Table of Contents 8.5 Analysts’ recommendations 124 8.6 Dividend policy 126
In the Report posters from internal communications for PZU employees were used.
– new proposals for our clients. This strategy is carried out through appropriate selection of employees, who realize the long-term business objectives and try to break through existing behavioral patterns and old processes. Simultaneously, an innovation evaluation process was started, which includes implementation of individual measures such as number of innovations in total submitted ideas or number of completed innovations among total innovations, value of savings and additional revenue obtained through implementation of an innovation.
PZU Energia Medycyna Ekologia, FIZ Akord, FIZ Dynamiczny, i.e. funds operating in a specific market segment and attempting to produce above-average management profits, not correlated with changes to market indexes (the so-called absolute rate of return funds).
PZU Group plans to become an integrated operator of coordinated health care by building a comprehensive product offer, creating a network of own medical establishments supported by the nationwide external network, and providing unique and customer-friendly service and appointment organization model.
13.8% of shareholder return comes from share price growth, PLN 2.77 per share
Return on equity (attributable to parent company) – 18.0% – a decline of 4.6 p.p. compared with 2014.
Second place on the market in volume of gathered assets at the end of December with 11.2% share.
Latvia: In 2015, PZU Group conducted business through AAS Balta – leader on the market, which entered the Group in June 2014 and, subsequently, acquired the PZU Lithuania branch operating on the Latvian market since 2012 (in May 2015). The share of both companies in the Latvian non-life insurance market reached 25.1% at the end of the third quarter of 2015. The total gross written premium of both entities in 2015 was EUR 67.1 million.
+0.3 p.p.y/y -1.6 p.p.y/y year-on-year and was the highest in 7 years. The real growth of disposable gross income was also considerably larger than in 2014. The consumer sentiment condition indicators also systematically improved. The Consumer Confidence Index published by the Polish Statistical Office (GUS) was the highest since 2008.
Swiss central bank in mid-January was another significant event in early 2015. The minimum EUR/CHF exchange rate of 1.20 was abolished. This decision resulted in a rapid strengthening of the Swiss currency also versus the Polish zloty.
In Q4 2015, the Polish 10-year treasury bonds yields slightly increased. At the same time, interest rates in Poland were expected to decrease, which led to a lower yield for bonds with shorter maturity dates.
Competition and Consumer Protection. The decision of the President of the Office of Competition and Consumer
The number of job places increased in other sectors of the economy. As a result, demand for work did not decrease, which translated into a positive remuneration dynamics.
Since 2014, political and economic situation in Ukraine has been unstable. This fact is linked with the following factors that influence the Ukrainian insurance market: military action in eastern Ukraine (including the Donetsk and Lugansk regions), annexation of Crimea in 2014, high inflation rate and strong dynamics of local currency (Ukrainian hryvnia)
The economic growth in Poland may be negatively impacted mainly by the external situation, mostly by the slowdown in
Real GDP growth in % (year-on-year) 3.5 3.6 3.3 1.3 1.6
PZU Group conducts various activities in the area of insurance and finance. In particular, PZU Group’s entities provide services in life insurance, non-life insurance, health insurance and asset management for clients within OPF and investment funds.
EMC Instytut Medyczny Warsaw PZU FIZ AN BIS 2 – 28.31%
PZU Group sold 99.879% of shares in PZU Lithuania to the Norwegian insurance company Gjensidige Forsikring
+3 p.p. - NPS of Link4 clients versus direct market competitors
Non-life insurance companies, on aggregate, estimated the value of net technical provisions at PLN 41.0 billion, which represented an increase of 2.9% compared with the end of 2014.
Link4 is the leader of the Polish direct insurance market and offers a wide range of non-life insurance, which covers motor insurance, property insurance, personal insurance, and TPL
In 2015, the bank channel saw continuation of cooperation with current distributors. The high sales of the Multicurrency
ON THE INSURANCE MARKET CHAPTER 2.4; • increasing by the PFSA minimum capital requirements to 10.25% in the core capital ratio Tier I and to 13.25% in the total capital ratio as of 1 January 2016, from the previously applicable levels of 9.00% and 12.00% respectively; • operating in the environment where very low interest rates prevail, which creates pressure on the level of generated net interest margin; • macroeconomic situation in the Polish economy – increase in the Gross Domestic Products, as well as the employment and salary level, accompanied by historically low interest rates and low prices of energy materials, positively affects the level of generated volume of credits and quality of credit portfolio.
