Open - Ina

was valid throughout the year. An increase or decreaseof interest rates by 50 base points is used in internalreporting on the interest rate risk and represents themanagement’s estimate on the reasonable possibleinterest rate change.In the event of increase/decrease of interest rate by50 base points, under the assumption of stability ofother variables, the following changes would occur inexpenditure for INA d.d. interest. Due to the increase inlong-term debt with a variable interest rate, the effect ofany changes to interest rate on profit is also increased.INA GroupINA d.d.2007 2006 2007 2006Effect of short-term loans interest rate change 1 1 1 1Effect of long-term loans interest rate change 16 10 15 9Total change: 17 11 16 10In the event of change to the interest rate by 50 basepoints, the Group’s profit as at 31 December 2007 wouldincrease/decrease by 17 million HRK (in 2006, the increase/decrease was by 11 million HRK), and INA d.d. profit wouldincrease/decrease by 16 million HRK in 2007 (by 10 millionHRK in 2006).Other price risksThe Group is exposed to risks of changes to the principalprice which result from equities. Equities are kept forstrategic reasons and not for trading.Principal price sensitivity analysissSensitivity analyses given below were made on the basis ofexposure to price risk of the principal on the reporting date.• this would not affect the current year’s profit,31 December 2007 included, since equities were listedin the category of available for sale• other INA d.d. reserves in the principal would begreater by 54 million HRK (42 million HRK in 2006),resulting from the changes to the fair value of stocksavailable for sale.In the event of reduction by 10%, the effect on the principalwould be equal and opposite.The Group’s sensitivity to the prices of principal did notchange significantly compared with the previous year.Credit risk management at INA d.d.Credit risk is risk from non-payment or failure to fulfill thecontractual obligations by the Group’s customers, whichcan cause possible financial loss of the Group. INA d.d.has adopted the “Procedure for Credit Risk Management”which is implemented in operations with customers, andcollects the payment insurance instruments whereverpossible, for the purpose of protection from potentialfinancial risks and losses due to failure to pay or to fulfillcontractual obligations.Customers are classified into risk groups according to thefinancial business indicators and their business historywith INA d.d., and appropriate credit risk protectionmeasures are applied for each group.Data from the customer’s official financial reports aremostly used for customer categorization, ratings fromindependent providers of creditworthiness informationare obtained, and INA d.d. information on customerhistory is used.INA d.d. exposure analysis and customer credit ratingprocesses are continuous, and credit exposure ismonitored and controlled through credit limits which aremodified and verified at least once a year.INA Group has business transactions with a large numberof customers of different business structures and sizes.Annual report 2007161