F.3. Investments
F.3.1. Investment properties
| (CZK million) | 2016 | 2015 |
|---|---|---|
| Carrying amount as at beginning of reporting period | 8,381 | 7,454 |
| Foreign currency translation effects | (21) | (69) |
| Increases | 92 | 8 |
| Acquisitions | 1,572 | 976 |
| Reclassifications | – | 6 |
| Decreases | (52) | – |
| Revaluation and other changes | 242 | 6 |
| Carrying amount as at end of reporting period | 10,214 | 8,381 |
The Group acquired two investment properties in 2016. In March 2016, the Group acquired an office building located in the centre of Prague, Náměstí republiky. The fair value of the acquired investment property amounted to CZK 788 million.
The second transaction occurred in May 2016. The Group purchased real estate entity MUSTEK PROPERTIES, s.r.o. owning accommodation and retail premises located in the centre of Prague. The fair value of the investment property amounted to CZK 784 million.
The decrease in investment properties amounting to CZK 52 million is a result of the sale of one investment property, Barrandov building. A profit of CZK 2.7 million has been realised from the sale.
In 2015, the Group acquired two investment properties. In the first half of 2015, the Group purchased real estate entity IDEE, s.r.o. owning retail and office property located in the centre of Prague. The total acquisition cost amounted to CZK 398 million, including contingent consideration of CZK 28 million paid to the seller in January 2016 after meeting conditions defined in the purchase agreement.
Another property was acquired in December 2015 in Warsaw, when the Group paid CZK 578 million to purchase an office building located in the Wlochy district, an established secondary office location facing Jerozolimskie avenue.
The fair value of investment properties is based on the valuation of an independent valuator who holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued.
Investment properties are valuated on the basis of inputs of similar assets in active markets or of discounted cash flows of future income and expenses of the rental considered as part of the higher and best use by a market participant.
For investment income see note F.19, for investment expense see note F.23.
F.3.2. Investments in subsidiaries and associates
| (CZK million) | 31.12.2016 | 31.12.2015 |
|---|---|---|
| Investments in associates consolidated at equity | 408 | 68 |
| Direct Care s.r.o. | 7 | 20 |
| Generali Fond nemovitostních akcií | 401 | – |
| Generali Fond živé planety | – | 48 |
| Investments in non-consolidated subsidiaries and associates | 36 | 36 |
| Nadace České pojišťovny | 6 | 6 |
| Other | 30 | 30 |
| Total | 444 | 104 |
During 2016 the Group’s share in Fond nemovitostních akcií increased above 20%. As a result, the fund has been reclassified from financial investments to an associated company and is accounted for under the equity method (see note B.1).
The Group’s share in Fond živé planety decreased below 20% in 2016. As a result, the fund is no longer classified as an associated company (see note B.1). The investment has been reclassified to financial investments and is accounted for in accordance with IAS 39.
On 14 April 2016, the Company signed an agreement to transfer 100% of shares it held in Finansovyj servis o.o.o. The net book value of Finansovyj servis o.o.o. was nil and the purchase price amounted to RUB 10,000.
In the first half of 2015, ČP DIRECT, a.s. merged with Generali Care, a.s., a company of GCEE Group. As a result of the merger, ČP DIRECT ceased and the Group recognized its participation interest in Generali Care. The investment was classified as investment in associate and is accounted for under the equity method.
In 2016, the value of Direct Care s.r.o decreased due to dividend payment.