Center, Contact Center, insurance and pension fund assistance, permanent intermediation in the conclusion of insurance contracts, financial and investment contracts, and assistance agreements.
PZU Group has held an equity stake in Armatura Kraków SA
Contents: 1. Key development directions of PZU Group in the years 2016–2020.
Further development of PZU Group will progress under conditions determined by the following main trends and factors: • Low interest rates
The regulations of the Solvency II directive establishing the requirements concerning key financial parameters of insurance activity came into effect on 1 January 2016.
Data The combination of the rising role of digital channels in client relations and rapidly growing analytical potential creates a unique opportunity for companies operating in the financial sector – especially insurance companies. However, numerous changes in business processes and investments in the solutions allowing for collecting and processing vast amount of data are essential, as well as tools for modeling and analyzing client behavior, which will enable the application of historical data collected by the companies.
1. 84% of PZU Group’s clients are satisfied with claims and benefits handling (satisfaction survey on a sample of 4.7 thousand clients conducted in the fourth quarter of 2015).
As the first company (to start in April 2014) the direct claims handling (BLS) process GLOSSARY on the Polish insurance market, PZU continues to handle claims under that scheme. It realizes it in two forms: individually and under an agreement.
• During such a call the Customer may make a claim, obtain information about the status of the liquidation of damage and buy insurance.
Group will be able to distribute information faster, which will enable the agents to better recognize and understand the needs of clients from different segments. Introducing improved and more advanced solutions to the working environment of the Group’s agents and employees, Everest 1 Change in sample selection methodology since the 2015 survey
PZU Group as an employer among candidates applying for a job at PZU. One of the key benefits of introducing the HRM
With gross written premium of PLN 18.4 billion, we are the leader in the Central and
Contents: 1. Key factors affecting the achieved financial results 2. Income 3. Claims and technical provisions 4. Acquisition costs and administrative expenses 5. Structure of assets and liabilities 6. Share of the business segments in the results
Share in net profit (loss) of entities measured using the equity method 4 (2) 1 - -
N et c la im s an d be ne fit
December 2014 (with no impact on net earned premium in 2014), partially offset by high written premium in motor own damage insurance due to a higher number of insurance policies; • in individual insurance segment, premium lower by
As at the end of 2015, the value of PZU Group’s investment portfolio3 amounted to PLN 55,411.2 million compared with
• lower growth in provision in individual unit-linked products in the banking channel as a result of a decreased sales volume and negative investment result; • decrease in provisions for compensation claims for damage in previous years in general TPL insurance and damage caused by forces of nature in the corporate insurance segment.
(resulting mainly from the deposits of Alior Bank, which entered the structures of PZU Group on 18 December 2015); • liabilities from sell-buy-back transactions in the amount of
• 11% decline in the investment income allocated to the segment at transfer prices to PLN 121.4 million, which was caused by the lower market interest rates; • decline in acquisition expenses by PLN 18.7 million, i.e.
implementation of changes in client relations management, including mainly implementation of a new model of the corporate insurance sales network.
