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                                 a
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                                            n a e    t 0 6
                                          An u lR por 2 0
O V E R A L L   T R A N S P A R E N C Y
             Helsinki


                            Moscow
Hamburg
                        Minsk
                          Kiev                   Almaty
          Vienna
                                             Bishkek


                                     Baku                          Beijing
                                            Tashkent
                         Yerevan




                                                          Mumbai
         O V E R A L L   T R A N S P A R E N C Y




AnnuAl RepoRt 2006
Content

Address of the Chairman of the Board and the General Director              Human Resources                                                 39
to the Shareholders and Clients of Open Joint-Stock Insurance
                                                                           Risk Management                                                 43
Company Ingosstrakh                                                4
                                                                           Insurance Risks                                                 45
Competitive Ability                                                7
                                                                           Financial Risks                                                 45
Quantitative and Qualitative parameters of the Insurance Market    8
                                                                           Credit Risks                                                    46
Key trends in the Russian Insurance Market in 2006                11
                                                                           operational Risks                                               46
Current Positioning of Ingosstrakh in the Market                  15
Strategic Goals of Ingosstrakh                                    21       Communications and GR                                           49

Implementation of Ingosstrakh’s Main Strategic projects           22       Relations with Governmental organizations and nGos              50

Performance Results in Core Business                              25       pR Activities                                                   50

property and liability Insurance for legal entities               26       Sponsorship and Charity                                         51

Special Risks Insurance                                           27       Key Financial and Economic Indicators                           53

Cargo Insurance                                                   27       Audit opinion on the accounting reports                         54

Insurance of Aviation and Space Risks                             28       performance Results                                             55

Insurance of Vessels and Ship-owners’ liability                   29       Financial Strength Ratings                                      55

transport operators’ Insurance                                    29       Statement of income reporting for the period ended 31 12 2006   56

Credit Risks Insurance                                            30       Balance Sheet                                                   57

Voluntary Medical Insurance                                       30       largest Insurance events of Ingosstrakh in the last Years       59

Motor Insurance                                                   31       Bank Details of Ingosstrakh                                     59

tourist Insurance                                                 31       Affiliated Companies                                            61
personal Insurance (Ingosstrakh-life)                             32       Foreign network                                                 62
Regional network                                                  33       Representative offices of Ingosstrakh Abroad                    62
Reinsurance                                                       34       Affiliated Companies Abroad                                     63
Marketing                                                         34       Affiliated Companies in Russia                                  63
Investment Activities                                             36       History                                                         65
                                                                       3
Address of the Chairman of the Board and the General Director to the
Shareholders and Clients of open Joint-Stock Insurance Company Ingosstrakh




ladies and Gentlemen,                                                            In 2006, the Company improved its business and partner relations with
                                                                                 corporate and private clients based on professionalism and in-depth
We hereby present to you the Annual Performance Report of Open Joint-
                                                                                 understanding of goals and objectives of the insurance business. In the
Stock Insurance Company Ingosstrakh for 2006.
                                                                                 reported period, Ingosstrakh strengthened its leadership position in the
The previous fiscal year was a success for the Company. The premium              Russian insurance market and, despite tougher competition, preserved its
income grew by over 20%, total assets of Ingosstrakh increased by 35%            leadership in voluntary insurance — motor insurance, property insurance,
and amounted to RUB 45.4 bln, and year-end actuarial reserves increased          liability insurance, special risks and travel.
by 38% and totaled RUB 34.3 bln. Regardless of the current market trends,
Ingosstrakh managed to stabilize the loss ratio both for the Company as          Another Ingosstrakh’s attainment in 2006 was that international rating
a whole and for some of its business divisions. Combined ratio for 2006          agencies Standard&Poor’s and Moody’s Investors Service revised its rating
was about 97, 3%, which is a perfect result for the composite insurance          upwards. Once again, experts confirmed high business reputation of In-
company. Last year, Ingosstrakh earned a record profit for the Russian in-       gosstrakh. Standard&Poor’s raised its financial strength rating and insurer’s
surance market of about RUB 2 bln. At this, 2006 was a year of large com-        counterparty credit rating to ВВ+ with a stable outlook. The Company’s
pensations, but high-quality professional reinsurance protection enabled         rating under the Russian scale is ruAA+. Moody’s Investors Service up-
Ingosstrakh to meet all its obligations to the clients.                          graded Ingosstrakh’s insurance financial strength rating under the inter-
                                                                             4
national scale to Ba1, with a stable outlook. At the same time, Moody’s                by the experts of Interbrand Group, the international consulting company.
Interfax Rating Agency announced upgrade of the long-term credit rating                In 2006, the Company received main insurance award “Golden Salaman-
of the Company at Aа1.ru according to the national scale. Russian Rating               der” for the Best Insurance Company in Russia. Besides, last year, Ingoss-
Agency Expert RA affirmed the highest rating A++ of Ingosstrakh for the                trakh won the all-Russian contest Russian Business Elite. The Company was
fifth time.                                                                            awarded for the “Valuable contribution in development of the national
                                                                                       insurance system”. In May 2006, Ingosstrakh received the National Award
Today, Ingosstrakh is one of the largest universal companies of the federal
                                                                                       of the Financial Press Club of Russia “Golden Diploma 2006 for Information
level with the highest financial stability and well-balanced insurance port-
                                                                                       Transparency and Impeccable Business Reputation”.
folio. Our services are available not only in Russia, but also abroad. Ingoss-
trakh stands for high reliability and impeccable fulfillment of its obligations         Summing up, we are optimistic about the future. In 2007, Ingosstrakh will
to the clients, to a large extent thanks to its reliable reinsurance programs.          celebrate its 60th anniversary. We are entering this year as a committed
Among our reinsurance partners, there are leading international compa-                  team with ambitious and yet realistic strategic plans, unique insurance ex-
nies AIG, Allianz, AXA, CCR, Gen Re, Hannover Re, syndicates Lloyd’s, Mu-               perience and significant financial resources. We are convinced that we will
nich Re, Partner Re, QBE, SCOR, Swiss Re, Transatlantic Re, XL Re, etc.                 cope with our main task — to provide our clients with insurance services
                                                                                        that meet international quality standards.
In 2006, Ingosstrakh was awarded of many prizes. For the second year in a
row, Ingosstrakh became the only insurance company in the domestic mar-                 We are grateful to all our clients for trusting us and to all our partners for
ket among 40 most valuable Russian brands according to the list compiled                mutually beneficial multi-year cooperation.




Sincerely yours,


Chair of the Board                                                                    General Director
S.А. Goglenkov                                                                        А.V. Grigoriev




                                                                                  5
Competitive Ability
Quantitative and Qualitative Parameters of the Insurance
Market. Key Trends in the Russian Insurance Market in 2006
                                                                                 Higher market growth can be attributed mainly to two factors:
Quantitative and Qualitative                                                           increase in compulsory insurance (primarily, compulsory motor TPL
parameters of the Insurance Market                                                      insurance and compulsory medical insurance1);
                                                                                       sustainable progressive advance of classic voluntary insurance, includ-
                                                                                        ing real life insurance.
According to the Federal Insurance Supervision Service, as of January 1,
2007, there were 918 companies in the state register of insurers, includ-        Development of classical voluntary insurance (except life insurance) was im-
ing reinsurance companies. 886 insurers reported in 2006, among them —           pacted by insurers’ pursuit of universality. The breakdown of the market by
780 composite insurance companies and 106 special insurers, including 56         companies shows that in 2006, 145 companies offered life insurance (29
companies that offered only compulsory medical insurance and 50 compa-           less than in 2005), 691 — personal insurance (49 companies more than in
nies — personal insurance, including life insurance.                             2005), 633 — property insurance (9 companies more). As the total number
                                                                                 of players in the insurance market decreased, the number of companies that
In 2006, the development trends in the insurance market were positive.
                                                                                 deal with all types of insurance except life insurance went up. This proves
Aggregate insurance premiums increased by 22.7% versus previous year
                                                                                 that companies choose to be composite insurers with special emphasis on
and totaled RUB 602.1 bln, whereas in 2005 insurance premiums grew
                                                                                 portfolio structuring. Primarily, this is due to the growth of the retail sector.
only by 4%. In 2006, insurance compensations amounted to RUB 345.2 bln,
which is an increase of 25.8%, while in 2005 insurance compensations flow        1 Hereinafter, the insurance market is analyzed without taking into account compulsory
was negative (–10.8%).                                                           medical insurance.



      Insurance premiums (contributions) and insurance compensations in 2006 (RUB bln)


                                                                            Insurance        Rate of growth   Insurance   Rate of growth
                                                                            premiums            vs. 2005    compensations    vs. 2005
   1. Voluntary insurance:
      Life insurance                                                            16 0               –36 9%                  16 6                   –33 6%
      Personal insurance (except life)                                          76 8               20 1%                   41 9                    9 4%
      Property (except liability insurance)                                     227 9              22 8%                   64 6                    40 8%
      Liability insurance                                                       16 3                1 0%                    14                     19 9%
   2. Compulsory insurance:
      of members of armed forces and eligible persons                            53                15 8%                    42                     2 2%
      of passengers                                                              05                 –0 6%                   00                     14 8%
      Compulsory motor TPL insurance                                            63 9               18 9%                   27 5                    20 8%
   Market total without compulsory medical insurance                            406.8              16.2%                  156.2                   14.1%


                                                                            8
If we assume that companies who have been in the market for over three             Although the comparative premium trend in the life insurance market is
years are permanent players, then there are 670 permanent companies.               still negative, real insurance has started to develop. In 2006, the volume of
Their aggregate premium (without compulsory medical insurance) was                 real life insurance was slightly less than RUB 13 bln, and premiums in this
75.4% of total premium in 2004, 92.2% in 2005, 97.2% in 2006. As can be            segment of life insurance market almost doubled versus the same period
seen from above, this group of companies plays a key role in the whole             in the previous year. Not all real life insurance is long-term or endowment
Russian insurance market, and any change in the number of participants             individual life insurance — the leading position belongs to the corporate
either upwards or downwards will influence the aggregate amount of the             employees’ insurance, but in any case there are few tax optimization pat-
insurance premium in the market by up to 10% per year.                             terns.
First 50 companies of the group of permanent insurers received 72.4% of            In the personal insurance segment, the largest share is still taken by vol-
premium in 2006, in 2005 — 64%, in 2004 — 52%.                                     untary medical insurance. Higher premiums in the segment build on ap-
                                                                                   preciation of the policy of voluntary medical insurance and deficit of skilled
In 2006, 168 companies offered compulsory motor TPL insurance (12 more
                                                                                   personnel, which causes more and more employers to offer compensation
than in 2005). The concentration in this type of insurance is higher than in
                                                                                   packages with medical insurance to their employees.
other types of insurance — 88.5% premiums go to 50 companies.
                                                                                   Accident insurance is another segment of personal insurance market. Here,
                                                                                   higher premium was driven by explosive growth of mortgage lending in
                                                                                   2006. In case of mortgage, many insurers classify life insurance as personal
                                                                                   insurance.
                                                                                   Continued economic growth in Russia, in particular, higher capital invest-
                                                                                   ments from all sources of finance, as well as unprecedented increase in
                                                                                   sales of brand-new foreign-manufactured cars directly influenced insur-
                                                                                   ance premium in the property insurance market and caused its share of
                                                                                   the total insurance market to increase. Past year was a milestone for the
                                                                                   automobile market — sales of brand-new foreign cars reached a million
                                                                                   and exceeded the volume of sales of domestic cars.
                                                                                   After seasonal premium growth in the 1st quarter of 2006, voluntary liabil-
                                                                                   ity insurance market returned to the state characterized by a slow growth
                                                                                   rate because of the following factors:
                                                                                           lack of tax incentives for voluntary liability insurance;
                                                                                           uncertainty about such future imputed types as liability insurance of
                                                                                           hazardous production facilities, professional liability, etc.
                                                                                   Higher premiums for compulsory motor TPL insurance built on objective
                                                                                   growth of car fleet in Russia and were significantly influenced by the peak
As the growth of different types of insurance was unequal, the total market
                                                                                   of tenders for insurance of car fleets of budget-supported organizations
share of personal insurance premium increased from 14.1% in 2004 to
                                                                                   and state agencies that happened in 2006 and practically in all the regions
18.9% in 2006, for property insurance — from 40.9% to 56%, for voluntary
                                                                                   of Russia.
liability insurance — from 3.3% to 4%, for compulsory motor TPL insur-
ance — from 13.1% to 15.7%. The total market share of life insurance               Total volume of authorized capital of all Russian insurers was RUB 150.2 bln.
premium reduced from 27.3% to 3.9% for the same period.                            It grew by 5.3% versus 2005.

                                                                               9
Growth rate of total capital slowed down as compared to the previous               slow change in the number of large insurers with authorized capital
years, which resulted from two processes in the insurance market:                  of over RUB 500 ml who increase their capital at a maximum speed
                                                                                   for all groups at the level of 20%. Authorized capital of such insurers
                                                                                   accounts for nearly 70% of the total authorized capital in the insur-
                                                                                   ance market;
                                                                                   quick decrease in the number of companies with authorized capital
                                                                                   of up to RUB 120 ml, which was caused by the Federal Insurance
                                                                                   Supervision Service’s policy of crowding out of insurers with insuf-
                                                                                   ficient rate of capitalization and/or pre-arranged transactions. At the
                                                                                   same time, several insurers moved to the group with higher volume
                                                                                   of authorized capital. For this reason, the number of insurers with au-
                                                                                   thorized capital from RUB 30 ml to RUB 120 ml increased just slightly.
                                                                             Almost one half of all insurance fees in the market (except compulsory
                                                                             medical insurance) go to large federal-level insurers with authorized
                                                                             capital of over RUB 1 bln. At this, the largest number of insurers has
                                                                             authorized capital of up to RUB120 ml, which puts them in the “hazard
                                                                             area”. Such insurers most often bear a risk of lack of funds to pay for
                                                                             authorized capital, and they are the first to be acquired or taken over
                                                                             by financially more powerful insurers. In 2006, the share of insurance
                                                                             premium of insurers with authorized capital of over RUB 1 bln under-
                                                                             went the largest growth of 4 points. Business volume of smaller insurers
                                                                             who exit the market and have authorized capital of up to RUB 30 ml
                                                                             reduced from 2% to 1% in the total volume of insurance charges.