F.3.2.1. Summarized financial information for associates
| (CZK million) | Generali Fond nemovitostních akcií | Direct Care |
|---|---|---|
| 31.12.2016 | 31.12.2016 | |
| Total assets | 1,727 | 62 |
| Investments | 1,644 | — |
| Receivables and other assets | 3 | 18 |
| Cash and cash equivalents | 79 | 44 |
| Current assets | 1,727 | 62 |
| Total liabilities | 34 | 39 |
| Other provisions | — | 1 |
| Payables and other liabilities | 34 | 38 |
| Current liabilities | 34 | 39 |
| Net assets | 1,693 | 23 |
| (CZK million) | Generali Fond živé planety | Direct Care |
|---|---|---|
| 31.12.2015 | 31.12.2015 | |
| Total assets | 257 | 108 |
| Intangible assets | – | 1 |
| Investments | 223 | – |
| Receivables and other assets | 3 | 18 |
| Cash and cash equivalents | 31 | 89 |
| Current assets | 257 | 108 |
| Total liabilities | 1 | 35 |
| Other provisions | – | 1 |
| Payables and other liabilities | 1 | 34 |
| Current liabilities | 1 | 35 |
| Net assets | 256 | 73 |
Summarized SOCI
| (CZK million) | Generali Fond nemovitostních akcií | Direct Care | Generali Fond živé planety | Direct Care |
|---|---|---|---|---|
| 2016 | 2016 | 2015 | 2015 | |
| Net loss from the fees and commissions | (41) | – | (6) | – |
| Net gains from financial operations | 132 | – | 11 | – |
| Other operating income | – | 214 | – | 195 |
| Other operating expense | – | (204) | – | (186) |
| Earnings before tax | 91 | 10 | 5 | 9 |
| Tax | (8) | (2) | (1) | (2) |
| Net profit of the year | 83 | 8 | 4 | 7 |
Financial result of investment funds is from Group point of view immaterial, therefore not disclosed.
F.3.3. Loans and receivables
| Book Value | Fair Value | |||
|---|---|---|---|---|
| (CZK million) | 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 |
| Unquoted bonds | 927 | 905 | 1,098 | 1,101 |
| Deposit under reinsurance business accepted | 1 | – | 1 | – |
| Other loans and receivables | 7,974 | 5,526 | 7,974 | 5,526 |
| Term deposit with credit institutions | 737 | 176 | 737 | 176 |
| Reverse repurchase agreement (Reverse REPO) | 7,237 | 5,350 | 7,237 | 5,350 |
| Loans and receivables total | 8,902 | 6,431 | 9,073 | 6,627 |
| Current portion | 7,975 | 5,526 | – | – |
| Non-current portion | 927 | 905 | – | – |
Of which relates to the Transformed fund:
| Book Value | Fair Value | |||
|---|---|---|---|---|
| (CZK million) | 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 |
| Other loans and receivables | 1,000 | 2,750 | 1,000 | 2,750 |
| Term deposit with credit institutions | 600 | – | 600 | – |
| Reverse repurchase agreement (Reverse REPO) | 400 | 2,750 | 400 | 2,750 |
| Loans and receivables total | 1,000 | 2,750 | 1,000 | 2,750 |
| Current portion | 1,000 | 2,750 | – | – |
Fair value measurement as at the end of the reporting period:
| (CZK million) 31. 12. 2016 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Unquoted bonds | – | 1,098 | – | 1,098 |
| Deposit under reinsurance business accepted | – | 1 | – | 1 |
| Other loans and receivables | – | 7,974 | – | 7,974 |
| Term deposit with credit institutions | – | 737 | – | 737 |
| Reverse repurchase agreement (Reverse REPO) | – | 7,237 | – | 7,237 |
| Total | – | 9,073 | – | 9,073 |
| (CZK million) 31.12.2015 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Unquoted bonds | – | 1,101 | – | 1,101 |
| Other loans and receivables | – | 5,526 | – | 5,526 |
| Term deposit with credit institutions | – | 176 | – | 176 |
| Reverse repurchase agreement (Reverse REPO) | – | 5,350 | – | 5,350 |
| Total | – | 6,627 | – | 6,627 |
Of which relates to the Transformed fund:
| (CZK million) 31. 12. 2016 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Other loans and receivables | – | 1,000 | – | 1,000 |
| Term deposit with credit institutions | – | 600 | – | 600 |
| Reverse repurchase agreement (Reverse REPO) | – | 400 | – | 400 |
| Total | – | 1,000 | – | 1,000 |
| (CZK million) 31.12.2015 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Other loans and receivables | – | 2,750 | – | 2,750 |
| Reverse repurchase agreement (Reverse REPO) | – | 2,750 | – | 2,750 |
| Total | – | 2,750 | – | 2,750 |
Generally, if available and if the market is defined as active, fair value is equal to the market price. In the opposite case, the fair value is determined using the market and income approach. Primary inputs to the market approach are quoted prices for identical or comparable assets in active markets where the comparability between security and benchmark defines the fair value level. The income approach in most cases means a discounted cash flow method where either the cash flow or the discount curve is adjusted to reflect credit risk and liquidity risk, using interest rates and yield curves commonly observable at frequent intervals. Depending on observability of these parameters, the security is classified in level 2 or level 3.
