Caixa Seguros e Saúde Annual Report 2012 Notes to the Consolidated Financial Statements 1 Annual Report 2012 CAIXA SEGUROS E SAÚDE, SGPS, S.A.
Annual Report 2012 CAIXA SEGUROS E SAÚDE, SGPS, S.A. Registered Office: Av. João XXI, No. 63-1000-300 Lisbon Share Capital: EUR 799 924 920 Tax no. 504 622 510 Registered in the Conservatory of the Commercial Registry of Lisbon, under the same number
Caixa Seguros e Saúde Annual Report 2012 - Index 3 Index Statutory Bodies Main Brands 4 7 8 10 01 02 03 04 05 06 07 08 09 10 Board of Directors Report Consolidated Financial Statements Notes to the Consolidated Financial Statements Consolidated Inventory of Investments and Financial Instruments and Other Consolidated Annexes Separate Financial Statements Notes to the Separate Financial Statements Separate Inventory on Financial Investments and Financial Instruments Report and Opinion of Audit Board and Statutory Audit Certificate Corporate Governance Report Report on Compliance with Legal Guidelines 11 50 51 59 60 295 296 352 353 358 359 389 390-391 392-398 399-416 417-423
Caixa Seguros e Saúde Annual Report 2012 Notes to the Consolidated Financial Statements 4 Statutory Bodies
Caixa Seguros e Saúde Annual Report 2012 Statutory Bodies 5 Statutory Bodies 2012 01 Caixa Seguros e Saúde, SGPS, S.A. 02 Fidelidade - Companhia de Seguros, S.A. Shareholders Meeting Chairman Deputy Chairman Secretary José Lourenço Soares Vitor José Lilaia da Silva Maria Amélia Vieira de F. Carvalho de Figueiredo Shareholders Meeting Chairman Deputy Chairman Secretary José Manuel Simões Correia José Lourenço Soares João José Lobato Moreira da Silva Board of Directors Chairman Deputy Chairman Member Audit Committee Chairman Members Deputy Statutory Auditors Norberto Emílio Sequeira da Rosa Jorge Manuel Baptista Magalhães Correia Francisco Manuel Marques Bandeira Pedro Antunes de Almeida José António da Costa Figueiredo Luís Manuel Machado Vilhena da Cunha Jorge Manuel dos Santos Pereira Pichel DELOITTE & ASSOCIADOS, SROC, S.A. Represented by João Carlos Henriques Gomes Ferreira, ROC Board of Directors Chairman Members Audit Committee Chairman Members Deputy Statutory Auditors Jorge Manuel Baptista Magalhães Correia Eugénio Manuel dos Santos Ramos Francisco Xavier da Conceição Cordeiro José Manuel Alvarez Quintero António Manuel Marques de Sousa Noronha Vasco Maria de Portugal e Castro de Orey Rogério Miguel Antunes Campos Henriques Pedro Antunes de Almeida José António da Costa Figueiredo Luís Manuel Machado Vilhena da Cunha Jorge Manuel dos Santos Pereira Pichel DELOITTE & ASSOCIADOS, SROC, S.A. Represented by João Carlos Henriques Gomes Ferreira, R.O.C. 03. Other Caixa Seguros e Saúde, SGPS, S.A. Group Companies Via Directa - Companhia de Seguros, S.A. CARES - Companhia de Seguros, S.A. Shareholders Meeting Chairman Secretary Maria Isabel Toucedo Lage Carla Cristina Curto Coelho Shareholders Meeting Chairman Secretary Maria Isabel Toucedo Lage Salomão Jorge Barbosa Ribeiro Board of Directors Chairman Members Audit Committee Chairman Members Deputy Statutory Auditors Francisco Xavier da Conceição Cordeiro Carlos Manuel Nunes Leitão (managing-director) José Filipe de Sousa Meira Miguel António Vilarinho Vasco Jorge Valdez Ferreira Matias João Filipe Gonçalves Pinto Luis Máximo dos Santos João Manuel Gonçalves Correia das Neves Martins DELOITTE & ASSOCIADOS, SROC, S.A. Represented by João Carlos Henriques Gomes Ferreira, ROC Board of Directors Chairman Members Audit Committee Chairman Members Deputy Sole Auditor Acting CAIXA SEGUROS E SAÚDE, SGPS, S.A., which nominated Francisco Xavier da Conceição Cordeiro to perform this office in his own name. Ana Rita Martins Sambado de Macedo Luís Filipe Mateus Alves Vasco Jorge Valdez Ferreira Matias João Filipe Gonçalves Pinto Luis Máximo dos Santos João Manuel Gonçalves Correia das Neves Martins DELOITTE & ASSOCIADOS, SROC, S.A. Represented by João Carlos Henriques Gomes Ferreira, ROC
Caixa Seguros e Saúde Annual Report 2012 Statutory Bodies 6 Multicare - Seguros de Saúde, S.A. Companhia Portuguesa de Resseguros, S.A. Shareholders Meeting Chairman Secretary José Filipe de Sousa Meira Vitor Manuel Dinis Lopes Shareholders Meeting Chairman Secretary Maria Isabel Toucedo Lage Carla Cristina Curto Coelho Board of Directors Chairman Members Audit Committee Chairman Members Deputy CAIXA SEGUROS E SAÚDE, SGPS, S.A., which nominated José António Rodrigues Nunes Coelho to perform this office in his own name. Carlos Vaz de Macedo da Cunha Coutinho Maria João Caroço Honório Paulino de Sales Luís Vasco Jorge Valdez Ferreira Matias João Filipe Gonçalves Pinto Luis Máximo dos Santos João Manuel Gonçalves Correia das Neves Martins Board of Directors Chairman Members Audit Committee Chairman Members Deputy COMPANHIA DE SEGUROS FIDELIDADE MUNDIAL, S.A., which nominated Francisco Xavier da Conceição Cordeiro to perform this office in his own name. Sandra Paula Rodrigues de Gouveia Ana Filomena de Vieira Neves Agapito Salvado Vasco Jorge Valdez Ferreira Matias João Filipe Gonçalves Pinto Luis Máximo dos Santos João Manuel Gonçalves Correia das Neves Martins Statutory Auditors DELOITTE & ASSOCIADOS, SROC, S.A. Represented by Maria Augusta Cardador Francisco, ROC Statutory Auditors DELOITTE & ASSOCIADOS, SROC, S.A. Represented by Maria Augusta Cardador Francisco, ROC CARES