   Breakdown of insurance companies by authorized capital


   Authorized Capital                          31.12.2002          31.12.2003            31.12.2004           31.12.2005            31.12.2006
     Up to RUB 30 ml                              1 142                1 006                 563                   312                  129
     RUB 30–120 ml                                 178                 257                   452                   468                  470
     RUB 120–500 ml                                 60                  93                   200                   227                  246
     RUB 500 ml – RUB 1 bln                         21                  26                   39                    38                    42
     Over RUB 1 bln                                 7                   15                    26                   30                    31


                                                                       10
Key trends in the Russian Insurance                                                   In 2006, such financial factors, as well as federal insurers’ ambition to in-
                                                                                      crease their business volume and properly balance their insurance portfo-
Market in 2006
       Fewer participants in the insurance market caused by the exit of
       insurers.

Main reasons of insurers’ exit from the market are:
       termination of activities of the companies that couldn’t for some rea-
       sons increase the authorized capital to the corresponding amount;
       voluntary termination of activities because of low efficiency of trans-
       actions under some type of insurance;
       financial insolvency because permissible level of insurance compensa-
       tions and business costs was exceeded.
       Some insurers, especially regional subsidiaries, became affiliates
       of the federal-level companies, and smaller market participants
       were taken over by the larger ones. Efforts to establish insurance
       groups, holdings, business mergers, etc. intensified.

During 2006, insurers fulfilled the requirements to increase authorized cap-
ital and ensure real solvency pursuant to the rules of the Ministry of Finance
of the Russian Federation on placement of premium reserve and standards
imposed on the composition and structure of assets for equity capital.

                                                                                 11
lios became the reason for accession (and are catalysts of this process in             became more active, and in 2006 started to convert them into full-fledged
2007) of small and medium regional insurers in insurance groups controlled             subsidiaries.
by insurers in the most developed constituent entities of the Russian Fed-
                                                                                       In 2006, 11 foreign insurers entered the Russian market, 4 companies an-
eration. In 2006, 17 transactions got coverage in mass media (versus 10
                                                                                       nounced their intention to enter the Russian market.
transactions in 2005), whereas most of them were connected with setting
up insurance groups.                                                                   As of 1.01.07, the share of foreign capital in the aggregate authorized
       Large insurers’ ambition to get rating by the top rating agencies               capital of Russian insurers amounted to 4.5%.
       including international ones helped to improve transparency                     However, according to the most conservative estimates, the amount of
       of the insurance market leaders and in the insurance sector in
                                                                                       planned and actual investments of foreign insurers is much higher due to
       general.
                                                                                       different types of indirect investments for own development purposes, IT
In 2006, insurance companies, in particular, those from among the lead-                divisions, opening of offices, creation (acquisition) of agency networks.
ers stepped up their efforts getting ratings of Russian and foreign rating
agencies.
44 market participants got rating from Expert RA. 18 of them had their
ratings affirmed and 3 got it upgraded. Seven largest insurers got ratings
form international rating agencies at the end of 2006.
       State and municipal entities intensified their use of insurance
       services, which is connected with the all-level budget allocations
       for insurance purposes.
This trend is to be seen not only in the area of compulsory motor TPL insur-
ance, but also in voluntary medical insurance and property insurance. The
number of insurance tenders held by budget-supported organizations of
various levels in all the regions of the Russian Federation increased consider-
ably. Coverage of potential insurants with insurance services is extending.
       More foreign insurers entered the Russian market.
       More foreign capital.
In the reported period, against the background of Russia’s WTO accession
negotiations, foreign insurers who only had representative offices in Russia




                                                                                  12
Current Positioning of
Ingosstrakh in the Market
In 2006, Ingosstrakh’s premium for direct insurance and risks assumed for
reinsurance amounted to RUB 34.1 bln, an increase of 20.3% versus 2005.
Premium for inwards insurance for the last year went down 3% and totaled
RUB 3.2 bln.
In the period from 2003, the average growth of direct premium in Ingoss-
trakh was 46%, which is one of the highest rates in the insurance market
and is almost twice as large as the market growth rate in the same period.
In 2006, Ingosstrakh’s business development in the voluntary non-life in-
surance market including compulsory motor TPL insurance outpaced the
market growth rate.
According to the Federal Insurance Supervision Service, insurance pre-
miums in this target segment grew by 20.5%, whereas in Ingosstrakh it
reached 23.8%. Premium for property insurance in this period grew at the
same pace as in the market (growth of 22.8%). This is based on the fact
that the Company selects risks in the segment, in particular, as regards
property insurance of economic agents where the growth rate was 13.3%
versus the previous year.
In 2006, Ingosstrakh retained leading position in terms of direct insurance        ers registered in the Russian Federation. Ingosstrakh’s leadership builds on
premium (except compulsory medical insurance transactions) among insur-            its high standing in different segments of the insurance market:




  Ingosstrakh’s performance in direct insurance in 2006



                           Types of Insurance                                 2006, RUB bln          Growth vs. 2005            Current market share

  1. Voluntary insurance:                                                          27.0                    23.8%                         7.9%
     personal (except life insurance)                                               34                      36 7%                         4 4%

     property (except liability insurance)                                         21 1                     22 8%                         9 2%

     liability insurance                                                            25                     16 2%                         15 0%
  2. Compulsory insurance (compulsory motor TPL insurance)                         3.9                     21.2%                         6.0%
  Total                                                                            30.9                    23.4%                         7.5%



                                                                              16
Ingosstrakh is leading in voluntary insurance other than life insurance in
terms of insurance premium. At this, the Company holds the first place
among all participants of the insurance market in terms of premium
for property insurance and voluntary liability insurance, and in absolute
terms the gap with the closest competitor is rather substantial;
Ingosstrakh traditionally targets property types of insurance; there-
fore the share of personal types of insurance in its portfolio is smaller
than in the structure of the insurance market. Regardless of this, in
voluntary personal insurance, Ingosstrakh was the 4th in terms of in-
surance premium in 2006;
Ingosstrakh’s third place in compulsory motor TPL insurance builds
on deliberate and careful approach of the Company towards this
type of insurance. In some regions of the Russian Federation, the
situation around compulsory motor TPL insurance is critical. Although
the level of compensations is coming close to the “forbidden” 77%,
this is happening mainly to smaller regional insurers, while Ingosstrakh
is able to compensate for high losses in the regions with low territo-
                                                                                  Ingosstrakh’s leadership in voluntary property insurance (including liability
rial ratios with standard loss ratio in the regions with high territorial
                                                                                  insurance) is driven by its strong position in corporate insurance (insurance
ratios, and the Company monitors carefully its loss ratios and main-
tains proper balance of the insurance portfolio.




                                                                             17
of property and liability of legal entities), its experience in insurance of         In 2006, the main factors of growth in the corporate sector for Ingosstrakh
complex types of risk like aviation and space insurance, hull insurance and          were fire and attending risks insurance of legal entities and voluntary medi-
ship-owners’ liability insurance, technical risks insurance.                         cal insurance covered by employers.
In 2006, insurance of individuals (retail insurance) grew at a priority rate.        In 2006, the main factors of growth in the retail sector were auto-hull
In 2006, the share of individuals totaled 43.1% of aggregate insurance               insurance and voluntary medical insurance for tourists. Ingosstrakh raised
premium (versus 41.2% in 2005).                                                      premiums for property insurance for individuals (except cars) by 1.5 times,
                                                                                     whereas premium collection in the market increased by 15–20%. Thus, the
In 2006, Ingosstrakh’s total premium for insured individuals amounted to
                                                                                     company is quite successful in implementing its plans to intensify its efforts
RUB 13.3 bln.
                                                                                     in the segment of individuals’ property insurance.
Last year, the development of Ingosstrakh’s retail and corporate insurance
was influenced by different factors.




                                                                                18
Strategic Goals of
Ingosstrakh
Implementation of Ingosstrakh’s Main Strategic Projects
The strategic goal of the Company has not changed — maximum capi-                       drafting of life insurance strategy and development of medical
talization and profitability through efficient capital management, retain-              insurance, which enabled the Company to clearly identify the areas
ing leadership positions in the market and strengthening competitive ad-                of further activities and spur their development and increase their
vantages. To attain this goal, the Company has chosen the differentiated                shares in the Company’s insurance portfolio;
development model in four key segments: retail insurance (motor and                     streamlining of claims settlement system in retail insurance, which
individual property), corporate insurance, healthcare and life.                         enabled to improve the quality of internal procedures and streamline
                                                                                        the Company’s resources;
In retail types of insurance, the Company’s goal is to become the most
                                                                                        launch of Internet auction for subrogated cars, which enabled to
profitable player in the market. The key factor to achieve this is Ingoss-
                                                                                        increase the Company’s net income by Rub19.8 ml in 2006. The ex-
trakh’s ability to offer best services and prices, in order to expand its client
                                                                                        pected yield of the program in 2007 is Rub31 ml;
base and to maintain high level of client loyalty.
                                                                                        after modeling of targeted sales and management in motor
The Corporate segment provides for increase in the Company’s capital-                   insurance, we identified about 20 initiatives to help to streamline
ization based on higher profits. The Company will retain its leadership in              sales. Main initiatives include informatization of agent and partner
all types of corporate insurance also by diversifying its client portfolio, by          networks, setting-up of a traveling group, development and sub-
increasing the share of “medium” client segment and aggressive penetra-                 sequent implementation of the knowledge base, better quality and
tion of regional markets. Sales will increase as a result of entering new and           speed of information provided after monitoring, etc.;
promising market segments, developing a multi-channel sales model and                   interim results of CRM project will include a material improvement
increasing the number of products per client.                                           of customer service and of handling client applications, automation
                                                                                        of business processes in the Contact Center and retail sales of the
In medical insurance, the Company is looking to become one of the top
                                                                                        Company, forming of a comprehensive understanding of the client.
three by means of efficient control and quality management of services of-
fered by healthcare institutions and through competitive pricing policy.
The main goal in life insurance is to attain a 10% share of the real insurance
market by introducing and actively developing diversified sales models.



Implementation of Ingosstrakh’s Main
Strategic projects
In 2006, the Company continued systematic implementation of its long-
term strategic plans:
       drafting of the development strategy for retail and corporate
       segments prompted the Company to introduce new sales channels
       and insurance programs for corporate clients, actively build contacts
       with small and medium enterprises and adjust retail business model
       to the conditions of the quickly developing motor and individual
       property insurance market with regard to introduction of a new pric-
       ing model and agent network development;

                                                                                   22
Performance Results in Core Business
Property and Liability Insurance for Legal Entities. Special Risks Insurance. Cargo Insurance. Insurance of
Aviation and Space Risks. Insurance of Vessels and Ship-Owners’ Liability. Transport Operators’ Insurance.
Credit Risks Insurance. Voluntary Medical Insurance. Motor Insurance. Tourist Insurance. Personal Insurance
(Ingosstrakh-Life). Regional Network. Reinsurance. Marketing. Investment Activities
                                                                                              insurance of property and liability of tenants in large business centers
          property and liability Insurance                                                    and shopping malls.
          for legal entities                                                           In 2006, Ingosstrakh continued to develop the policy of active insurance of
                                                                                       risks of agribusiness. Ingosstrakh became a committed participant of Agri-
Property and liability insurance is the most quickly developing segment                business Development — the national project of the Government. Among
in Ingosstrakh. For a number of years, it has held the second place in the             insurers there were both large agriholdings and smaller companies — per-
Company in terms of insurance charges. In 2006, the share of this seg-                 sonal subsidiary economies, recipients of government investments within
ment in the Company’s portfolio totaled 20%. Aggregate premium income                  the framework of national projects and private investments for production
outpaced the market growth rate, increased by 34.7% versus 2005 and                    development. Here, the Company’s main task was to speed up the devel-
totaled RUB 6.9 bln. The share of inwards reinsurance grew substantially               opment of such sectors of agri-industrial insurance as crop insurance, ani-
from RUB 583 ml in 2005 to RUB 1 bln in 2006 (+74%).                                   mal and fish stock insurance, insurance of manufacturers’ property. Thanks
                                                                                       to successful development of operations and expert risk assessment, we
As before, the main areas are still fire insurance, different types of liabil-
                                                                                       managed to increase premium income from RUB 135 ml in 2005 to RUB
ity insurance and technical risks insurance. At this, traditionally small share
                                                                                       308 ml in 2006, which is an increase of 129%, while the rate of loss stayed
belongs to fire insurance — here, premium income totaled RUB 4.2 bln
                                                                                       at 35%.
or 61.4% of total income. The share of technical risks is RUB 2 bln (29.3%
of total income), and of liability insurance — RUB 639 ml (9.3% of total               In 2006, the largest insurance compensations for property types of insur-
income).                                                                               ance were paid for losses caused by total loss of property in fire (5 large
                                                                                       losses of the total amount of RUB 1.1 bln).
Sustainable growth rate was due to the fact that for a number of years the
Company’s main efforts were aimed at:                                                  It must be said that regardless of compensations for severe losses, the loss
       maintenance and development of mutually beneficial cooperation                  ratio didn’t go beyond 25%.
       with existing clients according to the principle “grow with the client”.
                                                                                       Compensation for severe losses:
       Thanks to larger volume and better quality of services provided to
                                                                                            RUB 1.1 bln — first part of compensation (50% of total compensa-
       loyal clients, their share in the portfolio totaled 83% or RUB 5.7 bln,
                                                                                            tion amount) to Center of Implementation Protek — fire in the ware-
       which is an evidence of high loyalty of Ingosstrakh’s clients;
                                                                                            house for pharmaceutical products;
       attracting new clients. In 2006, we signed 15.2th of new contracts for
                                                                                            RUB 23.1 ml — Production Firm Mataplast — fire in the painting
       the amount of RUB 1.2 bln.
                                                                                            shop;
Activities were stepped up in all client categories. In 2006, high premium                  RUB 8.5 ml — LVZ Virma — fire in the warehouse for alcoholic bever-
growth took place in the segment of large accounts — growth under con-                      ages;
tacts with insurance premium of over USD 100th amounted to 40%. At the                      RUB 8.0 ml — Makhachkala Poultry Plant — loss of poultry stock
same time, volumes increased for small and medium accounts (with con-                       caused by avian flu;
tract premium of up to USD 100th), too (by 28%). This dynamic increase                      RUB 6.4 ml — Avtozentr — fire caused by arson;
builds on significant expansion in all core areas:                                          RUB 6.0 ml — Poultry Plant Eldama — loss of poultry stock caused by
         insurance of property pledged to banks as loan security;                           avian flu;
         insurance of property for leasing;                                                 RUB 5.3 ml — fire in the warehouse for alcoholic beverages;
         insurance of property interest of agribusiness and personal subsidiary             RUB 5.1 ml — Mobikom Kavkaz — explosion at substation caused by
         economy;                                                                           willful misconduct of a third party.



