05       Ø X-XII 05
                                                                                      XI 05            XII 04           Ø I-XII 04          Ø 04       grew in November 2005. It grew by 814 people or 0.1%, which               of insurance products – in these factors an upward trend has
                                                                                                                                                       is one of the most significant November increases in employ-               been noticed in recent years while, compared to 2001, the
Slovenia                       184.159          176.311           185.930                93,9          100,5               106,1           110,9
                                                                                                                                                       ment in recent years. Growth was again most significant in                 participants found the duration of the period in which their
                                                                                   Source: http://www.stat.si/novice_poglej.asp?ID=951 9.3.2006        the area of business services (by 587 people or 0.9%) and                 claims are paid out, pleasant attitude of the sales personnel
                                                                                                                                                       also notable in the area of trade.                                        and payment terms and conditions to be less important.
                                                                                                                                                       (source: http://www.sigov.si/zmar/arhiv/og0106/eo0106.pdf#3)

12                                                                                              Annual report of Zavarovalnica Maribor d.d. for 2005   Business report                                                                                                                        13
                                                                                                                                                                         4
The significance of the factors ‘reliable and trustworthy insur-
ance company’ and ‘stable and economically safe insurance
company’ has not changed.

Non-life insurance
When deciding on non-life insurance, people focus on the
same factors as in life insurance with the exception of the quick
payment of claims which seems to be the most significant
factor. an upward trend can also be noticed here with the
exception of the factor relating to the reliability and trustwor-
thiness of the insurance company. In non-life insurance the
largest share (besides compulsory motor third party liability
insurance) was taken by real estate insurance (houses, apart-
ments, holiday houses), followed by comprehensive motor
insurance and movable property (i.e. items and equipment
in the apartment). In the case of the latter, the growth trend
is positive. (Gral-Iteo, june 2005)

Life insurance
When deciding to take out a life insurance policy, economic
stability, reliability and trustworthiness of the insurance com-
pany, quick payment of claims and good price/quality of
service ratio seem to be the most important factors; the
latter showed a growth trend while the importance of others
is falling. In general, it can be said that ever more people are
deciding on various types of personal insurance, the most
popular being accident insurance followed by life insurance.
Among the types of personal insurance, the most consider-
able reduction can be noticed in annuity insurance. (Gral-Iteo,
june 2005)

3.3.1. Impact of competition
on the insurance industry

In the Slovenian insurance market there are currently 21
companies, of which 19 are insurance companies and 2
are reinsurance companies. With Slovenia’s entry to the
EU, foreign insurance companies showed great interest in
operating in the territory of Slovenia; however, only a few of
them actually plan to set up branches in Slovenia – most of
them wish to operate according to the principle of the free
provision of services in the single EU market. The arrival of
foreign insurance companies varied the domestic range of
insurance services on offer. Many new products were intro-                                                                                                       Weather impacts
duced in life and pension insurance and some in automobile
insurance. (vir: www.ljnovice.com, 4. 9. 2005)                                                                                               The impact of extreme weather conditions on
According to data provided by the Slovenian Insurance As-                                                                                    claims movements
sociation, foreign insurance companies are not as successful
in Slovenia like they are in Croatia, where the German insur-                                                                                In the last decade, the international insurance industry has
ance company Allianz recorded 96% growth in life insurance                                                                                   had to face a dramatic increase in the volume and frequency
premiums in the first five months of 2005 and pushed Croatia                                                                                   of claims arising from natural disasters. The number of serious
Osiguranje down from its leading position. Iztok Pečnik, the                                                                                 natural disasters (excluding earthquakes and volcanic erup-
Director of Life Insurance at Zavarovalnica Triglav, explains the                                                                            tions) thus trebled compared to 1960, the scope of claims
relatively low market share of foreign insurance companies in                                                                                (taking inflation into account) increased five-fold, while the sum
Slovenia by the fact that they have not yet developed sufficient-                                                                             of paid out amounts grew tenfold. (source: Dnevnik, 14 July 2005)
ly widespread networks, like for example Allianz has in Croatia
thanks to its good co-operation with Zagrebačka banka.                                                                                       Insurance companies can contribute considerably in the
(vir: Dnevnik, 22. 8. 2005)                                                                                                                  process of raising people’s awareness about the unpleasant
Because of the merger of the Adriatic and Slovenica insurance                                                                                and often fatal consequences of natural disasters for their
companies in 2005 ZM moved into third position in terms                                                                                      property (and, not to forget, their life) by offering appropriate
of market share among traditional insurance companies in                                                                                     products of insurance against such types of risk and other
Slovenia.                                                                                                                                    measures or activities focused on reducing the level of the
                                                                                                                                             seriousness of such disasters.
3.4. Expectations of strategic
partners and buyers                                                                                                                          Severe storms, accompanied by hail which also devastated
                                                                                                                                             Slovenia last summer (SIT 8.3 billion in damages as a result
The strategic partners of ZM expect high quality and a com-                                                                                  of hail damage) stimulated us to offer financial support for
prehensive offer of insurance products along with the fast                                                                                   the project of launching anti-hail rockets also in 2005, which
and fair settlement of claims. They also expect appropriate                                                                                  has been carried out for the last five years by the Aviation
professional consultancy services and suitable conduct in                                                                                    Centre Maribor (Letalski center Maribor) in co-operation with
taking out their insurance contracts, and the provision of                                                                                   46 municipalities of the Podravje region.
safety and security to them and their property.


 14                                                                 Annual report of Zavarovalnica Maribor d.d. for 2005   Business report                                                                15
                                                                                                                                                                                                                                       5
                                                                                                                                                                                                           Management
                                                                                                                                                                                                           Board
                                                                                                                                                                                                           Report




A year of innovations and results                                     with personal and legal assistance, ‘Modri kasko’ with the        School, Manual for pregnant women and mothers etc.) but            In 2005 we witnessed some turbulence in the insurance busi-
                                                                      options Mini, Delni, Fleksi, Polni and Super polni, unit-linked   also through responsible conduct vis-à-vis the environment         ness related to additional health insurances not marketed by
Just as we said that 2004 was a year of catastrophes that             life insurance Prizma FlexPension with guaranteed principal       (the ‘Zoe Green Map’ project, recycling etc.).                     ZM. Unfortunately, the expected mergers within the scope of
we hope to never have to relive, it can be claimed that 2005          and guaranteed profit – represent a completely new range for                                                                          the financial pillar did not take place, although we expect an
was a favourable year for Zavarovalnica Maribor. Unaudited            the Slovenian market. These insurance products are tailored       At the same time, we are trying to adequately control costs. It    epilogue in 2006 in addition to some further changes that are
pre-tax profit for 2005 totalled SIT 3.78 billion, which means         to the needs of our customers. We believe that the future         seems we succeeded here in 2005 as our costs were below            to be introduced because of the amended Insurance Act.
SIT 2.57 billion of net profit. We shall allocate additional SIT 1.5   of the insurance business lies in an adapted, segmented           the planned level and also below the growth in income. The
billion to the accounts of our life insurance policyholders. This     and target-oriented range that will satisfy the consumer, our     claims were also below the plan – both in terms of number          We entered the EU and survived. We are soon about to face
shows the results of many years of our efforts since no other         insurance customer. Our focus has ultimately been redirected      and volume. We collected more premiums than planned. Asset         another big challenge, namely the introduction of the euro,
comparable company can boast similar profits. We worked                from technology to the development of such products and           management was also better than expected. 2005 was a real          for which ZM has been preparing itself since the beginning
on improving our quality, restructuring our portfolio, covering       services that will satisfy the expectations of our customers.     success. It will not be easy to repeat it but the entire ZM team   of 2005.
the loss brought forward from previous years as a result of           We regard them as our partners too.                               will try to come as close as possible to doing that.
statutory provisions on capital adequacy. Premiums written                                                                                                                                                 These days, changes are the
totalled SIT 45.1 billion (or 7% more than in 2004) and paid          We were therefore the first and remain the only company to         We know that we have excellent individuals who work in             only constant. We, the ZM team,
out claims were SIT 27.1 billion (a drop of 7.1% over 2004).          have developed the service ‘Cash on hand’ i.e. the immedi-        successful teams. The HR policy we adopted is being imple-         are ready for them!
Therefore, we look to the future with great confidence.                ate payment of claims arising from car accident injuries. We      mented. We are, on one hand, raising the level of expertise
                                                                      were the first to offer claim reports for non-life insurance       of all those in the various positions and education levels         Drago Cotar,
In 2005 we also strived to enhance our partner relationships          over the Internet. Claims can also be reported on the free        while, on the other hand, this is reflected in the streamlining     President of the
– the Dnevnik publishing house, the Diners and Engrotuš               phone number 080 19 20. We have been monitoring cus-              of work processes. Consequently, because of the improved           Management Board of ZM
companies etc. We are linking up with reputable and suc-              tomer satisfaction levels for many years through surveys          productivity there is no need for new employment. In 2005, ZM
cessful companies that boast excellent teams and results.             and research and the results have been used to improve            introduced interviews with its employees with two objectives       Srečko Čebron,
We at Zavarovalnica Maribor are perfectly aware that these            our working processes. We strive to be socially responsible       in mind: the development and planning of individual careers        Deputy President of the
two go hand in hand.                                                  not only by way of sponsorship (Gazelles, ŠKL - Secondary         and the achievement of the business policy and results of          Management Board
                                                                      Schools Basketball League, HDD Zavarovalnica Maribor              Zavarovalnica Maribor. We are aware that these two are
We are therefore especially proud of the fact that our innova-        Olimpija, the NK Maribor Pivovarna Laško football team, the       connected and therefore use other methods for achieving            Srečko Čarni,
tive approach to the development of insurance services in             ‘Borštnikovo srečanje’ festival, Festival Lent, the ‘Golden       them both – BSC indicators, education system, focus groups,        Member of the
terms of both claims settlement and the provision of insurance        Fox’ world ski cup, SNG Maribor, the ‘Glasbeni september’         feedback loops and, of course, research and analyses. The          Management Board
products has enabled us to offer many new products and                festival etc.), donations (companies employing the disabled,      consensus achieved with the trade unions regarding amend-
services to the market and we dare to claim we have become            Ozara, culture, education etc.) and prevention (Council for       ments to the collective agreement is an additional motive for      Mag. Darko Tolar,
the market leaders. The product OPA! – non-life insurance             Prevention and Education in Road Traffic, Safe Bike Ride to        improved engagement and motivation.                                Member of the Management Board



16                                                                           Annual report of Zavarovalnica Maribor d.d. for 2005       Business report                                                                                                             17
                                                                                                                                                                                            6
      Report on the work    The Supervisory Board of ZM d.d. started the 2005 business
                            year with the following members:
                                                                                              In 2005, the Supervisory Board held seven regular meetings
                                                                                              and one extraordinary (constitutive) meeting and, in carry-
                                                                                                                                                               • it also discussed the report on the disclosure of the
                                                                                                                                                                 participation of ZM d.d. employees in the company’s capital

of the Supervisory Board    1. predstavniki delničarjev:
                                                                                              ing out its regulatory and statutory authorisations, it keenly
                                                                                              monitored the management of the company’s operations
                                                                                                                                                                 and the different business interests of insurance agencies
                                                                                                                                                                 and insurance agents.

               of ZM d.d.   Zvonko Ivanušič, Chairman
                            (representative of the shareholder Sava Reinsurance Com-
                                                                                              and took care of its compliance and efficiency, including in
                                                                                              the following areas:                                               3. the human resources area:
                            pany d.d.)                                                                                                                         • the Supervisory Board monitored the ZM d.d. staffing policy,
                            Drago Pišek, Vice-Chairman,                                       1. supervision of the management and                               approved the report on recruitment activities in 2005, and
                            (representative of the shareholder Nova KBM d.d.)                 compliance of the company’s operations:                            passed the guidelines for the ZM staffing schedule for
                            Borut Jezeršek, Member                                          • in accordance with the forecast operations of ZM d.d. in the       2006;
                            (representative of the shareholder Sava Reinsurance Com-          2002-2011 period it adopted the annual business plan for         • it adopted the resolution on the consensual termination of
                            pany d.d.)                                                        2005 and the plan of BSC (Balanced Scorecard) controlling          an employment contract with a member of the Management
                            Matjaž Kovačič, Member                                            in ZM d.d. for 2005 and, at the end of the business year, also     Board and appointed the deputy president of the company’s
                            (representative of the shareholder Nova KBM d.d.)                 approved the guidelines regarding the plan for 2006;               Management Board;
                                                                                            • the members discussed the situation in the area of life          • it drafted proposals for the General Meeting of Shareholders
                            2. predstavnika delavcev:                                         insurance, analysed the causes of the reduced market share         of ZM d.d. regarding the appointment of new members of
                            Edi Kosi, Member                                                  in these insurance products and laid down the starting points      the Supervisory Board of ZM d.d. for the new term of office;
                            (representative of ZM d.d. employees – president of the SSS       for preparing the programme of measures aimed at increasing        and
                            trade union organisation of ZM)                                   the portfolio of life insurance products and their marketing;    • at its extraordinary (constituent) meeting held on 28 June
                            Branko Tekmec (representative of ZM d.d. employees              • on a regular basis, the Supervisory Board reviewed the monthly     2005 the members elected the chairman and vice-chairman
                            – president of ZM workers’ council).                              reports on ZM business operations prepared by ZM expert            of the company’s Supervisory Board.
                                                                                              services (in the form of comparative data for the same period
                            On the basis of a resolution passed by the General Meeting of     over the previous year) for the following:                         4. organisation of the zm d.d.:
                            Shareholders of ZM d.d. on 28 June 2005 on the appointment      - total gross premiums and gross premiums written by individual    • considering the personnel changes to the company’s
                            of members of the Supervisory Board of ZM d.d. for the new        branch offices;                                                     Management Board, the Supervisory Board defined the
                            4-year term of office starting on 28 June 2005, the composi-     - amounts of claims and/or indemnities settled – in total and        areas of competence of the president and members of the
                            tion of the Supervisory Board was the following:                  by individual branch offices; and                                   company’s Management Board; and
                            Zvonko Ivanušič, Chairman                                       - operating expenses;                                              • it also approved the Management Board report on the setting
                            (shareholder representative)                                    • it discussed and adopted the Annual Report compiled by             up of the controlling system in ZM d.d. and the controlling
                            Nataša Prah, Member                                               the Management Board for 2004 and expressed its opinion            report for 2004.
                            (shareholder representative                                       on both the Report and the opinion on the certified auditor’s
                            Manja Skernišak, Member                                           report for 2004 as well as drafted proposals for and convened
                            (shareholder representative)                                      the regular General Meeting of ZM d.d. shareholders;               5. statutory, legal and technical area:
                            Matjaž Kovačič, Member                                          • it discussed periodic accounting statements;                     • the Supervisory Board discussed and adopted the information
                            (shareholder representative)                                    • it discussed the interim reports of the certified auditor BDO       from the ZM d.d. expert services on implementation of the
                            Edi Kosi, Member                                                  - EOS Revizija d.o.o., Ljubljana, especially the part of their     Order of the Insurance Supervision Agency on the elimination
                            (representative of ZM d.d. employees – president of the SSS       report to the Management Board regarding the auditing of           of violations (Order dated 17 March 2004); and
                            trade union organisation of ZM)                                   the final accounting statements.                                  • it also adopted the programme of measures and the marketing
                            Branko Tekmec                                                                                                                        of life insurance products by ZM d.d.
                            (representative of ZM d.d. employees – president of ZM            2. internal audit activities:
                            workers’ council).                                              • the Supervisory Board adopted the report on auditing in 2004
                                                                                              and reviewed and approved the action plan of the Internal
                                                                                              Audit for 2005;                                                    Zvonko Ivanušič, BSEc
                                                                                            • it reviewed and approved quarterly reports of the Internal         Chairman of the Supervisory Board
                                                                                              Audit for the year 2005; and                                       of Zavarovalnica Maribor d.d.