RH - Companhia de Assistência e Representação de Seguros, S.A. Fidelidade - Mundial, Sociedade de Gestão e Investimento Imobiliário, S.A. Shareholders Meeting Chairman Secretary Maria Isabel Toucedo Lage Salomão Jorge Barbosa Ribeiro Shareholders Meeting Chairman Secretary José Filipe de Sousa Meira Maria Isabel Toucedo Lage Board of Directors Chairman Members Sole Auditor Acting Deputy CAIXA SEGUROS E SAÚDE, SGPS, S.A., which nominated Francisco Xavier da Conceição Cordeiro to perform this office in his own name. Luís Maria Cabral Soares de Albergaria Luís Filipe Mateus Alves DELOITTE & ASSOCIADOS, SROC, S.A. Represented by João Carlos Henriques Gomes Ferreira, ROC Carlos Luís Oliveira de Melo Loureiro, ROC Board of Directors Chairman Members Sole Auditor Acting Deputy Vasco Maria de Portugal e Castro de Orey António Afonso Palhoto Viegas Vaz Carlos António da Silva Nunes Coelho DELOITTE & ASSOCIADOS, SROC, S.A. Represented by João Carlos Henriques Gomes Ferreira, ROC Carlos Luís Oliveira de Melo Loureiro, ROC
Caixa Seguros e Saúde Annual Report 2012 Statutory Bodies 7 CARES Multiassistance, S.A. EAPS - Empresa de Análise, Prevenção e Segurança, S.A. Shareholders Meeting Chairman Secretary Clemente Maria de Abreu Valente Galvão Maria Isabel Toucedo Lage Shareholders Meeting Chairman Secretary Maria Isabel Toucedo Lage Carla Cristina Curto Coelho Board of Directors Chairman Members Francisco Xavier da Conceição Cordeiro Francisco Javier Bartolomé Delicado José António Molleda Fernandez Francisco José Conceição Salvador Luís Filipe Mateus Alves Board of Directors Chairman Members COMPANHIA DE SEGUROS FIDELIDADE-MUNDIAL, S.A., which nominated António Manuel Marques de Sousa Noronha to perform this office in his own name. Francisco de Assis Andermatt Brás de Oliveira Ramiro José de Sousa Martins Sole Auditor Acting Deputy DELOITTE & ASSOCIADOS, SROC, S.A. Represented by Manuel Maria Reis Boto, ROC Duarte Nuno Passos Galhardas, ROC Sole Auditor Acting Deputy DELOITTE & ASSOCIADOS, SROC, S.A. Represented by Maria Augusta Cardador Francisco, ROC Carlos Luís Oliveira de Melo Loureiro, ROC GEP - Gestão de Peritagens, S.A. CETRA - Centro Técnico de Reparação Automóvel, S.A. Shareholders Meeting Chairman Secretary Maria Isabel Toucedo Lage Virgilio da Luz Ferreira Shareholders Meeting Chairman Secretary Maria Isabel Toucedo Lage Carla Cristina Curto Coelho Board of Directors Chairman Members COMPANHIA DE SEGUROS FIDELIDADE-MUNDIAL, S.A., which nominated António Manuel Marques de Sousa Noronha to perform this office in his own name. Francisco José Conceição Salvador João Carlos Preto dos Santos Marques Board of Directors Chairman Members COMPANHIA DE SEGUROS FIDELIDADE-MUNDIAL, S.A., which nominated Luís Maria Cabral Soares de Albergaria to perform this office in his own name. João Carlos Preto dos Santos Marques Francisco José Conceição Salvador Sole Auditor Acting Deputy DELOITTE & ASSOCIADOS, SROC, S.A. Represented by Maria Augusta Cardador Francisco, ROC Carlos Luís Oliveira de Melo Loureiro, ROC Sole Auditor Acting Deputy NUNES CAMEIRA E ANTUNES CABRERA, SROC, Represented by Joaquim Pires Nunes Cameira, ROC Luís Borges da Assunção, ROC LCS - Linha de Cuidados de Saúde, S.A. EPS - Gestão de Sistemas de Saúde, S.A. Shareholders Meeting Chairman Secretary Maria Isabel Toucedo Lage Mário Rui Dinis Nacho Shareholders Meeting Chairman Secretary José Filipe de Sousa Meira Maria Isabel Toucedo Lage Board of Directors Chairman Members Sole Auditor Acting Deputy José António Rodrigues Nunes Coelho Pedro Manuel Martins Ataíde Cordeiro Crisanto Sousa Gonçalves Artur Luís Martins Luís Filipe Mateus Alves DELOITTE & ASSOCIADOS, SROC, S.A. Represented by Maria Augusta Cardador Francisco, ROC Carlos Luís Oliveira de Melo Loureiro, ROC Board of Directors Chairman Members Sole Auditor Acting Deputy José António Rodrigues Nunes Coelho Carlos Vaz de Macedo da Cunha Coutinho Maria João Caroço Honório Paulino de Sales Luís DELOITTE & ASSOCIADOS, SROC, S.A. Represented by Maria Augusta Cardador Francisco, ROC Carlos Luís Oliveira de Melo Loureiro, ROC
Caixa Seguros e Saúde Annual Report 2012 Notes to the Consolidated Financial Statements 8 Main Brands
Caixa Seguros e Saúde Annual Report 2012 Main Brands 9 Main Brands Fidelidade In 2012, the main activities of the Company were centred in the development of its relationship with the commercial networks, in the development of products adjusted to the needs of its customers, in the constant attention to the balance between the technical operation and the increase of its organisational efficiency, as well as in the pursuit of its social responsibility programme. It is also worth noting the completion of the merger between Fidelidade Mundial and Império Bonança (Bonança being the oldest of the merged brands, dating back 1808), which was a significant contribution for the materialization of additional gains and efficiency, which led to the launching in 2013 of the single brand FIDELIDADE. With the aim of achieving a better organisational efficiency, in 2012, a significant change was implemented in the subscription areas, which now have a better interconnection with the product areas. For most of non-life insurance areas, several products were subject to improvements meant to adjust them to the market conditions and to the customers