                                                                                  26
                                                                                       In 2006, Ingosstrakh remained a monopolist in insurance of cultural valu-
Special Risks Insurance                                                                ables and exhibition goods in the Russian market. Premium income in this
                                                                                       segment amounted to over RUB 90 ml, and the loss ratio was almost equal
Special risks insurance is one of the priorities for the Company. Special risks
                                                                                       to zero (0.2%). The growth rate versus the same period in the previous
include cargo insurance, space and aviation risks, insurance of vessels and
                                                                                       year was over 60%.
ship-owners’ liability, insurance of transport operators and trade credits.
                                                                                       Most exhibitions held by Russian museums in other countries were insured
                                                                                       by Ingosstrakh. Large-scale projects include the Year of Russia in China,
          Cargo Insurance                                                              Masterpieces of the Orsay Museum in the Tretyakov Gallery and exhibition
                                                                                       Russia in Bilbao, Spain. Among the Company’s clients are the State Hermit-
                                                                                       age, the Moscow Kremlin, State Russian and Historical Museums.
In 2006, the Company signed over 25 thousand cargo insurance contracts,                In 2006, insurance of valuables transportation was made an independent
by 18% more than in the previous reported period. Insurance premium                    business line. In the reported period, premium income grew by 111% and
income was RUB 709 ml, reinsurance income amounted to RUB 15 ml.                       amounted to over RUB 40 ml. Here, large accounts are VTB, Post of Russia,
                                                                                       Inkakhran.
Cargo insurance market was influenced by the following factors:
       progressive increase in volumes of domestic and international inter-            In 2006, the Company made efforts not only to attract new large accounts,
       modal transportation due to more trade contacts and dynamic de-                 but also to develop relations with existing large accounts, which yielded
       velopment of the Russian economy;                                               higher insurance premiums. The share of large accounts in total premium
       improved insurance culture among large and medium-sized busi-                   income was over 55%. Among new large insurants (annual premium for
       ness — understanding the need to get insured, primarily among the               each is over USD 100th) are M.Video Trade, Avtologistika — Trans, Post
       owners of expensive and highly marketable goods;                                of Russia, etc.
       steady trend towards considerable decline of cargo imported under
                                                                                       Along with retaining existing clients and attracting new ones in the Mos-
       grey schemes.
                                                                                       cow region, one of the key objectives was to strengthen cooperation with
Sales turnover insurance for Russian participants in foreign economic activi-          insurants in the regions of Russia, CIS and other countries. As a result of
ties remains the main type of insurance in this segment for the Company.               Ingosstrakh’s efforts, its position in cargo insurance in many regional mar-
We continued to monitor the foreign volume of business of the Russian                  kets strengthened significantly. The Company’s share grew to 24%, which
Federation in terms of the goods structure, which helped to identify prior-            is a 10% growth versus 2005.
ity areas of work with Russian foreign trade enterprises.
                                                                                       As regards payment for severe losses, past year was rather favorable, just
High quality of services and reliable insurance coverage were responsible              as 2005. In 2006, 1479 claims were made to the amount of over RUB
for prolongation of contracts with the largest in Russia importers and ex-             190 ml, of them 1327 claims were settled for the amount of RUB 94 ml,
porters of raw sugar, corn, meat, tobacco products, tropic oils, coal and              which is 35% less than in 2005. Total loss ratio for cargo insurance was
non-ferrous metals. The same factor prompted many new companies                        13% — a record figure for the past several years.
that trade with Western Europe, South-East Asia, Near and Middle East to
                                                                                       The largest settled claims were:
become Ingosstrakh’s clients. At this, insurance of external transportation
                                                                                              RUB 7.4 ml — weight shortage of raw sugar carried by sea from
developed in parallel to insurance of transportation inside Russia, and we
                                                                                              Brazil to Russia;
attracted new large accounts — car dealers and forwarding companies.
                                                                                              RUB 5.5 ml — non-delivery (theft) of a vehicle with cosmetic prod-
                                                                                              ucts on the route Italy — Latvia;


                                                                                  27
       RUB 4.8 ml — total loss of cargo (passenger cars) in fire during trans-                duced at least by 15–20%, and for some types (in particular, for ferry
       portation;                                                                             flights) even more.
       RUB 3.9 ml — theft of a vehicle with household appliances and elec-
                                                                                       Although the Russian aviation insurance market is very limited, there are
       tronics;
                                                                                       quite many insurers (currently, over 35 companies). Most of them act as
       RUB 3.5 ml — theft of container with cigarettes from the load plat-
                                                                                       brokers or fronting companies and transfer all profit for reinsurance, mainly
       form at a railway station.
                                                                                       abroad. Still, many aviation insurers in Russia use reinsurance capacity of
In 2007, The Company will continue the implementation of 60 large-scale                Ingosstrakh as its reinsurance terms are more favorable.
promising projects that will ensure an increase in premium income and
                                                                                       In this situation, Ingosstrakh has not only preserved and developed tradi-
help to preserve Ingosstrakh’s leadership in the Russian cargo insurance
                                                                                       tional partner relations with larger airlines (S7, Transaero, Krasair), but also
market.
                                                                                       increased the share of large accounts in its portfolio — it insured the fleet
                                                                                       of VIMavia and KD Avia. This allowed to compensate for lower premium
                                                                                       income caused by decline in rates and smaller volume of transactions in
          Insurance of Aviation                                                        other segments.
          and Space Risks                                                              The Company continued its foreign operations, both in the CIS countries
                                                                                       and far abroad. Ingosstrakh accepts for insurance aviations risks from the
Aviation and space insurance transactions are still holding an important               markets of Ukraine, Byelorussia, Kazakhstan and Kirgizia, also through rep-
place in Ingosstrakh’s portfolio of property and liability insurance for legal         resentations, affiliates in the above states and international brokers. The
entities. Traditionally, the Company has been one of the largest operators             main markets in CIS are Ukraine and Kazakhstan.
in aviation and space segments of the insurance market, both as a direct
                                                                                       In 2006, premium income from aviation insurance amounted to over RUB
insurer and as a reinsurer.
                                                                                       1.7 bln, of them RUB 1.3 bln was direct insurance.
In 2006, the air transport insurance market demonstrated the following
                                                                                       2006 wasn’t really a successful year as severe losses were claimed. Total
trends:
                                                                                       paid losses amounted to over RUB 700 ml, including RUB 584 ml in di-
        lower number of airlines in the market caused by more rigid safety
                                                                                       rect insurance. The most severe losses were aircraft А-310 — 435 (Irkutsk),
        requirements of the public authorities;
                                                                                       TU-154 (Donezk and Iran/Afghanistan), Boeing 737 (Nigeria).
        higher concentration of the national air transportation market. A
        group of leaders was formed in the market that included such com-              Being a part of the world market, the Russian space risks insurance market
        panies as Aeroflot, S 7, Air Union, Transaero and some others that             followed the world trends, primarily to continue to reduce insurance pre-
        control over 70% of the market;                                                mium rates for accepted risks.
        prevailing need to modernize the fleet, primarily by means of leasing
                                                                                       In 2006, Ingosstrakh actively participated in insurance and reinsurance of
        second-hand aircraft by foreign manufacturers. High prices and very
                                                                                       over 40 space projects including liability insurance of European commercial
        limited number of aircraft types manufactured by Russian aviation
                                                                                       enterprises, which is a good level of operations development taken a very
        plants caused shrinkage of potential sales market for local aviation
                                                                                       tough competition. In 2006, we implemented another large project for
        and repair bases that are also active in the aviation insurance mar-
                                                                                       Federal State Unitary Enterprise “Space Communications” — insurance of
        ket;
                                                                                       orbital group of communication satellites of the new generation “Express
        lower tariff rates caused by limited solvent demand for aviation insur-
                                                                                       AM”. Total insurance premium under the project was about RUB 250 ml.
        ance, as well as by the world trends in the aviation insurance market.
        According to the estimates, in 2006, the rates for different risks re-


                                                                                  28
In 2006, total premium of the Company for space risks insurance was RUB                           RUB 24, 6 ml — breakdown of the main propulsion unit, “Inzenieris
293 ml, including RUB 273 ml for direct insurance.                                                Neciporenko”;
                                                                                                  RUB 20.4 ml — flooding of machine space, “Forest Enterprise”;
At the same time, in 2006, some insurance compensations were paid. Total
                                                                                                  RUB 17.1 ml — breakdown of the main propulsion unit, “Merchant
compensation for space risks was about RUB 204 ml, including over RUB
                                                                                                  Brilliant”;
118 ml for direct insurance.
                                                                                                  RUB 15.3 ml — stranding, “Altair Dilek”.
The largest settled claim was RUB 114 ml — insurance of loss of income,                         Among severe losses under ship-owners’ liability insurance settled in
total loss of communication satellite Express АМ11.                                               2006 there were:
                                                                                                  RUB 15.3 ml — total loss of vessel (“Blue Ocean”) off the Japanese
                                                                                                  coast;
           Insurance of Vessels and Ship-                                                         RUB 13.4 ml — collision of “Vasya Korobko” with motorship Liva.

           owners’ liability
                                                                                                      transport operators’ Insurance
 In 2006, Ingosstrakh remained a leader in the Russian market of insurance
 of vessels and ship-owners’ liability. At the same time, the competition in                 In 2006, in the area of transport operators’ insurance, the Company con-
 this sector intensified last year. In this environment, the Company chose to                tinued its positive development and reached a 23% growth as compared
“clean up” its portfolio and attract high-quality young fleet. As a result, ac-              to the previous period and received premium income of RUB 550.8 ml.
 crued premium for hull insurance stayed on the level of 2005, which is RUB
                                                                                             The dynamic development of the segment built on:
 887.5 ml, and decreased for liability insurance by 2.5% and totaled RUB
                                                                                                   partial liberalization of cargo transportation by the Russian railways;
 693.6 ml. This minor reduction of liability insurance premium was caused
                                                                                                   speedy renewal of the fleet of cars, locomotives and track equipment
 by the general stagnation in the liability market because:
                                                                                                   due to increased demand.
         of the dоminant role of foreign insurers in working with large steam-
         ship companies — premiums go to the foreign market;                                 2006 was very successful both in terms of retaining old clients and attract-
         of foreign origin of vessels of potential insurants;                                ing new ones, among them the leading carriers and train operators, like
         often, hull insurance is preferred to ship-owners’ liability insurance;             RZD (Russian Railroads), Firm Transgarant, ZAO Evraztrans, Metalloinvest-
         of general lack of liability insurance risk in insurance of small-sized ves-        trans, Russkaya Troika, etc.
         sels.
                                                                                             In our traditional segment TIR, the client portfolio has not changed — our
In 2006, hull insurance market was characterized by a larger number of ves-                  clients are 10 Associations of International Motor Carriers from Russia, Lat-
sels under construction in Russian shipyards, inflation component in insur-                  via, Lithuania, Armenia, Azerbaijan, Georgia, Kazakhstan, Kirghizia, Moldova
ance sums and slow non-systematic increase in the number of insured ves-                     and Uzbekistan. Higher premium income in 2006 for this type of insurance
sels. Under such conditions, we insured large vessels under construction as                  can be explained with a larger number of TIR Carnets received by the As-
platform MOSS CS 50 II, a food carrier, a seismic prospecting vessel.                        sociations, which in its turn is related to the increase in export-import and
                                                                                             transit operations via the territory of Russia, the Baltic States and the CIS
Altogether, the loss ratio in this segment was below the forecast and to-
                                                                                             countries.
taled 60%. Severe losses in hull insurance (reinsurance) settled in 2006
include:                                                                                     Larger volume of business between Russia and its foreign partners and
       RUB 173.2 ml — fire on the destroyer under construction;                              penetration in the domestic market of large foreign companies formed de-
                                                                                             mand for new insurance products. With regards to our clients’ needs, we


                                                                                        29
introduced changes to the current Rules of Liability Insurance for Carrier/          In the reported year, following the development of the insurance portfo-
Forwarding Agent, Operator of Transport/Customs Terminal, Customs Car-               lio, reinsurance protection for credit insurance developed further: debtors’
rier in order to offer comprehensive insurance to our clients on all stages          limits were raised and the number of international reinsures increased. All
of cargo delivery. Such changes resulted in insurance of such new logistic           reinsures have international financial strength ratings of A range.
companies as Logistic Service “Siyanie”, MC Logistic, IKEA Mos (Trade and
                                                                                     The Company closely cooperated with Austrian Insurance Company Garant
Real Estate).
                                                                                     and its Swiss affiliate, Belgian Insurance Group ONDD — Ducruar, Italian
Moreover, starting with 2006, Ingosstrakh introduced a new insurance                 Insurance Group Sacce and some other credit insurance and reinsurance
product — liability insurance for persons who give guarantees (surety) of            partners.
customs charges payment. Potential consumers of such insurance services
are banks, customs carriers, limited storage sites/customs warehouses, etc.
                                                                                              Voluntary Medical Insurance
         Credit Risks Insurance                                                      In 2006, the same way as in 2005, the voluntary medical insurance mar-
                                                                                     ket was characterized by tough competition, prevalence of legal entities
As a pioneer of credit insurance in Russia, Ingosstrakh is strengthening its         among insurants and regional business development.
leadership position in this type of insurance and offers high-quality insur-
                                                                                     In 2006, the market development was influence by the following factors:
ance of accounts receivable.
                                                                                            more complicated situation in budget-supported healthcare system;
In the reported year, the insured volume of business exceeded RUB 100 bln.                  higher income of corporations and private persons — potential cli-
Premium income for insurance of trade credits increased compared with                       ents;
2005 and amounted to RUB 333.2 ml.                                                          increased demand of employers’ to include medical insurance in
                                                                                            compensation package for employees;
The main growth factor was demand for trade credits insurance from large
                                                                                            higher insurance tariffs for voluntary medical insurance. Tariffs were
multinational corporations that supply their product to Russia and CIS.
                                                                                            influenced by inflation expectations as regards cost of services in
Most requests were in the area of electronics and home appliances. The
                                                                                            healthcare institutions. The annual tariff growth is 10-15% and will
sustainable growth of sales in the sector, continued concentration of play-
                                                                                            remain on the same level in the next few years;
ers and limited opportunities of European insurers promoted high demand
                                                                                            increased volume of one-time medical services sold through “mo-
for the services of reliable Russian companies. In 2006, the major growth
                                                                                            nopolicies” regardless of rather “strict” position of regulatory authori-
was driven by clients from South Korea, Italy, Turkey, the USA, Austria and
                                                                                            ties concerning this type of business (no serious sanctions have been
Japan.
                                                                                            enforced for “monopolicies” against market participants so far).
A large volume of credit insurance operations persisted in pharmaceutical
                                                                                     In 2006, the Company significantly increased income in this segment —
distribution, foodstuffs, construction and finishing materials and packaging.
                                                                                     the growth rate was 40.7% versus the previous year, and total premium
Advance payments were insured for export of metal and mineral fertil-
                                                                                     exceeded RUB 2.5 bln. Ingosstrakh’s compensations amounted to RUB
izers.
                                                                                     2.0 bln. (+28.1%).
About 80% of portfolio was short-term insurance of business volume. Mid-
                                                                                     Based on its performance in 2006, the Company holds the 3rd place in the
term insurance covered risks of non-payment for equipment supplies for
                                                                                     market with the share of 4.8%, which is 0.7 percentage points more than
food and processing industry. This trend will prevail under conditions of
                                                                                     in the previous year.
continued re-equipment of the Russian industry.



