Účtovná uzávierka 2004

Notes as at 31 December 2004
f) Technical reserves
Unearned premium reserve
Creation and release/use of the unearned premium reserve in life and non-life insurance is stated in the table below:
Type of reserve Opening Creation Release Closing
net of reinsurers share balance balance
UPR – non-life 7,379 3,767 4,411 6,735
UPR – life 64,724 97,330 91,337 70,717
Total 72,103 101,097 95,748 77,452
Life reserve
2003 2004
Non-zillmerized reserve 1,141,279 1,430,634
Zillmer adjustment 478,788 481,603
Zeroing of negative reserves 68,064 60,129
(eventually: capitalization of negative reserves) 68,064 60,129
Administrative costs reserve 1,475 1,648
Zillmer reserve balance 732,030 1,010,808
Besides traditional life insurance, Kontinuita offers a specific type of life insurance, so called “personal insurance accounts”, which
is recorded in the Balance sheet within life reserves in an amount of TSKK 437,566 (2003: TSKK 384,764).
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Based on the requirements pursuant to Act No. 431/2002 Coll. § 27 par. 1 letter c) with subsequent amendments, as well as
relevant legislative provisions of the Act No. 95/2002 with subsequent amendments, in particular §22 par. 2 (adequacy), §22a
par. 1a) (definition of future liabilities), §23, §24, §25, §28, a §27 par. 2 (creation), in order to ensure adequate reserves, the
Company has decided on further increase of technical reserves in order to be able to meet its liabilities from insurance contracts.
As of 31.12.2004 the Company conducted adequacy test of life insurance technical reserves, determined by financial flows discount
method. For the test purposes under financial flows are understood to be predominantly the premium written. Insurance
claims including sharing profits and surrender values, as well as administrative and acquisition expenses.
Policy register, where inadequacy could be expected, was divided into groups, whereby the adequacy of technical reserves was
assessed for individual groups separately. Minimal value of insurance liabilities was calculated for individual groups applying the
best estimates of future development of input parameters, adjusted by loading for unfavourable development. To discount financial
flows, non-risk interest rate applicable as of 31.12.2004 was used, adjusted by loading of 4.15%, whereby this takes into
account also the average length of policy term. The assumptions used for future development, as well as loadings form
unfavourable development were determined based on past experience of the Company.
Based on the result of the test of adequacy an additional reserve, which initially was created in 2003 was increased as of
31.12.2004 to an amount of MSKK 70,185.