needs, which contributed to a better customer retention capacity. Distinguished year-in, year-out as the brand most trusted by the Portuguese, in 2012, Fidelidade was elected Trustworthy Brand for the 12th time in the insurance companies category. Multicare In 2012, Multicare consolidated its leadership in the market, managing through reinsurance the portfolio of Fidelidade. Several initiatives were launched with the aim of adjusting to the socio-economic conditions and the area s operation conditions, among which should be noted the reformulation of the offer and the improvement of customers satisfaction indices. Regarding the reformulation of the offer, more emphasis was placed on the risk and less on consumption through the increase of minimum hospitalisation capitals, launch of plans with no maximum age limit, introduction of cover for serious illnesses and protection in case of unemployment. In what concerns the improvement of customers satisfaction indices, an area for pro-active work on customer retention was developed and there continued to be initiatives for the improvement of the quality of service and operating efficiency, which translated immediately in the customers satisfaction index improvement. Via Directa Via Directa is the group s insurance company geared to direct channels sales telephone and internet and also has three lounges which provide personal customer service in Lisbon and Porto. OK! Teleseguros brand for 15 years, is operating in the market being the leader in advertising recognition in the direct insurance market and was elected in 2012 as the Best Direct Insurance Company in the study Escolha do Consumidor (Consumer s Choice), having been preferred by 200,000 customers. The achievement of this milestone derived from the continuous launch of new motor insurance products; from the opening of its services to other insurance areas products OK! Casa, OK! Acidentes Pessoais, OK! Viagem and OK! Desporto; from the agreement made with Sporting Clube Portugal for the sale of the product Seguro de Leão; from the partnership with the largest food distribution group in Portugal, which, in turn, led to the growth of the brand Seguros Continente; from the launch of the recent OK! MUV product, a motor insurance for young drivers which incentivises them to save and to drive more carefully.
Caixa Seguros e Saúde Annual Report 2012 Main Brands 10 In 2012, Via Directa also launched the brand ipronto, a low-cost insurance product for customers who are young, urban, informed, proactive and familiar with the new channels, and which values self-servicing. The 2,4% increase of Via Directa s premiums consolidated its leadership with a 42,9% share among the direct insurance companies in Portugal, which led to its ascent, for the first time, to the top10 insurance companies operating in the motor insurance area, with the traditional companies. The insurance company also intends to widen its offer, giving the first steps with the brand Siga Seguro a new brand created to sell Via Directa insurance products through partners. CARES CARES mainly operates in the domestic insurance market as a reinsurer in the assistance and legal protection areas, with most of its billing coming from Caixa Seguros e Saúde insurance companies. The operations areas, in 2012, provided more than 1,300 daily assistances and fielded approximately 700,000 telephone calls. The first steps towards internationalisation have been made, so that in 2013 assistance operations can be set up in Cape Verde. Together with the registered evolution, CARES aims to be permanently focused on the customer service, to increase their satisfaction indices, further consolidating the management system which guarantees certification to NP EN ISO 9001:2008. EAPS EAPS, operating under the Safemode brand, performs and provides technical appraisal and vulnerabilities and risk reduction services, consultancy, projects, technical audits, energy certification and quality of air inside buildings and training in the prevention, protection and safety of persons, property and the environmental sphere. It is a party to EAPS Lab Laboratório de Ensaios, accredited by IPAC to NP EN ISO/IEC 17025:2005 and has also been certified by DGERT as a training entity, in the referred to specialised technical areas. Safemode is certified to NP EN ISO 9001:2008 and has been authorised by ACT to provide external occupational health and safety services. EAPS furthered its mission as a Caixa Seguros e Saúde corporate vehicle providing continuity to the technical support services provided to the insurance activity.
Caixa Seguros e Saúde Annual Report 2012 Notes to the Consolidated Financial Statements 11 01 Board of Directors Report
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 12 In compliance with the legal and statutory requirements governing the provision of information, the board of directors of Caixa Seguros e Saúde, SGPS, S.A., hereinafter referred to as Caixa Seguros e Saúde, hereby submits its annual report for 2012. The fulfilment of the above requirements also represents an opportunity to provide an overview of the most relevant aspects characterising the company and principal guidelines for its development, prior to analysing the evolution of its various business segments and presenting its financial statements.