                                                                                30
Ingosstrakh’s voluntary medical insurance portfolio is distinguished by prev-         Altogether in 2006, 164 thousand contracts of voluntary motor insurance
alence of large corporate clients (premium from USD 100th per annum                   were signed with Ingosstrakh — an increase of 48% versus the previous
and more). For the last few years, the share of such accounts increased               year. The Company signed 1256 thousand contracts of compulsory motor
from 60% to 75%.                                                                      liability insurance. In 2006, in this segment, settled claims exceeded 68.5
                                                                                      thousand.
In 2006, the Company attracted the largest producers from food, con-
struction and other sectors, such as Danone Industry, Baltika Brewery, Mc-            In 2006, in Moscow the base tariff system has not changed, however dur-
Donalds, AMD Programme, Gallery Service, Glavmosstroymonolit, Ermann,                 ing the year there were changes in tariffs for damage to certain car brands
etc.                                                                                  and models depending on changes in repair cost of official dealers.
In 2006, along with programmes for corporate clients, Ingosstrakh devel-              Besides, there were changes in tariffs for auto theft for certain car brands
oped “box” package of current retail programmes, programme based on                   and models based on quarterly monitoring of car thefts and correspond-
outpatient clinics “Value for Money”, as well as outlined new products for            ing loss ratio. In 2006, Ingosstrakh’s branches launched the same tariff sys-
individuals with franchise, waiting periods, multi-year insurance, etc. in or-        tem as in Moscow adjusted for regional correction factors for “Damage”
der to provide a 100% satisfaction to our clients.                                    and “Auto Theft”.
                                                                                      In compliance with the current development strategy, the following chang-
                                                                                      es were made in the product sales channels:
          Motor Insurance                                                                   restructuring of sales of private property in order to increase the
                                                                                             market share — spin off of property underwriting;
Currently, motor insurance is a locomotive of the whole Russian insurance
                                                                                            restructuring of direct sales in order to increase the share of direct
market.
                                                                                            sales in the portfolio — direct sales were restructured according to
 2006 was a milestone year for the automobile market: sales of brand-                       specialization, pilot project “mobile group” was implemented;
new foreign cars exceed a million and surpassed sales of domestic cars.                     accelerated promotion of the product for target segment “second-
Aggregate insurance premium for MOD insurance was about RUB 90 bln,                          hand” foreign cars which ensured premium income for “Optimal” in
and in the last two years the market has been growing at an average rate                    the rate of RUB 260 ml.
of 60% per annum. It must be noted that the market development was
                                                                                      The largest compensations for motor insurance in 2006 were mainly relat-
driven mainly by the growing car fleet but not higher average policy price.
                                                                                      ed to thefts of premium-class cars: 3 Porsches CAYENNE and a Mercedes-
However regardless of high growth rate of sales and car insurance, the
                                                                                      Benz S with the average compensation of RUB 4 ml and a car accident with
market grew mainly due to the low price segment (cars from USD 10 to
                                                                                      the total destruction of BMW M 5 — RUB 4.5 ml.
20th). This segment is most sensitive to price changes, and the competition
here is very rigorous, even with dumping. Under such conditions Ingoss-
trakh decided to strengthen further its position in upper price segments of
the automobile market, which will help to prevent higher losses if growth                      tourist Insurance
is limited.
                                                                                      In 2006, the tourist insurance market continued to develop as in 2005. At
Total premium income for motor insurance exceeded RUB 16.4 bln, of                    the same time, increased number of insurants was leveled by dumping
them RUB 12.6 bln (+32.5%), compulsory motor TPL insurance — RUB                      and rigid competition among insurers for large travel agents. This resulted
3.9 bln (+21.1%).                                                                     in annual premium reduction by 5-10%, and for some travel agents — by
                                                                                      20%. As a result, the average market growth was not more than 7% in
                                                                                      2006.


                                                                                 31
It must be noted that in 2006 there was a change in favorite destinations.
Now, Russian tourists often prefer to spend their vacations in Spain, Croatia,                  personal Insurance
Montenegro and Greece. Still, traditional leaders — Turkey and Egypt —
preserved their leading position, but the gap is getting narrower.
                                                                                                (Ingosstrakh-life)
In 2006, the Company’s premium income was RUB 346.6 ml, which ex-                     After coming into effect on July 1, 2007 of the requirement of the Fed-
ceeds the previous year by 4%.                                                        eral Law on Insurance Business in the Russian Federation to divide life and
                                                                                      property insurance in one company, there emerged subsidiaries of insur-
Higher premium income in 2006 was not the result of an increased number
                                                                                      ance companies that offer life insurance.
of insurants but because higher limits of insurers’ liability were introduced
for insurance contracts and higher tariffs for entry to European countries,           As a result, this business line was turned into independent insurance com-
including the Schengen States. Restraint of premium income by price                   pany Ingosstrakh-Life.
dumping and parallel increase in the number of insurants caused higher
                                                                                       Life insurance market development in 2006 was influenced by the Fed-
costs of portfolio maintenance and reduced efficiency of insurance trans-
                                                                                       eral Insurance Supervision Service that implemented a tough policy against
actions. However, the Company managed to preserve its leadership, which
                                                                                      “pre-arranged transactions” in the market. As a result, life insurance market
is about 40% of the market.
                                                                                       reduced by 37% as compared to 2005.
In 2006, the Company had to step up its activities to retain large travel
                                                                                       Unlike other market players, Ingosstrakh has always abided by the policy of
agents who guide the market in terms of destinations, such as Natali Tours,
                                                                                      “white business”. In 2006, Ingosstrakh-Life got RUB 473.7 ml of premium,
Lanta-Tour, Mostravel, Biblio-Globus, Roza Vetrov, Solveks, Capital Tour,
                                                                                       which is 22% more than in 2005. Premium in the main segment — life insur-
and others. At the same time, over 150 middle-sized travel agents, several
                                                                                       ance — grew by 116% (+RUB 59.7 ml), in accident and health insurance —
corporate clients that get their employees insured for business trips out-
                                                                                       by 8% (+RUB 27.1 ml). This resulted in an increase of the Company’s share
side Russia became the Company’s clients.
                                                                                       in life insurance from 0.2% to 0.7%. Currently, the Company’s share in the
Last year, a milestone in development of this segment was the launch or                life insurance market is not big, but its growth rate is much higher than in
retail sales of non-departure insurance, which enables to offer a larger               the market. Pursuant to the adopted development strategy, the share will
range of insurance services not only in course of the trip, but also on the            grow to 10% by 2010. The leaders in the life insurance market (in terms
preparatory stage.                                                                     of premium income) are either captive insurers (Capital Insurance, SOGAZ-
                                                                                       Life, Neftepolis) or insurers affiliated with banks (Russian Standard Insur-
In 2006, we managed to keep the loss ratio of tourist portfolio at 43%,
                                                                                       ance). There is only one market insurer among top five– AIG Russia.
which is a proof of stable and efficient claims settlement.
                                                                                      In 2006, Ingosstrakh — Life signed contracts with major companies, like
The largest settled losses were under insurance of emergency medical
                                                                                      Ernst&Young (consulting services), Xerox (manufacturer of office equip-
costs when traveling abroad. Among them, in 36 cases the amount ex-
ceeded RUB 260 thousand each.




                                                                                 32
ment) and Dupont (scientific and industrial corporation). Total number of            improve the quality of management of branches located in East Siberia,
persons insured in 2006 was 650 thousand.                                            we closed down the Baikal Regional Center, and the relevant branches are
                                                                                     now managed by the Siberia Regional Center.
In 2006, the main goal of the product policy was to adjust the product
line for their proper positioning in the market with regards to changing cli-        In 2006, we opened 23 additional offices of the Company’s branches.
ent requirements. The Pension Programme was made subject to the rules
                                                                                     Insurance premium income in regional divisions of the Company totaled
of Pension Life Insurance, which seriously simplified purchase of pension
                                                                                     RUB 7.8 bln, which is 39.4% more than in 2005.
programs by individuals and made it more beneficial. A special calculator
was developed to calculate pension payments. Also in 2006, a credit insur-           The main share of the insurance portfolio of the branch network belongs
ance programme for individuals was developed, which is a much-needed                 to motor insurance — RUB 4.9 bln (the share in the regional insurance
product in the situation of growing consumer and mortgage lending in                 portfolio is 62.2%). The share of compulsory motor TPL insurance in total
the country.                                                                         motor insurance was 39.2%. Premium income for property and liability
                                                                                     insurance amounted to RUB 1.0 bln (13.1% in the portfolio), for voluntary
According to the competition analysis of the life insurance market that
                                                                                     medical insurance — RUB 758 ml (9.7%). Other types of insurance ac-
was held in the fourth quarter 2006, accident insurance programmes of
                                                                                     count for less than 10% of the portfolio. This includes space and aviation
Ingosstrakh — Life are among the most flexible and comprehensive in-
                                                                                     risks — 6.0%, insurance of vessels and ship-owners’ liability — 4.3% and
surance products in the Russian market. Current long-term life insurance
                                                                                     other types — less than 3%.
programmes can answer the market needs.
                                                                                     The share of branch network in the total premium income of the Company
In 2006, the Company’s compensations totaled RUB 108.9 ml, including
                                                                                     in 2006 was 22.9%, which is 3.2% more than in 2005. At this, the share of
several settled claims with compensation of over RUB 1 ml each. The larg-
                                                                                     branches in total charges has not changed materially in 2006, except for
est part of compensations was paid under group insurance contracts.
                                                                                     insurance of space and aviation risks (23.8% versus 12.7%). In motor insur-
                                                                                     ance, the branches’ share increased from 24.8% to 27.7%.

Regional network                                                                     An increase in the volume of premium income in 2006 as compared with
                                                                                     2005 amounted to 45.9% for motor insurance, 35.2% for property and
In 2006, the branch network of Ingosstrakh consisted of 9 regional centers,          liability insurance, 40.9% for voluntary medical insurance. The maximum
87 branches and 148 additional offices. Ingosstrakh’s divisions are func-            growth in relative terms was in insurance of space and aviation risks —
tioning in all constituent entities of the Russian Federation and are open in        53.5%, and in absolute terms — in motor insurance — by RUB 1.5 bln.
235 cities and urban centers.
In 2006, we closed down the Southern Regional Center (Rostov-on-Don)
and simultaneously opened the “South” Regional Center (Krasnodar). To




                                                                                33
          Reinsurance                                                                   Marketing
Portfolio protection is the priority for Ingosstrakh. Protection operations             In 2006, the Company abided by the key principles of its marketing strat-
can be divided into two main components: marine and aviation reinsur-                   egy approved by the Board of Directors of the Company in 2005. In 2006,
ance and non-marine reinsurance programmes. Key parameters of Ingoss-                   main marketing events were targeted at retail consumers of insurance ser-
trakh’s reinsurance contracts in 2006 are given in the table below.                     vices. In the previous year, five segments of consumers were identified;
                                                                                        three of them were declared target segments for Ingosstrakh in terms of
In 2006, because of new more stringent requirements of the European
                                                                                        the product line and communication policy. At the same time, significant
Union to European flights, carriers need higher liability limits. Therefore, In-
                                                                                        marketing efforts were aimed at promoting priority types of insurance for
gosstrakh acquired additional protection for such risks. Also in 2006, we ex-
                                                                                        corporate business. Another equally important marketing aspect was im-
panded aviation risks reinsurance portfolio by entering into new contracts
                                                                                        provement of marketing communications in the regions of the Company’s
for military risks. A new leader emerged in catastrophic contract for MOD
                                                                                        presence in 2006.
insurance (Converium instead of Platinum), as the new leader in MOD in-
surance offered more attractive terms, both of pricing and coverage.