F.3.4. Available-for-sale
| (CZK million) | 31.12.2016 | 31.12.2015 |
|---|---|---|
| Unquoted equities at cost | 4 | 4 |
| Equities at fair value | 1,740 | 2,189 |
Quoted | 1,740 | 2,189 |
| Bonds | 148,674 | 140,829 |
Quoted | 148,674 | 140,829 |
| Investments in fund units | 6,194 | 7,036 |
| Total | 156,612 | 150,058 |
| Current portion | 15,494 | 15,337 |
| Non-current portion | 141,118 | 134,721 |
Of which relates to the Transformed fund:
| (CZK million) | 31.12.2016 | 31.12.2015 |
|---|---|---|
| Equities at fair value | 255 | 123 |
Quoted | 255 | 123 |
| Bonds | 92,954 | 85,205 |
Quoted | 92,954 | 85,205 |
| Investments in fund units | 2,496 | 2,207 |
| Total | 95,705 | 87,535 |
| Current portion | 8,435 | 9,443 |
| Non-current portion | 87,270 | 78,092 |
Fair value measurement as at the end of the reporting period:
| (CZK million) 31.12.2016 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Unquoted equities at cost | – | – | 4 | 4 |
| Equities at fair value | 1,740 | – | – | 1,740 |
Quoted | 1,740 | – | – | 1,740 |
| Bonds | 133,353 | 12,774 | 2,547 | 148,674 |
Quoted | 133,353 | 12,774 | 2,547 | 148,674 |
| Investments in fund units | 5,984 | 210 | – | 6,194 |
| Total | 141,077 | 12,984 | 2,551 | 156,612 |
| (CZK million) 31.12.2015 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Unquoted equities at cost | – | – | 4 | 4 |
| Equities at fair value | 2,189 | – | – | 2,189 |
Quoted | 2,189 | – | – | 2,189 |
| Bonds | 121,448 | 16,939 | 2,442 | 140,829 |
Quoted | 121,448 | 16,939 | 2,442 | 140,829 |
| Investments in fund units | 6,820 | 216 | – | 7,036 |
| Total | 130,457 | 17,155 | 2,446 | 150,058 |
Of which relates to the Transformed fund:
| (CZK million) 31. 12. 2016 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Equities at fair value | 255 | – | – | 255 |
Quoted | 255 | – | – | 255 |
| Bonds | 90,188 | 2,493 | 273 | 92,954 |
Quoted | 90,188 | 2,493 | 273 | 92,954 |
| Investments in fund units | 2,496 | – | – | 2,496 |
| Total | 92,939 | 2,493 | 273 | 95,705 |
| (CZK million) 31.12.2015 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Equities at fair value | 123 | – | – | 123 |
Quoted | 123 | – | – | 123 |
| Bonds | 80,446 | 4,355 | 404 | 85,205 |
Quoted | 80,446 | 4,355 | 404 | 85,205 |
| Investments in fund units | 2,207 | – | – | 2,207 |
| Total | 82,776 | 4,355 | 404 | 87,535 |
The following table represents the transfers between the fair value levels during the reporting periods:
| (CZK million) | 2016 | 2015 |
|---|---|---|
| Transfers into Level 1 from Level 2 | – | – |
| Transfers into Level 1 from Level 3 | – | – |
| Transfers into Level 2 from Level 1 | – | – |
| Transfers into Level 2 from Level 3 | 363 | 1,956 |
| Transfers into Level 3 from Level 1 | – | – |
| Transfers into Level 3 from Level 2 | – | 727 |
In 2016, government bonds amounting to CZK 194 million and corporate bonds amounting to CZK 169 million were reclassified out of Level 3 as a result of available market information about their future yields.
The transfer of corporate bonds amounting to CZK 727 million from Level 2 into Level 3 in 2015 was caused by the situation in the financial markets which led to unavailability of observable market inputs, namely the level of credit spreads.
Further analysis was carried out in order to harmonize the portfolio in 2015. Based on that, corporate bonds amounting to CZK 1,700 million were reclassified into Level 2 from Level 3 and government bonds amounting to CZK 256 million were reclassified into Level 2 from Level 3.
