Preventive health tests, educational campaigns and social campaigns to enhance safety in road traffic and initiatives such as giving away reflective lights to pedestrians to protect them against accidents on the road and purchasing rescue equipment for fire fighters serve to achieve this purpose.
The PZU Group has PLN 343 billion of consolidated assets and it enjoys the trust of 22 million clients in five countries by offering products and rendering services to retail clients, small and medium enterprises and business entities. The Polish market is the PZU Group’s core market measured by its magnitude and client numbers. Nevertheless, its subsidiaries play an important role on the markets in Lithuania, Latvia, Estonia and Ukraine.
Health – in its efforts to ensure greater and more complete satisfaction of its client needs, the PZU Group has been actively developing the health insurance market with accompanying health care services under the PZU Zdrowie brand. The health business deals with the following activities: (i) sales of health products in the form of insurance and sales of non-insurance products (occupational medicine, medical subscriptions, partnerships and prevention programs), (ii) construction and development of medical infrastructure in Poland to give clients the best accessibility to the medical services rendered.
Insurance penetration rate of in Poland below the European average (7.5% in 2018)
The structure of the Polish market is dominated by non-life insurance (approx. 65% of the market), with the majority of gross written premium generated by motor insurance. In 2018, gross written premium collected on motor third party liability 5 Swiss Re, sigma No 3/2019: World insurance: the great pivot east contiunues insurance and motor own damage insurance accounted for 39% of the entire market’s gross written premium6. The share of life insurance in Poland’s total gross written premium (35%) was, in turn, a third lower than the European average. A similar structure of insurance markets is also typical of the Baltic states. In those countries, life insurance, on average, accounts for less than 30% of total gross written premium. This situation is completely different from that of West European countries where life insurance takes the bigger chunk of the market. In 2018, nearly 58% of insurance premiums in Europe was generated in life insurance, 31% in non-life insurance and 10.6% in health insurance7. Countries with the most developed life insurance market are countries that also have the largest insurance markets. These include Italy (in 2018, life insurance accounted for 75.3% of gross written premium), the United Kingdom (69.5%), France (63.6%) and the Scandinavian states: Finland (81.3%), Sweden (78.5%) and Denmark (70.6%).
Penetration of insurance in relation to GDP per capita in Europe (2018, EUR)
On 1 November 2019, the split payment procedure, which has been voluntary since July 2018, became mandatory for deliveries of selected groups of goods and services, for the payment of invoices documenting transactions concluded between taxpayers, whose one-time value, regardless of indemnity than that specified in the TPL insurance contract. This may take place in the event the indemnity is increased by the court pursuant to Article 3571 of the Civil Code, which creates the possibility of modification of an existing obligation relationship. The claim for the payment of an annuity will apply to periods following the date of the Act’s entry into force.
Factors specific to the sectors in which the PZU Group operates In addition to the above factors which influence the conditions of operation and the Group’s results, the situation in individual areas of activity is influenced by sector-specific factors and their changes.
The following changes transpired in the structure of the PZU Group in 2019 up to the date of publication of these financial statements: • on 31 January 2019, the final share purchase agreement was signed between PZU Zdrowie and the shareholders of Alergo-Med Tarnów Sp. z o.o., under which PZU Zdrowie purchased shares in Alergo-Med Tarnów Sp. z o.o. affter this transaction, PZU Zdrowie is the sole shareholder of AlergoMed Tarnów Sp. z o.o.; • on 3 June 2019, PZU Zdrowie purchased shares in FCM Zdrowie and Starówka Sp. z o.o.; • on 29 October 2019, PZU Zdrowie entered into a preliminary share purchase agreement with THC SICAV-RAIF SA, and on 9 December 2019 into final share purchase agreement for an equity stake in Tomma. At the same time, PZU Zdrowie, and thus also PZU, became an indirect owner of the following subsidiaries of Tomma: Asklepios Diagnostyka Sp. z o.o. and
In the first three quarters of 2019, the PZU Group’s technical result (PZU together with LINK4 and TUW PZUW) stated as a percentage of the overall market’s technical result was 48.0% (the PZU Group’s technical result was PLN 1,016 million while the overall market’s technical result was PLN 2,116 million).