   Basic Contract Parameters of Outwards Reinsurance of Ingosstrakh in 2006



       Programme                                    Details                                                            Features
   Marine and                Hull reinsurance                                             Excess of loss, priority USD 1 5 ml, limit USD 30 ml
   aviation risks
                             Cargo reinsurance                                            Excess of loss, priority USD 2 5 ml, limit USD 30 ml

                             Ship-owners’ liability reinsurance                           Excess of loss, priority $3 ml, limit $500 ml
                             Aviation liability risks reinsurance                         Excess of loss, priority $3 ml, limit $75 ml
                             Aviation liability to third parties of over USD 75 ml        Excess of loss, priority $75 ml, limit $675 ml
                             Aviation liability to third parties of over USD 50
                                                                                          Excess of loss, priority $50 ml, limit $500 ml
                             ml, “military risks”
                                                                                          Quota share reinsurance USD 18 ml and 20% net retention (for
                             Aviation hull risks reinsurance
                                                                                          some risks — USD40 ml and 10%)
   Non-marine risks          Reinsurance of property risks                                Excess of loss, priority USD 1 ml, limit USD 150 ml
                             Reinsurance of technical risks                               Excess of loss, priority USD 2 5 ml, limit USD 50 ml

                             Reinsurance of civil liability risks                         Excess of loss, priority USD 0 75 ml, limit USD 5 ml


                                                                                   34
As regards marketing communications, the main focus was on their integra-                Also in 2006, we developed and implemented a communication pro-
tion on the basis of the Guidelines on the Corporate Style of the Company                gramme to stimulate consumer demand in the sales channel for retail types
as approved by the Management Board of Ingosstrakh in 2006. The new                      of insurance that envisages promotion of insurance services using POS and
corporate style was launched in the Company’s sales offices, in advertising              other advertising and information materials, as well as events to enhance
and information materials, for design of the corporate website, souvenir                 the number of requests to the Company Contact Center.
products and other advertising and information vehicles.
                                                                                         To enhance competitive ability of the Company’s products based on mar-
Last year, we developed the plan of marketing events and implemented                     keting research held in 2006 using different methods (focus group, con-
the integrated communication programmes to promote corporate and re-                     joint-analysis, etc.), we analyzed the existing product lines and identified
tail types of insurance, such as:                                                        proposals to create new or modify existing products in motor insurance,
        insurance of property of natural and legal persons;                              property insurance and voluntary medical insurance.
        retail and corporate motor insurance;
                                                                                         We continued evaluation of the Company’s activities in general. Last year,
        voluntary medical insurance and travel insurance;
                                                                                         we developed the evaluation methods and assessed such key performance
        cargo insurance;
                                                                                         indicators as attracting and retaining clients, satisfaction of insurants, aver-
        aviation and space risks insurance;
                                                                                         age number of business lines per customer. Besides, in 2006 we developed
        insurance of vessels and ship-owners’ liability (in particular, insurance
                                                                                         and introduced the procedure of organizing regional integrated advertis-
        of yachts and boats);
                                                                                         ing campaigns and their assessment.
        insurance of transport operators.




   Examples of Successful Protection



                                                                               Property
   Ptotek                       May 14, 2006, there was a large fire on the territory of the warehouse owned by Protek Final loss compensated to
                                the client was USD 75 ml This is the largest loss in the history of the Russian property reinsurance The amount of
                                loss exceeded Ingosstrakh’s net retention (USD 1 ml); it was collected from reinsurers under the obligatory property
                                treaty
   Azovstal                     In 2006, another large loss was claimed Blast furnace #3 exploded in the plant of Azovstal on March 23, 2006
                                Currently, Ingosstrakh’s reserve for this type of insurance is USD 12 7 ml Net retention was USD 1 ml
                                                                           Hull Insurance
   Severnaya Verf               April 27, 2005, there was a fire on the destroyer ship under construction at OAO Severnaya Verf (Northern
                                Shipyard) Ingosstrakh’s loss was USD 6 578 500 and was paid to the client on November 10, 2006 Under the
                                obligatory treaty, reinsurers covered the amount of loss in excess of Ingosstrakh’s net retention


                                                                                    35
                                                                                       Research Company, throughout 2006 Ingosstrakh was among top three
                                                                                       in the market according to this indicator and the brand knowledge was
                                                                                       growing at a stable rate.
                                                                                       Ingosstrakh is the only insurance company in the rating of most valuable
                                                                                       Russian brands compiled by Interbrand Group, the international consulting
                                                                                       company.



                                                                                       Investment Activities
                                                                                       Ingosstrakh’s investment policy is aimed at building the best investment
                                                                                       portfolio and proper management thereof based on full compliance with
                                                                                       the existing legal norms and requirements and with regards to the Compa-
In the light of the forthcoming 60th anniversary and increased visibility of
                                                                                       ny’s strategic objective to improve its financial stability and capitalization.
the Company in the Internet, Ingosstrakh developed and launched a new
website (www.ingos.ru) that differs significantly from the previous version.           Short-term investments fund is being formed on the basis of conservative
It is aimed at all the categories of users: retail consumers, corporate clients        approach aimed at risk minimization, which ensures reliability and return
and partners of the company. At this, the structure and navigation of the              on investments at the planned rate of return. The main task of short-term
website cover all segments of insurants: those with some insurance experi-             investments is to fulfill obligations and earn investment income. The source
ence and wanting to choose a tailor-made programme and those who are                   of short-term investments is insurance reserves and equity of the Com-
just starting to use insurance services. The website offers quick and easy             pany.
access to calculators of insurance premium for different types of insurance
                                                                                       In 2006:
(motor insurance, property insurance and travel insurance) in order to start
                                                                                              the bank instruments portfolio grew by 63 %, from RUB 11.9 bln to
Internet-based sales of insurance products.
                                                                                              RUB 19.4 bln;
Marketing efficiency is confirmed by the sustainable knowledge of Ingoss-                     because of high volatility of the Russian Stock Exchange in 2006, profit
trakh’s brand (no prompting). For instance, according to the ComCon                           for portfolio of non-bank financial instruments was partly fixed and
                                                                                              some assets were converted into low-risk bank instruments, which re-
                                                                                              sulted in a reduction of the non-bank financial instruments portfolio
   Insurance Brand                  1st wave       2nd wave 3rd wave                          by 14 % from RUB 4.9 bln to RUB 4.2 bln;
                                                                                              in 2006, yield of the non-bank financial instruments portfolio totaled
                                                                                             21.8 % per annum or RUB 1.2 bln in absolute terms;
   Rosgosstrakh                         42.3         41.9         44.3                        yield of the bank financial instruments portfolio totaled 8.2 % per an-
                                                                                              num or RUB 1.1 bln in absolute terms;
   Ingosstrakh                          33.4         34.9         37.0                        total yield of transactions with short-term investment portfolio of the
                                                                                              Company in 2006 amounted to RUB 2.3 bln.
   Rosno                                34.0         32.0         32.8
   Spasskie Vorota                      26.8         27.5         27.9
   Alfa Strakhovanie                    24.5         25.1         25.6


                                                                                  36
Human Resources
As of 31.12.2006, there were 1664 employees in the head office in Mos-                Personnel’s training is based on special programmes of the Corporate Uni-
cow and 2151 in the regional network. 64% of employees are up to 35                   versity. The training is aimed at improving the competency of employees in
years of age. About 78% of employees have higher education.                           order to promote implementation of the Company’s strategic goals.
Key areas of HR policy of the Company are the following elements of the               In 2006, about 2500 persons took part in trainings (over 60% of the Com-
personnel management system:                                                          pany’s employees). Education programmes make wide use of distant learn-
       planning personnel resources and recruitment;                                  ing including training programmes in special subjects with regard to the
       professional training;                                                         needs of the regions.
       improved system of motivation;
                                                                                      In November 2006, we held the annual Performance Evaluation of Person-
       monitoring of personnel;
                                                                                      nel that covered about 90 % of all the employees. As a result, we formed
       development of corporate culture.
                                                                                      a personnel reserve of the Company and developed the annual plan of
Throughout its history, the Company has been developing certain princi-               professional education for the employees.
ples of corporate culture that must be strictly followed by all employees. In
                                                                                      In 2006, new Training Procedures for Insurance Agents of Ingosstrakh were
2006, the management terminated contracts with 24 employees (including
                                                                                      introduced. According to the Procedures, a special methodology will be ap-
in regional branches) for non-compliance with such principles.
                                                                                      plied to select candidates to learning groups, a programme of adaptation
In October 2006, the Board of Directors of the Company adopted the                    and traineeship. The training programme for insurance agents acquired a
Code of Ethics of Open Joint-Stock Insurance Company Ingosstrakh. One                 wider format in 2006 — we introduced a course in voluntary medical insur-
of its main objectives is to strengthen loyalty to the Company as the high-           ance programmes. Insurance agents are trained by local experts in motor
est standard of ethical behavior. The Code sets forth the main principles of          insurance and medical insurance.
relations between employees, business partners, clients, and the principles
                                                                                      In December 2006, we held the 9th Contest of Ingosstrakh for the best
of fair business.
                                                                                      student work on insurance. Students from the universities of Moscow and
In 2006, we recruited specialists in different areas. The requirements includ-        regions took part in the contest: mechanical and mathematical faculty of
ed basic professional knowledge, previous experience, and knowledge of                the Moscow State University, the Financial Academy, UGTU-UPI, KemGU,
foreign languages, ambitious personality, performance-oriented attitude,              the Moscow University of Humanities, VGIK and others. The winners were
and desire to grow and improve one’s professional level.                              awarded grants and bonuses to the amount of RUB 195 thousand.




                                                                                 40
Risk Management
Insurance Risks. Financial Risks. Credit Risks.
Operational Risks
To ensure financial sustainability and efficiency, Ingosstrakh has introduced                     and control over compliance with limit and tariff compliance on the
a risk management system based on an integrated top-to-bottom ap-                                 part of the Company’s divisions and employees;
proach to risk identification, recognition, measurement and management                            Internal Audit Administration, which is entrusted with the function to
across the Company.                                                                               monitor operational risks;
                                                                                                  Engineering Center is responsible for pre-insurance due diligence of
The Risk Management System (‘RMS’) is based on the following principles:
                                                                                                  complex objects. The Center is authorized to adjust insurance tariffs,
       monitored decision making process;
                                                                                                  to incorporate in the insurance contracts special provisions and to
       accurate, reliable, timely reporting;
                                                                                                  participate in the settlement of insurance claims correspondingly.
       independent control. To avoid conflict of interests, the control over
                                                                                                  Information Analysis and Protection Department ensures protection
       the division assuming the risk is delegated to an independent entity.
                                                                                                  of Ingosstrakh’s interests through identification and suppression of
       information transparency. The principle of information transparency is
                                                                                                  corrupt practices through clearance of employees, clients, partners,
       entirely integrated in the risk management and risk control process.
                                                                                                  financial and crediting organizations.
The Company’s RMS is guided by in-house norms and standards. The risk
                                                                                           The results delivered through risk analysis exercises are especially important
management function lies entirely with the Company’s management and
                                                                                           in the context of developing a general risk management strategy. They are
the following divisions and committees:
                                                                                           taken into account in full during respective decision making processes by the
        The Audit Committee under the Board of Directors. This Committee
                                                                                           Company’s management. The Company classifies four major risk categories:
        is a consultative and advisory body which reviews issues of internal
        control, inclusive of financial and operational control, along with is-
                                                                                               Insurance        Financial Risks      Credit Risks       Operational
        sues of risk management. The Committee analyses internal control                         Risks                                                    Risks
        systems and elaborates improvement recommendations.
        The Insurance Committee, a collegial body which decides on the fea-
        sibility of major insurance contracts, provides net retention limits on              Underwriting        Forex              Investments        Processes
        insurance transactions, approves the structure and features of re-                                       Changes
        insurance coverage of Ingosstrakh’s insurance portfolio, determines
                                                                                             Pricing             Liquidity          Reinsurance        IT Risks
        the functions and powers of Ingosstrakh’s divisions as to the scope of
        insurance activities, determines the limits as per insurance contracts               Reserves            Market risk        Third Parties      Personnel
                                                                                             underestima-        (market value
        and payouts of insurance coverage and delivers decisions regarding                   tion                changes)
        settlements above the approved limits.
        Financial and Investment Committee is a collegial body responsible                   Major, Cu-
                                                                                             mulative and
        for identification of limits for all of the Company’s investment both in             catastrophe
        terms of issuers and separate instruments;                                           risks
        Insurance Evaluation and Control Administration. Its functions encom-
        pass the evaluation of insured risks, control of the risks undertaken for
        insurance coverage by operating and regional units and control of                  The overall Risk Management Scheme in the Company is based on the tra-
        relevance of insurance indemnity payments; development of recom-                   ditional system of multi-level limiting and monitoring of limit compliance at
        mendations for the Insurance Committee as to the authority to sign                 all management levels. The limits are undertaken on the basis of posteriori
        insurance contracts, payment of insurance indemnity, decision mak-                 mathematical modeling and many years of practical experience of best
        ing limits for Ingosstrakh insurers in the process of insurance activities,        insures for each major group of risks. The limits are subject to identifica-
        development and implementation of insurance risk mitigation actions                tion by independent bodies (committees) whose activities are continuously
                                                                                           monitored by the Company management.