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 13 1. Key Indicators (EUR million) 2012 2011 2010 CAIXA SEGUROS E SAÚDE, SGPS - INDICATORS Net assets 13 283.1 13 329.8 15 659.3 of which: Investments (including bank deposits and cash) 12 375.9 12 243.1 14 578.1 Shareholders equity 1 579.8 815.1 992.4 Non-controlling interests 18.1 19.8 17.2 liabilities 11 685.1 12 494.9 14 649.7 of which: Subordinated liabilities 0.0 436.5 436.5 Solvency (statutory accounts) 218.6% 145.6% 156.0% Net income (statutory accounts) 90.9 2.9 41.5 of which: Insurance area 96.6 32.8 89.6 Hospital area -5.7-29.9-48.1 Average return on shareholders equity 7.5% 0.3% 3.7% No. employees 5 639 5 618 5 871 Insurance 3 318 3 369 3 472 Corporate vehicles 228 221 210 HPP (consolidated) 2 093 2 028 2 189 Technical income from insurance activity 195.7 4.6 62.8 - Life insurance 143.1-14.0 53.1 - Non-life insurance 52.6 18.7 9.7 Technical return Technical return on life insurance (on earned premiums) 60.3% -5.7% 18.1% Technical income on non-life insurance (on earned premiums) 5.5% 1.9% 0.9% Technical provisions 10 922.8 11 416.5 13 517.3 Technical provisions for direct insurance and inwards reinsurance 4 173.7 4 555.4 5 675.8 Liabilities on financial instrumements 6 749.1 6 861.1 7 841.5 Technical indicators (net of reinsurance) Non-life insurance loss ratio * 69.4% 73.4% 75.7% Non-life insurance expense ratio 29.0% 27.0% 28.0% Non-life insurance combined ratio * 98.5% 100.4% 103.7% Life operating costs/provisions for life insurance 0.8% 0.7% 0.7% INSURANCE ACTIVITY INDICATORS Direct insurance premiums (EUR million) 3 269.6 3 963.4 5 713.2 Life insurance 261.2 267.7 310.7 Investment contracts (financial instruments) 1 909.7 2 567.7 4 233.7 Non-life insurance 1 098.7 1 128.0 1 168.8 Market shares (operations in Portugal) 29.3% 33.4% 34.5% Life insurance (including investment contracts) 31.0% 37.2% 37.0% Non-life insurance 26.4% 26.6% 27.1% No.Branches/agents support centres 145 149 148 No. exclusive agents 2 688 2 695 2 500 * Excluding extraordinary provision reinforcements in Workman s compensation in the amount of EUR 44 million.
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 14 2. Executive Summary Caixa Seguros e Saúde, SGPS, S.A. earned, in its statutory accounts in 2012, a net income of EUR 90.9 million (EUR 2.9 million in 2011), an increase of EUR 88.1 million compared to the previous year. The insurance area registered a contribution of EUR 96.6 million and the hospital activity of EUR -5.7 million (EUR -29.9 million in 2011). The hospital business area was subject to an alienation process, negotiated throughout the year, having the sale agreement been finalized still in 2012. This operation was concluded in the first quarter of 2013. The solvency levels of the insurance companies of Caixa Seguros e Saúde as a whole remained comfortable, the solvency margin cover rate was reinforced to 218.6% (145.6% in 2011), conveying a high level of confidence for all insured and economic agents asssociated with them. In terms of its insurance activity, Caixa Seguros e Saúde registered a volume of direct insurance premiums (including resources taken under investment contracts) of EUR 3,269.6 million, in 2012, down 17.5% over 2011, mainly deriving from the reduction (-23.4%) of life insurance business. Activity in Portugal, responsible for the majority of sales, reached a volume of direct insurance premiums of EUR 3,195 million, corresponding to a decrease of 18%. However, Caixa Seguros e Saúde maintained its marked leadership in the domestic insurance market, with an overall market share of 29.3%, both in lifeinsurance (31.0%) and in non-life insurance (26.4%). Caixa Seguros e Saúde consolidated net assets were EUR 13.3 billion, and shareholders equity, including non-controlling interests, were EUR 1.6 billion, which represents an increase of 91.4%, mainly derived from the conversion of Subordinated Debt in Share Capital and from the positive evolution of the Fair Value Reserve. 3. Overview of Caixa Seguros e Saúde 3.1. Shareholding Structure Caixa Seguros e Saúde is owned by Caixa Geral de Depósitos (CGD), its sole shareholder.
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 15 3.2. Milestones 1835 Start-up operations of Companhia de Seguros Fidelidade; 1975 Nationalisation of Companhia de Seguros Fidelidade and Atlas, MSA and Industrial insurance companies; 1979 Creation of Fidelidade-Grupo Segurador, as a merger between the four above referred companies; 1988 Transformation of Fidelidade - Grupo Segurador in a public limited liability company (S.A.), which was integrated in CGD Group; 2000 Acquisition of Mundial Confiança insurance company by CGD Group, in addition to several subsidiaries, comprising Via Directa (Ok!teleseguros), HPP and a collection of corporate vehicles operating in the insurance area; 2002 Formation of Caixa Seguros, SGPS, S.A. holding company, which assimilated Fidelidade Mundial insurance company (resulting from a merger, in the same year, between the Fidelidade and Mundial Confiança insurance companies) and Cares insurance company, which was already a CGD subsidiary; 2005 Acquisition of Império Bonança insurance company; 2007 Acquisition of the full amount of the share capital of CPR Companhia Portuguesa de Resseguros and formation of Multicare Seguros de Saúde, S.A.; 2009 Caixa Seguros, SGPS, S.A. changes its name to Caixa Seguros e Saúde, SGPS, S.A., in line with the growing relevance of its hospital activity; 2011 Acquisition of a majority stake in Universal Seguros (Angola); 2012 Conclusion of the merger process between Império Bonança Companhia de Seguros, S.A. and Companhia de Seguros Fidelidade-Mundial, S.A., which changes its name to Fidelidade Companhia de Seguros, S.A, and the brands Fidelidade-Mundial and Império Bonança continue to co-exist as up to this point; 2012 Alienation process of hospital business line, with the sale agreement being finished during the year. Caixa Seguros e Saúde operates in domestic market through various brands Fidelidade Mundial, Império Bonança, Ok!teleseguros, Multicare and Cares supported by the largest and most diversified insurance market sales network in Portugal. It also has operations in several other countries, either via Fidelidade branches, or subsidiaries such as Universal Seguros in Angola. Within the insurance area, it also owns Companhia Portuguesa de Resseguros, S.A. (CPR) and several corporate vehicles providing several complementary services to insurance operations.
