F.3. Investments
F.3.1. Investment properties
| (CZK million) | 2015 | 2014 |
|---|---|---|
| Carrying amount as at 1 January | 7,454 | 5,227 |
| Foreign currency translation effects | (69) | 23 |
| Increases | 8 | 32 |
| Acquisitions | 976 | 2,120 |
| Reclassifications | 6 | – |
| Revaluation and other changes | 6 | 52 |
| Carrying amount as at end of reporting period | 8,381 | 7,454 |
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. 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.
A property owned by the Group which was presented as non-current assets held for sale in the amount of CZK 6 million at 31 December 2014 was decided to be kept as an investment property and reclassified to this section. For further details see Note F.8.
Acquisitions into the Group in 2014 of CZK 2,120 million represent property acquired by purchase of Palác Křižík a.s. The transaction is considered an acquisition of group of assets.
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 mainly 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.
Based on the analysis of inputs used for valuations, considering the limited cases where the inputs would be observable in active markets, the Group proceeded to classify the whole category at level 3.
For investment income see Note F.19, for investment expense see Note F.23.
F.3.2. Investments in subsidiaries and associates
| (CZK million) | 31.12.2015 | 31.12.2014 |
|---|---|---|
| Investments in associates consolidated at equity | 68 | 427 |
| Direct Care s.r.o. | 20 | – |
| PFO ČPI - Fond nemovitostních akcií | – | 380 |
| PFO ČPI - Fond živé planety | 48 | 47 |
| Investments in non-consolidated subsidiaries and associates | 36 | 36 |
| Nadace České pojišťovny | 6 | 6 |
| Europ Assistance s.r.o. | 30 | 30 |
| Total | 104 | 463 |
In 2014, the Group had investment in REFICOR s.r.o. and a Russian company Finansovyj servis o.o.o.. The value of investment in REFICOR was CZK 0.1 million and the investment in Finansovyj servis was fully impaired.
In 2015, REFICOR s.r.o. merged with another Group entity Pankrác services s.r.o. (see Note B.1.) and the investment was reclassified to consolidated subsidiaries. Net amount of investment in Finansovyj servis did not change.
During 2015 the Group share in Fond nemovitostních akcií decreased below 20%. As a result the company is not any longer classified as associated company (see Note B.1.). The investment has been reclassified to financial investments and is accounted for in accordance with IAS 39.
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.
F.3.2.1. Summarized financial information for associates
| (CZK million) | PFO ČPI - Fond nemovitostních akcií 31.12.2015 | PFO ČPI - Fond živé planety 31.12.2015 | Direct Care 31.12.2015 | Total 31.12.2015 |
|---|---|---|---|---|
| Total assets | – | 257 | 108 | 365 |
| Intangible assets | – | – | 1 | 1 |
| Tangible assets | – | – | – | – |
| Investments | – | 223 | – | 223 |
| Receivables | – | – | 18 | 18 |
| Other assets | – | 3 | – | 3 |
| Cash and cash equivalents | – | 31 | 89 | 120 |
| Current assets | – | 257 | 108 | 365 |
| Non-current assets | – | – | – | – |
| Total liabilities | – | 1 | 35 | 36 |
| Other provisions | – | – | 1 | 1 |
| Financial liabilities | – | – | – | – |
| Payables | – | – | 34 | 34 |
| Other liabilities | – | 1 | – | 1 |
| Current liabilities | – | 1 | 35 | 36 |
| Non-current liabilities | – | – | – | – |
| Net assets | – | 256 | 73 | 329 |
| (CZK million) | PFO ČPI - Fond nemovitostních akcií 31.12.2014 | PFO ČPI - Fond živé planety 31.12.2014 | Direct Care 31.12.2014 | Total 31.12.2014 |
|---|---|---|---|---|
| Total assets | 1,497 | 216 | – | 1,713 |
| Intangible assets | – | – | – | – |
| Tangible assets | – | – | – | – |
| Investments | 1,461 | 203 | – | 1,664 |
| Receivables | – | – | – | – |
| Other assets | 8 | – | – | 8 |
| Cash and cash equivalents | 28 | 13 | – | 41 |
| Current assets | 1,497 | 216 | – | 1,713 |
| Non-current assets | – | – | – | – |
| Total liabilities | 23 | 5 | – | 28 |
| Other provisions | – | – | – | – |
| Financial liabilities | – | – | – | – |
| Payables | 4 | 1 | – | 5 |
| Other liabilities | 19 | 4 | – | 23 |
| Current liabilities | 23 | 5 | – | 28 |
| Non-current liabilities | – | – | – | – |
| Net assets | 1,474 | 211 | – | 1,685 |
Summarized SOCI
| (CZK million) | Direct Care | |
|---|---|---|
| 2015 | 2014 | |
| Net interest income | – | – |
| Net profit from the fees and commissions | – | – |
| Other operating income | 195 | – |
| Other operating expense | (186) | – |
| Earnings before tax | 9 | – |
| Tax | (2) | – |
| Net profit of the year | 7 | – |
Financial result of investment funds is from Group point of view immaterial, therefore not disclosed.