                                                                                      44
                                                                                       the amounts of reinsurance are subject to review and approval by the
Insurance Risks                                                                        Insurance Committee.
The management of the Underwriting Risk in Ingosstrakh is based on a
predetermined strategy through meticulous selection of insurable/reinsur-
able risks. The Company lays down special insurance norms, rules and limits            Financial Risks
of insurance coverage, and each operating division has the right to deliver
                                                                                       Financial Risks are managed with the help of the tools and methods laid
decisions regarding the acquisition and liquidation of losses at its own dis-
                                                                                       down in the Company’s investment policy. The latter is primarily targeted
cretion provided that it acts within the ambit of the foregoing norms, rules
                                                                                       at compliance with legal requirements regarding principles of diversifica-
and limits. The loss acquisition and liquidation functions are split between
                                                                                       tion, profitability and liquidity to be observed in the placement of insur-
the coordinators of losses and the coordinators of insurance policies. This
                                                                                       ance reserves. The foreign exchange risk is controlled through the diversifi-
division eliminates the possibility of losses for the company because of a
                                                                                       cation of the investment portfolio by type of currency. The purpose of this
more loyal indemnification of losses for retention of its own clients if an
                                                                                       exercise is to provide compliance with the open foreign currency position
insurance claim is coordinated by one coordinator in charge only. The con-
                                                                                       limit in the future depending on the forecast value of balance sheet items
trol of compliance with the limits and the review of risk acquisitions and risk
                                                                                       and cash flows by currencies. The limits per the relation of the open for-
indemnification cases whose size is above the level set down by the limit
                                                                                       eign currency position in major currencies (rubles, US dollars and Euro) to
for the division, is the responsibility of dedicated bodies, namely the Insur-
                                                                                       the size of equity capital and sight liabilities (the difference between the
ance Committee and the Insurance Control and Evaluation Administration.
                                                                                       insurance reserve valuation according to the Russian standards and their
The Pricing Risk may emerge in the event of inadequate assessment of                   actuarial evaluation) are determined by the Financial and Investment Com-
risks used for the calculation of insurance tariffs. The development of the            mittee. The compliance with the open currency position requirements is
Company’s tariff system in general is the responsibility of the actuarial divi-        controlled by the Chief Financial Officer on a monthly basis.
sion entrusted with the function to calculate specific tariffs for insurance
                                                                                       The Liquidity Risk is managed through managing the investment portfolio
products offered to retail and corporate clients on the basis of the ac-
                                                                                       to time the investment placements in such a manner as to ensure that the
tuarial model. The rationale regarding the feasibility of tariff approvals is
                                                                                       liabilities are secured by current assets. Cash flow forecasts are also taken
determined in conjunction with the interested operational divisions and is
                                                                                       into account. The compliance with the liquidity norms is controlled by the
subject to further approval by the Company’s management, its Insurance
                                                                                       CFO on a quarterly basis. Cash flows are reported to the CFO every month
Committee and the Insurance Control and Evaluation Administration.
                                                                                       while the Treasury provides for weekly cash flow monitoring.
The Risk of Insufficient Reservation is placed under continuous control
                                                                                       To manage the market risk, the Company uses a two-level system of limits:
through analysis of reservation sufficiency, including run-off analysis. Ad-
                                                                                       it has determined a list of types of assets acceptable for reserve coverage,
ditionally, the comparison against actuarial evaluations is used as the basis
                                                                                       and there are limits laid down for investments into each type of assets and
for evaluation of adequacy of insurance reserve calculation methods set
                                                                                       into one specific asset (securities by one issuer, real estate objects etc).
down in applicable legislation. The findings of such analysis are used to
                                                                                       There are also Stop-loss limits and Take-profit limits. The limits are deter-
optimize the methods of actuarial evaluation of insurance reserves and to
                                                                                       mined by the Financial and Investment Committee. The limit summary size
develop proposals for the RF Ministry of Finance in order to improve insur-
                                                                                       of the investment and trade sub-portfolios as well as the array of instru-
ance reserve calculation rules in compliance with the Russian accounting
                                                                                       ments comprising securities sub-portfolios are also subject to approval by
standards.
                                                                                       the decisions of the Financial and Investment Committee. The compliance
The management of major, cumulative and catastrophe risks in the Com-                  with the limits is monitored on a daily basis by the CFO and the General
pany is done through reinsurance. The limits for retainable amounts and                Director.


                                                                                  45
                                                                                     The responsibility for control of compliance with the limits is placed with
Credit Risks                                                                         heads of structural divisions.
The major source of credit risks for the Company is investments into debt            From 2006, the Company started creating the pool of credit histories of
securities (non-bank financial instruments) and RUB/Forex bank deposits              individual insurants (in the context of their contacts with Ingosstrakh). This
and promissory notes (bank financial instruments). In the base investment            information will be used as the basis for clearance of potential clients to
portfolio option the percentage of investments in bank and non-bank fi-              sign contracts / afford payment by installment.
nancial instruments are limited by 30% and 70% thresholds correspond-
ingly. The investments are allowed only in the instruments listed in Order
No 100 of the RF Ministy of Finance dtd. August 30, 2005. Within the
foregoing limits, the Company employs a two-level system of limits: limits
                                                                                     operational Risks
per each type of assets and per one specific asset. As to bank financial in-              Processes
struments, there are limits per groups of banks. The limits are determined
                                                                                     In 2006, the Company updated its system of delimitation of areas of re-
by a special collegial body, the Financial and Investment Committee, and
                                                                                     sponsibility through explicit distribution of job functions top to bottom in
are monitored weekly by the CFO.
                                                                                     the organization to avoid duplication of functions and to fast-track deci-
The Reinsurance Risk is determined by the quality of the coverage providers.         sion-making processes. There were also introduced new regulations on
Ingosstrakh selects the reinsurers on the grounds of explicit criteria which         delegation of authority, pursuant to which there were determined limits of
encompass limitations of the rating, reputation and geography. There are             financial responsibility for each executive position in the Company.
separate limitations for groups of reinsurers and individual reinsurers. At
                                                                                     Ingosstrakh performs continuous evaluation and analysis of business pro-
the moment, the reinsurance portfolio is represented by first-rate players
                                                                                     cesses in place with a view to their potential optimization as par of the
with the ratings of at least S&P BBB- and Moody’s Baa3. Each reinsurer cov-
                                                                                     Business Processes Reengineering Strategic Project. In 2006, the Company
ers the maximum of 5% of the overall number of reinsurable assets, which
                                                                                     completed the first and most important phases of the projects, the opti-
signs the lack of influence of individual reinsurers. The Company is working
                                                                                     mization of car insurance business processes. Along the improvement of
to maintain and set up new contacts with reliable reinsurers.
                                                                                     this business processes in general, the Company in conjunction with Ernst
 As to the credit risk of third parties, the Company follows the traditional         & Young completed the audit of the claims settlement process of settle-
limitation method. In 2006, the Company developed and approved a spe-                ment of motor vehicle insurance claims. The effect of the foregoing ac-
cial system to determine the terms and procedures in relation to commer-             tions enabled the Company to outstrip the budgeted business efficiency
cial loans available under insurance, co-insurance and reinsurance contracts.        parameters.
Pursuant to the system, the following limits are available for insurance, co-
insurance and reinsurance contracts:
                                                                                          IT Risks
        limit per maximum size of a commercial loan;                                 The Company is focused on improving information security of the cor-
        limit per maximum grace period;                                              porate information system through analysis of IT risks pertaining to key
        limit per maximum number of payments;                                        business processes. The IS improvement effort is tailored to incorporate
        limit per maximum period of payment by installments.                         requirements of the RF laws on protection of information and the guide-
                                                                                     lines offered by international information security standards.
The limits are determined in the context of:
       level of authorized commercial loans signatories;                             In 2006 the Company approved the update of the Guidelines on Sensi-
       line of business                                                              tive and Confidential Information and Version 2.0 of the Regulations on
                                                                                     Protection of Personal Information of OSAO Ingosstrakh Employees. These


                                                                                46
documents set out a consistent approach to protection of sensitive and              The encryption will involve the use of the RF-certified encryption algorithm
confidential information and the extent of liability for its disclosure.            (GOST 28147-89) developed by Signal-Com. The Company conducted
                                                                                    activities to ensure availability and adequacy of software licenses in the
Currently, to improve availability and accessibility of centralized informa-
                                                                                    central corporate offices.
tion systems and to ensure their reliability the Company is working on the
creation of a Back-Up IT Center and a back-up data repository on EMC                Additionally, the Company completed the evaluation of the new corporate
Symmetrix DMX-3 platform in its central venue at 12, Pyatnizkaya St. in             information projects (Contact Center — Siebel CRM and the Mobile Office)
Moscow.                                                                             and developed requirements to information security binding for these in-
                                                                                    formation systems.
There was completed a range of organizational and technical initiatives to
build up protection of corporate data and information system from unau-                  Personnel
thorized access: the Company upgraded its corporate password protection
                                                                                    The Company is focused on identification, prevention and interception of
subsystem (which involved the use of group password protection policies
                                                                                    abusive practices and breaches in its divisions. In 2006, the Company devel-
in the Corporate Active Directory and modification of the AIS password
                                                                                    oped and improved guidelines and methodological recommendations on
protection module). The Company implemented the RSA Keon-based
                                                                                    elimination of corrupt practices among the personnel of the Company. In
electronic digital signature and Sanctuary Device Control by SecureWave,
                                                                                    addition, the General Director helmed a field audit of Ingosstrakh branches.
a subsystem which allows the blocking of unauthorized connection of ex-
                                                                                    The audit proved to be a relevant instrument in controlling the activities
ternal drivers and devices to work stations. The number of remote offices
                                                                                    of the branches. The findings of fraud, corrupt or abusive practices, em-
connected to the corporate resources via a protected VPN built with the
                                                                                    bezzlement and disloyalty towards the Company resulted in immediate
use of CheckPoint hardware and software, now totals 162.
                                                                                    changes in the personnel. As the final phase of this undertaking, at the end
Throughout 2006, the Company channeled its resources in improving the               of October 2006, the Company approved and introduced Ingosstrakh’s
reliability of corporate information systems. The key deliverable was the           Ethics Code. The Code sets down basic corporate principles of relations
creation of a powerful integrated anti-virus protection of the Company’s            among the employees, clients and governmental based on legal compli-
internet traffic and the implementation of e-mail spam filters on Aladdin’s         ance, respect of personal rights, honest and fair business, and creation of
eSafe platform. The Company dovetailed the corporate encryption tools               a mutually-beneficial environment for cooperation etc. The Code contrib-
with applicable legal requirements: there was initiated a project to intro-         utes to the support and development of the corporate culture necessary
duce data encryption for information communicated via open channel.                 to achieve the highest standards in meeting our business goals.




                                                                               47
Communications and GR
Relations with Governmental Organizations and NGOs. PR Activities.
Sponsorship and Charity
Relations with Governmental                                                          pR Activities
organizations and nGos                                                               Being the leader in the Russian market of insurance services, Ingosstrakh’s
                                                                                     PR efforts are targeted at strengthening the Company’s positive image
In 2006 Ingosstrakh continued its effort towards improving and expanding             and at enhancement of the overall insurance culture in the society. The
relations with governmental and public organizations in order create a fa-           tool that enables the Company to tackle these objectives successfully is
vorable environment that could contribute to the Company’s efficiency.               the Company’s efficient interface with mass media. Ingosstrakh bases its
                                                                                     relationship with journalists and partners on the principle of information
One of the key areas for the Company last year was the participation of
                                                                                     transparency and mutual respect.
its professionals in the analysis and development of proposals regarding
amendment and supplementation of the effective legislation which gov-                The Company’s information policy in 2006 was primarily targeted at pro-
erns the Company’s activities, in particular, the bills of law ‘On Incorpora-        moting insurance services and at in-depth coverage of Ingosstrakh’s ac-
tion of Changes in the Federal Laws on Compulsory Liability Insurance of             tivities in the press. 2006 was the second year of The Risk Factor, a show
Motor Vehicle Owners’, ‘On Basics of Tourism’, ‘On Protection of Com-                on The Echo of Moscow radio station. A namesake column is run in the
petition’, and ‘On Agricultural Development. The professional team also              Arguments and Facts, one of Russia’s most popular papers. The Company’s
worked on the elaboration of Orders from the RF Ministry of Finance on               experts are key speakers in surveys of insurance services and related sub-
the rules and procedures of insurance reserve development by insurers                jects in the federal press and on television. Ingosstrakh is one of the major
and on the approval of requirements to capital adequacy of assets contrib-           newsmakers in the insurance media-field.
utable as coverage of insurer’s own funds in terms of their array and struc-
                                                                                     Ingosstrakh is working on its information coverage and promotion not only
ture. The laws were approved and put into effect in 2006. The Company’s
                                                                                     in Moscow but across many other cities in Russia, and this effort results in
experts continued as active participants in the development of bills of law
                                                                                     feature publications on insurance in the regional press. In November 2006
on incorporation of changes in the RF laws ‘On Insurance Businesses’, ‘On
                                                                                     the Company gathered again representatives of leading regional media to
Compulsory Liability Insurance for Damages Caused Through Operation of
                                                                                     Moscow to attend a three-day seminar on insurance, Ingosstrakh’s central
a Hazardous Facility’ and other draft bills on changes in the RF Tax Code
                                                                                     office being the venue of the event.
and other legal instruments.
                                                                                     Altogether, in 2006 the total number of publications and informational
Ingosstrakh is the member of more than 60 professional public organiza-
                                                                                     releases involving Ingosstrakh in web news, prints, on radio and television
tions (All-Russia Insurers Union, Russian Association of Insurers and other).
                                                                                     ran over 3000, including over 1500 released in the national press.
Such membership provides the Company with an efficient mechanism to
develop and reconcile the position of professional market participants in            According to the Medialogy, an information and analytical system, in 2006
relation to the issued which determine further development trends for in-            its informational favorability index made Ingosstrakh first in the rating of
surance businesses in Russia.                                                        Russian insurers. The expert team of the International University in Mos-
                                                                                     cow affirms that the bulk share of information on Ingosstrakh in the overall
Moreover, as part of its cooperation with federal state authorities the Com-
                                                                                     quantity of information on insurance companies remained at the level of
pany’s representatives are members of consultative and advisory bodies
                                                                                     14%, which is as high as in 2005.
(Expert Councils of the Federal Insurance Supervisory Authority, the Rus-
sian Federation Chamber of Accounts, various committees under the State              In May 2006, Ingosstrakh received the Golden Diploma-2006 from the Na-
Duma and other).                                                                     tional Financial Award of the Financial Press Club of Russia ‘for information
                                                                                     transparency and impeccable business reputation.’ In October 2006, In-
                                                                                     gosstrakh was nominated the most transparent company in the Expert-400
                                                                                     rating.