18                                Annual report of Zavarovalnica Maribor d.d. for 2005        Business report                                                                                                             19
                                                                                                                                         7
                 Events that                ... in the field of recruitment:
                                            • on 1 January, the systemic procedure ‘Employee development’

                    marked                      entered into force – a motivational form adopted by the Management
                                                Board in 2004;

                       2005                 • on 1 January, Stanko Petek was appointed Head of Non-life
                                                Insurance Sales Department and Evgen Likl Head of Life Insurance
                                                Sales Department; these are newly-founded departments within the
                                    2005,       Marketing Sector;
     a year of many events and changes...   • on 1 December, Boris Presker was appointed Head of the Internal
        ... with some also concerning ZM:       Audit Department;
                                            • Mitja Mejač resigned from his position on the Management Board
                                                on 31 May;
                                            • on 1 December, Marko Klemenčič became deputy executive




                                                                                                                                         8
                                                manager of the Marketing Sector, and Tomislav Ćaćić became
                                                acting executive manager of the Life Insurance Technology Sector
                                                for a period of one year; and
                                            • as at 31 December, the company had 844 employees, of whom
                                                288 were agents and 616 internal staff.


                                            ... in the field of communication and innovation:
                                            • completion of the project of preparing the website for the employees
                                                (intrAnet);
                                            • ZM obtained authorisation from the Insurance Supervision Agency
                                                to perform insurance operations in Austria, where it mostly plans
                                                to market life insurance;
                                            • it conferred cash and practical awards on students – winners of the
                                                project ‘Best papers on entrepreneurship in the 2003-2004 study
                                                year’;
                                            • i signed a sponsorship contract with the Slovenian national ski
                                                team member Aleš Gorza who took out the Prizma unit-linked life
                                                insurance with ZM;
                                            • the company distributed among its life insurance policy holders profit
                                                in the amount of SIT 1.7 billion, which was more than in 2003;
                                            • the 5th mountain run of ZM including international participation
                                                – also cash awards for the fastest runners this year;
                                            • a contract was signed with the Dnevnik newspaper company – ZM
                                                insures its readers and organises a raffle with attractive awards for
                                                the holders of Dnevnik American Express cards;
                                            • ZM and Lent Festival are also ‘hand in hand’ this year;
                                            • again, ZM was the golden sponsor of ‘Gazelles’ – the Slovenian
                                                Gazelle for 2005 was the company Engro Tuš from Celje;
                                            • a subsidiary company ZM Finada was established in Ptuj which will
                                                market life insurance products; and
                                            • ZM again sponsored the 40th ‘Borštnikovo srečanje’ festival, the
                                                annual Slovenian theatre festival.

                                            • New insurance products offered to the market:
                                            - the ‘No points’ insurance product which covers the costs of re-
                                              obtaining a driver’s licence that has been taken away;
                                            - compensation of first damage so that policyholders can keep their
                                              discount on the premium even after causing a traffic accident;
                                            - ‘Modri kasko’ – a new programme, 5 different automobile insurance
                                              packages with several options and choices and a special ‘Miss
                                              Modri Kasko’ – the winner of the final Miss Modri Kasko contest was
                                              Saskya Biderman from Zgornja Polskava who received a VW Polo
                                              from ZM together with the ‘Modri kasko’ insurance package.
                                            - OPA! – complete modernisation of non-life insurance products,
                                              ZM becomes the first in Slovenia to include personal and legal
                                              assistance in non-life insurance; and
                                            - Prizma Junior – unit-linked life insurance and an extra advantage for
                                              our youngest customers. Upon taking out Prizma Junior insurance,
                                              ZM will add free accident insurance this year!



           Events after                       The Panel of the Insurance Supervision Agency issued a
                                              decision on 16 March 2006 establishing that in February

     the balance-sheet                        2006 Zavarovalnica Maribor d.d. took over the entire portfolio
                                              of life insurance products from Krekova zavarovalnica d.d.

                  date                        Ljubljana. The provisions and assets were transferred and a
                                              reinsurance contract was assigned.



20                                                   Annual report of Zavarovalnica Maribor d.d. for 2005              Business report   21
Report on the
operations of
Zavarovalnica
Maribor d.d.
for 2005




22              Annual report of Zavarovalnica Maribor d.d. for 2005   Business report   23
                                                                                                                                                                          9
     ZM
     Business
     Strategy




     9.1. Mission, vision and values                                     9.2. Basic goals for 2006 and beyond                                 In the field of claims settlement, the following is
                                                                                                                                              planned for 2006:
     Our mission is to be successful in all areas of our opera-          New products are planned for 2006, along with additional
     tions and to thereby meet the expectations of our owners,           benefits in the form of assistance to our policyholders and         • we will direct the work of our officers and improve claims
     employees and the company as a whole. We strive to make             changes to the current pricelists.                                   settlement by issuing additional instructions;
     profits and by doing this to ensure the further development                                                                             • additional training will be organised for those areas related
     of the company and diversification of our services. Further,         Mixed life insurance products                                        to claims settlement;
     we want to create entrepreneurial culture based on participa-       We plan to offer insurance to those aged between 50 and            • we will prepare meetings of life insurance liquidators and
     tion and which makes the employees feel good so they are            80 years, called ‘Modra jesen’. There will also be an option         show them some practical examples;
     happy in their jobs, which guarantees quality. A culture that       to take out joint insurance – for two people. Since this is        • we plan to visit our branch offices and offer expert help in
     promotes team work, enables participation in the operating          a specific segment of the population, the insurance pack-             order to assure fast and fair claims settlement, which will
     process as well as participation in realisation of the mission.     age will also include assistance that will be attractive to our      increase the satisfaction of our customers;
     The employees must be adequately rewarded and have the              policyholders.                                                     • a survey will be conducted with the aim of determining
     opportunity to be promoted.                                         Further, we plan to change the existing pricelist of ‘Zlata          satisfaction levels of our clients with our claim settlement
                                                                         naložba’ (Golden investment) by adding new risks.                    procedures and the findings will be used to improve the
     The noble idea that is the underlying principle of all ZM activi-                                                                        process of claim liquidation; and
     ties is to help people in misfortune and to alleviate the burden    In view of the fact that many policyholders decide on ad-          • we will continue to closely monitor the technical result of
     of loss, which is also expressed by our slogan: ‘Whatever           ditional accident insurance when taking out mixed life insur-        accident insurance operations.
     may happen, life goes on – with ‘ZM’ there to help                  ance products, the options will be further upgraded and new
     you out.’                                                           benefits will be offered to our customers.                            Automobile insurance
                                                                                                                                            • Further development of comprehensive automobile insurance
     Our corporate values are represented by care for the envi-          Unit-linked insurance products                                       and premium differentiation on the basis of the make and
     ronment in which we live and operate, care for our partners,        In 2006 we will further develop the special form of unit-linked      type of vehicle.
     our customers and our employees whose expert skills, experi-        insurance with a once-off premium payment. The pricelist           • Introduction of legal protection to automobile insurance.
     ence and capabilities are helping to improve the company’s          will be called Prizma DWS FlexPension Plus. This special           • Continuing and updating electronic ‘no-paper’ claims
     success and create its positive image in the environment.           product will only be available until a certain date with the         processing in all ZM business units.
     Our vision is to become a Slovenian insurance company               aim of attracting as many clients as possible by offering          • Optimisation of work processes with the aim of reducing
     offering the highest quality of services that is judged by the      special benefits.                                                     labour costs.
     satisfaction of our customers, and a company with loyal and         The success of the unit-linked insurance product Prizma            • Adapting the terms and conditions for the needs of introducing
     satisfied employees.                                                 Junior that we offered last year made us think of also in-           the euro as a new currency in Slovenia.
                                                                         troducing additional benefits upon the taking out of such
     Our mission is to achieve success in all areas of our opera-        insurance this year.                                                 In 2006 we will continue with the updating of new compre-
     tions. By doing this, we will meet the expectations of the ZM       At the end of the year we plan to introduce a family unit-linked     hensive automobile insurance products (Modri kasko) with
     owners, employees and society in general. We strive to make         insurance package.                                                   the aim of achieving a substantial comparative advantage
     profits and in so doing to ensure the further development of                                                                              in the market.
     the company and diversification of our services, and to ensure       Accident insurance
     appropriate salaries for all employees and opportunities for        In 2006 the product Personal Assistance will be attached to          Non-life insurance
     their personal growth and development.                              several types of accident insurance products.                      • Checking the perception of policyholders as regards the
                                                                         As always, we plan to organise a school campaign for mar-            new individual non-life insurance product OPA! and other
                                                                         keting accident insurance for children in 2006.                      non-life insurance products (customer satisfaction research,
                                                                         A lot of attention will be paid to collective accident insurance     field response from our sales staff, personal communication
                                                                         financial cards in 2006.                                              etc.).
                                                                         We will also prepare a new circular letter for accident insur-     • Adapting the terms and conditions for the needs of introducing
                                                                         ance (especially due to introduction of the euro).                   the euro as a new currency in Slovenia.
                                                                                                                                            • Continuing with the sales promotion campaigns.
                                                                                                                                            • We will introduce various motivation-raising activities for our
                                                                                                                                              sales personnel etc.

24   Annual report of Zavarovalnica Maribor d.d. for 2005                Business report                                                                                                                 25
                                                                                                                                                                                                               10
    Naložba/struktura portfelja na dan                              31. 12. 2004               31. 12. 2005
                                                                                                              Življenjska zavarovanja
                                                                                                                    plan 31. 12. 2005
                                                                                                                                           Overview of
    Vrednostni papirji RS                                                52,9 %                      54,4 %                     53,0 %     ZM operations
    Depoziti                                                             14,6 %                      12,5 %                     15,0 %     in 2005
    Dolžniški vrednostni papirji                                         21,4 %                      23,5 %                     21,0 %
    Lastniški vrednostni papirji                                         11,1 %                       9,6 %                     11,0 %
    Druga posojila                                                        0,0 %                       0,0 %                      0,0 %
    Skupaj                                                               100 %                       100 %                      100 %


                                                                                                          Premoženjska zavarovanja
    Naložba/struktura portfelja na dan                              31. 12. 2004               31. 12. 2005         plan 31. 12. 2005
    Vrednostni papirji RS                                                42,0 %                      39,2 %                     42,0 %
    Depoziti                                                             24,2 %                      23,1 %                     24,0 %
    Dolžniški vrednostni papirji                                         25,5 %                      31,6 %                     26,0 %
    Lastniški vrednostni papirji                                          5,5 %                       4,2 %                      5,0 %
    Druga posojila                                                        2,0 %                       1,4 %                      2,0 %
    Hipotekarna posojila                                                  0,8 %                       0,4 %                      1,0 %
    Skupaj                                                               100 %                       100 %                      100 %




    Life insurance                                                       Non-life insurance                                                                                                                    Uresničevanje naložbene politike

    In the area of life insurance, the plan set for 2005 was             Automobile insurance                                              to the competitors’ products. This improved product was             Life insurance
    achieved. We recorded a significant increase in sales of              The plan for 2005 was also achieved in the field of automobile     launched in June when we also started with a one-month              In the last quarter, the share of government bonds in the
    unit-linked life insurance products (PRIZMA, PRIZMA junior           insurance.                                                        promotion campaign. This considerably improved our visibility       company’s portfolio was reduced and will exceed the share
    and PRIZMA FlexPension). A decrease was noticed in sales             In the field of TPL insurance, 94% of the plan was achieved.       in the Slovenian market.                                            planned for the end of the year by slightly more than one
    of classic mixed-type life insurance products which is in line       The number of insurance policies grew over the previous                                                                               percentage point. The share of deposits fell by 1.4 percentage
    with the market trends.                                              year.                                                             Industrial property insurance                                       point in the last quarter while the share of non-government
                                                                         Comprehensive automobile insurance: growth was also re-           Growth was recorded compared to the previous year and               bonds grew by 2.5 percentage points. On average, the
    Accident insurance                                                   corded in comprehensive automobile insurance in terms of the      the 2005 plan was exceeded in this area.                            return of bank deposits with FX clause is still lower than that
    There was a drop in collected premiums over the previ-               number of insurance policies sold compared to the previous                                                                            of comparable debt securities which is why there were no
    ous year; nevertheless, we managed to carry out the sales            year, which meant that the plan was exceeded.                     Business property insurance (PPZ)                                   long-term investments in this form of investment policy even
    promotion action of accident insurance coverage for school-          It can be said, in general, that 2005 was a successful year for   In 2005, we recorded real growth in this segment in premium         though some of the contracts fell due.
    children.                                                            sales of comprehensive automobile insurance policies.             terms and thus exceeded the plan. We plan to upgrade the
    The following activities were carried out in the area of accident    A new comprehensive automobile insurance product was              product this year although it has already proven to be one          The share of equity securities has not changed considerably
    insurance in 2005:                                                   launched – ‘Modri kasko’, which impacted on the results           of the best in the market. Some new risks will be added to          over the previous quarter.
-   we developed a new product called Personal Assistance                of the second half of the year and is expected to boost this      the product.
    which is currently marketed together with individual non-life        year’s results.                                                   In 2006 we plan to co-operate with various sales centres in         Non-life insurance
    insurance (OPA);                                                                                                                       order to promote our products. We also plan some presenta-          The share of investments in government securities rose by
-   further, we designed a new product – collective accident             Personal property insurance                                       tions at various fairs at which we intend to give priority to the   1.4 percentage point. Following the release of short-term time
    insurance of people;                                                 This category includes individual non-life insurance (IPZ         presentation of a specific product – depending on the topic          deposits earmarked for covering current liabilities, the share
-   we revised the pricelist for the accident insurance of               – OPA!) concluded by our field sales personnel, especially in      of the fair itself (OPA, Kasko or PPZ products).                    of deposits dropped by more than 6 percentage points. The
    people carrying out voluntary fire fighting and other rescue           the private sector. Compared to the previous year, growth                                                                             share of non-government debt securities grew by slightly over
    activities;                                                          was recorded in terms of both premiums and the number of                                                                              5 percentage points.
-   we successfully implemented the activity targeted at selling         OPA! policies in 2005.
    accident insurance to children, pupils and students; and                                                                                                                                                   The share of equity securities in the portfolio has not changed
-   we made a shift from concluding other accident insurance             The IPZ – OPA product was improved in 2005 by adding                                                                                  considerably. The shares of mortgage and other loans in the
    contracts (apart from group and collective accident insurance)       personal and legal assistance and increasing the sum insured                                                                          portfolio are still falling.
    to policies (which were previously provided by the agents).          against, so that its quality and price are now comparable