The company offers its clients flexible insurance programs that optimize both costs and coverage. Since 2016, it has been selling and handling commercial insurance products targeted at clients from various industries, focusing predominantly on cooperation with large enterprises, medical centers (hospitals and clinics), local government units and church entities.
In 2019, the company continued to improve its product offering by modifying existing products and expanding its offering, for instance with a health insurance bundle. While attuning its operating model to the scale of business, the company keeps expanding its team of professionals to ensure the provision of comprehensive insurance services to its members and the capacity to tailor its insurance offering to the specific needs of clients.
Concurrently, the changes in the offering take into account the changing requirements of the regulatory authority and the growing extent of statutory consumer protection. PZU Życie takes a customer-oriented approach by designing its offer and client service process so that the client feels fully cared for and satisfied. It should also be emphasized that the changes are made not only to the product itself but also entail the modernization and simplification of the way in which insurance is offered and sold and enable the client to take advantage of various contact channels to reach the insurance undertaking (e.g. in a branch, by phone, e-mail, client account, person providing technical insurance services in the workplace or through an insurance intermediary, whether tied or external).
In 2019, Bank Pekao continued to develop its cooperation with PZU in the area of bancassurance, expanding its offer in the branches with two insurance products securing the repayment of loans. In cooperation with PZU, Pekao was involved in various activities aimed at supporting the sales network in improving knowledge about the products and sales skills. Almost 3,000 employees took part in the product training and over 750 new employees took the license examination. In Q4 2019, the volume of loans with CPI insurance increased 37% compared to Q1 2019. In Q4 2019, the value of the insurance premiums associated with sales of cash loans in remote channels increased 14% compared to Q1 2019. In the segment of property insurance covering buildings and residential premises, written premium in Q4 2019 was 40% higher than in Q1 2019.
In the area of bancassurance, Alior Bank introduced voluntary protection insurance in 2019 as a supplement of its banking
Changes in the asset value of individual funds were driven predominantly by: • active sales of funds as part of Employee Pension Plans; • active sales of PZU Oszczędnościowy and PZU PD Polonez for retail clients; • launch of inPZU SFIO, a new product line of passive funds; • difficult situation on the equity market causing outflows from this class of funds; • unfavorable sentiment towards closed-end funds on the domestic market.
At the end of 2019, there were 12 companies operating in the non-life insurance sector (including 8 branches of insurance companies established in other EU member states).
In 2019 the work was underway to implement a new procurement platform that, according to the assumptions underpinning the CSR strategy, incorporates the necessity of affirming the obligation to abide by the “Code of CSR Best Practices.
Individual Retirement Account Individual Retirement Security Account Open-end pension fund Employee pension scheme Employee Capital Scheme
Employee life and health Gain a competitive edge on the labor market. Offer insurance cover to your employees. Give them and yourself some support in difficult situations (e.g. in sickness, after an accident or in the event of a relative’s death). Also tend to health prevention.
On top of accelerating the process of determining the amount of the loss PZU has introduced a number of automated processes in order to speed up the payment of the indemnity by introducing robotics elements at the stage of summarizing the claims notification, sending out correspondence, making the claims decision and downloading police memos. Robotics are used in specific types of claims.
Innovations, digitalization and development of new technologies are processes that have been in progress for years in all the sectors of the economy. By rolling out many new solutions companies are gaining an ability to transform their strategy, business model and client, partner and employee experience. PZU grasps how new technologies are changing the insurance industry. In recent years, the PZU Group has been very active in implementing innovative solutions. Activities in this area are supported by the Innovation Laboratory – a unit created with a view to verifying the latest technological trends and testing new solutions across the organization. Modern solutions are being created both internally and in cooperation with the best start-up companies in the respective fields. Annually, 1,500-2,000 solutions are analyzed and 12-15 pilot projects are run. The projects executed with the support of the Innovation Laboratory have been awarded both in domestic and international competitions (in 2019, among others, Gazeta Ubezpieczeniowa’s award for the Band of Life, Gazeta Bankowa’s award for AI in claims handling and PZU GO, award from Fintech and Insurance Awards for PZU GO, award from Corporate Innovation Awards for the Innovation Laboratory for its overall activity).