                                                                                50
                                                                                       Moreover, Ingosstrakh became official partner of the final match of the
Sponsorship and Charity                                                                Davis Cup between Russia’s and Argentina’s national tennis teams, and it
                                                                                       sponsored the Russian national tennis team in the final games of the cup
Ingosstrakh is one of Russia’s largest and oldest insurance companies. It ac-
                                                                                       held on December 1–3, 2006 in Moscow on the Olympic Stadium.
knowledges its responsibility to the society. Over the past several decades,
charity has become part and parcel of the Company’s business.                          On the threshold of inauguration of the Russian Ice Hockey Championship
                                                                                       with the participation of Superleague teams, Ingosstrakh became official
In 2006, Ingosstrakh continued cooperation with the Russian ‘HELP’ Foun-
                                                                                       partners of the Russian Hockey Federation. The contract arrangements cov-
dation of the Kommersant Ъ Publishers. The Company transferred over
                                                                                       er all games of the Russian Hockey Championship with the participation of
RUB3.7 mln to cover medical treatment of seriously ill children whose par-
                                                                                       Superleague teams in 2006-2007 season, the games of the Russian National
ents referred to the Foundation for financial assistance.
                                                                                       Team in the Eurohockeytour, including the games of the Channel 1 Cup,
For ten years Ingosstrakh has been an active participant of a UNESCO                   participation of the Russian Youth Team in the Four Nations Cup in Sweden
project ‘Books For Blind Children’.                                                    and the Czech Republic, international matches in Canada and Russia and the
                                                                                       Under-20 World Junior Hockey Championship for male teams in Sweden.
Ingosstrakh offered charitable assistance to the organizers of 5th National
                                                                                       Besides, Ingosstrakh acted as the insurer of players on the national teams
Delphic Games in Krasnoyarsk on May 19–24 2006.
                                                                                       during their travel outside Russia to participate in international games.
In the run up to the International Children’s Day on June 01 2006 Ingoss-
                                                                                       In 2006, the Olympic Assets, a joint project run by Ingosstrakh and the
trakh allocated funds to arrange two performances of the Russian National
                                                                                       USSR Hockey Legends Club, proved to be a successful undertaking. Dur-
Academic Symphony Svetlanov Orchestra in the Russian Clinical Children’s
                                                                                       ing the tour of Russian cities with the ‘golden series’ of games the USSR
Hospital and in the Morozov Children’s Hospital.
                                                                                       Hockey Legends Team which encompassed the veteran of Russian hockey,
In addition, in 2006 Ingosstrakh offered financial assistance to the Children’s        winners of 24 Golden Olympic Medals and 83 medals of World Cups, se-
Hearts Charitable Foundation. The money was channeled to cover the cost                lected hockey beginners (y.o.b. 1995) from a number of regional sports
of a number of heart surgeries on children with cardiac anomalies.                     schools to join a new national children’s hockey team. The future champi-
                                                                                       ons were taken to Moscow to attend the spectacular match between the
Also, throughout the previous year the Company supported financially the
                                                                                       USSR Hockey Legends and the International World Hockey Stars Team in
Disabled Association of Great Patriotic War Veterans and people in need
                                                                                       January 2006. The children also attended a series of master classes offered
of financial support; it supported budget cultural institutions.
                                                                                       by the greatest sportsmen of the world.
In its sponsorship initiatives Ingosstrakh is an active supporter of national
                                                                                       The Company places high emphasis on projects in arts and culture.
sports.
                                                                                        In 2006, Ingosstrakh partnered for the seventh time in the run with In-
In September 2006, Ingosstrakh and the Russian National Volleyball Federation
                                                                                        termuzeum-2006 7th Russian National Museum Festival. Traditionally, In-
signed a partnership agreement. Pursuant to the agreement, Ingosstrakh will
                                                                                        gosstrakh offered two nominations, ‘Professional Honor and Dignity’ and
continue to be partner of the Federation for the third year running and will
                                                                                       ‘Loyalty and Devotion’. Over the past seven years, seventy employees of
provide general sponsorship to the Russian Volleyball Male Championship.
                                                                                        various museums were noted for their achievements and named winners
2006 was Ingosstrakh’s fifth year as General Partner and Official Issuer of             in these nominations.
the International Kremlin Cup Tennis Tournament. Ingosstrakh provides
                                                                                       Besides, Ingosstrakh was the official partner of the celebration concert
liability insurance of the Kremlin Cup organizers covering third-party life,
                                                                                       dedicated to the 70th anniversary of the Russian National Academic Sym-
health and property damage, including visitors, spectators, guests, em-
                                                                                       phony Svetlanov Orchestra in the Great Hall of the Moscow Conservatory
ployees and tenants during or in connection with the event. The liability
                                                                                       on October 5, 2006.
limit topped RUB 130 mln.

                                                                                  51
Key Financial and Economic Indicators
Audit opinion on the accounting reports. Performance Results. Financial Strength Ratings. Balance Sheet.
Largest Insurance Events of Ingosstrakh in the Last Years. Bank Details of Ingosstrakh
Audit opinion on the accounting
reports


                                                                                                               We performed an audit of the attached accounting report of Ingosstrakh for the period from January
                                                                                                               1 to December 31, 2006, inclusive, that consists of the accounting balance sheet, income and loss
                                                                                                               statement, statement of changes in capital, cash flow statement, appendices to the accounting balance
                                                                                                               sheet and explanatory memorandum, paragraphs 5-26. Responsibility for keeping accounting records,
                                                                                                               preparation and presentation of this accounting report lies with the management of Ingosstrakh. Our
                                                                                                               task is to express our opinion about accuracy of the report in all material aspects and about compliance
                                           Audit Opinion
                                                                                                               of the accounting procedures in terms of drafting of the accounting report with the legislation of the
                                    about Accounting Reports of
                                                                                                               Russian Federation based on the performed audit.
                          Open Joint-Stock Insurance Company Ingosstrakh
                                                                                                               We performed an audit in compliance with Federal Law on Auditing Practices, Federal Rules
                                                                                                               (Standards) of Auditing Practices, Rules (Standards) of Auditing Practices approved by the
    To the Shareholders and the Board of Directors of Ingosstrakh
                                                                                                               Commission on Auditing Practices of the President of the Russian Federation and the International
                                                                                                               Audit Standards.
    Information about the Auditor
                                                                                                               The audit was planned and performed in such a manner as to be reasonably sure that the accounting
    Name: Ernst and Young, Ltd.
                                                                                                               reports do not contain material distortions. Audit was performed on a sample basis and included
                                                                                                               test-based study of evidence confirming index numbers and disclosure of information about financial
    Location: 115035 Russia, Moscow, Sadovnicheskaya nab. 77-1
                                                                                                               and economic activities in the accounting report, evaluation of compliance with the accounting
                                                                                                               principles and rules used to prepare the accounting report, analysis of material estimated figures of
    The Certificate of inclusion into the Uniform State Register of Legal Entities of a legal entity
                                                                                                               the management of the audited entity, as well as evaluation of general presentation of the accounting
    registered before July 1, 2002, the date of entry – December 05, 2002, 77 #007367150, registered by
                                                                                                               report. We believe that the performed audit gives sufficient grounds to express our opinion about
    the State Moscow Registration Chamber on June 20, 2002, #108.877, main state registration number
                                                                                                               accuracy in all material aspects of the accounting report and about compliance of accounting practices
    1027739707203.
                                                                                                               in terms of preparation of the accounting report with the legislation of the Russian Federation.
    The license for audit practice #E002138 was approved by the Ministry of Finance of the Russian
                                                                                                               In our opinion, in 2006, accounting practices in terms of preparation of the accounting report of
    Federation as of September 30, 2002, #223, issued for five years.
                                                                                                               Ingosstrakh met in all material aspects the requirements of Federal Law on Accounting #129-FZ
                                                                                                               dated November 21, 1996, and the aforementioned accounting report prepared in compliance with
    Membership in the accredited professional audit union – Ernst and Young, Ltd. is a member of
                                                                                                               the above Law reflects accurately in all material aspects the financial situation of Ingosstrakh as of
    non-for-profit partnership Institute of Professional Accountants and Auditors of Russia (NP “IPB
                                                                                                               December 31, 2006, and results of its financial and economic performance in the period from January
    of Russia”).
                                                                                                               1 to December 31, 2006, inclusive, in compliance with the requirements of the legislation of the
                                                                                                               Russian Federation in terms of preparing the accounting report.
    Information about the entity under audit
                                                                                                               The attached accounting report is not intended to demonstrate the financial standing or performance
    Name: OSAO Ingosstrakh
                                                                                                               results in accordance with accounting principles and methods generally recognized in countries
                                                                                                               or other administrative and territorial entities besides the Russian Federation. Thus, the attached
    Location: 115998 Russia, Moscow, GSP-8, Piatnizkaya 12, building 2
                                                                                                               accounting report is not intended for people not familiar with the principles, procedures and methods
                                                                                                               of accounting recognized in the Russian Federation.
    State Registration: #1027739362474 as of October 11, 2002
                                                                                                               March 29, 2007

                                                                                                               Vinogradova A.M.                Signed
                                                                                                               Partner

                                                                                                               Head of the Audit
                                                                                                               Valetskaya S.Y.                 Signed

                                                                                                               Qualification certificate entitling to perform audit in the field of auditing of insurers № K 026735,
                                                                                                               issued in perpetuity on November 9, 2006.




                                                                                                          54
performance Results                                                               Financial Strength Ratings
In 2006, premium income totaled RUB 34.1 bln, which is by 20.3% more              High financial and economic results and transparency of Ingosstrakh were
than in the previous year. The Company’s net profit reached the record of         confirmed by international and Russian rating agencies.
RUB 1.9 bln, which is a maximum result not only in the history of the Com-
                                                                                  In 2006, the Company’s credit rating was revised upwards by two interna-
pany but also of the insurance market. Profits grew by 102.6% versus 2005.
                                                                                  tional rating agencies — Standard&Poor`s to «ВВ+» and Moody’s Investors
This was a result of very positive insurance performance and a record-high
                                                                                  Service to Ва1, both with a stable outlook.
investment income as described above. Due to higher profits, the Com-
pany raised its authorized capital by 27% to RUB 8.3 bln.                         The Company’s ratings are given in the table below as of 31.12.2006:



   The Company’s ratings are given in the table below as of 31.12.2006



   Rating Agencies                      Ingosstrakh’s Rating                       Rating Scale                         Actual Date
   Standard&Poor`s                      BB+, stable outlook                        International                        27 06 2006
                                        ruAA+, stable outlook                      Russian

   Moody’s Investors Service            Ba1, stable outlook                        International                        06 12 2006
                                        Аа1 ru (long-term)                         Russian
                                        RUS-1 (short-term)
                                        stable outlook
   Expert RА                            А++                                        Russian                              19 12 2006




                                                                             55
Statement of income reporting for the period ended 31 12 2006
 Statement of income reporting for the period ended 31.12.2006



 I. Insurance activity                                              2006           2005

   Premiums earned, net of reinsurance                           25 165 266     19 139 564

   Claims incurred, net of reinsurance                           (15 236 564)   (12 833 254)

   Change in other insurance reserves                            (1 412 568)     (959 917)

   Acquisition costs, net of reinsurance                         (4 581 176)    (3 541 537)

   Other operating expenses                                       (117 397)       (96 888)

   Operating income                                               3 817 561      1 707 968

 II. Other gains and losses

   Gains less losses from investment activity                     2 729 819      1 782 678

   Administrative expenses                                       (2 950 117)    (1 693 545)

   Non-operating income less expenses                             (930 428)      (358 575)

   Income before tax                                              2 666 835      1 438 526

   Income tax expenses                                            (756 506)      (488 783)

   Net income (loss)                                              1 910 329       949 743




                                                         56
Balance sheet
 2006 Balance sheet


                                                                              December 31,
 I. Assets                                             2005         2006
   Intangible assets                                  10 049        8 577
   Investment property                                205 693      203 600
   Investments in subsidiaries and associates        1 812 449    2 014 447
   Other investments                                 7 210 435    6 181 056
   Amounts due from credit institutions              8 813 526    15 542 476
   Reinsurance share in insurance reserves           4 802 497    9 041 564
   Insurance and reinsurance receivables             4 771 501    5 247 049
   Other assets                                      1 005 682    1 126 610
   Property and equipment                            2 391 566    2 399 267
   Deferred tax assets                                 96 571      71 509
   Cash                                              1 260 034    1 887 993
   Total on section I                                32 380 003   43 724 148
   BALANCE                                           32 380 003   43 724 148

 II. Capital and reserves
   Share capital                                     2 500 000    2 500 000
   Additional paid-in capital                         444 852      439 813
   Reserves                                          1 000 000    1 000 000
   Retained earnings (uncovered loss)                2 582 537    4 372 930
   Total on section II                               6 527 389    8 312 743



                                                57
2006 Balance sheet



III. Insurance reserves                       2005         2006

  Unearned premium reserve                  12 301 497   14 919 810

   Loss reserves                            9 290 367    14 381 987

  Other insurance reserves                  2 692 369    4 089 242

  Total on section III                      24 284 233   33 391 039

IV. Liabilities

  Insurance and reinsurance payables        1 225 639    1 706 082

  Other payables                             121 589      121 553

  Dividends payable                            309          718

   Deferred tax liability                    171 757      145 867

   Deferred income                            5 820        8 938

  Preventive measures reserve                 43 267       37 208

  Total on section IV                       1 568 381    2 020 366

   BALANCE                                  32 380 003   43 724 148




                                       58
largest Insurance events of                                                       Bank Details of Ingosstrakh
Ingosstrakh in the last Years                                                     Full Company Name: Open Joint-Stock Company Ingosstrakh
 USD 84.6 ml — total loss of the Cupon satellite (1998)                           Short Name: OSAO Ingosstrakh
 USD 56.2 ml — loss of cargo in a plane crash in Irkutsk (1997, settled in        115998, Moscow, Piatnizkaya st., 12, building 2.
 1998)
                                                                                  EGRN 1027739362474
 USD 40.1 ml — fire in the pharmaceutical warehouse, first part of com-
                                                                                  INN 7705042179
 pensation (50% of total amount) (2006)
                                                                                  KPP 774401001
 USD 16.5 ml — total loss of aircraft А-310 in Irkutsk (2006)
                                                                                  Settlement Account 40701810200010000001
 USD 12.2 ml — total loss of Express-A satellite #1 (2000)
                                                                                  In AKB Soyuz (ОАО)
 USD 9.0 ml — damage to irrigation system under construction caused by
 natural calamity (1997, settled in 2000)                                         Correspondent Account 30101810400000000122
 USD 7.0 ml — fire in Samara Metallurgical Plant (2000, settled in 2002)          BIK 044585122
 USD 6.6 ml — fire on the destroyer under construction (2006)                     Mailing Address of the Head Office
 USD 5.0 ml — total loss of aircraft SU-30MK during demonstration flight          127994, Moscow, GSP-4, Lesnaya st.,41
 in Le Burge (1999)
                                                                                  Address of the 55th post office: 127055 Novoslobodskaya st., 49/2
 USD 4.4 ml — total loss of Express-AM11 satellite (2006)
                                                                                  Phones: phone inquiry service of DKS 956-5555, general phone inquiry
 USD 3.5 ml — berthing impact of Ivan Papanin at a tanker terminal                service of Ingosstrakh 232-3211
 (1999)
                                                                                  Fax: Lesnaya, 41 (495) 959-4518, 234-3600, 234-3601; Piatnizkaya, 12
                                                                                  (495)959-4405
                                                                                  Telex: 411144 INGS RU
                                                                                  E-mail: ingos@ingos.ru
                                                                                  Website: www ingos ru