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 16 Caixa Seguros e Saúde, SGPS, SA Caixa Seguros e Saúde 100% Fidelidade 100% Via Directa 100% CPR 100% 100% 100% Fidelidade Mundial SGII GEP EAPS 1.00% 100% EPS 81.94% Fundo SaudInveste 0.24% 100% Cetra 33.67% Audatex 25% Highgrove 67% 100% Universal Seguros (Angola) Fundo Bonança 1 100% Cares Seguros 1.00% 100% 51% Cares RH Cares Multi Assistência 100% Multicare 1.00% 100% LCS 100% HPP Ireland 100% HPP Luxembourg 89% 11% HPP - SGPS Assets, Liabilities, Gains and Losses classified as non-current held for sale
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 17 3.3. Dimension/Positioning of Caixa Seguros e Saúde Caixa Seguros e Saúde is a global operator in the Portuguese insurance market. It commercialises products in all insurance areas, as part of a multibrand strategy on the largest and most diversified insurance products sales network in the domestic market, comprising Fidelidade Mundial and Império Bonança branches, associated agents, agents and brokers, CGD branch offices, CTT outlets, internet and telephone channels. Its operating and benchmark status increases Caixa Seguros e Saúde s responsibilities in terms of its dissemination of good business practice. This is particularly relevant in the insurance area owing to the new solvency directive, risk management, corporate governance, market conduct and ethical business rules. In this context, Caixa Seguros e Saúde insurance companies adopted a strategy based primarily in the development of solutions which, apart from being relevant to the business development, enable it to respond to domestic interest issues. Concrete examples concerning the implementation of this strategy are the development of products to facilitate the access to savings and raise awreness to the issues regarding savings and retirement; a more integrated offer in the health area, promoting the importance of prevention; the analysis of viability of a life long insurance which, despite presenting risk to the insurance companies, corresponds to a great progress in consumer protection. In international terms, Caixa Seguros e Saúde insurance area has focused on accompanying operations in foreign markets in which CGD has an autonomous presence or through subsidiaries, without prejudice to operations with more autonomy and diversification of sales channels, such are the cases of Angola and Spain. 3.4. Human Resources Human resources, as a differentiating factor between organisations, have always been a particularly important area for Caixa Seguros e Saúde companies, which focus on their workers personal and professional advancement and in adequate training and motivational instruments. The different performance appraisal systems used by Caixa Seguros e Saúde companies are an important human resources policy tool, given their use as an instrument to align objectives, management of development potential and identification of training requirements. The economic recession environment verified in 2012 required a more rigorous approach to management in general and the human resources area in particular, due to the higher need to manage the balance between motivation, talent, development and result, in order to enable the organization to respond to the increasingly rapid and unpredictable transformations of the market, while remaining competitive and sustainable.
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 18 In quantitative terms, there was an increase of 21 employees in Caixa Seguros e Saúde companies as a whole compared to the same period in previous year, which derived mainly from the hospital activity. There was a reduction of 51 employees in the insurance companies. Number of Employees 5 871 5 618 5 639 210 221 228 Corporate vehicles 2 189 2 028 2 093 HPP (Consolidated) 3 472 3 369 3 318 2010 2011 2012 Insurance companies Regarding the age structure, the average age of the staff was 44.7 years old (against 44.2 years old in 2011), with an average 18.1 years with the company (against 17.9 years in 2011). Age Structure > 60 (4%) 55-59 (14%) < 29 (3%) 30-34 (9%) 50-54 (15%) 35-39 (20%) 45-49 (15%) 40-44 (20%)
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 19 In terms of academic qualifications, there continues to be a trend toward higher levels of academic qualification with graduate employees comprising 41% of the total. Academic Qualifications Basic (18%) Higher education (41%) Secondary (41%) 3.5. Social Responsibility Owing to its characteristics related with risk and the well-being and protection of persons and their property, insurance activity is perhaps the business sector with the highest potential to generate positive impacts in terms of sustainability. Its mission gives it the possibility of intervening in areas as diverse as the environment, health and prevention, issues concerning the increase of longevity, among others, leveraging behavioural changes at individual and corporate levels, and influencing public policies. In this context, as part of its Social Responsibility Program, in 2012 the lines of development promoted by the Social Responsibility Program followed the focus previously established population ageing, health and healthy life-styles, the environment and climate change, social inclusion and prevention of road accidents. However, it should also be noted the work developed in the areas of retirement, health and social inclusion of victims of severe car and workplace accidents. In association with specialized institutions, Caixa Seguros e Saúde has been promoting the investigation and general debate regarding the traits and motivations underlying the need to individual sustainability in the long run, and in line with this, it promoted in 2012 the conference Inovar a Reforma um Apelo a Todos Nós.