F.3.3. Loans and receivables
| (CZK million) | Book Value | Fair Value | ||
|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | |
| Unquoted bonds | 905 | 885 | 1,101 | 1,096 |
| Other loans and receivables | 5,526 | 5,057 | 5,526 | 5,057 |
| Term deposit with credit institutions | 176 | 100 | 176 | 100 |
| Buy-sell transactions | 5,350 | 4,900 | 5,350 | 4,900 |
| Other loans | – | 57 | – | 57 |
| Loans and receivables total | 6,431 | 5,942 | 6,627 | 6,153 |
| Current portion | 5,526 | 4,999 | – | – |
| Non-current portion | 905 | 943 | – | – |
Of which relates to the Transformed fund:
| (CZK million) | Book Value | Fair Value | ||
|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | |
| Other loans and receivables | 2,750 | 300 | 2,750 | 300 |
| Buy-sell transactions | 2,750 | 300 | 2,750 | 300 |
| Loans and receivables total | 2,750 | 300 | 2,750 | 300 |
| Current portion | 2,750 | 300 | – | – |
Fair value measurement as at the end of the reporting period:
| 31.12.2015 | ||||
|---|---|---|---|---|
| (CZK million) | 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 |
| Buy-sell transactions | – | 5,350 | – | 5,350 |
| Other loans | – | – | – | – |
| Total | – | 6,627 | – | 6,627 |
| 31.12.2014 | ||||
|---|---|---|---|---|
| (CZK million) | Level 1 | Level 2 | Level 3 | Total |
| Unquoted bonds | – | 1,096 | – | 1,096 |
| Other loans and receivables | – | 5,000 | 57 | 5,057 |
| Term deposit with credit institutions | – | 100 | – | 100 |
| Buy-sell transactions | – | 4,900 | – | 4,900 |
| Other loans | – | – | 57 | 57 |
| Total | – | 6,096 | 57 | 6,153 |
Of which relates to the Transformed fund:
| 31.12.2015 | ||||
|---|---|---|---|---|
| (CZK million) | Level 1 | Level 2 | Level 3 | Total |
| Other loans and receivables | – | 2,750 | – | 2,750 |
| Buy-sell transactions | – | 2,750 | – | 2,750 |
| Total | – | 2,750 | – | 2,750 |
| 31.12.2014 | ||||
|---|---|---|---|---|
| (CZK million) | Level 1 | Level 2 | Level 3 | Total |
| Other loans and receivables | – | 300 | – | 300 |
| Buy-sell transactions | – | 300 | – | 300 |
| Total | – | 300 | – | 300 |
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 yiels 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) | 31.12.2015 | 31.12.2014 |
|---|---|---|
| Unquoted equities at cost | 4 | 4 |
| Equities at fair value | 2,189 | 2,315 |
Quoted | 2,189 | 2,315 |
| Bonds | 140,829 | 138,097 |
Quoted | 140,829 | 138,097 |
| Investments in fund units | 7,036 | 5,453 |
| Total | 150,058 | 145,869 |
| Current portion | 15,337 | 16,213 |
| Non-current portion | 134,721 | 129,656 |
Based on clarification of definition of quoted and unquoted instruments unquoted bonds in the amount of CZK 16,232 million were reclassified from unquoted bonds to quoted bonds in 2014.