The PZU Group’s insurance offer in Poland is complemented by an extensive range of investment products - open and closed-end mutual fund products and pension products - open-end pension fund, individual retirement security accounts with a voluntary pension fund, employee pension plans (PPE), individual retirement accounts (IKE), individual retirement security accounts (IKZE), and Employee Capital Schemes (PPK).
Distribution network Health products – in the form of life and health and property insurance and non-insurance products – benefit from synergies within the PZU Group and are distributed through virtually all sales channels, however based on the corporate and agency chain of PZU and PZU Życie.
Your health and employee health We cover your health and the health of your relatives. We help you when you have an accident or fall ill. Thanks to our offering, being an employer, you can provide your employees, e.g. with life protection and medical care.
As a leader of the Polish financial market, with immense potential to create innovative solutions for business and one of the biggest financial groups in Central and Eastern Europe, the PZU Group actively promotes Polish economy abroad.
In 2019, Bank Pekao continued the digital transformation process, comprising over 200 technologically advanced initiatives focused on development of sales and improvement of the quality of service in the remote channels, automation and robotization of the processes and enriching the offering to include state-of-the-art digital services.
The sales functions were expanded to include: • sale of Brokerage House products (including, among others, the brokerage and deposit account and the possibility of concluding a fund agreement); • facilitation in the handling of simplified cash loan applications; • handling of dedicated special deposit offers; • use of offer and information push notifications in the mobile application; • the possibility of opening a business account by a retail client who has not had business relationship with the bank before.
The next project, being developed in 2019 by the RBL_ Innovation by Alior Bank team, was the bank’s investment vehicle which executed two transactions at the time. The first one was a continuation investment in the amount of PLN 1.3 million in PayPo, a Polish fintech offering deferred payments for online purchases. In addition, together with banks PKO BP and BNP Paribas and two venture capital funds, the vehicle invested PLN 17 million in Autenti. It is a company offering a platform for electronic signing of agreements and digital document circulation. It is the first transaction in the Central and Eastern Europe region effected by banks jointly and on equal rules.
Operating profit was driven in particular by the following factors: • record-breaking gross written premium of PLN 24,191 million, including rapid sales expansion in international companies, the rising level of premium generated on protection products offered in own channels and the bancassurance channel in life insurance in Poland, the development of investment products in the bancassurance channel and the portfolio of group health products. Higher premium in the non-motor business, including insurance against fire and other damage to property in non-life insurance in Poland; • higher result on listed equities, among others due to better conditions on the Warsaw Stock Exchange; • dip in profitability in the mass insurance segment – effect of the higher loss ratio in insurance against fire and other damage to property as a result of the above-average number of losses caused by atmospheric phenomena; • higher insurance result in the corporate insurance segment, including improved profitability in the motor TPL insurance class; • higher result on individual insurance due to the expanding portfolio of high-margin protection insurance, in both own channels and bancassurance channels; • lower profitability in group and individually continued insurance with a growing health insurance portfolio as a result of an increase in the loss ratio of certain risks in the 1 Non-recurring events include the effect of converting long-term policies into yearly renewable term business in type P group insurance, provision for the reimbursement of fees on the premature amortization of consumer loans before 11 September 2019 and in the comparable period a non-recurring effect of setting up additional provisions in non-life insurance to cover the claims regarding pain and suffering by the vegetative state.
Net revenues from commissions and fees Net revenues from commissions and fees in 2019 stood at PLN 3,279 million, or were PLN 76 million lower than in the previous year, mainly as a result of higher commission costs in banking activity.