    26                                                                             Annual report of Zavarovalnica Maribor d.d. for 2005    Business report                                                                                                                27
     10.1. Market share developments                                        10.3. Performance analysis                                            10.4. Advantages and benefits                                        10.7. Retail business
                                                                                                                                                  by insurance class
     The ZM market share in the pie chart of the Slovenian insur-           Life insurance                                                                                                                            Our sales force working in the field, i.e. full-time agents, agen-
     ance industry in 2005 grew from 12.11% to 12.17%. In the               In 2005, life insurance operations generated a written gross          ZM is the second largest traditional insurance company in           cies and sole proprietors, is responsible for sales activities
     last five years the ZM market share was as is shown in the              premium amounting to SIT 11,030,012,421.                              the Slovenian market, which has a favourable effect on its          targeted at private individuals. Each has a direct superior
     table below (source: preliminary unofficial data from the Slo-                                                                                reputation and trust among customers. A widespread sales            responsible for taking care of the appropriate training of their
     venian Insurance Association (SIA) from collected statistical          This amount places ZM in second place among providers                 network over the whole country enables good coverage of             staff. If necessary, it is the head who, together with the sales
     reports ST-50).                                                        of life insurance in the Slovenian market. Life insurance con-        the entire Slovenian insurance market.                              agent, visits a customer to provide additional information
     The proportion of the ZM market share of non-life insurance            tracts are being sold through our full-time insurance agents,                                                                             concerning a certain insurance class.
     class in the last five years has been growing slightly but              agencies and independent brokers/sole proprietors, while              Life insurance
     steadily. In life insurance operations, which have recently been       we also founded three specialised agencies for marketing              An advantage of the ZM life insurance products is that they are
     blooming especially in the field of pension and unit-linked in-         life insurance in 2005. Some are also sold by business unit           familiar to Slovenian customers. All products, apart from life
     surance products, the company’s share is falling. Their share          headquarters, representative offices and external sales points.        insurance, offer additional accident insurance. Zlata naložba       10.9. Sales promotion activities
     dropped from 73% to 70% in 2005 but still represents SIT               Across the entire Slovenian market the same sales channels            (Golden investment) and Prizma (Prism) life insurance with
     77.5 billion of annual premium of the total of SIT 111 billion         are used for mixed life insurance as well as unit-linked insur-       the additional coverage of severe illness are distinguished by      With our various instruments of sales promotion we try to
     generated by this insurance group. A more detailed table               ance contracts.                                                       having the widest range of illnesses covered. In the Prizma         boost interest in our services and especially to expand the
     presenting the Slovenian market of life insurance products             We also changed the terms and conditions for the buy-out              FlexPension life insurance, our partner Deutsche Bank guar-         range of sales in a very competitive insurance environment.
     in 2005 is as follows:                                                 of insurance coverage in which case we require the taking             antees customers the payment of the principal and profits            We are well aware that our customers must always come
                                                                            out of a new policy with the same premium amount, since               already earned.                                                     first and that with various actions we must make our existing
     The increase of market share in the group of life insurance            we noticed a trend of reduced insurance premiums. The two                                                                                 range of products and services more attractive to them and,
     products linked to mutual funds by more than one percentage            measures taken are already yielding positive results. Further,        Non-life insurance                                                  consequently, to promote our sales.
     point supports the investments since the company places a              we offered our policyholders a new form of unit-linked life in-       The non-life/property insurance products provided by ZM
     lot of effort and energy and time on marketing.                        surance – Prizma FlexPension which guarantees the principal           are easily recognisable in the entire Slovenian insurance           Life insurance operations:
                                                                            as well as profits already earned. We also launched in the             market. Their characteristic features are competitive insur-      • the national sales campaign PRIZMA 2015 was carried
                                                                            Slovenian market a new product for the youngest, namely               ance conditions and fast and fair claims settlement. In 2005,       out;
                                                                            the Prizma Junior unit-linked life insurance which can also           our customers were also offered a new product in the field         • we established three agencies which specialise in sales of
                                                                            act as a sort of scholarship insurance.                               of non-life insurance. With the conclusion of a non-life insur-     life insurance products (Finada, Providus, Vivus);
     10.2. Overview of insurance classes which                                                                                                    ance policy, customers are offered the insurance of legal         • we introduced life insurance sales promotion activities in large
     account for 95.1% of the entire portfolio                              We intentionally hire new agents whose most important                 protection and personal assistance and modernised non-life          trading centres; and
                                                                            tasks are sales of life insurance contracts. The most suc-            insurance called OPA!.                                            • we prepared new products we believe are attractive to our
     In ZM there are only six insurance classes which in 2005               cessful agents are awarded and receive prizes in the form                                                                                 customers, i.e. PRIZMA, PRIZMA junior and PRIZMA DWS
     represented 95.1% of the total ZM premium amount. These                of organised trips. Such awards are also granted to the best                                                                              which are still the most favourable for policyholders in terms
     are the following:                                                     agencies and sole proprietors.                                                                                                            of the cost-benefit ratio.
 •   accident insurance;                                                                                                                          10.5. Target groups by insurance class
 •   comprehensive automobile insurance;                                    Non-life insurance                                                                                                                        Automobile insurance operations:
 •   fire and natural forces insurance;                                      The gross premium collected in 2005 amounted to SIT                   ZM is a universal insurance company offering all classes          • we informed the public about new products introduced
 •   other damage to property insurance;                                    31,122,607,529.                                                       of insurance to all structures of its customers. If we take a       through the media, press conferences and jumbo posters;
 •   automobile liability insurance; and                                                                                                          closer look at them, we can see they are targeted at various        and
 •   life insurance.                                                        The sales of non-life insurance contracts of ZM are effected          customers, as follows:                                            • the ‘Miss Modri Kasko’ contest aimed at promoting individual
                                                                            through traditional sales channels, which include:                •   accident insurance products: intended for employees, pre-           comprehensive insurance packages and at the same time at
                                                                        •   a universal network of insurance agents;                              school, primary and secondary schoolchildren, students,             selecting Miss Modri Kasko.
                                                                        •   insurance sales personnel;                                            families and members of various associations and societies
                                                                        •   insurance agencies;                                                   etc.;                                                               Personal property insurance operations:
                                                                        •   insurance brokers;                                                •   fire and natural forces insurance products: targeted at           • the personal property insurance product was upgraded with
                                                                        •   business units;                                                       individual customers as well as companies and craftsmen.            new added values such as personal and legal assistance.
                                                                        •   representative offices; and                                            These insurance products are intended for all those who own         We are the only company in the Slovenian market to provide
                                                                        •   external sales points.                                                any kind of property;                                               these two added values;
                                                                                                                                              •   automobile insurance: intended for motor vehicle owners           • a promotion campaign was organised on TV and radio stations
                                                                            In 2005, there were 243 full-time agents on ZM’s payroll who          older than 18 years – after they obtain a driving licence or        in June;
                                                                            form part of the universal network of ZM insurance agents.            own a motor vehicle;                                              • we have in the past and will in the future offer maximum
                                                                                                                                              •   agricultural insurance products: intended for both individual       professional support for the sales of our products to all our
                                                                                                                                                  farm owners as well as co-operatives, combines and/or               contractual partners;
                                                                                                                                                  companies dealing with agricultural activities; and               • we have and will continue to perform local sales promotion
                                                                                                                                              •   life insurance products: we market products targeted both           campaigns in various fields;
                                                                                                                                                  at children from their birth and at adults including pensioners   • we offer help to our sales network through market research
                                                                                                                                                  as well as mixed life insurance and unit-linked insurance           activities and by providing information about our competitors
                                                                                                                                                  contracts. The most extensive range of products is targeted         and the ranges they offer; and
                                                                                                                                                  at the group of people from 25 to 60 years of age.                • we enable the use of new distribution channels (Internet, call
                                                                                                                                                                                                                      centres etc.)


                                                                                                                                                  10.6. Corporate business                                            Accident insurance operations:
                                                                                                                                                                                                                    • we successfully implemented the activity targeted at selling
                                                                                                                                                  Corporate operations are the responsibility of our sales per-       accident insurance to schoolchildren – by visiting schools
                                                                                                                                                  sonnel (agencies, sole proprietors/ entrepreneurs and/or            and kindergartens;
                                                                                                                                                  brokers) with the help of business administrators who advise      • we participated in the joint action of ŠKL and ZM which we
                                                                                                                                                  the sales personnel as well as the customers.                       also used to promote the company;
                                                                                                                                                                                                                    • we tried to raise awareness among the young about insurance
                                                                                                                                                                                                                      and ZM; and
                                                                                                                                                                                                                    • we organised the action ‘1000 children at the Golden Fox
                                                                                                                                                                                                                      (Zlata lisica) ski event’



28                                                                          Annual report of Zavarovalnica Maribor d.d. for 2005                  Business report                                                                                                                  29
                                                                                                                11
     Financial results   In 2005 ZM achieved positive financial results for both its non-
                         life and life insurance operations. This result is the sum total
                         of the technical result and the financial result. The technical
                         result of life insurance is negative, as usual, and is improved
                         by income from investment activities. For the first time this
                         year, the company recorded a positive technical result in the
                         group of non-life insurance which was further enhanced by
                         income from investment activities. The favourable trends are
                         reflected in the surplus of expected net results and, of course,
                         the considerably higher liability for corporate income tax.

                         For the first time in 2005, the technical result of non-life insur-
                         ance was positive. This was due to several factors such as, for
                         example, net income from premiums (index 112 over 2004)
                         and net expenses for claims (index 89). Besides the negative
                         effect of the reduced financial impact of investments (index
                         85), there is also the positive impact of operating costs which
                         lagged behind growth in premiums with an index of 105.

                         The impact of reduced indemnities and claims is also reflected
                         in the relative reduction in necessary provisions for outstand-
                         ing claims and in the decrease in the equalisation reserve for
                         non-expired risks.

                         The simple claims ratio in the field of non-life insurance ac-
                         counted for 62%, which is more favourable than in the previous
                         year (72%) and better than planned (58.5%). The relevant
                         claims result accounted for 56.1% and confirms the success
                         of our efforts in the field of claim recoursing and the efficiency
                         of reinsurance.


30                              Annual report of Zavarovalnica Maribor d.d. for 2005          Business report    31
Summary of the Income Statement compared to the business plan (in SIT thousand):


Items (in ’000 SIT)                                             Life             Non-life              In total            Planned
                                                          insurance            insurance                                   for 2005
Technical result                                          -1.896.673            1.756.135            -140.538            -2.447.096
Impact of investments in technical provisions              3.022.013            1.241.959           4.263.972            4.005.713
Other income and expenses                                     15.076             -353.226            -338.150               111.926
Income                                                   14.283.211           25.524.371          39.807.582            40.618.654
Expenses                                                 13.142.795          22.879.5032          36.022.298            38.948.111
Pre-tax profit                                              1.140.416            2.644.869           3.785.284            1.670.543
Corporate income tax                                         327.520              881.197           1.208.717               544.433
Net profit 2005                                              812.896            1.763.672           2.576.567             1.126.110


In terms of insurance classes, the company achieved the following financial results from its operations in 2005 (in SIT thousand):
                                                                                                       costs,
                                                      Income from         Expenses for              expenses     Gross profit
                                                         insurance           insurance          (-) and other or loss arising
     insurance class                                    operations          operations             income (+) from insurance
1    Accident insurance                                    3.327.742            1.390.055          -1.591.311              346.375
2    Voluntary health insurance                                      0                    0                   0                    0
3    Comprehensive automobile insurance                    5.697.911            3.871.009          -1.810.555                16.348
4    Comprehensive railway rolling stock insur-                      0                    0                   0                    0
5    Comprehensive aircraft insurance                         -28.669                4.834              -4.508              -38.011
6    Comprehensive vessel insurance                           23.553                 6.187              -4.121               13.246
7    Cargo insurance                                          68.945                 7.703             -20.527               40.714
8    Fire and natural forces insurance                     1.662.590              432.788            -814.432              415.369
9    Other damage to property insurance                    2.171.221            1.740.451            -821.675              -390.906
10 Automobile liability insurance                         11.420.342            5.691.699          -2.849.813            2.878.830
11 Aircraft liability insurance                                   2.700                399              -1.734                  567
12 Vessel liability insurance                                 10.995                    47              -7.767                3.182
13 Other liability insurance                                 675.164              598.336            -265.844              -189.016
14 Credit insurance                                          391.736              239.261            -432.095              -279.620
                                                                                                                                                                   �������������������������������������������
15 Suretyship                                                     6.875              1.500              -3.712                1.663
16 Financial losses insurance                                 55.449              105.728               26.064              -24.214                      ����                                                                       ����������������
17 Legal expenses                                             -13.190                   78             -20.239              -33.507
                                                                                                                                                         ����                                                                      ����������������
18 Assistance insurance                                       51.007                   278           -166.881              -116.152
     Total other insurance                               25.524.371           14.090.353          -8.789.150             2.644.869
                                                                                                                                                         ����                                                                     �����������������
19 Life insurance                                        14.283.211            6.685.999          -6.456.796             1.140.416
     TOTAL ZM d.d.                                      39.807.582           20.776.352         -15.245.945             3.785.284                        ����                                                                      ����������������


                                                                                                                                        �            �     �����     �����          ��           ����        ����   ����   ����    �����
The results established and presented for individual insurance        Nevertheless, the claims paid totalled SIT 4.8 billion and the
classes show losses were generated by other non-life insur-           replacement of expired policies with new ones impacted on
ance and other liability insurance. A loss was also recorded          the growth of mathematical provisions (index 125 over 2004).                                 ���������������������������������������
in credit insurance, where the so-called recoursing of “quick         The value of income from investment was 2% lower than in
loans” is only beginning. New products, such as insurance             2004 but still 14% above the plan, mainly due to dividends                                                                                                    ����������������
                                                                                                                                                         ����
against financial losses, legal expenses and other damages             and income generated through the sales of securities.
incurred by policyholders are not established well enough             The total technical effect of life insurance operations and the
and it is therefore still not possible to adequately adjust the       result are in accordance with the plan, and the profit accrued                      ����                                                                      ����������������
guarantees and at the same time study the policyholders.              to the account of life insurance policyholders in the amount
Data on operations in the area of life insurance show the fore-       of SIT 1.5 billion is satisfactory.                                                ����                                                                     �����������������
cast development of business categories: moderate growth              In 2005, corporate income tax was an important element of
of the total gross premium, a high index but insufficient mass         operations, especially in the part including the adjustment of
                                                                                                                                                         ����                                                                      ����������������
of collected insurance premiums in which the policyholders            receivables not recognised for tax purposes and prescribed
assume investment risks and fewer due old insurance poli-             by implementing acts and other expenses not recognised for
cies and consequently fewer claims than in the previous year.         tax purposes. The effective tax rate was 33%.                     �            �     �����     �����          ��           ����        ����   ����   ����    �����



32                                                                           Annual report of Zavarovalnica Maribor d.d. for 2005           Business report                                                                                            33
                                                                                                                                                                                                               12
                                                                                                                                                            120,0                   company’s assets

                                                                                                                                                            100,0

                                                                                                                                                            80,0                                                                 accruals and deferrals

                                                                                                                                                            60,0                                                                        various assets

                                                                                                                                                            40,0                                                                            receivables

                                                                                                                                                            20,0                                                                           investments


Financial position                                                                                                                                          in billion SIT
                                                                                                                                                                             2000      2001     2002        2003   2004   2005
                                                                                                                                                                                                                                           fixed assets

                                                                                                                                                            -20,0

The company’s stable financial position is reflected in the                     under the influence of a good claims result in which there was
expected assets/liabilities ratios. The two decisive categories               less need for additional provisions for outstanding claims.                   120,0                   company’s liabilities
are investments on the assets side with an 85% share in recent                The investments/provisions ratio is changing in favour of the
years, and growth which equals the growth of total assets.                    former, as the generated are temporarily in financial place-                   100,0                                                                accruals and deferrals
On the liabilities side, capital is growing faster than technical             ments. Liabilities are higher than in previous years because
provisions as a result of the positive operations in the last                 of the accounted but not yet paid corporate income tax. Still,                80,0                                                                         other liabilities
two years. The latter dropped by two percentage points, also                  receivables exceed liabilities by twice their value.
                                                                                                                                                            60,0                                                                                  bonds

Items (in million SIT)                             2000             2001               2002             2003            2004              2005              40,0                                                                         cost reserves
Assets                                            2.418            2.838              3.531            3.523           3.552             3.509
                                                                                                                                                            20,0                                                                   technical provisions
Investments                                      32.696           40.128             60.103          72.131           78.615            87.163
Receivables                                       5.516            4.593              5.466            5.997           8.887             9.268              in billion SIT                                                                        capital
                                                                                                                                                                             2000      2001     2002        2003   2004   2005
Cash and inventories                                277                 391             219              155               91              165
                                                                                                                                                            -20,0
Accrued costs and deferred revenues                 406                 553           1.188            1.568           1.787             1.993
ASSETS in total                                  41.313           48.503             70.507          83.374           92.933          102.099


Items (in million SIT)                             2000             2001               2002             2003            2004              2005
Capital                                           2.927            -2.728             6.462            9.683          13.412            15.444
Technical provisions                             34.709           48.393             57.432          66.418           72.258            77.177
Provisions for expenses                               73                 73             728              714              711              672
Bonds                                                  --                --           2.415            2.559           2.658             2.736
Other liabilities                                 1.260             1.630             2.191            2.685           2.646             4.873
Accrued costs and deferred revenues               2.344             1.135             1.277            1.315           1.259             1.197
                                                                                                                                                            120,0                   company’s assets
LIABILITIES in total                             41.313           48.503             70.505          83.374           92.933          102.099
                                                                                                                                                            100,0
Structural indicators                              2000             2001               2002             2003            2004              2005              80,0                                                                 accruals and deferrals
Investments in assets                               79%                 83%             85%             87%              85%              85%
                                                                                                                                                            60,0                                                                        various assets
Technical provisions in liabilities                 84%            100%                 81%             80%              78%              76%
                                                                                                                                                            40,0                                                                            receivables
Receivables/liabilities                              4,4                2,8              2,5              2,2             3,4               1,9
                                                                                                                                                            20,0                                                                           investments
Investments/provisions                              94%                 83%           105%             109%            109%              113%
                                                                                                                                                            in billion SIT                                                                 fixed assets
                                                                                                                                                                             2000      2001     2002        2003   2004   2005
In comparison to the previous year, the structure of the bal-                 The growth over the previous year was 46%. The total liability                -20,0
ance sheet items in assets did not change even by a whole                     for corporate income tax is included under the item of liabilities
percentage point. Investments, as the most important item,                    to the state, as the company was not obliged to pay these                                             company’s liabilities
                                                                                                                                                            120,0
increased by SIT 8.5 billon y/y (last year by SIT 6.7 billion), while         taxes in previous years.
total assets exceeded the limit of SIT 100 billion (reaching SIT                                                                                            100,0                                                                accruals and deferrals
102.1 billion) with an index of 109.9 (last year 111).                        The provisions in 2005 increased by SIT 4.9 billion, com-
                                                                              pared to a SIT 5.7 billion increase in the previous year. Since               80,0                                                                         other liabilities
In liabilities the share of capital is increasing on the account              outstanding receivables are recognised in the accounting
                                                                                                                                                            60,0                                                                                  bonds
of net technical provisions. The latter fell from 77.66% to                   statements as assets which can be used for establishing
75.59% last year, and the share of capital now accounts for                   the ratios between investments and provisions, we meet the                    40,0                                                                         cost reserves
15.13%. But due to the method of evaluating investments at                    requirements of the statutorily prescribed coverage.
fair value, 6.8% or SIT 6.9 billion of revaluation adjustments                                                                                              20,0                                                                   technical provisions
are also disclosed under capital. Liabilities to customers                    The most significant balance sheet growth was recorded in
comprise overpayments arising from premiums, liabilities                      investments and provisions for which the policyholders as-                    in billion SIT                                                                        capital
for losses and liabilities for expired life insurance policies not            sume the investment risk (Prizma – indices over 1000) which,                                   2000      2001     2002        2003   2004   2005
                                                                                                                                                            -20,0
paid out by 31 December.                                                      in terms of value, means over SIT 400 million.