Of which relates to the Transformed fund:
| (CZK million) | 2016 | 2015 |
|---|---|---|
| Transfers into Level 1 from Level 2 | – | – |
| Transfers into Level 1 from Level 3 | – | – |
| Transfers into Level 2 from Level 1 | – | – |
| Transfers into Level 2 from Level 3 | 169 | – |
| Transfers into Level 3 from Level 1 | – | – |
| Transfers into Level 3 from Level 2 | – | 410 |
The following table presents the changes in level 3 instruments in the reporting periods:
| (CZK million) | 2016 | 2015 |
|---|---|---|
| Balance as at beginning of reporting period | 2,446 | 5,741 |
| Transfers from Level 3 | (363) | (1,956) |
| Increases | 61 | 194 |
| Decreases and maturities | – | (2,843) |
| Transfers to Level 3 | – | 727 |
| Net unrealised gains and losses recognised in OCI | 389 | 569 |
| Net unrealised gains and losses recognised in P&L | (14) | (25) |
| Amortization | 32 | 37 |
| Other changes | – | 2 |
| Balance as at end of reporting period | 2,551 | 2,446 |
| Realised gains/losses for the period recognised in P&L | – | – |
| Net impairment loss for the period recognised in P&L | – | – |
Of which relates to the Transformed fund:
| (CZK million) | 2016 | 2015 |
|---|---|---|
| Balance as at beginning of reporting period | 404 | – |
| Transfers to Level 3 | – | 410 |
| Increases | 43 | 3 |
| Transfer from Level 3 | (169) | – |
| Net unrealised gains and losses recognised in OCI | – | 11 |
| Net unrealised gains and losses recognised in P&L | (5) | (20) |
| Balance as at end of reporting period | 273 | 404 |
| Realised gains/losses for the period recognised in P&L | – | – |
| Net impairment loss for the period recognised in P&L | – | – |
Maturity of available-for-sale financial assets – bonds (fair value)
| (mil. Kč) | Fair Value 2016 | Fair Value 2015 |
|---|---|---|
| Up to 1 year | 15,494 | 15,337 |
| Between 1 and 5 years | 48,161 | 50,530 |
| Between 5 and 10 years | 44,069 | 42,515 |
| More than 10 years | 40,950 | 32,447 |
| Total | 148,674 | 140,829 |
Of which relates to the Transformed fund:
| (CZK million) | Fair Value 2016 | Fair Value 2015 |
|---|---|---|
| Up to 1 year | 8,435 | 9,443 |
| Between 1 and 5 years | 28,750 | 28,904 |
| Between 5 and 10 years | 27,905 | 28,651 |
| More than 10 years | 27,864 | 18,207 |
| Total | 92,954 | 85,205 |
Realised gains and losses, and impairment losses on available-for-sale financial assets
| (CZK million) | Realised gains | Realised losses | Impairment losses | |||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Equities | 269 | 23 | (52) | – | (228) | (144) |
| Bonds | 987 | 380 | (53) | (185) | – | – |
| Investments in fund units | 112 | 388 | (192) | (35) | (99) | (194) |
| Total | 1,368 | 791 | (297) | (220) | (327) | (338) |
Of which relates to the Transformed fund:
| (CZK million) | Realised gains | Realised losses | Impairment losses | |||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Equities | 1 | 1 | (1) | – | (21) | – |
| Bonds | 13 | 123 | – | (40) | – | – |
| Investments in fund units | 2 | 144 | – | (35) | – | – |
| Total | 16 | 268 | (1) | (75) | (21) | – |
F.3.5. Financial assets at fair value through profit or loss
| (CZK million) | Held for trading | Designated at FVTPL | Total financial assets at fair value through profit and loss | |||
|---|---|---|---|---|---|---|
| 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 | |
| Equities | – | – | 105 | 165 | 105 | 165 |
Quoted | – | – | 105 | 165 | 105 | 165 |
| Bonds | – | – | 5,890 | 7,215 | 5,890 | 7,215 |
Quoted | – | – | 5,890 | 7,215 | 5,890 | 7,215 |
| Investments in fund units | – | – | 2,807 | 2,681 | 2,807 | 2,681 |