Ukraine and Baltics Life insurance – regular premium in Poland Life insurance – single premium in Poland Accident and other insurance in Poland TPL and other insurance in Poland Fire and property loss insurance in Poland Motor Own Damage insurance in Poland TPL motor insurance in Poland
(current and term deposits held by Pekao and Alior Bank up PLN 10,922 million compared to December 2018); • liabilities on the issue of own debt securities of PLN 9,273 million, including: ◦ PLN 3,976 million in bonds, down compared to last year following the amortization in July 2019 of eurobonds worth EUR 850 million issued through the wholly-owned subsidiary doing business as PZU Finance AB, which was partially offset by Pekao’s bond issue,
In addition, standby underwriting obligations for securities worth PLN 3,636 million contributed to the balance of contingent liabilities.
Group and individually continued insurance Operating profit in the group and individually continued insurance segment in 2019 was PLN 1,497 million, slightly down from last year (down 3%, or PLN 46 million). Operating profit, net of the conversion effect on long-term contracts into renewable term contracts in type P group insurance deteriorated PLN 43 million y/y (2.8%). The expanding portfolio of profitable health contracts and the lower level of benefit payments linked to deaths and childbirth were the main positive drivers of performance. In turn, the unfavorable factors were rising operating expenses and the growth in the loss ratio on some of the risks in the group protection portfolio.
◦ lower than a year ago pace of converting long-term insurance policies into yearly-renewable term business in type P group insurance. As a result, provisions were released in 2019 for PLN 14 million, or PLN 3 million less than in the corresponding period of 2018; • acquisition expenses up 39 million (11.2%) in the group and individually continued insurance segment. The factor driving the movement in this line item was the increasing remuneration for insurance intermediaries, especially for insureds left groups (work establishments) while limiting the pressure placed on the growth rate of the average premium made it possible to control the loss ratio in group protection products; • higher investment income (up PLN 87 million, or 15.0% y/y). The investment result consists of income allocated using transfer prices and income on investment products. Income allocated according to transfer prices is subject to slight fluctuation and its level depends largely on the level of technical provisions in protection insurance products. In 2019 the change in the segment’s investment income stemmed mostly from improved income in unit-linked products, especially Employee Pension Plans (EPS, a third pillar retirement security product) following better conditions on the Polish debt and equity market. This component of income on investing activity does not affect the segment’s result because it is offset by growth in technical provisions; • higher insurance claims and benefits and the movement in other technical provisions by PLN 126 million, i.e. 2.6% y/y to PLN 5,057 million. This change was driven by the following factors in particular: ◦ growth in technical provisions in EPS compared to last year’s decline, which was caused by this year’s higher investment performance coupled with a stable level of client contributions to, and higher disbursements from, unit-linked insurance accounts,
◦ higher nominal level of benefit payments due to critical illnesses and hospitalization.
Contingent receivables totaled PLN 4,257 million, implying a decline of PLN 233 million versus last year. They comprised among others: guarantees and sureties received and other contingent receivables comprising mainly securities received in the form of a mortgage on the debtor’s assets and other contingent receivables.
In 2019 PZU generated a return on equity of 18.4%, or 1.3 p.p. lower than in 2018. In 2015-2019 the return on equity (ROE) was 17.7% on average.
1. Gross claims and benefits ratio (simple) (gross claims and benefits/gross written premium) x 100%
2. Net claims and benefits ratio (net claims and benefits/net earned premium) x 100% 63.8% 66.7% 64.1% 62.2% 63.1%
Reporting involves communicating the level of financial liquidity to various decision-making levels. The frequency of each report and the scope of information provided therein are tailored to the information needs at each decision-making level.
The introduction of this Policy stemmed from the implementation, as of 1 January 2016, of Directive 2009/138/ EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II), as amended, the Insurance and Reinsurance Activity Act of 11 September 2015 and the expiration of the PZU Group’s Capital and Dividend Policy for 2013-2015 updated in May 2014.
PZU’s maximum share price (not adjusted for dividends) in 2019 was PLN 45.39 (at closing prices) and its minimum price was PLN 35.79. In 2018, these prices were PLN 47.34 and PLN 36.31, respectively.
PZU’s total shareholder return (TSR) calculated as the change in the share price plus the distributed dividend was -2.4% at the end of 2019. TSR in 2015-2019 was 18.7%. At the end of 2019 the WIG20TR index recorded a loss of 2.6% y/y.