34                                                                                   Annual report of Zavarovalnica Maribor d.d. for 2005          Business report                                                                                       35
                                                                                                                                                                                                                              13
13.1. Capital, capital adequacy and ensuring the minimum capital                                                                                     13.4. Currency risk

Minimum capital must be established and ensured separately            The improved situation was the result of the covered loss being                The statutory requirement of an 80% currency-clause bal-
for life insurance operations and non-life insurance operations.      brought forward from previous years, which is a deductible                     ance of investments and liabilities was fully complied with
In each quarter as well as at the end of the year, the company        item of available capital. Available capital also includes part                in 2005. For those investments that are not nominated in
fulfilled the statutory requirements regarding capital adequacy        of the net profit used as the company’s reserves, based on                      the same currency as liabilities, we did not use any financial
(KUS) with the following amounts of available capital compared        the resolution adopted by the Management Board and the                         instruments for insuring the risk on account of the currency
to the required minimum capital:                                      Supervisory Board of the company which also guarantees the                     clause, nor did we formulate provisions to cover possible
                                                                      achievement of the prescribed capital adequacy in 2006.                        losses from this.
                                                                                                                                                     The table below shows the structure of assets and liabilities
                                                                                                                                                     with regard to the nomination in tolars and euros in 2005.
                                                                            non-life insurance                       life insurance
Calculation items (in ’000 SIT)
                                                                       KUS P 2005 KUS P 2004 KUS P 2005                          KUS P 2004
                                                                                                                                                     insurance            nominated         nominated         items with
Available capital of the company                                         6.162.458          4.887.635          3.496.048            3.332.119
                                                                                                                                                     classes in total          in sit      in a foreign       a currency
Required minimum capital                                                 3.534.011          3.230.298          2.733.813            2.644.673                                                 currency            clause
Surplus of available capital                                             2.628.447          1.657.337             762.235             687.446
                                                                                                                                                     102.099.442         56.792.682           705.460        44.601.300       assets in total
Surplus in % of required capital                                              74,4%              51,3%              27,9%                26,0%
                                                                                                                                                     102.099.442         56.017.726            11.311        46.070.405       liabilities in total
Surplus index over the previous year                                             159                                    111



13.2. Reinsurance risk                                                Considering the fact that a thorough preliminary risk analysis                 13.5. Risk of interest rate changes
                                                                      is performed in all cases of non-quota share reinsurance
On the basis of the Decision on the method for calculating            together with efficient information processing performed                        The maturity of liabilities exceeds the maturity of investments
own shares by individual classes of insurance in the tables of        by the personnel of both companies, which is carried out                       which is why the insurance company’s investments in 2005
maximum coverage and establishing the highest probability of          before taking out an insurance policy, we are able to ensure                   were not exposed to the risk of refinancing but the risk of
loss with regard to individual risks underwritten, an insurance       the complete management of claim risks by means of our                         reinvestment. Therefore, a change in market interest rate,
undertaking is obliged, in compliance with the measures of            reinsurance policy.                                                            with the assumption of market evaluation, involves a change
risk management, to take appropriate measures to reinsure                                                                                            in the value of liabilities that is greater than the change in the
the underwritten risks.                                               For a minor part of the insurance contracts we have also taken                 value of the investment portfolio.
                                                                      out a reinsurance contract with the reinsurer Inter Partner                    In 2005, the company did not use financial instruments to
The reinsurance protection of non-life operations is arranged         Assistance (Axa assistance), while a long-term co-insurance                    immunise itself against interest rate risk and did not form
with Pozavarovalnica Sava. The quota share reinsurance ac-            contract has been concluded with the international insurance                   reserves for covering possible losses from interest rate risks.
counted for 80% of total reinsured amount. If we leave out            company ARAG for the co-insurance of legal protection, while                   The company managed the investment portfolio so that the
automobile insurance in which the quota share of reinsurance          the remaining co-insurance contracts are a consequence of                      gap between the maturity of liabilities and investments was
is sufficient for full risk management because of the number           individual business agreements and joint ventures.                             reduced as far as allowed by the range of financial instruments
and dispersion of insurance policies all over the country, as                                                                                        offered in the financial market.
much as 48.3% of the reinsurance premium was intended                 Life insurance contracts are reinsured with Pozavarovalnica
for other forms in 2005 (surplus, non-proportional excess of          Sava d.d. There are only a few insurance contracts that are
loss), facultative, surplus-quota share), which is much more          subject to reinsurance because of the amount of the sum                        13.6. Other market risks
than in the year before (36.8%). The fact that 53.1% of claims        insured against. Only 0.08% of the gross premium is rein-
and indemnities (without automobile insurance) recovered              sured while the remaining risk arising from such contracts is                  Zavarovalnica Maribor reduced the credit risk of individual
from the reinsurance company are due to disclosed forms of            covered by the company itself from mathematical provisions                     issuers so that it appropriately dispersed the investment
reinsurance coverage proves the efficiency of risk hedging.            and provisions for outstanding claims.                                         portfolio, for which the company used both legislative regula-
                                                                                                                                                     tions and internally determined limitations for individual types
                                                                                                                                                     of investments.
13.3. Investment risk                                                 not assume any investment risk, is an important parameter
                                                                      of investment activities.                                                      Because of the statutory requirement for the localisation of
In 2005, investment activities were aimed at providing for                                                                                           investments applicable up until the latest major amendment
the adequate safety, profitability and liquidity of portfolios.        Zavarovalnica Maribor invested funds arising from technical                    to the Insurance Act, there is still a large amount of securities
The basic principle of investment portfolio management                provisions in such a way that all statutory restrictions in rela-              of Slovenian issuers in the company’s investment portfolios.
is prudence which is reflected in a considerable share of              tion to investments in individual investment classes were fully                Therefore, the issuer country risk is somewhat less dispersed.
high-quality securities and a relatively small share of equity        complied with. Zavarovalnica Maribor also met the statutory                    In 2005, a minor part of investments was channelled abroad
securities. Together with the assurance of the adequate               requirements for the coverage of technical provisions with                     while we plan a more significant increase in investments in
safety of the investment portfolio, the profitability of such a        investments, where we took into consideration the items that                   securities issued by foreign issuers in 2006.
portfolio, and especially the assets covering mathematical            are accounted among investment items according to the
provisions (life insurance) in which the persons insured do           decision of the Insurance Supervision Agency.
                                                                                                                                                     13.7. Liquidity risk
                                                                                                                             in thousand SIT
                                                                                                                                                     Zavarovalnica Maribor carries out its investment activities in

Comparative items
                                                Assets covering Assets covering technical
                                         technical provisions (LI)      provisions (LI NT)
                                                                                                                     Assets covering
                                                                                                               mathematical provisions
                                                                                                                                                     such a way that, at all times, it is able to fulfil all its liabilities
                                                                                                                                                     in due time. It has therefore developed an efficient liquidity
                                                                                                                                                                                                                                                           Risk
Total technical provisions of life insurance            48.849.222                            410.056                             27.917.843         risk management system within the scope of which it plans
                                                                                                                                                     cash flows for daily, weekly, monthly, quarterly and annual
                                                                                                                                                                                                                                                     management
total investments*                                      54.969.687                            424.408                             31.302.483         periods.
Surplus/deficit                                            6.120.465                             14.352                              3.384.640        Pursuant to the Insurance Act and the secondary legislation,
                                                                                                                                                     every week the company calculates the prescribed liquidity
long-term investments                                       97,30 %                           85,00 %                                 74,70 %        ratio which was considerably above the minimum require-
short-term investments                                       2,70 %                           15,00 %                                 25,30 %        ment throughout 2005.
                                                                            * without a special revaluation adjustment of capital from investments


36                                                                           Annual report of Zavarovalnica Maribor d.d. for 2005                    Business report                                                                                          37
                                                                                                                                                                                                         14
                                                                                                                                                        0.83%


                                                                                                                                                            2.60% 0.80%
60%                                                  assets covering mathematical provisions (life insurance)                                      0.17%

50%                                                                                                             RS, BS securities       45.64%

40%                                                                                                                debt securities

30%                                                                                                                bank deposits

20%                                                                                                              equity securities

10%




                                                                                                                                                                                                         15
0%
                                                                                                                                                                                          46.96%

40%                                                  assets covering technical provisions (non-life insurance)

35%                                                                                                             RS, BS securities                                   0.83%
30%                                                                                                                debt securities         Nova KBM d.d.
25%                                                                                                                bank deposits           Sava-RE d.d.
20%                                                                                                              equity securities
                                                                                                                                           Other legal entities
15%                                                                                                                   other loans
                                                                                                                                           Other neutral persons
10%                                                                                                               mortgage loans
                                                                                                                                           Probanka d.d.
5%
                                                                                                                                           Perutnina Ptuj d.d.
0%




Investment policy and structure of investments                                                                                        Shareholders’ equity and
as at 31 December 2005                                                                                                                shareholders
Life insurance                                                     Other insurance classes                                            The amount of share capital did not change in 2005 and thus
                                                                                                                                      equalled SIT 6,812,050,000. The shares have been entered
ZM’s investment structure in 2005 was similar to that of 2004.     The share of government bonds fell by almost 3 percentage          in the Central Securities Clearing Corporation (KDD) register,
Less than 54% of all assets of the life insurance portfolio were   points in 2005 and exceeded 39% of total assets placed while       but are not listed on the Stock Exchange.
invested in government debt securities, and more than 23%          the share of non-government bonds grew by 6 percentage
of assets were invested in non-government bonds.                   points compared to the previous year and exceeded 31% of all       Their nominal value is SIT 1,000. The achieved unaudited
The amounts of assets invested in bank deposits in 2005            placed assets. The share of investments in bank deposits fell      book value as at 31 December 2005, including the capital
again slightly decreased. Therefore, the share of total invest-    by a good percentage point, reaching 23% of total assets.          revaluation adjustment arising from investments, amounted
ments in bank deposits again deviated from the maximum                                                                                to SIT 2,267.22 (as at 31.12.2004 it amounted to 1,968.96
prescribed by law, accounting for slightly over 12% of all         The share of investments in equity securities fell slightly as a   SIT). If we exclude the capital revaluation adjustment, the book
invested assets.                                                   result of the sale of those securities and accounted for more      value of the share exceeded its nominal value as a result of
                                                                   than 4% of the portfolio.                                          the covered loss brought forward from previous periods, and
The share of investments in equity securities rose by slightly                                                                        totalled SIT 1,244.41.
over one percentage point because of their sales.                  Investments in mortgage loans and other loans made be-
                                                                   fore 13 November 1994 were reduced by slightly under 1             The ownership structure is presented in the pie chart below.
                                                                   percentage point, and their total share thus reached 1.8%          Only in two minor segments was the change of owners made
                                                                   of the total portfolio.                                            in favour of natural persons (0.02%).

                                                                                                                                      The company does not have a fund of its own shares and in
                                                                                                                                      2005 ZM itself did not effect any trade with them. Two members
                                                                                                                                      of the Management Board are shareholders, but they only hold
                                                                                                                                      0.12% of the capital.



38                                                                        Annual report of Zavarovalnica Maribor d.d. for 2005        Business report                                                     39
  Investments

  Investments in business facilities in 2005
  The planned value of investments in 2005 was SIT 481,976,000
  while the actually achieved value was SIT 239,054,000. Some of
  the assets used for investment maintenance were drawn from the
  investment fund established in previous years. The main reasons for
  such low achievement of the planned level of investments in material
  assets originated from the extremely low new investments of assets,
  as we did not start with the comprehensive modernisation of the
  central headquarters at Cankarjeva 3 in 2005, and did not invest in
  the purchase of new computer equipment as planned.
  As regards modernisation of the central office building, we carried
  out the integration of the business, operational and technological
  connection of individual organisational units, the movement of a
  large number of employees and consequently the urgent invest-
  ment maintenance works.

  Following the adopted plan, we completely modernised the busi-
                                                                                                                                                   16
  ness premises in Velenje, Radlje ob Dravi and Ljutomer. Also, we
  finally obtained the entire technical and other documentation from
  the investor in the construction of new business premises in Idrija
  and thus ensured the basis for the entry of that facility in the land
  register.

  We also carried out most of the modernisation works regarding the
  business premises in Lendava, Ptuj and Slovenske Konjice.
  In accordance with the development strategy of individual ZM re-
  gional centres and taking the economic indicators into account, we
  leased the business premises in Črnomelj, the post offices in Škofja
  Loka and Bovec, Radovljica, Jurovski dol, Gorišnica and Muta.
  We also concluded a lease agreement for additional business
  premises of the Celje branch unit. We needed these new premises
  because of the increase in the number of employees, integration
  of contractual agencies and arrangement of the archives for claim
  documentation.
  The necessary office and other technical equipment was purchased
  for the leased and modernised premises.

  Sales of investment property
  In 2005 we also continued with activities of selling investment prop-
  erty not used for the needs of performing the insurance activity.
  We sold some of our business premises, i.e. those at Vurnikova 2,
  Ljubljana and part of the office and apartment building in Vodriž,
  Šmartno pri Slovenj Gradcu.
  We also sold 12 apartments, most of them in the Koroško re-
  gion.

  Investments plan for 2006
  The assets planned for investments in 2006 will be allocated as
  follows:
- more assets will be invested in modernisation of the central office
  building and the previously compiled project documentation;
- increased investment will be made in the purchase and renewal of
  various licences and software equipment; and
- urgent replacement of computer equipment in certain organisational
  units.

  In 2006 we will regularly compare the achievement of the planned
  level of investments by period with certain economic indicators:
  growth in the number of employees, achievement of premiums
  and claims, implementation of the plan of operating expenses, the
  structure of investments in total income and in comparison with the
  operating costs and, on these bases, by the adjustment of invest-
  ment dynamics aimed at ensuring synergetic effects.



