E.6. Liquidity risk

Liquidity risk arises in the general funding of the Group’s activities and in the management of its positions. It includes both the risk of being unable to fund assets using instruments with appropriate maturities and rates and the risk of being unable to liquidate an asset sufficiently quickly and in the appropriate amount, and the risk of being unable to meet obligations as they become due.

All the business units have access to a diverse funding base. Apart from insurance liabilities, which serve as a main source of financing, funds are raised using a broad range of instruments including deposits, other liabilities evidenced by paper, reinsurance policy, subordinated liabilities and shareholder equity. This enhances funding flexibility, limits dependence on any one source of funds and generally lowers the cost of funds.

The business units strive to maintain a balance between continuity of funding and flexibility through the use of liabilities with a range of maturities; for details see the section above on asset and liability matching. Further, all the business units hold a portfolio of liquid assets as part of its liquidity risk management strategy. The Group continuously monitors the liquidity risk to gain smooth access to funds to meet known obligations, with an additional buffer to cover potential unknown situations. Special attention is paid to the liquidity management of the non-life insurance business requiring sufficient funding to meet all the potential obligations in the event of a natural disaster or other extraordinary event.

All the business units as well as the Group as a whole continually assesses the liquidity risk by identifying and monitoring changes in the funding required to meet business goals and the targets set in terms of the overall strategy.

The following table shows an analysis of the Group’s financial assets and liabilities broken down into their relevant maturity bands based on the residual contractual maturities.

Residual contractual maturities of financial assets

31. 12. 2016 (CZK million)	Less than 1 year	Between 1 and 5 years	More than 5 years	Unspecified	Total
Investments	23,588	55,225	85,130	18,586	182,529
Loans	7,975	927	–	–	8,902
Available for sale	15,494	48,162	85,018	7,938	156,612
Bonds	15,494	48,162	85,018	–	148,674
Equities	–	–	–	1,744	1,744
Investment fund units	–	–	–	6,194	6,194
Financial assets at fair value through profit or loss	119	6,136	112	10,648	17,015
Bonds	–	5,890	–	–	5,890
Equities	–	–	–	105	105
Investment fund units	–	–	–	2,807	2,807
Unit-linked investments	56	134	–	7,736	7,926
Derivatives	63	112	112	–	287
Receivables	5,433	176	1,107	–	6,716
Cash and cash equivalents	5,694	–	–	–	5,694
Total financial assets	34,715	55,401	86,237	18,586	194,939

XLS

31. 12. 2015 (CZK million)	Less than 1 year	Between 1 and 5 years	More than 5 years	Unspecified	Total
Investments	22,392	57,568	75,151	19,671	174,782
Loans	5,526	905	–	–	6,431
Available for sale	15,337	50,530	74,962	9,229	150,058
Bonds	15,337	50,530	74,962	–	140,829
Equities	–	–	–	2,193	2,193
Investment fund units	–	–	–	7,036	7,036
Financial assets at fair value through profit orloss	1,529	6,133	189	10,442	18,293
Bonds	1,201	6,014	–	–	7,215
Equities	–	–	–	165	165
Investment fund units	–	–	–	2,681	2,681
Unit-linked investments	66	6	130	7,596	7,798
Derivatives	262	113	59	–	434
Receivables	6,537	22	514	–	7,073
Cash and cash equivalents	4,143	–	–	–	4,143
Total financial assets	33,072	57,590	75,665	19,671	185,998

XLS

Of which relates to the Transformed fund

31. 12. 2016 (CZK million)	Less than 1 year	Between 1 and 5 years	More than 5 years	Unspecified	Total
Investments	9,449	32,276	55,816	3,041	100,582
Loans	1,000	–	–	–	1,000
Available for sale	8,435	28,750	55,769	2,751	95,705
Bonds	8,435	28,750	55,769	–	92,954
Equities	–	–	–	255	255
Investment fund units	–	–	–	2,496	2,496
Financial assets at fair value through profit orloss	14	3,526	47	290	3,877
Bonds	–	3,504	–	–	3,504
Equities	–	–	–	103	103
Investment fund units	–	–	–	187	187
Derivatives	14	22	47	–	83
Receivables	381	–	–	–	381
Cash and cash equivalents	1,025	–	–	–	1,025
Total financial assets	10,855	32,276	55,816	3,041	101,988

XLS

31. 12. 2015 (CZK million)	Less than 1 year	Between 1 and 5 years	More than 5 years	Unspecified	Total
Investments	12,703	32,489	46,858	2,674	94,724
Loans	2,750	–	–	–	2,750
Available for sale	9,443	28,904	46,858	2,330	87,535
Bonds	9,443	28,904	46,858	–	85,205
Equities	–	–	–	123	123
Investment fund units	–	–	–	2,207	2,207
Financial assets at fair value through profit or loss	510	3,585	–	344	4,439
Bonds	450	3,571	–	–	4,021
Equities	–	–	–	160	160
Investment fund units	–	–	–	184	184
Derivatives	60	14	–	–	74
Receivables	729	–	–	–	729
Cash and cash equivalents	632	–	–	–	632
Total financial assets	14,064	32,489	46,858	2,674	96,085