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 20 In what concerns social inclusion, it was created the We Care+ commitment programme which aims to provide seriously injured claimants covered by workman s compensation and motor insurance with a more complete service, incorporating this assistance-related component into insurance companies value chains. Their social rehabilitation takes place through a collection of innitiatives which goes beyong the payment of the compensation, and which intends to promote a better quality of life, namely in what concerns professional reintegration, financial counselling, health aid and social integration. Health prevention and education have also received special attention from the Group s insurance companies which, by this means, keep their social mission. In this context, Caixa Seguros gave another contribution to society through the publication of the book Pensar Saúde Hoje and the organization of the Conference Visões sobre a Saúde da Teoria à Prática subject to the theme Saúde no Séc. XXI - Desafios e Oportunidades. The themes discussed in Pensar Saúde Hoje consist mainly in diagnostic, treatment and permanent consequences of some illnesses which, due to the frequency they occur, have an important social and economic impact, both in the level of families and of the intervening agents in the healthcare sector, public or private, which the insurance sector cannot ignore because of the relevance it has been gaining in the financing costs with healthcare. The Conference Saúde no Séc. XXI - Desafios e Oportunidades promoted the debate about the questions posed to the healthcare sector in the future, facing the increase of longevity as an opportunity, and alerted to the need to improve the health literacy, promoting life-long learning. Sustainability is also present in products offer, which have in their genesis concerns regarding sustainability and social responsibility: Demographic evolution, based on the Leve PPR product, associated with the ICR Índice de Consciência para a Reforma; Health, comprising Multicare s Global Health Offer (Health Plans, Activcare and Checkcare Cards); The environment, in the form of forest and environmental insurance; Social inclusion, based on protocols with IPSS (charitable institutions) providing special terms on insurance; Prevention of road accidents, by raising awareness and through the Ok!Gps product. In management terms, Caixa Seguros e Saúde continued its sustainability-based strategy, comprising the following variables: Growth and involvement of workers; Promotion of the growth of business partners; Strengthening of the quality of service;
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 21 Attention to the needs of customers and partners; Pursuit of greater efficiency; Structuring of investment in the community and in culture; Inclusion of a commitment to sustainability in the value chain; Ensuring of the transparency of activities; Placement of sustainability on workers radars. 4. Macroeconomic and Competitive Environment 4.1. Macroeconomic Environment In 2012, the evolution of the Portuguese economy continued to be marked by the financing restrictions and by the austerity measures, implemented as part of the economic and financial assistance programme (PAEF) established in 2011 and which has been subject to successive revisions. The international context has also been penalising this evolution, and a general slowdown of the world s economic growth has been verified, with special emphasis on the Euro area, which even highlighted a decrease of 0.4% (1.4% in 2011). In this context, the Portuguese economy showed a decrease of 3.2%, increasing its divergence from the Euro area, reflecting the contribution of the internal demand (-6.8pp.), which registered a negative evolution in their components in general, with particular emphasis on investment (-14.5%). The effect of the reduction of internal demand was, however, mitigated by the behaviour of net exports (+3.9pp.), which reflected an increase of 3.3% in exports and a reduction of 6.9% in imports, mostly deriving from the diminishing of consumption levels of lasting goods and investment. The favourable behaviour of the external demand was decisive to make the current balance and capital balance reach a slight superavit (+0.8% in 2012), reducing the need of financing and highlighting a tendency for the correction of the external deficit, which had been constituting one of the main unbalances of the Portuguese economy. Concerning the State Budget, which has, in recent years, showed high deficits, the consolidation observed was inferior to what was initially predicted, reaching a deficit of 6.4% in the end of 2012 (corresponding to about EUR 10 billion), which increased the public debt to around 120% of GDP. Inflation, measured by the Harmonised Index of Consumer Prices (HICP) registered 2.8%, reflecting the increase of prices of energy goods and of a set of public services, namely in the areas of health and transportation.
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 22 Regarding the unemployment rate, in 2012, an increase of the anual average rate to around 15.5% was verified (12% in 2011), reflecting the worsening of economic conditions of some companies derived from the adjustment in investment and consumption levels. The economic predictions for 2013 point to a new reduction of the economic activity in around -2.3%, derived from the contraction of the internal demand (-4.2%) as a consequence of the adjustment process, the effects of which we once again expect to be mitigated by the increase of the balance of net exports (+1.9%) which, should it be confirmed, would imply a favourable balance in the current and capital balance of 3.6% of GDP. This projection encompasses a set of risks of downward predominance, mainly in what concerns the worsening of the international environment, the need for additional budget austerity measures, the recessive effect in short term of the measures with a structural nature in several aspects (e.g. New Urban Rental Regime and labour legislation) and the worsening of the financing conditions of the domestic economy. As a result of a recessive economic climate and of the high unemployment rate predicted (around 18%), the inflation should be at about 0.7%, reflecting the smaller wage pressure, the reduced dynamism of the internal market and the favourable evolution of the imports prices (namely of energy products). 4.2. Competitive Environment in the Insurance Area In 2012, the domestic insurance market was again conditioned by a disadvantageous environment, and showed a reduction of 6.4% in the total amount of premiums, to about EUR 11 billion (about 7% of GDP), deriving from the evolution in the life insurance (-8.2%, to EUR 7 billion) and non-life insurance areas (-3.0%, to EUR 4 billion). The decrease in the life-insurance activity reflected once again the general reduction of the available income and the minor appeal of the retirement savings plans, having, however, been considerably inferior to the variation observed in 2011 (-38.1%), mainly deriving from the changes in the policies for resource-taking by the main financial groups. In this business area, the concentration levels were maintained, even though there were important changes in the market shares of some insurance companies, especially those which have the banking channel as preferential. The non-life insurance activity shows a better stability in its premiums portfolio, which is strongly connected to the macroeconomic evolution, so the decrease of 3% is in line with the behaviour of the GDP. Analysing the main areas, it should be noted the large reduction in motor insurance and workman s compensation and an increase of premiums in health and property business lines.