   40                                                                     Annual report of Zavarovalnica Maribor d.d. for 2005   Business report    41
                                                                                                                                                                                                                        17
17.1. Research
                                                                             Activities in research                                        17.2 Development

ZM in the eyes of its employees
In 2005, our primary concern was developing and maintaining                   & development and                                            The following was achieved in 2005...
                                                                                                                                           ... in life insurance operations:
the positive company spirit in ZM, and achieving the satisfac-
tion of employees.                                                                     innovations                                     •
                                                                                                                                       •
                                                                                                                                           Prizma, unit-linked life insurance was upgraded;
                                                                                                                                           a new insurance product for children – Prizma Junior – was introduced;
                                                                                                                                       •   a new unit-linked insurance product with guarantees – Prizma DWS
At the beginning of September 2005 we started partici-                                                                                     FlexPension – was introduced; and
pating in the national project of researching into the                                                                                 •   new funds Energy and Bric were added to the Prizma unit-linked insurance
organisational climate and satisfaction in Slovenian                                                                                       product.
organisations – SiOK. This is a four-year old project carried
out by the Chamber of Commerce and Industry of Slovenia                                                                                  ... in accident insurance operations:
upon the initiative of certain recognised Slovenian companies.                                                                         • a new product called Personal Assistance was developed which is currently
The project shall be designed so as to enable a comparison         ZM in the eyes of the business community                              being marketed together with individual non-life insurance (OPA);
between the companies in Slovenia. Identical questionnaires        Among the 200 companies included in the Reputation 2005             • a new product – collective accident insurance of persons was designed;
are filled in by all participating companies.                       survey (Kline&Kline 2005), ZM was placed in the group of            • we revised the pricelist for the accident insurance of persons carrying out
                                                                   companies with average recognisability and an above-aver-             voluntary fire fighting and other rescue activities;
It was the first time that ZM participated in the project. We       age reputation in Slovenia by the business community. In the        • we successfully implemented the activity targeted at selling accident
invited 120 employees to participate of which 60.8% re-            area of the “insurance industry”, ZM was assessed as above-           insurance to children, pupils and students; and
sponded to the survey. In the report received, ZM was              average in terms of its recognisability and slightly above-         • we made a shift from concluding other accident insurance contracts (apart
compared to the SiOK average of 2004. What will be the             average in terms of its reputation compared to competitive            from group and collective accident insurance) to policies (which were
most interesting for us is the comparison of the scope of          companies. If compared to the Reputation 2004 survey, the             previously provided by the agents).
activities among insurance companies.                              relative recognisability of ZM dropped slightly. The analysis of
In general, the employees participating in the survey assessed     trends showed that ZM has been recording an above-average             ... in accident insurance claims settlement operations:
the organisational climate as good. Loyalty to the organi-         assessment of recognisability in comparison with other insur-       • additional instructions were prepared for the work of the personnel working
sation, innovation and initiative, attitude to quality,            ance companies ever since 1996. It moved from last place              in claims settlement with the aim of improving the quality of liquidation;
motivation, involvement and organisation were ranked               among the five insurance companies (Triglav, ZM, Adriatic,           • we organised additional training and thereby enabled the staff to obtain
the highest. These were followed by the categories of Expert       Slovenica, Tilia) in 1996 to the second position in 2004 in           additional knowledge and skills in the area of resolving conflict situations
skills and training, Knowing the mission, vision and goals,        terms of recognisability and was ranked third in 2005.                with clients;
Management and Internal relationships. The lowest grade                                                                                • we harmonised the processes of claims settlement in all business units;
was given by the employees to the categories of Internal           In terms of its recognisability in the business community,          • by introducing additional controls of claim documents we focused on
communication and information, Remuneration and Career             ZM ranked 89th in 2004 and moved up 10 places to 79th                 improving the technical result of accident insurance operations; and
development.                                                       position in 2005.                                                   • we established individual deficiencies and discrepancies by means of a survey
Most categories were above the SiOK average for 2004.                                                                                    carried out among those employees working on claims settlement.
Slightly under the average was the category Attitude to quality    Compared to last year’s results, ZM’s reputation grew slightly
and Career development. The category Internal relationships        (it ranks 60th with only one insurance company ahead of it,             ... in non-life insurance operations:
equalled the SiOK average.                                         in terms of reputation). In terms of reputation, ZM occupied            Automobile insurance:
                                                                   the last, fourth position in 1996 (among five insurance com-         •   we modernised and considerably supplemented the conditions and the
We have thus conducted two different surveys in the last           panies), while it rose to second place among eight insurance            pricelist of comprehensive insurance as well as developed the packages
three years in which we asked the employees about their            companies in 2005. Information sent to the environment by               adapted specifically to the needs of our customers “Modri kasko”;
(dis)satisfaction with and loyalty to the company – the Hewitt     the company’s management is the principal source used for           •   we developed the product called “Compensation of first damage”;
Associates Survey in 2003 and the SiOK organisational              determining the reputation of ZM. The research showed that          •   we developed the general terms and conditions for the insurance covering
climate survey in 2005.                                            the quality of the range of products and services offered is            the expenses of mechanical and electrical car repairs; and
Besides that, we carried out another short research of             crucial for the company’s reputation.                               •   because of the new regulations stipulated by the Code of Obligations and
employee satisfaction in 2005 through our internal                                                                                         the Insurance Act, we aligned all the terms and conditions of automobile
newsletter “Pri nas Zmleto” which celebrated its 10th                                                                                      insurance.
anniversary last year. We wanted to offer our readers an at-       ZM in the eyes of the general public                                    Non-life insurance:
tractive outlay and interesting as well as informative contents    Among the 200 companies included in the Reputation 2005             •   the conditions and pricelists for the insurance of individual non-life
which is why we compiled a short questionnaire in order to         survey (Kline&Kline 2005), ZM ranked among those companies              insurance products OPA! were revised and upgraded by personal and
find out what the readers/employees think of the newsletter.        with average recognisability and an above-average reputation            legal assistance;
Their answers – opinions, ideas and proposals – will help          in Slovenia in the eyes of the general public. In the area of the   •   we modernised, supplemented and developed the conditions and pricelists
us a great deal in our future efforts to prepare an interesting    “insurance industry”, ZM was assessed as slightly above-aver-           for the General civil liability;
internal newsletter.                                               age in terms of its recognisability, compared to competitive        •   we further developed a new product Accounting Service Insurance;
                                                                   companies. Compared to 2004, the relative recognisability           •   we started developing the product Insurance of leased equipment which
The results of the survey revealed that the future of the news-    of ZM was slightly reduced.                                             we will also continue in 2006;
letter is very promising. In most cases, it was assessed as an                                                                         •   moreover, we supplemented the Burglary and theft insurance and Bank
efficient way of providing information which improves the level     The analysis of the company’s position in the market can                safe deposit box insurance; and
of information among the employees and would be missed if          also be studied through the level of connection between the         •   because of the new regulations stipulated by the Code of Obligations and
it no longer existed. The readers also said that the information   company’s recognisability and its reputation. The basis for             the Insurance Act and for the need to prepare for the introduction of the
and easily understandable contents of the newsletter help          this is the idea that the company’s recognisability is a pre-           euro, we aligned all the terms and conditions of non-life insurance.
them understand the goals and aims of ZM better and that it        condition for building its reputation since, as a rule, the level
is an important tool of internal communication which enables       of recognisability leads to a bigger reputation. Based on the         Credit and transport insurance:
them to identify themselves with the company.                      calculations, both NKBM and ZM are above the regressive             • a new product BankKredit was developed; and
                                                                   line which means they both managed to create a favourable           • we modernised, supplemented or developed the conditions and pricelists
On the other hand, the survey reveals some areas still require     relationship between reputation and recognisability.                  for Domestic cargo, Carrier liability, Comprehensive aircraft insurance and
improvement.                                                                                                                             Aircraft liability.
After ten years the internal newsletter was therefore upgraded     Among the studied companies, ZM occupied a good 71st
and modernised in terms of layout and contents in 2005.            position in terms of company recognisability in the eyes of           Agricultural insurance:
We took into account, as far as practicable, the results of        the general public. The average recognisability of ZM (on a         • we supplemented the conditions and pricelists for Crop and animal insurance
the survey on our internal newsletter carried out among our        scale from 1 to 5) was assessed at 2.32 and that of NKBM              which were also aligned with both the Code of Obligations and the Insurance
employees.                                                         at 2.09. The average of all companies was 2.14.                       Act.



42                                                                        Annual report of Zavarovalnica Maribor d.d. for 2005                   Business report                                                         43
    17.3. Innovations                                                        insurance for their automobiles. The names of the packages        • the active directory was updated;                                     17.6. Understanding customers’ needs
                                                                             were selected on the basis of the claim settlement type           • several servers were integrated in the centrally managed
    Innovations in accident insurance operations                             contained in individual comprehensive insurance packages            protection and archiving system;                                      Our efforts are focused on quality and integrity in satisfying the
    Innovations are mainly connected with the programme solu-                – Mini, Delni, Fleksi, Polni and for the most demanding           • the computer network was updated by introducing several               needs of our customers and business partners. We try hard
    tions involving the Internet.                                            customers Super polni.                                              new switches;                                                         to offer them all the insurance products they want, as well as
    The following products are still offered over the Internet:                                                                                • NTP, Radius and DHCP environments were set up or                      quality advice on how to handle various cases and/or how to
•   travel insurance with assistance services abroad;                        17.4. Information technology                                        modernised;                                                           react in certain situations. On the basis of their requirements
•    8+16 Accident insurance with extended coverage for the                                                                                    • network surveillance systems were modernised; and                     we are able to design new products that are tailored to the
    members of Študentski servis Maribor; and                                Changes in the business environment, consumer                     • at the location of the new computer centre the VoIP telephony         needs of our customers and business partners.
•   at the time of sales promotion action also the accident                  habits, the development and accessibility of                        system was set up.
    insurance policies for schoolchildren.                                   technology are strongly present in the area of the                                                                                        Their needs and expectations largely depend on their activities
    When we introduced the information technology support for                organisation of business and information processes                    In the field of organisation and optimisation of busi-               as well as the various situations in which they find themselves.
    collective accident insurance policies in 2003, we developed             in the insurance company. In 2005, the Information                    ness processes, the following was carried out:                      ZM wishes to understand the needs of our policyholders
    the Internet application enabling companies to register new              and Organisation Sector participated in a series of               •   we planned and produced organisational solutions for the            which is why it must know them very well, and to know their
    or to delete policyholders in collective insurance packages.             development projects besides the maintenance and                      operations of the assistance call centre;                           goals, habits, positions and ways of thinking, to know their
    We were pleased to establish that more and more companies                supplementing of the existing information solutions.              •   we conducted a detailed analysis of working processes in the        hobbies and special requirements, their lifestyles and how
    decided to operate through these modern channels which                                                                                         segment of the back-office processing of individual non-life         they spend their spare time... In relations with our custom-
    brings a lot of advantages:                                              The following was done in the area of information                     insurance contracts and prepared a proposal of changes              ers, we try to behave like a credible insurance company – a
•   reduced costs for the company (no need to send documents                 development:                                                          and improved working processes;                                     company whose customers can trust its correct attitude,
    to the insurance company);                                           •   we established and expanded the functionality of information      •   we drafted a proposal of changes and improvement in the             expertise and reliability.
•   less administrative work for the employees (registration and             support for monitoring insurance contracts linked to investment       organisation of the recourse department; and
    deletion can be done directly in the database of the insured             funds;                                                            •   we compiled technical documentation for several organisation
    persons);and                                                         •   information support was also introduced for a series of new or        and information areas.
•   the application enables the printing of the list of insured              amended insurance products in the area of non-life insurance
    persons.                                                                 and personal insurance, such as:                                    In the area of quality development and the ISO-9001
    In the years to come we will try to attract more users of this       -   new comprehensive automobile insurance that includes an             standard we:
    application.                                                             assessment of the value of accessories according to the           • carried out the planned internal audits by area;
                                                                             Eurotax system;                                                   • included some new and several updated system processes
    Innovations in accident insurance                                    -   insurance against the costs of re-obtaining one’s driver’s          and instructions in the standard; and
    settlement operations                                                    licence;                                                          • successfully carried out the external control audit in December
    With the help of information technology we will prepare              -   a new form of non-life insurance package “OPA”;                     2005 and thus extended the validity of the certificate.
    programme solutions with a focus on response times and               -   a new way of concluding accident insurance contracts;
    information on the persons insured about the settlement of           -   modernised insurance in the area of civil liability; and              In the second half of 2005 we intensively prepared to move
    claims.                                                              -   the Prizma Junior product;                                            the computer centre to a new location which was carried
                                                                         •   we continued with the construction of an integral system of           out successfully in the first half of January 2006. By moving
    Non-life insurance                                                       digital documentation management in the insurance company             the computer centre to a new location, we established the
    In its complete modernisation of non-life insurance products,            by means of including new documents in the area of insurance,         appropriate material and spatial conditions for fulfilment of the
    ZM is the first in Slovenia to include personal and legal as-             finance (compensation, direct debits) and recourse claims              strict safety criteria in the field of information technology.
    sistance in non-life insurance by introducing the product                (court documents);
    “OPA!”. Legal assistance included in non-life insurance              •   modernisation and implementation of information support for
    provides liability and criminal law protection in private and            the management of recourse and the general ledger;                    Plans for 2006
    professional life and legal protection in the field of counselling.   •   we created a web service for checking ratings in the field of
    Personal assistance guarantees carefree living in Slovenia               credit insurance and expanded the existing functionalities of         In 2006, more attention in the area of information and organi-
    and abroad as it covers the costs of medical emergencies                 the “bonus centre”;                                                   sation development will be put on adapting our services to
    and urgent transport in the case of accidents.                       •   we implemented information support for the operations of              the users: internal users, who are integrated in the business
                                                                             outgoing sales call centres;                                          processes and connected more directly with the insurance
    The “No points” insurance product introduced in 2005                 •   we provided information support for the modernised system             company’s information system, as well as external users,
    covers the costs of re-obtaining one’s driver’s licence that             of provisioning in the field of life insurance; and                    who perceive the efficiency and adequacy of the company’s
    has been taken away. Again ZM was the first to offer such             •   we adapted information support in the segment of claim                working methods as the users of our services.
    insurance in Slovenia. If the validity of a customer’s driving           processing because of the new ways introduced for obtaining
    licence is terminated in accordance with the Road Transport              police incident reports.                                              By using appropriate mechanisms and computer tools we will
    Safety Act as a result of exceeding the maximum amount                                                                                         strive to set up standardised procedures of communication
    of penalty points, such a customer must obtain a new driv-               In the area of information support of data storage                    and a definition of insurance product development in 2006,
    ing licence. Nevertheless, costs are not covered if penalty              and decision-making:                                                  with the aim of reducing the time required for their placement
    points are assigned as a result of the presence of psychoac-         •   we produced an information solution which enables an integral         in the market.
    tive substances or alcohol as well as certain other types of             analysis and assessment of client ratings by means of the
    conduct by the insured.                                                  integration of various information sources; we plan to continue       Further, we plan to construct computer support that will en-
                                                                             with these activities on this project in 2006;                        able us to closely monitor the market and technical effects
    “Compensation of first damage” – ZM will offer all custom-            •   we will also expand the existing data segments from data              of these new and changed insurance products.
    ers, notwithstanding their rating (premium class), the possibility       storage with new dimensions;
    of compensation for the first damage upon the conclusion              •   the physical data structures will have to be reorganised due          We will put more emphasis than ever on alternative means of
    of compulsory and driver’s liability insurance (TPL plus). By            to the volume of data;                                                providing insurance services as the accessibility and useful-
    taking out the “compensation for first damage” insurance,             •   the processes of extracting data from the databases will have         ness of electronic communication channels is growing daily in
    the ZM policyholder is entitled to keep the bonuses they have            to be modernised; and                                                 the insurance company’s business environment. The challenge
    accrued in spite of causing an accident within a year.               •   we will co-operate in upgrading the controlling system in the         in this context is the introduction of new services planned by
                                                                             insurance company.                                                    the state administration (e.g. e-registration of vehicles).
    “Modri kasko” – a new automobile insurance programme,                    The following was achieved in the information infra-
    5 different packages with several options to select from. The            structure and network segment:                                        Another big, if not the biggest, challenge for this year concerns
    aim of this new offer is to follow the development of technol-       •   we established a separate integral testing environment at the         the area of information technology in the insurance company
    ogy, changes in traffic regulations and, of course, the desires           level of the database and organised the system of its constant        which is of course the preparation of the information system
    of customers who wish to take out optimal comprehensive                  refreshment;                                                          for the introduction of the euro.