Of which relates to the Transformed fund:
| (CZK million) | 31.12.2015 | 31.12.2014 |
|---|---|---|
| Equities at fair value | 123 | 82 |
Quoted | 123 | 82 |
| Bonds | 85,205 | 79,675 |
Quoted | 85,205 | 79,675 |
| Investments in fund units | 2,207 | 1,811 |
| Total | 87,535 | 81,568 |
| Current portion | 9,443 | 6,956 |
| Non-current portion | 78,092 | 74,612 |
Fair value measurement as at the end of the reporting period:
| 31.12.2015 | ||||
|---|---|---|---|---|
| (CZK million) | 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 |
| 31.12.2014 | ||||
|---|---|---|---|---|
| (CZK million) | Level 1 | Level 2 | Level 3 | Total |
| Unquoted equities at cost | – | – | 4 | 4 |
| Equities at fair value | 2,315 | – | – | 2,315 |
Quoted | 2,315 | – | – | 2,315 |
| Bonds | 116,342 | 16,018 | 5,737 | 138,097 |
Quoted | 116,342 | 16,018 | 5,737 | 138,097 |
| Investments in fund units | 5,453 | – | – | 5,453 |
| Total | 124,110 | 16,018 | 5,741 | 145,869 |
Of which relates to the Transformed fund:
| 31.12.2015 | ||||
|---|---|---|---|---|
| (CZK million) | 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 |
| 31.12.2014 | ||||
|---|---|---|---|---|
| (CZK million) | Level 1 | Level 2 | Level 3 | Total |
| Equities at fair value | 82 | – | – | 82 |
Quoted | 82 | – | – | 82 |
| Bonds | 74,597 | 5,078 | – | 79,675 |
Quoted | 74,597 | 5,078 | – | 79,675 |
| Investment fund units | 1,811 | – | – | 1,811 |
| Total | 76,490 | 5,078 | – | 81,568 |
The following table represents the transfers between the fair value levels during the reporting periods:
| (CZK million) | 2015 | 2014 |
|---|---|---|
| Transfers into Level 1 from Level 2 | – | 183 |
| Transfers into Level 1 from Level 3 | – | – |
| Transfers into Level 2 from Level 1 | – | – |
| Transfers into Level 2 from Level 3 | 1,956 | – |
| Transfers into Level 3 from Level 1 | – | – |
| Transfers into Level 3 from Level 2 | 727 | 5,137 |
Transfer of corporate bonds in the amount of CZK 727 million from Level 2 into Level 3 in 2015 is caused by stress in the financial markets which led to unavailability of observable market inputs, namely level of credit spreads.
Further analysis was carried out in order to harmonize the portfolio in 2015. Based on that corporate bonds in the amount of CZK 1,700 million were reclassified into the Level 2 from Level 3 and government bonds in the amount of CZK 256 million were reclassified into Level 2 from Level 3.
In 2014, corporate bonds in the amount of CZK 4,309 million were reclassified from level 2 into Level 3 in connection with stress in the financial markets which led to unavailability of observable market inputs, namely level of credit spreads.
Further analysis was carried out in order to harmonize criteria for pricing and levelling. As a result, government bonds in the amount of CZK 828 million were reclassified from level 2 into Level 3 as a result of unavailable market information about its yields.
Of which relates to the Transformed fund:
| (CZK million) | 2015 | 2014 |
|---|---|---|
| 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 | – | – |
| 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) | 2015 | 2014 |
|---|---|---|
| Balance as at 1 January | 5,741 | 4 |
| Transfers from Level 3 | (1,956) | – |
| Increases | 194 | – |
| Decreases and maturities | (2,843) | – |
| Transfers to Level 3 | 727 | 5,137 |
| Net unrealized gains and losses recognized in OCI | 569 | 564 |
| Net unrealized gains and losses recognized in P&L | (25) | – |
| Amortization | 37 | 36 |
| Other changes | 2 | – |
| Balance as at end of reporting period | 2,446 | 5,741 |
| Realized 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) | 2015 | 2014 |
|---|---|---|
| Balance as at 1 January | – | – |
| Transfers to Level 3 | 410 | – |
| Increases | 3 | – |
| Net unrealized gains and losses recognized in OCI | 11 | – |
| Net unrealized gains and losses recognized in P&L | (20) | – |
| Balance as at end of reporting period | 404 | – |
| Realized gains/losses for the period recognised in P&L | – | – |
| Net impairmetn loss for the period recognised in P&L | – | – |
Maturity of available-for-sale financial assets – bonds (fair value)
| (CZK million) | Fair Value 2015 | Fair Value 2014 |
|---|---|---|
| Up to 1 year | 15,337 | 16,213 |
| Between 1 and 5 years | 50,530 | 52,935 |
| Between 5 and 10 years | 42,515 | 44,822 |