                                                                             59
Affiliated Companies
Foreign Network. Representative Offices of Ingosstrakh Abroad.
Affiliated Companies Abroad. Affiliated Companies in Russia
Foreign network                                                                       Representative offices
In 2006, foreign companies of INGO Group demonstrated sustainable                     of Ingosstrakh Abroad
growth rate. Total premium income in the group amounted to USD 202 ml
versus USD 175 ml in the previous period.
                                                                                      Representative Office in the Republic of Azerbaijan
The capitalization of foreign companies increased by 50% and totaled USD              Republic of Azerbaijan,
87 ml year end.                                                                       AZ100, Baku, A Zeinaly st , 31—33
We consistently implemented the leadership strategy in neighboring coun-              Phone: +994 (12) 497-03-31, 497-18-48
tries which resulted in an increase of Ingosstrakh companies’ premium in-             E-mail: ingosstrakh@ingos az
come in the CIS countries by 1.5 times versus 2005. The most convincing
results were demonstrated by Ingosstrakh’s flagship project in neighboring            Representative Office in the Republic of Kazakhstan
countries — INGO Ukraine attained a 50% increase in premium income in                 Republic of Kazakhstan, 480021,
2006.                                                                                 Almaty, pr Dostyk, 43,office 501, Business Center Dostyk
                                                                                      Phone: +7 (3272) 58-82-88
Ingosstrakh’s affiliates in Ukraine, Kyrgyz Republic and Armenia are among
the leading insurers in national ratings.                                             Fax: +7 (3272) 58-45-54
                                                                                      E-mail: info ingos@mail online kz
Ingosstrakh’s companies in the Western Europe increased their premium
income by 5%, which is an indicator of stable position in the developed               Representative Office in the Republic of Uzbekistan
markets.                                                                              Republic of Uzbekistan, 700015, Tashkent, Afrosiab st , 12Б
Ingosstrakh’s divisions in China, India, Kazakhsan, Uzbekistan and Azerbai-           Phone: +998 (71) 152-28-98
jan were also successful.                                                             Phone/Fax: +998 (71) 140-04-74
                                                                                      E-mail: ingos@sks ru
Highlights of 2006:
       authorized capital of INGO Ukraine increased by USD 4 ml;
       сlosing of transaction to attract strategic investor, the Belgian State        Representative Office in Ukraine
       Credit Insurance Company (ONDD) for SAO Garant;                                Ukraine, 04050, Kyiv, Pimonenko st , 13, office 6А/16
       new shareholder increased the authorized capital of SAO Garant to              Phone/Fax: +380 (44) 247-69-66, 247-69-67
       Euro 25 ml;                                                                    E-mail: ingosstrakh@ingos com ua
       authorized capital of INGO Armenia increased by USD 600 thou-
       sand;                                                                          Representation in India
       SAO Balva withdrew from the group of shareholders;                             Ingosstrakh Mumbai Representative Office,
       completed liquidation of INGO, Inc. that acted as Ingosstrakh’s repre-         Stock Exchange Building, 20th floor
       sentation in the United States of America;                                     East Wing Dalai St , Mumbai, 400023, India
       introduction of common reporting system for companies in order to              Phone: +91 (22) 22-72-19-56
       monitor current performance and prepare data under IFRS;
                                                                                      Fax: +91 (22) 22-72-19-06
       limits approved for net retention for affiliates by types of insurance;
                                                                                      E-mail: ingoind@vsnl com
       development of underwriting policy for the Ingosstrakh Group.



                                                                                 62
Representation in China                      Joint-Stock Insurance Company Ingo Ukraine
Ingosstrakh Beijing Representative Office,   Ukraine, 01054, Kyiv, Vorovskogo st , 33     Affiliated Companies
                                             Phone: +380 (44) 490-27-45, 490-27-49
Suite 1 702, Guangming Building,
Liangmaqiao Road, Chaoyang District,         Fax: +380 (44) 490-27-48                     in Russia
Beijing, 100016, China                       E-mail: office@ingo com ua
Phone: +86 (10) 64-68-58-52                                                               Limited Liability Insurance Compa-
                                             Closed Joint-Stock Insurance Company Ingo
Fax: +86 (10) 64-68-58-53                                                                 ny Ingosstrakh Life
                                             Armenia
E-mail: vladimir@ingoss com                                                               Moscow, B Tulskaya st , 10, building 1
                                             Republic of Armenia,
                                             375002, Yerevan, Demirchiana st , 38         Phone: +7 (495) 725-73-46
                                             Phone: +374 (10) 543-134                     Fax: +7 (495) 725-73-40
Affiliated Companies                         Fax: +374 (10) 543-135                       E-mail: life@ingos ru
                                             E-mail: efes@arminco com
Abroad
                                             Closed Joint-Stock Insurance Company         Limited Liability Company Team
Schwarzmeer und Ostsee,                      Belingosstrakh                               Assistance
Versicherungs-Aktiengesellschaft, SOVAG,     Republic of Belarus,                         Moscow, B Tulskaya st , 10, building 9
Schwanenwik 37, 22087 Hamburg, Germany       220050, Minsk, Miasnikova st , 40            Phone/fax: +7 (495) 232-34-89
Phone: +49 (40) 227-12-80                    Phone: +375 (17) 203-58-78                   E-mail: timasis@tim ingos ru
Fax: +49 (40) 22-57-19                       Fax: +375 (17) 217-84-19, 217-84-41          http://www tim su
E-mail: info@sovag de                        E-mail: bigs1@mail belpak by
www sovag de                                                                              Limited Liability Insurance Compa-
                                             Joint-Stock Insurance Company                ny Ingosstrakh-M
GARANT, Versicherungs-Aktiengesellschaft,    Kyrgyzinstrakh
                                             Kyrgyz Republic,                             Moscow, B Tulskaya st , 10, building 9
Wohllebengasse 4, Postfach 200,                                                           Phone/fax: +7 (495) 232-34-91
                                             720000, Bishkek, Chui pr , 219
A-1040 Vienna, Austria                       Phone: +996 (312) 21-95-54                   E-mail: Ingos-m@ingos ru
Phone: +43 (1) 505-28-96                     Phone/Fax: +996 (312) 21-99-44
Fax: +43 (1) 505-28-96-30                    E-mail: kinstrakh@infotel kg
E-mail: info@garantinsurance com                                                          Open Joint-Stock Insurance Com-
www garantinsurance com                                                                   pany Chrezvychainaya Strakhovaya
                                                                                          Companiya
Vakuutusosakeyhtio IngoNord,                                                              Russia, Moscow
Salomonkatu 5C PL 218, 00101                                                              Moscow, 2nd Samotechnyi per , 7
Helsinki, Finland                                                                         Phone: +7 (495) 780-50-05
Phone: +358 (9) 251-03-00                                                                 E-mail: chsk@chsk ru
Fax: +358 (9) 251-03-099, 693-35-60                                                       http://www chsk ru/index php
E-mail: info@ingonord com
www ingonord com




                                                                 63
History
                                                                                     At the end of the 1980s, the Company started insuring commercial risks,
Creation of Ingosstrakh (1947–1948)                                                  loans, joint-ventures, various types of civil and professional liability.
November 16 1947 is the date of creation of Ingosstrakh. This was when
the USSR Council of Ministers signed Decree No 3819-1281c ‘On Establish-
ment of Foreign Insurance Department of the USSR (Ingosstrakh) on the                Time of Change (1991–1997)
basis of the USSR Department of Foreign Transactions of the USSR State
                                                                                     In 1991, Ingosstrakh was transformed into a publicly traded, or open
Insurance’. In 1948, Ingosstrakh provided five insurance products: cargo
                                                                                     joint-stock company. The size of its equity capital increased more than 7.5
insurance, fire insurance, hull insurance of vessels, liability insurance and
                                                                                     times.
reinsurance.
                                                                                     In 1994, Ingosstrakh received a new insurance and reinsurance license.
                                                                                     In 1997, the company signed an Incorporation Agreement for transna-
Conquest of the World (1950–1971)                                                    tional group Ingosstrakh.
In 1952, Ingosstrakh inaugurated its representative office in Finland. In the
period between 1953 and 1971 it launched representative office in Paki-
stan (1953), Egypt (1954), Afghanistan (1955), and Algeria (1963), in Mali           Endurance Test (1998–1999)
(1963) and Cuba (1971).
                                                                                     Following the default of 1998, Ingosstrakh managed to retain stability and
In 1956-1964, Ingosstrakh’s affiliate Blackbulcy (UK) established and                displayed convincing development trends maintaining its key asset, the
launched branch offices in France, Egypt (1956), Syria (1958), Lebanon               trust of its clients and its one of Russia’s most professional insurance teams.
(1961) and Sudan (1964).                                                             The paid up equity of the Company increased from RUB 30 mln to RUB
                                                                                     80 mln.
In 1958, Garant, an insurance company, was incorporated in Austria.
                                                                                     Ingosstrakh is the first Russian company to offer Bankers Blanket Bonds to
In 1967, a Soviet-Indian insurance bureau was set going in Bombay (Mumbai).
                                                                                     its clients alongside with commercial insurance of export loans and guaran-
Some of these Ingosstrakh’s representative offices continue nowadays.                tees and a range of programs to insure professional liability. The Company
                                                                                     commissioned its representative office in China.
                                                                                     At the end of 1998, the Ingosstrakh network encompassed 42 units in the
Step by Step (1972–1990)                                                             territory of the Russian Federation and 10 subsidiaries and representative
                                                                                     offices in Europe, Asia and North America.
On 20 July 1972, the USSR Council of Ministers issued a resolution. Pursu-
ant to it, Ingosstrakh acquired the status of the Foreign Insurance Head-            In 1999, Ingosstrakh managed to extend the scope of its pre-default op-
quarters of the USSR. At the same time Ingosstrakh’s legal status changed,           erations. The number of insurance products offered by the Company in-
which enabled it to operate abroad and domestically, when necessary, as              creased to reach 66.
a joint stock insurer.
In 1972, Ingosstrakh started providing liability insurance to ship owners, as
well as launched insurance products for construction works, assembling
operations and aviation. During the same year the array of products ex-
panded to reach twenty in number.


                                                                                66
new perspectives (2000–2004)                                                          latest Developments (2005–2006)
In 2000, Ingosstrakh obtained А++ reliability rating, the highest possible            In July 2005, Ingosstrakh registered changes to the Charter following the
from Expert RA, an independent rating agency. Its equity capital increased            increase of the Company’s equity capital to RUB2.5 mln.
to RUB500 mln.
                                                                                      In December 2005, Ingosstrakh received new licenses which enabled the
By 2002 the Company held licenses for 77 types of insurance operations,               Company to perform all types of insurance (with a view to the Company’s
its regional network expanded to 140 units.                                           specialization) and reinsurance activities pursuant to Article 32.9 of the RF
                                                                                      Law ‘On Insurance Business in the Russian Federation’. In 2005, the Com-
A new agreement on transnational group Ingosstrakh was signed.
                                                                                      pany’s insurance premiums exceeded USD1bn, the record-breaking level
2003 became the first year in Ingosstrakh’s history when its insurance pre-           in the whole of the Company’s 60 years in business.
miums topped USD500 mln.
                                                                                      In 2006, Standard & Poor’s Ratings Services assigned “BB+” long-term
The Company launched offices in Ukraine, Azerbaijan and Uzbekistan.                   counterparty credit and insurer financial strength ratings to Ingosstrakh,
                                                                                      stable outlook, while the Company’s national rating went a notch up to
Transnational Group Ingosstrakh was joined by Ostra-Kiev (Ukraine) and
                                                                                      ruAA+.
Efes (Armenia). The number of types of licensed insurance activities was
extended to 87.                                                                       In Rome, Ingosstrakh signed Cooperation Memorandums with the insur-
                                                                                      ers from the Italian SACE Spa and SACE BT groups of insurance compa-
On May 12, 2004, Standard & Poor’s Ratings Services announced that it
                                                                                      nies. The Memorandums foresee active involvement of the parties in the
has assigned its “BB” long-term counterparty credit and insurer financial
                                                                                      support and development of trade relationship between Italy and Russian
strength ratings to Ingosstrakh, stable outlook, while Russian national rat-
                                                                                      through insurance of credit risks of national exporters.
ings positioned Ingosstrakh as ruAA.
                                                                                      In April 2006, Ingosstrakh joined OJSC ‘Chrezvychainaya Insurance Com-
On May 25, 2004, Ingosstrakh issued a corporate decision on an additional
                                                                                      pany’ and purchased 71.25% of its shares from GUTA Group. The deal
share issue to increase its equity capital to RUB2 mln.
                                                                                      was part of the capital concentration process in the national insurance
On August 27, 2004, an Incorporation Agreement was signed in Helsinki to              marketplace and was a preliminary step on the way to Russia’s access to
set up INGO International Insurance Group. The Group united insurers and              the WTO.
auxiliary insurance and reinsurance service companies whose controlling
                                                                                      In June 2006, was finalized the access of Office National du Ducroire Com-
interests are held by Ingosstrakh.
                                                                                      pany, a Belgian Export Credit Agency in the equity capital of Ingosstarkh’s
In December 2004, Moody’s Investors Service assigned to Ingosstrakh Ba2/              affiliate Garant. For the first time in history the international credit insur-
Positive Insurer financial strength rating. Almost simultaneously, Moody’s In-        ance market witnessed the creation of a Russian — European insurance
terfax Rating Agency assigned to the Company Aa3 (rus) long-term credit               partnership.
rating and RUS-1 short-term credit rating on the national rating scale.
                                                                                      In December 2006, Moody’s Investors Service boosted Ingosstrakh’s in-
                                                                                      surance financial strength rating up a notch to Ba1 level, stable outlook.
                                                                                      Simultaneously, Moody’s Interfax Rating Agency announced the Company’s
                                                                                      long-term insurance rating to go up Aa1.ru on the national scale.




                                                                                 67
             Helsinki


                            Moscow
Hamburg
                        Minsk
                          Kiev                   Almaty
          Vienna
                                             Bishkek


                                     Baku                          Beijing
                                            Tashkent
                         Yerevan




                                                          Mumbai

				
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