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 23 Similarly to what happened in previous years, and deriving from the high levels of competitiveness, the insurance market shows a diminished concentration in the non-life insurance activity, and the smaller insurance companies have increased their market shares. For 2013, the insurance activity will continue to be conditioned by the contraction of the insurable workforce, particularly in the workman s compensation and motor insurance areas, deriving from the persistence of a negative macroeconomic context. 5. Strategic Vision Caixa Seguros has continued to assume itself as a reference in the Portuguese insurance market. In this terms, it adopts a corporate perspective dominated by three large objectives, which work as permanent guidelines and as a support to all actions: creation of shareholder value; improvement of the supply and quality of service to customers; advancement and training of employees. 5.1. Macro Objectives Following the approval of a strategic action program for the insurance area, the four macro objectives defined as a corollary to a strategic revision exercise are: Continued improvement of net income; Improvement of the commercial efficiency and the quality of the service provided; Organisational improvement and process simplification; Internationalisation. 5.1.1. Continued Improvement of Net Income Caixa Seguros e Saúde insurance companies will remain focused on the profitable growth objective. Thus, they intend to achieve a continued improvement of their income by taking specific steps: reinforcing the technical profitability aspects; competitive positioning (consolidation of their position in the life-insurance market and recovery of the non-life insurance market); reinforcing the visibility of the brands; product innovation; and dinamization of the sales channels. The objective behind the sustained improvements of profitability levels should continue to place special emphasis both on cost control which should be internalised as a strategic long term vector for the sustainability and competitiveness of the Group s companies and operational efficiency through procedural simplifications.
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 24 5.1.2. Improvement of the Commercial Efficiency and the Quality of the Service Provided The larger professionalisation of the agents network is one of the priorities of the insurance companies that are part of Caixa Seguros e Saúde. The focus has been the intensification of the usage level of the business platforms based on the Internet, developing and capitalising their transactional and commercial potential in order to provide a better service to their partners and clients, and to reduce operational costs. A substantial change was implemented in the underwritting areas, in 2012, comprising a greater level of connection with the product development areas. A change was also made to the internal structure of the commercial agents network to achieve more specialisation and efficiency. Improvements kept being made to several products of the non-life insurance area, with the aim of adjusting them to market conditions and customers needs, which contributed to a larger retaining capability. At the same time, portfolio concentration was also actively incentivised with a permanent focus on a high level of professionalization to provide customers with an excellent service, and with most of the company s active agents being involved in a re-energising project designed to improve their working procedures and organisation. 5.1.3. Organisational Improvement and Process Simplification The objective of achieving a sustained improvement in profitability levels should be particularly furthered, and in addition to increasing income, it should focus on operational efficiency. To improve efficiency and achieve a more rational use of available resources, priority will be afforded to the intensification and simplification of processes and the implementation of a cost-control approach, both of which considered essential to ensure long term competitiveness. With the aim of maximising the operational efficiency and management of the Group capital, in 2012, the operational and functional integration of Fidelidade Mundial and Império Bonança was formalized, from a legal standpoint, and the activities of the two companies started being performed by Fidelidade Companhia de Seguros, S.A. The brands Fidelidade-Mundial and Império Bonança continued to co-exist, given their great notority and public recognition. The formalization of the two insurance companies integration will allow, however, a more efficient management of clients and business partners, thus constituting an opportunity for improving profitability and creation of shareholder value.
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 25 5.1.4. Internationalisation Given the dimensional constraints of the domestic insurance market and Caixa Seguros e Saúde s current market share, the internationalisation of activity, via organic growth, acquisitions or negotiated partnerships is considered to be an effective formula for achieving expressive growth and enhancing the insurance group s status in this area. Besides monitoring developments in foreign markets, in which Caixa Geral de Depósitos operates autonomously or through subsidiary companies, other potential markets will also continue to be examined, particularly with the aim of capitalising on Portugal s characteristics as an Atlantic nation and the strong economic development of several countries with which Portugal has linguistic and cultural affinities. 6. Consolidated Financial Analysis 6.1. Technical Income In 2012 consolidated technical income achived EUR 195.7 million, an increase of EUR 191.1 million over the previous year. This evolution reflects mainly an improvement of the financial activity in insurance business line, since that 2011 was negatively influenced by non-recurrent adverse factors, namely the impairment derived from the insurance area s exposure to the Greek sovereign debt. An analysis of the main technical account headings shows the following: In non-life insurance, the technical income was EUR 52.6 million, reflecting an increase of EUR 33.9 million against the previous year, due to the improvement of claims rates, financial activity and contention of operation costs; In technical terms, combined ratio net of reinsurance (excluding the extraordinary reinforcement of provisions in a total amount of EUR 44 million in 2012 in workman s compensation) reached 98.5%, a reduction of 1.9 pp against the previous year, having benefited from the reduction of the loss ratio (- 4,0 p.p.) deriving from general good behaviour of the current claims rate, and suffered an increase derived from the expense ratio (+2.0 p.p.), which includes non-recurrent costs concerning the adjustment of staff s volume. The technical income for life insurance area showed an increase of EUR 157.1 million over 2011, mainly derived from the improvement of financial activity.