    44                                                                              Annual report of Zavarovalnica Maribor d.d. for 2005           Business report                                                                                                                   45
Sustainable
development




46            Annual report of Zavarovalnica Maribor d.d. for 2005   Business report   47
                                                                                                                                                                                                    18
             growth in the number of employees in the period from 1996 to 2005                                                     Employees
1996                                                                                                                               and education
1997
                                                                                                                     internal
1998
                                                                                                                      agents
1999

2000                                                                                                             managment

2001

2002

2003

2004

2005

        0          100       200         300       400        500         600      700          800      900    employees



600         number of employees by year and by organisational unit
                                                                                                                                   ZM has been training its employees for years and covers         As already mentioned, priority was given to hiring employees
                                                                                                                                   the need for experts by relying on its own labour potential.    in individual business units. The total reduction in the number
500
                                                                                                                                   In 2004 we made (and in 2005 will continue with) the foun-      of employees in BUs is the result of fewer insurance agents
                                                                                                                      central      dations for the systematic guided career paths of our           being employed. We said goodbye to those unable to even
400
                                                                                                                                   employees, our experts as well as senior level executives.      cover the costs of their own operations, let alone make a
                                                                                                                           units   The system of promotions has already had the requirement        profit, in spite of all the efforts of the heads of business units,
300
                                                                                                                                   for additional professional education, in compliance with the   organised training and sales promotion campaigns.
                                                                                                                                   needs of the employer, as well as very favourable conditions
200
                                                                                                                                   for further part-time study.                                    The fluctuation of the workforce was mainly due to regularly
                                                                                                                                                                                                   terminated employment relationships (40 employees or 57%),
100
                                                                                                                                   The planned growth in the number of employees in 2005 was       13 employees retired (19%), the employment relationship of
                                                                                                                                   3% but it turned out at the end of the year that the increase   14 employees was terminated by mutual agreement (20%)
0
            1990    1997     1998    1999        2000       2001    2002        2003     2004     2005                             was slightly negative. The total number of employees as at 31   and three employees lost their jobs for fault-based reasons
                                                                                                                                   December 2005 was 844 or, in other words, it decreased by       (4%). The employment relationship of 70 employees, which
                                                                                                                                   0.12%. In this period we increased the number of in-house       equals 8%, was terminated.
                                                                                                                                   employees by 14 and decreased the number of agents by 15,
                           fluctuation of the workforce                                                     education structure     which means that the number of agents went up by 6.17%,         Gaining knowledge and competence
               4%                                                                      11 20
                                                                                                 60                                and that of in-house employees by 2.33%.                        through education and training
                                    regular termination               166                                                    II
20%                                                                                                                                Our focus in employing new workers is on business units all     In 2005, the number of employees with a secondary education
                                               retirement                                                                   IV     around Slovenia, whereby we would like to achieve the better    or less (levels II, III, IV and V) was reduced by 4.19% compared
                                                                                                                                   coverage and accessibility of our services all over Slovenia.   to the previous year while the number of employees with a
                                          by agreement                                                                       V
                                                                                                                                   We hired 21 new in-house employees in 2005 and 34 agents        higher or university education grew by 8.81% and the number
                                           fault reasons                                                                    VI     in business units while 15 new employees were hired by the      of master’s and doctors remained unchanged. In 2005 we also
                                                                                                                                   “central” headquarters (sectors and departments). In 2005,      monitored the educational-level structure with the S4–BSC
                                                                    118                                                     VII    ZM the employment relationship of 49 insurance agents and       indicator, which stood at 1,537 at the end of the year.
                                   57%                                                                   469                       22 in-house employees was terminated.
                                                                                                                     VIII + IX                                                                     The annual review of activities in the field of functional edu-
      19%                                                                                                                          We continued hiring new insurance agents and the person-        cation and training shows the successful implementation of
                                                                                                                                   nel required for back-office services in 2005. In 2005 ZM        planned educational events and training activities of the em-
                                                                                                                                   hired a total of 20 new in-house employees and 34 insur-        ployees in individual areas. In 2005, 809 days were spent on
             education structure by years                                                                                          ance agents.                                                    training, including 1,875 participations of our employees.

1998                                                                                                                          II              Number of newly hired     Number of newly hired      In the field of professional education and training, which rep-
                                                                                                                                                in-house employees          insurance agents       resents the largest share, a new concept was introduced and
                                                                                                                             IV                                                                    followed last year. Training programmes were formed accord-
2001                                                                                                                               Ljubljana BU                    4                          5
                                                                                                                                                                                                   ing to the uniform methodology for all products marketed by
                                                                                                                                   Maribor BU                      7                          9    ZM which are part of the annual plan of professional seminars
2002                                                                                                                          V    Celje BU                        1                          3    and thematic workshops. Besides the internal lecturers who
                                                                                                                                   Kranj BU                        1                          5    already participated in the professional training activities last
2003                                                                                                                         VI                                                                    year, we attracted a new group of employees and trained them
                                                                                                                                   Nova Gorica BU                  0                          1    as internal trainers or lecturers. These are sales personnel,
                                                                                                                                   Koper BU                        2                          0    heads of business units who are already involved in the training
2004                                                                                                                        VII
                                                                                                                                   Slovenj Gradec BU               5                          3    of their team of representatives on a daily basis.
                                                                                                                                                                                                   This is the area where professional education and training
                                                                                                                      VIII + IX    Novo mesto BU                   0                          4
2005                                                                                                                                                                                               meet and relate with the broader area of business education.
                                                                                                                                   Ljutomer BU                     0                          4    Our goal is to establish a system of in-house trainers and
        0          100       200         300       400        500         600      700          800      900   employees           Total                          20                         34    transfer them to the latter area. This is why we introduced



48                                                                          Annual report of Zavarovalnica Maribor d.d. for 2005   Business report                                                                                                               49
the programmes of education and training in the area of           The total average of sick-leave hours up to 30 days increased by               18.1. Innovation, performance                                      18.2. Goals and vision of the insurance
sales for all heads of BUs and heads of sales last autumn.        8.9% compared to the year 2004 while a downward trend was                      and career development                                             company’s development strategy in the field
The programme consists of consultancy workshops, field             noticed in the amount of sick-leave hours in the last two years                                                                                   of boosting motivation and performance in the
coaching and the programme Train the Trainers. Our purpose        compared to the previous period. The average period of a sick-leave            In 2004, the Employee development – motivation sys-                future
is to train and learn the heads of business units and the         absence for less severe illnesses is 6 working days per year.                  tem procedure was adopted by the Management Board
heads of sales departments to train their colleagues in the                                                                                      which entered into force on 1 January 2005. The aim of the         In the months ahead of us, we intend to ask our employees
area of expert and also “soft” contents, such as sales skills,    In 2005 we recorded only 21 accidents at work, most of them on                 procedure is the method of employee evaluation and the             about the factors that impact on their efficiency and perfor-
management and motivation.                                        the way to and/or from work.                                                   determination of starting points for employee development.         mance. We also plan to find out which skills and knowledge are
                                                                                                                                                                                                                    crucial for their work performance. On the basis of experience
The approach to education based on the Train the Trainers         Special attention is paid to the health of ZM employees. Each year,            The adopted system procedure is also the basis for carrying        and expert assistance for the employees, we will compile a
principle is gradually being introduced into all programmes,      preventive medical examinations are organised for those groups                 out the following procedures:                                      list of types of conduct that will help the employees of ZM
including the ongoing ones, in the area of business educa-        of employees exposed to various occupational hazards, e.g. for             •   Innovation: the employees are entitled to propose changes to       achieve the required performance in the future years.
tion.                                                             claims assessors, sales personnel, heads at different levels, office            the procedures which will guarantee better quality and faster
                                                                  workers etc.                                                                   work. The heads of organisational units must always stimulate      The second step is the construction of an annual inter-
Some of our colleagues employed in the expert services have                                                                                      the employees to propose changes. If a proposal results in a       view system. The head of a department will organise an
participated in the training and examinations of the Slovenian    In co-operation with the ZM trade union organisation, recreational             considerable saving of operating costs, the employee making        annual meeting with the employee to talk about any prob-
Insurance Association for obtaining the licence to provide        activities are organised for our employees in hired sports facilities,         it shall be entitled to the remuneration stipulated by the Rules   lems, ideas and work-related plans (for the past, present
insurance agency services since 2000. They participate as         where they can play basketball, football, volleyball and tennis. To-           on Innovation Activity.                                            and future) and in relation to the employee’s experiencing
lecturers and interviewers at the examinations and as the         gether with their families they can also use our holiday facilities in     •   Remuneration: the methods and procedures are determined            of the work environment. The annual interview will be
authors of materials on individual expert topics.                 the Rogla recreation centre. Twice a year, our employees participate           in the Collective Agreement of Zavarovalnica Maribor d.d.          the key element for personnel monitoring and career
                                                                  in the sport games of financial institutions which are organised in         •   Promotion: the methods and procedures are determined in            development. It will be the form that the heads of depart-
In 2005 four employees participated in nine examinations          summer and winter. Once a year a trip is organised, usually to a               the Collective Agreement of Zavarovalnica Maribor d.d.             ments will have to follow when working with their colleagues,
and two in five training courses of the Slovenian Insurance        European country.                                                          •   Training: the method is described in the System Instructions       focused on their professional skills, development potential
Association.                                                                                                                                     (“QP 06-05 funkcionalno izobraževanje (Functional                  and work efficiency. The annual interviews will also help us
                                                                  Length of service in ZM                                                        education).                                                        guarantee the efficient work organisation of capable, skilled
Besides the functional skills, our employees are also obtaining   The average length of service in ZM is 9.3 years, with the highest                                                                                and productive colleagues.
formal education, knowledge and skills at the faculties and       average being in the Cargo and Credit Insurance Department (28                 The procedure applies to the evaluation of all ZM employees
other higher education institutions. In 2005 29 employees         years), the Management Board (16 years) and the Accounting                     and is used by the company’s Management Board, executives,         We have already established the system of performance
entered into undergraduate studies contracts and 22 post-         Sector (14 years).                                                             heads of departments and business units when evaluating            evaluation which will be further upgraded and supplemented
graduate studies contracts with the employer. Two employees                                                                                      their subordinates.                                                by the 360-degree questionnaire so that the heads of de-
graduated and obtained a level VII education.                     Payroll                                                                                                                                           partments will get some feedback on their performance.
                                                                  The average gross salary per employee based on the Collective                  The purpose of such an evaluation in ZM is to obtain results
Share of expenses for educational purposes in 2005                Agreement is:                                                                  on the number of successful or unsuccessful colleagues             In co-operation with the Educational Department, the system
The cost of education accounted for 0.17% of the gross            − Agents                                            363,078                    and thus get an overall picture of employee efficiency. The         of annual interviews will be integrated with the training
premium written and 0.60% of total expenses. In total labour      − In-house employees                                375,874                    task of their direct superiors is to commend the most suc-         so as to provide, on one hand, the types of conduct pro-
costs, the expenses for educational and training activities of    − Managerial contracts                            1,405,019                    cessful ones, and possibly to remunerate them (cash and            moted by the ZM and to strengthen, on the other hand, the
our employees accounted for 1.31%.                                                                                                               other awards), and help those who are less successful to           required skills and knowledge for improving work efficiency.
                                                                  The total average gross salary thus amounted to SIT 417,135.                   improve their performance. If an employee is assessed as           The goal in this area is to recognise the most talented people
share of education in                2004                2005                                                                                    unsuccessful twice in a row and does not follow the instruc-       in the company and give them the chance to further develop
Gross premium written              0,17 %              0,15 %     ZM also pays the premium for voluntary supplementary pension                   tions for improvement issued by the superior, that employee’s      themselves.
                                                                  insurance for its employees. In 2005, SIT 100,518,733 was al-                  employment relationship can also be terminated.
Total expenses                     0,70 %              0,60 %     located for this purpose.
Total costs                        1,31 %              1,12 %                                                                                                                                                       In the future, the Human Resources Development Service
                                                                  Labour costs vs. operating expenses:                                           The objectives of monitoring work efficiency are to:                seeks to produce a personal folder of each employee’s
ZM allocated SIT 67 million, which means SIT 79,440.80 per        In 2005, total operating costs amounted to SIT 11.2 billion. Total         •   improve work processes;                                            knowledge, skills, abilities and special talents, align the
full-time employee for educational purposes in 2005.              labour costs (salaries, holiday allowance, compensations etc.)             •   provide feedback to the employees;                                 employees’ expectations with those of the company and thus
                                                                  dropped by 0.1% over the previous year. Labour costs per employee          •   correct all mistakes;                                              assure appropriate career development and an educational
Total expenses incurred for educational purposes per em-          thus grew by a mere 7.28% over last year.                                  •   build up self-esteem; and                                          plan for every individual employee.
ployee amounted to SIT 50,676.11. The average number of                                                                                      •   improve performance.
educational days per employee in 2005 was 4.96 days.              Age structure of ZM employees
                                                                  The average age of employees in the company was 37.5 years, which
Employee absenteeism                                              is one year less than in the previous year. In individual organisational
The total number of all forms of absences in 2005 increased       units the average age ranges from 32 to 52 years. In the age group
by 4.87%.                                                         below 20 years there are no employees, while in the age group
                                                                  above 60 years we only have 4 employees. In other age groups the
                                                                  employees are evenly spread. The youngest employees are in the
                                                                  Board Management support services (on average, from 32 to 44
                                                                  years), as a counterbalance to the members of the Management
                                                                  Board with the highest average age of 52 years.




50                                                                       Annual report of Zavarovalnica Maribor d.d. for 2005                    Business report                                                                                                              51
                                                                                                                                                            19
Quality management
system and the
monitoring of customer
satisfaction

19.1. Quality management system                                       19.2. Internal audit

In the field of quality development and the ISO-9001 stan-             In the 2005 audit year, there were four auditors in the Internal
dard we successfully carried out the external control audit           Audit Service. The entire action plan was carried out accord-
in December 2005 and thus extended the validity of the                ing to the schedule, both in terms of the contents and the
certificate.                                                           volume of planned audits. Last year we conducted 20 audits
                                                                      on the basis of which the Management Board adopted 100
We included in the documentation of the standard some new             measures aimed at eliminating discrepancies and improving
and several updated system processes and instructions.                the work of the audited areas.

In co-operation with the appointed quality control manage-            The audits were carried out in various areas of the company’s
ment representative, two external advisers for the development        operations, as presented below:
of quality control system conducted several workshops for             1. The first group comprises audits within the scope of which
key employees in the area of product development project              we reviewed compliance with the provisions of the Insurance
management and process analyses workshops. The feedback               Act and the insurance company’s internal regulations. We
received from the participants confirmed our anticipation              audited the compliance of record keeping in the field of the
regarding the need for such forms of training.                        register of insurance representative agencies, activities in the
                                                                      area of strict policy records and implementation of provisions
This year we will continue with the training of the representa-       of the Money Laundering Prevention Act.
tives, while we also plan to conduct general as well as specific       2. The second group comprises audits of the insurance
project management workshops.                                         company’s operations by business unit. The audits were
                                                                      conducted in three business units.
All audits planned for 2005 were carried out by the deadline          3. The third group comprises audits carried out in various
apart from the audit of the quality management representative         areas of the company’s operations, namely:
because of a change in the position concerned. In October         -   conclusion of automobile insurance contracts;
2005, the role of the quality management representative was       -   resolving of damage compensation claims;
taken over by Mr. Borut Celcer, MSc, otherwise the executive      -   work of the Life Insurance Technology Sector;
manager of the Information and Organisation Sector. This          -   the company’s activities in the area of recourse claim
audit was therefore postponed until 2006.                             management;
Last year, the insurance company’s basic processes were           -   information technology audits;
audited. In most audits, no major deviations were found and       -   charging fees to insurance agencies; and
so some recommendations were merely issued.                       -   the company’s operations in the area of HR management.
                                                                      4. The fourth group comprises the reviewing of the com-
The plan of audits for 2006 has also been drafted and ap-             pany’s financial accounts. We audited the presented final
proved. We intend to audit those areas that still do not have         account for 2005 and regularly monitored the fulfilment of
their own system documentation or have not been audited               the set business goals and the probability of their fulfilment
yet. The purpose of the audits is to cover all the ongoing            at the end of the year.
processes in the insurance company and thus to carry out              5. The last group comprises the audit aimed at examining
internal informal training in the field of ISO standards and           the possibility of the existence of related persons and conflicts
quality.                                                              of interest in the company and in its relationships with external
                                                                      business partners.