Update of PZU strategy to 2020 - #newPZU - More than Insurance
Statistics concerning the PZU share price adjusted for dividends paid 2015 2016 2017 2018 2019
Ratios As at the end of 2019, PZU’s shares had a high P/BV ratio of 2,1, i.e. twice the average for European insurance companies, which the analysts perceive as attributable to its high ROE (in 2019, it was 21,2%).
The decision of the Bank Guarantee Fund concerning the level of contribution and its allocation among various banks was also an additional burden for the banking sector. In 2019, the entire sector saw its contribution shoot up by 27%. Out of this amount, the contribution to the forced restructuring fund rose by 110% to PLN 2.0 billion, while the contribution to the deposit guarantee fund fell by 36% to PLN 0.8 billion.
Ratio of dividend payment for a given year * excluding the dividend from surplus capital (PLN 2 per share) ** by the date of this Report, the Management Board has not adopted a resolution on the distribution of profit for 2019
Moody’s Investors Service Ltd. (ratings not procured by the bank) Bank Pekao Poland
The rules for interactions with stakeholders are shaped by its own code entitled PZU Group’s Best Practices. PZU Group’s Best Practices lay down the fundamental ethical standards and standards of conduct employed by PZU Group entities. They constitute a set of values and rules by which all the employees of PZU Group entities should be guided.
Shareholders may attend the Shareholder Meeting and exercise the right to vote in person or through a proxy. The proxy document to participate in the Shareholder Meeting and exercise the voting right must be granted in writing or electronically.
Alojzy Nowak Supervisory Board Secretary since 14 March 2017 (on the Supervisory Board since 30 May 2012)
Since 2005 he has been sitting on management boards and supervisory boards of commercial law companies. An experienced manager in the field of strategic consulting and corporate governance. He specializes in developmentoriented restructuring of enterprises and capital investments.
Economics of the Polish Academy of Sciences. President of the Polish
The following persons sat on the nomination and compensation committee as at 1 January 2019: • Paweł Górecki – Committee Chairman; • Agata Górnicka – Committee Member; • Katarzyna Lewandowska – Committee Member; • Maciej Łopiński – Committee Member.
Supervisory Board’s activity in 2019 The Supervisory Board held 13 meetings in 2019 at which it adopted 93 resolutions. It also adopted 22 resolutions between meetings under the written procedure. These resolutions pertained to all the areas of the Company’s business and were consistent with the scope of oversight functions defined by the requirements of the generally binding law, the Insurance and Reinsurance Activity Act of 11 September 2015, the Polish FSA’s recommendations, corporate governance rules and the ones described in PZU’s Articles of Association and the Supervisory Board Rules and Regulations.
Group; • adoption of an annual financial plan and a report on its implementation; • accepting the Management Board’s report on the
The following persons served as PZU Group directors in PZU Życie in 2019: • Adam Brzozowski (since 25 May 2019); • Roger Hodgkiss (from 1 until 24 May 2019).
Bartłomiej Litwińczuk 460 - 979 471 1) Remuneration for the function of Pekao Supervisory Board Member discharged from 1 January to 20 June 2018. 2) Including non-competition fee of PLN 74 thousand and severance pay of PLN 115 thousand. 3) Bonus for the Sponsoring Director function discharged from 1 January to 14 March 2017.
As at 31 December 2019, the total value of all the 294,687 cases pending before courts, competent bodies for arbitral proceedings or public administration authorities to which PZU Group entities are a party was PLN 8,363 million (of which PZU was a party to 200,676 cases with a total value of PLN 3,542 million). PLN 4,293 million of that amount pertains to liabilities and PLN 4,070 million to the accounts receivable of PZU Group companies (of which PLN 3,019 million pertains to liabilities and PLN 523 million to accounts receivable of the Issuer).
Basic and diluted Issuer’s profit per ordinary share (in PLN) 2.60 1.82 2.85 3.14 3.07 *including shares in consolidated funds Dane as at 31 December 2015-2018 restated
Data from the profit and loss account – individual insurance (PLN million) 2015 2016 2017 2018 2019
IDD – Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution (Insurance Distribution Directive)