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 26 Evolution of the Technical Income 195.7 Life insurance 52.6 62.8 9.7 4.6 143.1 Non-life insurance 53.1 18.7-14.0 2010 2011 2012 6.1.1. Life Insurance Caixa Seguros e Saúde performs its life insurance activities through Fidelidade, which has adopted a multichannel approach using traditional, banking and CTT channels. In 2012, Caixa Seguros e Saúde achieved life insurance premiums sales, including resources taken under investment contracts, of EUR 2,171 million, down 23.4% over the same period in the previous year. This was mainly due to taking less resources via financial insurance, conditioned by a disadvantageous economic enviroment, reflecting a general reduction of the available income and a higher interest of the savers in banking products. The portfolio structure shows a higher proportion of risk and annuities, being, however, noteworthy a reduction in financial products. Premium Portfolio Structure - Life Insurance 24.6% 18.5% 18.6% PPR 70.9% 3 552 74.4% 3 472 72.1% 3 369 Capitalisation 4.5% 7.1% 9.3% 2010 2011 2012 Risk and Annuities
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 27 Caixa Seguros e Saúde has registered a technical income of EUR 143.1 million on life insurance business. Details can be seen in the following chart (worth mentioning that the resources taken under investment contracts are not processed as direct insurance premiums): Breakdown of Technical Income on Life Insurance (EUR million) Earned Commissions on premiums investment contracts net of reinsurance management Investment income /costs Other technical / income costs Claims costs net of reinsurance Other technical provisions and profit sharing Net operating costs Technical income Life insurance 136.5 0.3 237.3 2.5 384.1 143.1-68.7-549.0 Change 2012/2011-3.1% -43.5% 5144.9% 37.5% -52.4% -60.0% 0.2% 1120.3% This income is influenced by an improvement of Investment income/costs, which in 2011 were under the negative influence of impairments mainly derived from investments in the Greek state s sovereign debt, as well as by the reduction of claims costs against the previous year. 6.1.2. Non-life Insurance In non-life insurance, besides Fidelidade, Caixa Seguros e Saúde also operates in the market through Via Directa (which owns the Ok!teleseguros brand), especially geared to remote channels (telephone and Internet) and Universal Seguros, which operates in the Angolan market. Multicare, Cares and Companhia Portuguesa de Resseguros also operate in this business area, but essentially in reinsurance. In 2012, Caixa Seguros e Saúde achieved direct insurance premiums sales for non-life insurance of EUR 1,099 million, down 2.6% over the preceding year.
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 28 Premium Portfolio Structure - Non-life Insurance 7.1% 10.0% 17.0% Accidents and Health 40.4% 37.3% 33.7% Fire and Other Damage 20.7% 21.3% 20.3% Motor (a) 31.8% 31.4% 29.1% 2010 2011 2012 Other (a) Includes additional cover The loss ratio was down 4.0 pp. to 69.4% (excluding the extraordinary reinforcement of provisions in workman s compensation), therefore reducing the combined ratio to 98.5% at the end of the year. Non life business registered a technical income of EUR 52.6 million, an increase of 181.7% over 2011. Details are given in the following chart: Technical Income on Non-life Insurance (EUR million) Earned premiums net of reinsurance 961.0 Investment income/ costs Other technical income / costs 79.4 2.4 Claim costs net of reinsurance Other technical provisions net of reinsurance Net operating costs Technical income Non-life Insurance 10.6-721.8 52.6-279.0 Change 2012/2011-3.3% 280.0% 89.5% -2.9% -23.7% 4.1% 181.7%
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 29 6.2. Structure and Return on Investments Caixa Seguros e Saúde s investment portfolio, including bank deposits and cash, totalled EUR 12.5 billion, an increase of 1.8% over 2011, and consists mainly in debt securities classified as available for sale assets and investments to be held to maturity. 666 1 277 3 117 2012 536 6 257 465 693 2011 559 3 824 6 146 0 2010 569 774 822 12 249 Land and Buildings Available for sale assets Investments to be held to maturity Other financial assets Bank deposits and cash The average return on financial income in 2012 was 3.6%, slightly inferior to the 3.8% registered in 2011. On the other hand, the average yield was 2.6%, an increase against the 1.4% observed in 2011. Financial Income Global Activity (EUR thousand) 2012 2011 2010 Income 445 682 503 133 472 241 Net income on assets and liabilities not recognised at fair value (a) 31 093-21 920 93 825 Net income on assets and liabilities at fair value - 6 399-22 481-11 529 Impairments net of reversal -120 786-181 092-160 153 Other financial income and costs -25 126-84 922-18 349 Total of financial income 324 464 192 718 376 035 (a) Excluding the effect of financial liabilities recognised at amortised cost
Caixa Seguros e Saúde Annual Report 2012 Board of Directors Report 30 6.3. Net Income and Shareholders Equity Income before tax in 2012 totalled EUR 146.5 million, an increase of EUR 141.2 million over the preceding year, owing to the favourable performance of the financial activity and claims rate, compared to 2011. Net income, after non-controlling interests, in turn, was EUR 90.9 million, an increase of EUR 88.1 million over 2011. Shareholders equity, including non-controlling interests, reached EUR 1.6 billion, an improvement of EUR 763 million derived from the positive evolution of the fair value reserve, of the net income and an increase of the share capital the latter owing to the conversion of subordinated debt. 6.4. Technical Liabilities and Solvency Technical provisions for direct insurance and inwards reinsurance were EUR 10.9 billion, down by EUR 493.7 million over the preceding year. This particularly reflected the sales decrease in financial products. Technical Reserves, Net of Reinsurance Global Activity (EUR thousand) 2012 2011 2010 Provision for unearned premiums 276 401 290 352 297 838 Mathematical provision Life insurance 1 900 871 2 267 893 3 216 080 Claims provision Life insurance 116 526 137 938 167 675 Workman s compensation 770 733 721 310 719 884 Other non life 957 729 1 031 481 1 135 850 Provision for profit sharing 83 484 31 645 54 894 Other technical provisions 67 985 74 798 83 591 Financial liabilities 6 749 113 6 861 072 7 841 520 Technical liabilities for insurance and inwards reinsurance (A) 10 922 841 11 416 489 13 517 331 Investments allocated to representation (B) 11 627 334 11 686 622 13 964 037 Cover rate (B/A) 106.4% 102.4% 103.3% Technical provisions for outwards reinsurance (C) 192 398 220 024 260 162 Technical liabilities net of reinsurance (A-C) 10 730 443 11 196 465 13 257 169