                                                                      Based on the conducted audits, the Internal Audit Service
                                                                      established that there were no significant discrepancies or
                                                                      deficiencies in internal controls and compliance of the au-
                                                                      dited areas that would increase the risks of the company’s
                                                                      operations.




52                                                                           Annual report of Zavarovalnica Maribor d.d. for 2005         Business report    53
    19.3. Strategic business partners                                    19.5. Methods of communicating                                                                                                        19.6. Managing the environment
                                                                         with target publics

    The company’s strategic partners in the area of products             In 2005, ZM also paid great attention to various forms of          Our basic objectives in the field of maintaining good relations     Notwithstanding the fact that ZM is a service provider, it
    and services are Arag, AXA and DWS Investments from the              communication with our key target publics – ZM stakeholders.       with media were implemented by organising press confer-            supported projects that contribute to the protection and
    Deutsche Bank Group.                                                 We are aware that these are the target groups without which        ences, meetings with journalists, the preparation of press         conservation of the natural heritage and the environment
    In terms of the sales of insurance products, our key strategic       the company cannot exist and grow. Our communication               releases, submission of publicity material, monitoring press       while, on the other hand, we strive to make the best possible
    business partners are companies offering insurance brokerage         strategy was adapted to the interests and characteristics of       releases and analysing them etc. Our survey carried out            use of the existing resources.
    and agency services.                                                 individual groups and we used those tools that enable us to        among the journalists from those media houses with which
    In terms of the marketing of life insurance products, our key        achieve the best communication effects.                            ZM co-operates showed that the journalists are satisfied            With the aim of promoting the environmental awareness of
    strategic business partners are exclusive specialised agencies                                                                          with our way of work, the timely preparation of materials,         pupils we launched an environmental contest called the
    for marketing life insurance.                                        Communication with the insured and our business                    information ....                                                   “Zoe Green Map” which we started implementing at the
                                                                         partners                                                           It was also established, on the basis of a comparative analysis    beginning of this year. The project was drafted in co-opera-
    In the field of claims settlement, an important role is played        In 2005 in the process of establishing and maintaining com-        of 2004 and 2005, that the number of media articles men-           tion with the programme called “Ekošola kot način življenja”
    by car repair shops authorised by ZM for claims assessment           munication links and relations with our customers, the fol-        tioning ZM (either in the headline or in the text) grew by 16%     (Eco-school as a way of living) with active support from the
    and rectifying damages for comprehensive automobile insur-           lowing communication tools were used: direct marketing,            which proves that we regularly and correctly inform journal-       Ministry of Environment and Spatial Planning, the Ministry
    ance policyholders, which is performed exclusively through           communication through electronic media, organisation of            ists about new developments in the insurance business and          of Education and Sport and the development project called
    the Online QuickCheck system.                                        events and business meetings with the persons insured,             the area of ZM’s operations. In 2005 ZM was presented in           Ekomanija. The aim of the contest is to stimulate school-
                                                                         preparation of presentations and various publications (ZM          the media as an insurance company about which the few-             children to explore the natural environment around them,
                                                                         company profile, annual report, leaflets etc.) free phone line,      est negative articles were written, while the President of the     discover problems in it and learn to find solutions and ways
    19.4. Responsibility to the social environment                       research and surveys on the customers’ satisfaction with           Management Board Drago Cotar was the most positively               of eliminating or preventing such problems in order to ensure
                                                                         ZM and similar.                                                    described president of all presidents of the management            a clean environment.
    In 2005 ZM was also actively involved in the wider social life                                                                          boards of Slovenian insurance companies and the only one
    and focused on supporting the achievement of important life          Communication with the employees                                   without a negative article being written about him.                The goal of the “Zoe Green Map” project, named after the
    goals through numerous sponsorships, donations, preventive           Positive developments in the area of internal communica-                                                                              turtle Zoe, a well-known mascot of ZM, was for the children
    campaigns in the fields of sports, culture, health and art.           tions                                                              Communication with shareholders and financial                       to produce an “eco” map of the local environment on which
                                                                                                                                            publics                                                            they mark ecologically significant points and highlight problems
    In 2005 ZM provided financial support for the following ac-           In 2005 we continued with the construction of an efficient          When preparing the programme for maintaining relations with        as well as environmentally-friendly solutions, e.g. “recycling
    tivities:                                                            information system which we started in 2004 and launched           shareholders and other financial publics, our standpoint was        islands”. Of all the environmental problems identified they
•   In the field of sports:                                               the project of a thorough redesign of the content and graphics     that, for a successful mutual relationship, it is necessary to     select one and try to find the best possible solution for it.
-   the 41st Golden Fox (Zlata lisica) – World Alpine ski cup            of the internal web page for employees – intrAnet. We also         know your investors well – to be aware of their goals, needs,      Among the received proposals for the solutions of environ-
    competition on the slopes of the Mariborsko Pohorje;                 continued providing information for the employees through          requirements and interests. To provide timely and quality          mental problems, the expert committee will select one and
-   Aleš Gorza, a giant slalomist from the Koroško region, a             electronic media with the aim of expanding the amount of           information to them, we used active ways of communication          ZM will try to rehabilitate it. ZM will namely sign a Letter of
    member of Slovenian National Ski Team A;                             available information. We introduced prize-winning questions       (in written and oral forms), regular updates about our opera-      Intent to rehabilitate the environmental problem with the
-   the Maribor football team ‘NK-Maribor-Pivovarna Laško’;              in our electronic communications in order to motivate two-         tions and other important information. Also in 2005 the most       winner’s local community and contribute SIT 1,000,000 for
-   the Secondary Schools Basketball League (ŠKL);                       way communication and improve the perception and recall            important source of communication with shareholders and            that purpose.
-   the Shooting Union of Slovenia;                                      of received information/messages.                                  other financial publics remained the Annual Report, which
-   the Ice Hockey Club ‘Zavarovalnica Maribor – Olimpija’;                                                                                 presents all important pieces of information in the one place,
-   4th ZM Mountain Run Trophy;                                          With such prize-winning questions we managed to achieve            intended for investors and financial publics and of course
-   the volleyball team OK NKBM Branik Maribor;                          another of our set goals - i.e. enable the employees to partici-   also for all important stakeholders (basic company data, its
-   the Ptuj Golf Club;                                                  pate in various events sponsored or patronised by ZM.              organisational structure, business operations in the previous
-   the handball club from Slovenj Gradec;                                                                                                  year, vision and goals, financial report, notes on the financial
-   the tennis club Branik Maribor; and                                  After ten years the internal newsletter “Pri nas Zmleto” was       statements, summary of statistical data, certified auditor’s and
-   the basketball club Perutnina Ptuj etc.                              therefore upgraded and modernised in terms of layout and           appointed actuary’s opinions, ...) Other effective tools used
•   In the field of culture and preventive campaigns:                     contents in 2005 and we also introduced, for the first time,        for communication purposes were books of data, personal
-   the Maribor summer festival ‘Festival Lent’;                         a separate annual report for the employees. We are con-            presentations, a meeting with management of the company,
-   the ‘Borštnikovo srečanje’ festival of theatre performances;         vinced that by doing this we managed to achieve our goal           letters to shareholders, quarterly and mid-year reports, an-
-   the musical event ‘Glasbeni September’;                              – to tell the employees by means of a special annual report        nual general meeting of shareholders and the report from the
-   the Slovenian Radio Festival (SRF) supported by 53 radio             for them that they are at least as equally important to the        annual general meeting etc.
    stations from Slovenia;                                              company as all its other activities and shareholders.
-   Gazele (Gazelles) – the fastest growing SMEs in Slovenia;                                                                               Communication with the local community and the
-   the “aircraft defence against hail” project organised by the         Communication with the media                                       environment
    Maribor Aircraft Centre; and                                         In ZM we are aware of the fact that only through timely, pro-      Through the numerous sponsorships, donations, preventive
-   the »Safely to school by bike« project, carried out by               fessional and accurate information can enable the domestic         activities in the sphere of sports as well as culture, health
    Primotehna in Slovenian schools.                                     and, upon the entry to the EU also foreign publics, to get an      and arts, we were actively involved in 2005 in wider social
                                                                         insight into our operations.                                       life with a focus on supporting the achievement of important
                                                                                                                                            life goals. The adequate communication strategy and careful
                                                                         Through communication strategies in the field of commu-             fostering of all our relationships helped us raise the level of
                                                                         nication with the media we strived to achieve the following        our recognisability and reputation in the environment.
                                                                         goals last year:
                                                                     -   strengthen the trust in ZM from the media and through this         Communication with suppliers
                                                                         to strengthen the trust of present and potential customers         The basic activity of ZM is to provide services and it is there-
                                                                         in ZM’s operations and objectives;                                 fore not so dependent on its suppliers as are manufacturing
                                                                     -   familiarise with and educate our publics about the ways and        companies. But as quality services and products are a pre-
                                                                         forms of insurance;                                                condition for the implementation of our primary goal, i.e. to
                                                                     -   increase the reputation of ZM through argumentative media          assure excellent operations and correct attitudes to all our
                                                                         presentations; and                                                 partners, our suppliers also receive our full attention. This is
                                                                     -   increase the number of ZM customers through the improved           why ZM developed a system for the selection and assessment
                                                                         reputation of ZM.                                                  of its suppliers in line with the ISO standards.




    54                                                                          Annual report of Zavarovalnica Maribor d.d. for 2005        Business report                                                                                                               55
     about
     Zavarovalnica
     Maribor d. d.




56                   Annual report of Zavarovalnica Maribor d.d. for 2005   Business report   57
                                                                                                                                                                                             20
              Management bodies
              and organisational chart
              of the company

Supervisory
     Board




                         Zvonko Ivanušič             Manja Skernišak
                    Chairman, Shareholder                      Member,
                            representative    Shareholder representative




                                                                                                                                                                                                                  20.1. ZM Company profile

                                                                                                                                                                        Company name:        Zavarovalnica Maribor d.d.,
                                                                                                                                                                                             Cankarjeva ulica 3, 2507 Maribor
                                                                                                                                             Date of registration with the District Court:   26 December 1990 Comp. reg. no. 1/03762/00
                                                                                                                                                                            Tax number:      44814631
                         Matjaž Kovačič                   Nataša Prah,
                                 Member,                       Member,
                                                                                                                                                                   Company ID Number:        5063400
                Shareholder representative    Shareholder representative                                                                                        Amount of share capital:     SIT 6,812,050,000.00
                                                                                                                                                   Transaction accounts numbers (TA):        04515-0000512086 with Nova Kreditna banka
                                                                                                                                                                                             Maribor d.d. – TA of non-life insurance operations
                                                                                                                                                                                             20470-0011030597 with NLB Koroška banka –
                                                                                                                                                                                             TA of life insurance operations
                                                                                                                                                                                             04515-0001049078 with Nova Kreditna banka Maribor
                                                                                                                                                                                             (TRR for unit-linked life insurance operations “Prizma”)
                                                                                                                                                                   Telephone exchange:       +386 2/2332 100
                                                                                                                                                                                   Fax:      +386 2/2332 530
                                                                                                                                                                                 E-mail:     info@zav-mb.si
                                                                                                                                                                              Web page:      www.zav-mb.si
                               Edi Kosi,              BrankoTekmec,
                       Member, Employee              Member, Employee                                                                               Type of insurance company (activity):    General insurance company (66.03)
                          representative                 representative                                                                              Organisation of insurance company:      Public Limited Company
                                                                                                                                                               Number of business units:     9
                                                                                                                                                       Number of representative offices:      32
                                                                                                                                                                    Number of agencies:      134
Management                                                                                                                                                        Number of employees:       844 (of which 228 agents)
     Board                                                                                                                                                                                   (as at 31 December 2005)




                                                                                                                                                                                             20.2. ZM Management Board and Supervisory Board

                                                                                                                                                                                             Management Board
                              Drago Cotar            mag. Darko Tolar                                                                                                                        Drago Cotar, President of the Management Board
              President of the Management           MSc, Member of the                                                                                                                       Srečko Čebron, Deputy President of the Management Board
                                    Board            Management Board                                                                                                                        mag. Darko Tolar, MSc, Member of the Management Board
                                                                                                                                                                                             Srečko Čarni, Member of the Management Board and Workers’ Director

                                                                                                                                                                                             Supervisory Board
                                                                                                                                                                                             Zvonko Ivanušič, Chairman, Shareholder representative
                                                                                                                                                                                             Matjaž Kovačič, Member, Shareholder representative
                                                                                                                                                                                             Manja Skernišak, Member, Shareholder representative
                                                                                                                                                                                             Nataša Prah, Member, Shareholder representative
                                                                                                                                                                                             Edi Kosi, Member, Employee representative
                                                                                                                                                                                             BrankoTekmec, Member, Employee representative

                         Srečko Čebron                    Srečko Čarni
                   Deputy President of the   Member of the Management
                      Management Board       Board and Workers’ Director

              58                                                           Annual report of Zavarovalnica Maribor d.d. for 2005   Business report                                                                                                       59
       20.3. ZM Organisational structure                                                                                                                                                          Information
                                                                                                                              Non-life
                                                                                                       Life Insurance                                                                             Technology
                                                                                Marketing                                    Insurance              Accounting             Financial
                                                                                                        Technology                                                                                    and
                                                                                 Sector                                     Technology                Sector                Sector
                                                                                                           Sector                                                                                 Organisation
                                                                                                                               Sector
                                                                                                                                                                                                     Sector




                                                                                                                                                                          Management
                                                                               Complaints                                                                                  Representa-
                                                                                                        Secretariat
                                                                               Commission                                           MANAGEMENT                           tive for Quality
                                                                                                                                      BOARD                                  Control


                                                                                                       Adviser to the
                                                                                                        President of                                                       Company
                                                                                                       the Manage-                                                         Secretary
                                                                                                        ment Board




                                                                                                                                                     Human
                                                                                                                                                                                                     Public
                                                                               Maintenance               Actuarial         Internal Audit           Resources                   Legal
                                                                                                                                                                                                    Relations
                                                                                 Service                 Service              Service              Development                 Service
                                                                                                                                                                                                     Service
                                                                                                                                                     Service




       20.4. Most significant changes in 2005

     • On 1 January 2005, the “Sales Department” within the Marketing
       Sector is renamed the Marketing Sector – Technical Support to
                                                                              20.9. ZM Associated companies
       the Sales Network;                                                                                                                         20.10. Authorisation to perform insurance
     • On 1 January 2005, the Information Technology Service is renamed                                                                           operations
                                                                              According to the ZM ownership structure, ZM operates as a
       Information Technology and Organisation Sector;
                                                                              subordinate company in the Nova KBM d.d. financial group,
     • On 1 June 2005, a new organisational unit is formed within                                                                                 On 22 July 2004 Zavarovalnica Maribor d.d. was issued with
                                                                              and at the same time it operates in the insurance group
       the Information Technology and Organisation Sector – Quality                                                                               a Decision by the Insurance Supervision Agency (Decision
                                                                              with a parent company Pozavarovalnica SAVA d.d. (Sava
       Management Department and Martina Jeromel is appointed Head                                                                                no.: 30200-1147/04-24,15,13) stating that ZM is authorised
                                                                              Reinsurance Company).
       of Department; as at 30 September 2005 the role of Management                                                                              to perform insurance operations.
                                                                              Both parent companies include ZM in their accounting state-
       Representative for Quality Control in ZM is assumed by the Executive
                                                                              ments according to the capital method.
       Manager of the Information Technology and Organisation Sector;
     • Within the Non-life Insurance Technology Sector, the Cargo and
                                                                              ZM also holds a stake in some insurance agencies, a pension
       Credit Insurance Department is terminated and a new Transport
                                                                              company and a fund management company, for the reasons
       Claim Settlement Division is founded. Consequently, the cost centre
                                                                              of business co-operation or market interest in the area of
       in the Cargo and Credit Insurance Department is closed and a
                                                                              the expansion and exclusivity of the sales network. For that
       new cost centre is opened within the Transport Claim Settlement
                                                                              purpose, the insurance company purchased a stake in 2005
       Division within the Expert Support Department. The employees
                                                                              or entered into a further three insurance agencies so that it
       are reallocated from the Transport Claim Settlement Division to
                                                                              holds 10%+ stakes in the following companies:
       the Cargo and Credit Insurance Department – to positions with
       the same job descriptions and the same salary brackets;
                                                                              Name of the company                                source       stake in % date of investment                                 Note
     • The Organisation, Development and Business Optimisation
       Department within the Information Technology and Organisation          ZM Agenta d.o.o. Maribor – insurance agency            OA        40,00 %           20. 2. 1997                  no change in 2005
       Sector is renamed the Development and Business Process
                                                                              Moja naložba, pokojninska družba d.d., - pension                                             23 June 2005 – capital increase
       Optimisation Department;
                                                                              company                                                 CI       20,00 %        28. 11. 2000               of SIT 20 million
     • On 1 December 2005, Marko Klemenčič, the Executive Manager
       of the Life Insurance Technology Sector is dismissed from his          KBM Infond d.o.o. - fund management company            OA        15,00 %           11. 3. 1994                  no change in 2005
       previous office and appointed to a new position, namely that of
                                                                              Aviza d.o.o., Maribor                                  OA        10,00 %            2. 7. 2002             capital decrease in 2005
       Deputy Executive Manager of the Marketing Sector; Tomislav
       Ćaćić is appointed to the position of Executive Manager of the Life    Finada d.o.o., Maribor                                 OA       100,00 %            9. 6. 2005                           Purchase
       Insurance Technology Sector as the Acting Executive Manager of         ZM Providus d.o.o., Maribor                            OA        10,00 %            8. 9. 2005                           Purchase
       the Life Insurance Technology Sector.
                                                                              Zavarovalno zastopanje IQ                              OA        10,00 %        29. 12. 2005                             Purchase