XLS

Residual contractual maturities of liabilities

31.12.2016 (CZK million)	Less than 1 year	Between 1 and 5 years	More than 5 years	Unspecified	Total
Financial liabilities	7,572	3,636	797	–	12,005
Financial liabilities at fair value through profit or loss	969	804	797	–	2,570
Other financial liabilities	6,603	2,832	–	–	9,435
Payables	8,094	–	–	–	8,094
Other liabilities	2,267	116	23	–	2,406
Total liabilities	17,933	3,752	820	–	22,505

31.12.2015 (CZK million)	Less than 1 year	Between 1 and 5 years	More than 5 years	Unspecified	Total
Financial liabilities	1,747	2,519	1,164	1,400	6,830
Financial liabilities at fair value through profit or loss	429	480	1,164	–	2,073
Other financial liabilities	1,318	2,039	–	1,400	4,756
Payables	8,035	–	–	–	8,035
Other liabilities	2,077	105	12	–	2,194
Total liabilities	11,859	2,624	1,176	1,400	17,059

XLS

Of which relates to the Transformed fund

31.12.2016 (CZK million)	Less than 1 year	Between 1 and 5 years	More than 5 years	Unspecified	Total
Financial liabilities	319	154	554	–	1,027
Financial liabilities at fair value through profit or loss	319	154	554	–	1,027
Other financial liabilities	–	–	–	–	–
Payables	121	–	–	–	121
Other liabilities	93	–	–	–	93
Total liabilities	533	154	554	–	1,241

31.12.2015 (CZK million)	Less than 1 year	Between 1 and 5 years	More than 5 years	Unspecified	Total
Financial liabilities	119	194	492	–	805
Financial liabilities at fair value through profit or loss	119	194	492	–	805
Other financial liabilities	–	–	–	–	–
Payables	80	–	–	–	80
Other liabilities	199	–	–	–	199
Total liabilities	398	194	492	–	1,084

XLS

The following table shows the amount of insurance liabilities and financial liabilities for investment contracts broken down by contractual maturity.

Estimated cash flows of insurance liabilities and liabilities of investment contracts with DPF

31.12.2016 (CZK million)	Less than 1 year	Between 1 and 5 years	Between 5 and 10 years	Between 10 and 15 years	Between 15 and 20 years	More than 20 years	Total
Non-life insurance liabilities	6,490	3,719	1,762	1,566	1,410	1,096	16,043
RBNS & IBNR	6,107	3,719	1,762	1,566	1,410	1,096	15,660
Other insurance liabilities	383	–	–	–	–	–	383
Life insurance liabilities	4,418	12,616	11,055	5,858	4,270	6,199	44,416
Financial liabilities from investment contracts	32,696	14,710	12,390	9,021	9,763	14,237	92,817
Total	43,604	31,045	25,207	16,445	15,443	21,532	153,276

31.12.2015 (CZK million)	Less than 1 year	Between 1 and 5 years	Between 5 and 10 years	Between 10 and 15 years	Between 15 and 20 years	More than 20 years	Total
Non-life insurance liabilities	6,714	3,811	1,784	1,622	1,460	1,135	16,526
RBNS & IBNR	6,404	3,811	1,784	1,622	1,460	1,135	16,216
Other insurance liabilities	310	–	–	–	–	–	310
Life insurance liabilities	7,067	14,060	10,928	5,564	3,658	5,825	47,102
Financial liabilities from investment contracts	31,409	14,830	11,105	8,405	8,476	13,436	87,661
Total	45,190	32,701	23,817	15,591	13,594	20,396	151,289

XLS

Of which relates to the Transformed fund

31.12.2016 (CZK million)	Less than 1 year	Between 1 and 5 years	Between 5 and 10 years	Between 10 and 15 years	Between 15 and 20 years	More than 20 years	Total
Life insurance liabilities	20	9	7	5	6	8	55
Financial liabilities from investment contracts	32,687	14,710	12,390	9,021	9,763	14,236	92,807
Total	32,707	14,719	12,397	9,026	9,769	14,244	92,862

31.12.2015 (CZK million)	Less than 1 year	Between 1 and 5 years	Between 5 and 10 years	Between 10 and 15 years	Between 15 and 20 years	More than 20 years	Total
Life insurance liabilities	18	8	6	5	5	8	50
Financial liabilities from investment contracts	31,396	14,830	11,105	8,405	8,476	13,436	87,648
Total	31,414	14,838	11,111	8,410	8,481	13,444	87,698

XLS