| Derivatives | 142 | 130 | 145 | 304 | 287 | 434 |
| Unit-linked investments | – | – | 7,926 | 7,798 | 7,926 | 7,798 |
| Total | 142 | 130 | 16,873 | 18,163 | 17,015 | 18,293 |
| Current portion | 119 | 1,529 | ||||
| Non-current portion | 16,896 | 16,764 | ||||
Of which relates to the Transformed fund:
| (CZK million) | Held for trading | Designated at FVTPL | Total financial assets at fair value through profit and loss | |||
|---|---|---|---|---|---|---|
| 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 | 31.12.2016 | 31.12.2015 | |
| Equities | – | – | 103 | 160 | 103 | 160 |
Quoted | – | – | 103 | 160 | 103 | 160 |
| Bonds | – | – | 3,504 | 4,021 | 3,504 | 4,021 |
Quoted | – | – | 3,504 | 4,021 | 3,504 | 4,021 |
| Investments in fund units | – | – | 187 | 183 | 187 | 183 |
| Derivatives | 73 | 59 | 10 | 16 | 83 | 75 |
| Total | 73 | 59 | 3,804 | 4,380 | 3,877 | 4,439 |
| Current portion | – | – | – | – | 14 | 513 |
| Non-current portion | – | – | – | – | 3,863 | 3,926 |
Fair value measurement as at the end of the reporting period:
| (CZK million) 31. 12. 2016 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Equities | 105 | – | – | 105 |
Quoted | 105 | – | – | 105 |
| Bonds | 5,890 | – | – | 5,890 |
Quoted | 5,890 | – | – | 5,890 |
| Investments in fund units | 2,807 | – | – | 2,807 |
| Derivatives | 2 | 285 | – | 287 |
| Unit-linked investments | 6,998 | 771 | 157 | 7,926 |
| Total | 15,802 | 1,056 | 157 | 17,015 |
| (CZK million) 31.12.2015 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Equities | 165 | – | – | 165 |
Quoted | 165 | – | – | 165 |
| Bonds | 6,464 | 751 | – | 7,215 |
Quoted | 6,464 | 751 | – | 7,215 |
| Investments in fund units | 2,681 | – | – | 2,681 |
| Derivates | 2 | 432 | – | 434 |
| Unit-linked investments | 6,049 | 1,723 | 26 | 7,798 |
| Total | 15,361 | 2,906 | 26 | 18,293 |
Of which relates to the Transformed fund:
| (CZK million) 31. 12. 2016 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Equities | 103 | – | – | 103 |
Quoted | 103 | – | – | 103 |
| Bonds | 3,504 | – | – | 3,504 |
Quoted | 3,504 | – | – | 3,504 |
| Investments in fund units | 187 | – | – | 187 |
| Derivates | – | 83 | – | 83 |
| Total | 3,794 | 83 | – | 3,877 |
| (CZK million) 31.12.2015 | Level 1 | Level 2 | evel 3 | Total |
|---|---|---|---|---|
| Equities | 160 | – | – | 160 |
Quoted | 160 | – | – | 160 |
| Bonds | 4,021 | – | – | 4,021 |
Quoted | 4,021 | – | – | 4,021 |
| Investments in fund units | 183 | – | – | 183 |
| Derivates | – | 75 | – | 75 |
| Total | 4,364 | 75 | – | 4,439 |
The following table represents the transfers between the fair value levels during the reporting periods:
| (CZK million) | 2016 | 2015 |
|---|---|---|
| Transfers into Level 1 from Level 2 | – | – |
| Transfers into Level 1 from Level 3 | – | – |
| Transfers into Level 2 from Level 1 | – | 1,539 |
| Transfers into Level 2 from Level 3 | – | – |
| Transfers into Level 3 from Level 1 | – | – |
| Transfers into Level 3 from Level 2 | 133 | 26 |
In 2016, unit-linked corporate bonds amounting to CZK 133 million were reclassified from Level 2 to Level 3 as a result of an improved FVH assessment. For these bonds, volatility of underlying equity indices creates material non-observable market input.
In 2015, unit-linked investment fund units amounting to CZK 1,539 million were reclassified from Level 1 to Level 2 and CZK 26 million were reclassified from Level 2 to Level 3 in relation to the frequency of an officially published valuation of the fund units.
There were no significant transfers between Level 1 and Level 2 fair value measurement categories in 2016 and 2015 for the Transformed fund.