60            Annual report of Zavarovalnica Maribor d.d. for 2005            Business report                                                                                                                   61
20.7. ZM business units                             20.6. ZM Business units in Slovenia                                    Maribor                                                      Šentilj
                                                                                                                                                                                      Pesnica
Ljubljana Branch Office                                                                                                     Ruše                                                        Apače
Dunajska cesta 8, 1000 Ljubljana                                                                                           Fram                                                     Maribor
Phone: 01/234 55 04                                                                                                        Oplotnica                                         Murska Sobota
Fax: 01/234 55 10                                                                                                          Radlje ob Dravi                                  Gornja Radgona
E-mail: pe-ljubljana@zav-mb.si                                                                                             Dravograd                                                   Lenart
Director: Marko Vilfan                                                                                                     Vuzenica                                         Jurij ob Ščavnici
                                                                                                                           Ravne na Koroškem                                         Lendava
Maribor Branch Office                                                                                                       Mežica                                                 Cerkvenjak
Cankarjeva ul. 3, 2507 Maribor                                                                                               Slovenj Gradec                                        Ljutomer
Tel.: 02/233 23 07                                                                                                         Mislinja                                                 Majšperk
Fax: 02/233 25 28                                                                                                          Črna na Koroškem                                           Makole
E-mail: info@zav-mb.si and                                                                                                 Velenje                                                     Ormož
pe-maribor@zav-mb.si                                                                                                       Jesenice                                                  Poljčane
Director: Miran Kunst                                                                                                      Mozirje                                                       Ptuj
                                                                                                                                                                        Slovenska Bistrica
Celje Branch Office                                                                                                                                                        Slovenske Konjice
Ljubljanska c. 14, 3000 Celje                                                                                              Radovljica                                                   Zreče
Tel.: 03/428 45 04                                                                                                         Tolmin                                                       Celje
Fax: 03/544 31 45                                                                                                          Kranj                                            Rogaška Slatina
E-mail: pe-celje@zav-mb.si                                                                                                                                                            Kamnik
Director: Florjan Lorger                                                                                                                                                              Trbovlje
                                                                                                                                                                                    Dobrovo
Kranj Representative Office                                                                                                                                                        Škofja Loka
Nazorjeva ul. 1, 4000 Kranj                                                                                                                                                        Ljubljana
Tel.: 04/281 80 10                                                                                                                                                                       Litija
Fax: 04/201 80 20                                                                                                                                                                        Idrija
E-mail: pe-kranj@zav-mb.si                                                                                                                                                             Solkan
Director: Milan Košir MSc                                                                                                                                                             Vrhnika
                                                                                                                                                                              Nova Gorica
Nova Gorica Representative Office                                                                                           Ajdovščina                                               Bizeljsko
Bevkov trg 6, 5000 Nova Gorica                                                                                             Cerknica
Tel.: 05/335 90 00                                                                                                         Renče                                                      Brežice
Fax: 05/335 90 15                                                                                                                                                                      Vipava
E-mail: pe-nova-gorica@zav-mb.si                                                                                                                                                   Postojna
Director: Ada Filipič                                                                                                                                                          Novo mesto
                                                                                                                                                                                    Cerknica
Koper Representative Office                                                                                                                                                            Sežana
Cesta Zore Perello-Godina 2, 6000 Koper, p.p. 223                                                                                                                                     Ribnica
Tel.: 05/611 77 80                                                                                                                                                           Lucija-Portorož
Fax: 05/639 36 85                                                                                                                                                                        Izola
E-mail: pe-koper@zav-mb.si                                                                                                                                                            Koper
Director: Zlatko Keber, MSc                                                                                                                                                   Ilirska Bistrica
                                                                                                                                                                                    Črnomelj
Slovenj Gradec Branch Office
Francetova cesta 7, 2380 Slovenj Gradec
Tel.: 02/881 27 00
Fax: 02/881 27 37
E-mail: pe-slovenj-gradec@zav-mb.si
Director: Janez Blagotinšek

Novo mesto Representative Office
Zwittrova 1, 8000 Novo mesto
Tel.: 07/332 53 30
Fax: 07/332 53 31
E-mail: pe-novo-mesto@zav-mb.si
Director: Jože Klobčar

Ljutomer Representative Office
Prešernova 7, 9240 Ljutomer
Tel.: 02/584 96 70
Fax: 02/584 12 42                                                                                                                                                        registered office
E-mail: pe-ljutomer@zav-mb.si                                                                                                                  business unit (branch, representative office)
Director: Boris Lebar                                                                                                                                                  representative office
                                                                                                                                                                                     agency




62                                                       Annual report of Zavarovalnica Maribor d.d. for 2005   Business report                                                            63
                                                                                                                                                                                               21
Selected financial
and accounting
indicators to the
profit and loss
account for 2005



Insurance                                           1 Jan. to               1 Jan. to              in              in    Insurance                                             1 Jan. to                      1 Jan. to             in               in
class                                           31 Dec. 2005            31 Dec. 2005            2005            2004     class                                             31 Dec. 2005                   31 Dec. 2005           2005             2004




Growth of gross premiums                                                                                                 Gross profit/loss as % of net premiums written
                                             Gross insurance         Gross insurance                                                                                  Profit (+) or loss (-)       Net premiums written              % profit/loss of net
                                             premium written         premium written                    Growth index                                                 of the financial year           in the financial year             premiums written
Non-life insurance operations in total       33,962,307,662           31,122,607,530             109              114    Non-life insurance operations in total          2,644,868,792                 24,940,043,222          10.61%            1.36%
Life insurance                               11,155,380,001           11,030,012,421             101              104    Life insurance                                  1,140,415,693                 11,164,486,056          10.21%            7.78%
Insurance operations of ZM d.d. in total     45,117,687,663           42,152,619,951             107              111    Insurance operations of ZM d.d. in total        3,785,284,485                 36,104,529,278         10.48%            3.44%


Change in gross claims incurred                                                                                          Net profit/loss as % of average capital
                                                        Gross                   Gross                                                                               Net profit (+)        or    Average status of capital                  Profit/loss as
                                                claims settled          claims settled                          Index                                                               loss (-)         (1.1. + 31.12. / 2)                   % of capital
Non-life insurance operations in total       21,209,576,468           22,307,241,747              95              130    Insurance operations of ZM d.d. in total        2,576,567,241                 14,428,556,078             17.9              9.5
Life insurance                                6,715,259,255            7,565,770,639              89              135
Insurance operations of ZM d.d. in total     27,924,835,723           29,197,225,389              96              131


Claims ratio                                                                                                             Available capital as % of net premiumss written
                                                        Gross                 Gross                                                                                     Available capital                                  Available capital as % of net
                                                claims settled      premiums settled                    % claims ratio                                                  of the company                              Net               premiums written

Non-life insurance operations in total       21,209,576,468           33,962,307,663            62.5             69.5    Non-life insurance operations in total          6,162,458,000                 24,940,043,222             24.7             21.1

Life insurance                                6,715,259,255           11,155,380,001            60.2             68.6    Life insurance                                  3,496,048,000                 11,164,486,056             31.3             30.2

Insurance operations of ZM d.d. in total     27,924,835,723           45,117,687,664            61.9             69.3    Insurance operations of ZM d.d. in total        9,658,506,000                 36,104,529,278             26.8             24.1


Costs of operations as % of gross insurance premium written                                                              Available capital of the insurance company as % of minimum capital
                                                    Operating                 Gross                                                                                     Available capital              Minimum capital           Available capital as %
                                                    expenses     insurance premiums           % operating expenses                                                      of the company                 of the company              of minimum capital

Non-life insurance operations in total        8,840,709,407           33,962,307,663            26.0             26.3    Non-life insurance operations in total          6,162,458,000                  3,534,011,000            174.4           161.4

Life insurance                                2,330,155,659           11,155,380,001            20.9             19.4    Life insurance                                  3,496,048,000                  2,733,813,000            127.9           126.0

Insurance operations of ZM d.d. in total     11,170,865,067           45,117,687,664            24.8             24.5    Insurance operations of ZM d.d. in total        9,658,506,000                  6,267,824,000            154.1           144.9


Net provisions for outstanding claims as % of net revenues from insurance premiums                                       Available capital as % of technical provisions
                                            Net provisions for     Net revenues from % provisions for outstanding                                                       Available capital                    Technical        Available capital as % of
                                           outstanding claims    insurance premiums claims in insurance premiums                                                        of the company                       provisions            technical provisions

Non-life insurance operations in total       16,130,337,977           24,046,483,140            67.1             70.8    Non-life insurance operations in total          6,162,458,000                 27,917,842,985             22.1             18.5

Life insurance                                2,472,043,579           11,198,291,951            22.1             23.5    Life insurance                                  3,496,048,000                 48,849,222,176              7.2              7.3

Insurance operations of ZM d.d. in total     18,602,381,556           35,244,775,091            52.8             54.8    Insurance operations of ZM d.d. in total        9,658,506,000                 76,767,065,160             12.6             11.4




64                                                               Annual report of Zavarovalnica Maribor d.d. for 2005    Business report                                                                                                            65
Insurance                                              1 Jan. to                       1 Jan. to                 in                in
class                                              31 Dec. 2005                    31 Dec. 2005               2005              2004




Net premiums written as % of capital and technical provisions
                                                                     Average balance of capital                      Net premiums
                                                           Net         + technical reservations          written as % of capital and
                                                premium written           (1 Jan. + 31 Dec.) / 2                technical provisions
Non-life insurance operations in total          24,940,043,222                  32,368,544,446                 77.1              79.1
Life insurance                                  11,164,486,056                  56,553,537,934                 19.7              21.4
Insurance operations of ZM d.d. in total        36,104,529,278                  88,922,082,381                 40.6              42.3


Average status of technical provisions as % of net premiums written
                                    Average status of tech. prov.                         Net                      % tech. prov. of
                                              (1.1. + 31.12.) / 2              premium written                net premiums written
Non-life insurance operations in total          27,180,247,215                  24,940,043,222               109.0             109.0
Life insurance                                  47,313,279,088                  11,164,486,056               423.8             399.4
Insurance operations of ZM d.d. in total        74,493,526,303                  36,104,529,278               206.3             202.9


Available capital as % of unearned premiums
                                                Status of capital                         Net                         Capital as %
                                                of the company             unearned premiums                 of unearned premiums
Non-life insurance operations in total            5,944,527,231                 10,252,103,817                 58.0              47.4
Life insurance                                    9,499,917,512                     249,018,512            3,814.9           2,970.2
Insurance operations of ZM d.d. in total        15,444,444,743                  10,501,122,329               147.1             138.9


Available capital as % of liabilities
                                                Status of capital                                                        Capital as
                                                of the company              Liabilities - liabilities              % of all liabilities
Non-life insurance operations in total            5,944,527,231                 39,003,345,323                 15.2              12.8
Life insurance                                    9,499,917,512                 63,407,488,869                 15.0              15.4
Insurance operations of ZM d.d. in total        15,444,444,743                102,099,441,541                  15.1              14.4


Net technical provisions as % of liabilities
                                                    Status of net                                           Technical provisions as
                                             technical provisions           Liabilities - liabilities             % of all liabilities
Non-life insurance operations in total          27,917,842,985                  39,003,345,323                 71.6              76.4
Life insurance                                  48,849,222,176                  63,407,488,869                 77.0              78.4
Insurance operations of ZM d.d. in total        76,767,065,160                102,099,441,541                  75.2              77.7


Gross insurance premiums written vs. Number of employees
                                                                            Average number of
                                                  Gross premium             full-time employees         Amount of gross premiums
                                           written in current year               (1.1.+31.12) / 2           written per employee
Insurance operations of ZM d.d. in total        45,117,687,663                                 845      53,393,713      51,721,006




66                                                                        Annual report of Zavarovalnica Maribor d.d. for 2005            Business report   67
                                                                                                                                                                                      K
Colophon                                                                                                                 Zoja’s green maps
                                                                                                                         In the 2005/2006 school year, Zavarovalnica Maribor
                                                                                                                         organised a contest for the pupils of Slovenian primary
                                                                                                                         schools called “Zoja’s green maps”. Its aim was to draw
                                                                                                                         attention to environmental problems and help raise
                                                                                                                         environmental awareness. Some of the children’s cre-
                                                                                                                         ations were included as motifs in our annual report. The
                                                                                                                         fruits of their research and creative efforts were thereby
                                                                                                                         combined with our performance results. The creators of
                                                                                                                         the contributions are:




                                                                                                   Final selection
                                                                                               “Zoja’s green maps”
                                                             Pupils from Class 1.b of the OŠ Radenci primary school
                             Award for the class/group:                                        Mentor: Renata Kolbl
                                     accident insurance                                       Appearing on page 19
                        “Healthy people in healthy nature”
        Pupils from Class 5.b of the OŠ Neznanih talcev
                                 Dravograd primary school
     Mentor: Silvija Ravnikar, appearing on pages 1 and 9




                            Award for the class/group:                                              Final selection
                                    accident insurance                                            “Green detectives”
                 “Zoja’s green maps: around the school”                              Pupils from Class 2.b of the OŠ
 Pupils from Class 1.b of the OŠ Bežigrad primary school                               Vide Pregarc primary school
                  Mentors: Lili Mahkovič and Maja Prudič                                       Mentor: Marija Horvat
Appearing on pages 7, 11, 15, 17, 18 and the front pages                                        Appearing on page 9




                     Individual award – Prizma Junior                                                Final selection
                         “Garbage away, for a better day”                     “Zoja’s green maps: around the school
     Blaž Polak, Class 2.s of the OŠ Simona Jenka Kranj,     Pupils from Class 1.a of the OŠ Bežigrad primary school
                                 PŠ Goriče primary school                     Mentors: Lili Mahkovič and Maja Prudič
          Mentor: Jana Dubravica, appearing on page 23                               Appearing on pages 4, 8, 12, 14



                                                                                                        Production
                                                                                                            Formitas
                                                                                                               Texts
                                                                                             Zavarovalnica Maribor
                                                                                                             Design
                                                                                           Boštjan Martinjak/ Divizija
                                                                                                     Photographs
                                                                                                         Miha Krivic
                                                                                                                Print    The Management Board of the company
                                          Final selection                                                 Print Shop     hereby declares that all the information
 Primary school: Simon Jenko – subsidiary school Goriče                                                 Circulation      in this publication represent a true and
                                     Mentor: Janka Kuralt                                                500 copies      fair summarised version of Zavarovalnica
                         Project title: Zoja’s green maps                                        Maribor, July 2006      Maribor Annual Report 2005.
                                   Appearing on page 21

68                                                              Annual report of Zavarovalnica Maribor d.d. for 2005     Business report                                              69
70   Annual report of Zavarovalnica Maribor d.d. for 2005

				
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