| More than 10 years | 32,447 | 24,127 |
| Total | 140,829 | 138,097 |
Of which relates to the Transformed fund:
| (CZK million) | Fair Value 2015 | Fair Value 2014 |
|---|---|---|
| Up to 1 year | 9,443 | 6,956 |
| Between 1 and 5 years | 28,904 | 31,057 |
| Between 5 and 10 years | 28,651 | 31,088 |
| More than 10 years | 18,207 | 10,574 |
| Total | 85,205 | 79,675 |
Realised gains and losses, and impairment losses on available-for-sale financial assets
| (CZK million) | Realised gains | Realised losses | Impairment losses | |||
|---|---|---|---|---|---|---|
| 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |
| Equities | 23 | 196 | – | (209) | (144) | (90) |
| Bonds | 380 | 404 | (185) | (148) | – | – |
| Investments in fund units | 388 | 346 | (35) | (2) | (194) | (51) |
| Total | 791 | 946 | (220) | (359) | (338) | (141) |
Of which relates to the Transformed fund:
| (CZK million) | Realised gains | Realised losses | Impairment losses | |||
|---|---|---|---|---|---|---|
| 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |
| Equities | 1 | 5 | – | (18) | – | (6) |
| Bonds | 123 | 58 | (40) | (29) | – | – |
| Investments in fund units | 144 | – | (35) | – | – | – |
| Total | 268 | 63 | (75) | (47) | – | (6) |
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 | |||
|---|---|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | |
| Equities | – | – | 165 | 228 | 165 | 228 |
Quoted | – | – | 165 | 228 | 165 | 228 |
| Bonds | – | – | 7,215 | 11,168 | 7,215 | 11,168 |
Quoted | – | – | 7,215 | 11,168 | 7,215 | 11,168 |
| Investments in fund units | – | 102 | 2,681 | 4,124 | 2,681 | 4,226 |
| Derivatives | 130 | 78 | 304 | 141 | 434 | 219 |
| Unit-linked investments | – | – | 7,798 | 7,404 | 7,798 | 7,404 |
| Total | 130 | 180 | 18,163 | 23,065 | 18,293 | 23,245 |
| Current portion | – | – | – | – | 1,529 | 3,854 |
| Non-current portion | – | – | – | – | 16,764 | 19,391 |
Based on clarification of definition of quoted and unquoted instruments unquoted bonds in the amount of CZK 4,537 million were reclassified from unquoted bonds to quoted bonds in 2014.
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 | |||
|---|---|---|---|---|---|---|
| 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | 31.12.2015 | 31.12.2014 | |
| Equities | – | – | 160 | 223 | 160 | 223 |
Quoted | – | – | 160 | 223 | 160 | 223 |
| Bonds | – | – | 4,021 | 4,124 | 4,021 | 4,124 |
Quoted | – | – | 4,021 | 4,124 | 4,021 | 4,124 |
| Investments in fund units | – | – | 183 | 560 | 183 | 560 |
| Derivatives | 59 | – | 16 | 53 | 75 | 53 |
| Total | 59 | – | 4,380 | 4,960 | 4,439 | 4,960 |
| Current portion | – | – | – | – | 513 | 23 |
| Non-current portion | – | – | – | – | 3,926 | 4,937 |
Fair value measurement as at the end of the reporting period:
| 31.12.2015 | ||||
|---|---|---|---|---|
| (CZK million) | 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 |
| Derivatives | 2 | 432 | – | 434 |
| Unit-linked investments | 6,049 | 1,723 | 26 | 7,798 |
| Total | 15,361 | 2,906 | 26 | 18,293 |
| 31.12.2014 | ||||
|---|---|---|---|---|
| (CZK million) | Level 1 | Level 2 | Level 3 | Total |
| Equities | 228 | – | – | 228 |
Quoted | 228 | – | – | 228 |
| Bonds | 6,631 | 4,537 | – | 11,168 |
Quoted | 6,631 | 4,537 | – | 11,168 |
| Investments in fund units | 4,226 | – | – | 4,226 |
| Derivates | – | 219 | – | 219 |
| Unit-linked investments | 7,373 | 31 | – | 7,404 |
| Total | 18,458 | 4,787 | – | 23,245 |
Of which relates to the Transformed fund:
| 31.12.2015 | ||||
|---|---|---|---|---|
| (CZK million) | Level 1 | Level 2 | Level 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 |
| 31.12.2014 | ||||
|---|---|---|---|---|
| (CZK million) | Level 1 | Level 2 | Level 3 | Total |
| Equities | 223 | – | – | 223 |
Quoted | 223 | – | – | 223 |
| Bonds | 4,124 | – | – | 4,124 |
Quoted | 4,124 | – | – | 4,124 |
| Investments in fund units | 560 | – | – | 560 |
| Derivates | – | 53 | – | 53 |
| Total | 4,907 | 53 | – | 4,960 |
The following table represents the transfers between the fair value levels during the reporting periods:
| (CZK million) | 2015 | 2014 |
|---|---|---|
| Transfers into Level 1 from Level 2 | – | 23 |
| 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 | 26 | – |
In 2015 Unit-linked investment fund units in the amount 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 2015 and 2014 for the Transformed fund.