• 7.9% decline y/y (i.e. PLN 44.7 million) in the investment income allocated to the mass insurance segment at transfer prices, which was caused by the lower market interest rates; • 12.5% higher acquisition costs compared with the corresponding period of the previous year resulting from higher inward reinsurance commission (effect of the conclusion of inward reinsurance agreements with the
These factors were offset by the lower acquisition costs in group protection insurance as the effect of the rising focus of the agency network on acquisition of individual protection products; • 6.3% higher administrative expenses. The growth to
PLN 122.7 million was caused mainly by the withdrawal of the Plan na Życie savings product with a protection component and regular premium; • administrative expenses increased by PLN 6.3 million in comparison with the previous year. The growth to
Poland (PZU, Link4 and PZU Życie) increased by the surplus of income exceeding the risk-free rate from investments matching the value of technical provisions of PZU, Link4 and
3. Insurance activity costs ratio (Costs of insurance activity/premium earned net of reinsurance ) x 100%
The main elements of an integrated risk management system are consistent for all insurance companies of PZU Group and implemented in a way which ensures the realization of strategic plans of individual companies and ensures business objectives of the whole PZU Group. They include, among others: • systems of limits and restrictions of the acceptable risk level, including the level of risk appetite; • processes of identification, measurement and assessment, monitoring and control, reporting and management actions with respect to individual risks; • risk management organizational structure, in which
The risk management system of PZU Group is based on: • organizational structure – including division of responsibilities and tasks performed by management bodies, committees as well as organizational units in the risk management process; • risk management process, including the methods of identification, measurement and assessment, monitoring and control, reporting risk and taking management action.
The most important factors influencing PZU Group’s risk profile in 2015
The integration of risk management process in insurance companies within PZU Group and implementation of Solvency
The nature of the process of credit spread risk management and concentration risk varies from management process of other subcategories of market risk and has been defined in the next section (Credit and concentration risk) along with the process of managing counterparty default risk.
Management actions in response to identified and assessed operational risk involve in particular: • risk mitigation by taking actions aimed at minimizing the risk, e.g. by strengthening the internal control system; • risk transfer – in particular by means of concluding an insurance agreement; • risk avoidance by not engaging in or withdrawing from particular business activity when excessive operational risk is detected and its restriction would be too costly to make the venture profitable; • risk acceptance – approval of consequences of a possible materialization of operational risk if its level does not exceed the tolerance level for operational risk.
Compliance risk covers especially the risk of non-compliance of PZU Group companies’ operation with a changing legal environment. The risk may be materialized as a result of absence of clear and unambiguous provisions or any provisions at all, i.e. so-called legal loophole. This may cause irregularities in PZU Group operations, which may in turn contribute to a cost increase (e.g. due to financial penalties), as well as higher risk of reputation loss, and what follows deteriorated credibility of the Group on the market (and a potential possibility to suffer financial loss).
Under compliance risk mitigation on a system and current level, among others the following mitigating activities have been implemented: • current realization of effective compliance function as one of the key functions in the management system at PZU
Financial assets exposed to currency risk include deposit transactions and debt instruments used to hedge payments from technical provisions denominated in foreign currencies, as well as exposures to equities listed on stock exchanges other than WSE, investment fund units and certificates in foreign currencies, exposures to derivatives denominated in foreign currencies and financial assets of consolidated entities denominated in foreign currencies.
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better than in the same previous period of 2014, which was a very good result compared with WIG20 (a 2.7% drop yearon -year) or WIG Banks (a 12.5% drop year-on-year.) However, the subsequent quarters brought a market downturn. In a downward trend, PZU share value dropped faster than the main market indexes. The closing price from the last session in 2015 amounted to PLN 34.0 and 8.3% lower than the estimate as at the end of 2014. By comparison, the same
PLN 1.6 billion. The PZU Management Board planned to buy further banks to build an entity that would be one of five largest institutions in Poland when it comes to asset volume.
Average value of the volume per session (PLN million) 80.3 73.9 80.9 73.2 92.9
The share of institutional investors from Poland dropped in 2015 by 4.4 p.p. to 26.6%, which was related to a higher supply of PZU shares, mainly from the Polish fund management companies (TFI). Simultaneously, the share of individual investors from Poland increased to 7%.
Europe institutional investors excl. Polish State Treasury* – 384.3 m shares
PZU Group and an attempt to maintain the own funds of
The policy assumes dividend payment calculated based on: • consolidated net profit where the amount of the dividend paid cannot be lower than 50% or higher than 100% of the net profit shown in PZU Group’s consolidated financial statements compliant with IFRS; and
The change for negative outlook reflects S&P’s opinion that further downgrading Poland’s rating is likely in the next 24 months if credibility of monetary policy is endangered and deficit in public finances drops below the expectations of agency analysts.
January 2016, as a result of downgrading PZU rating, the rating of eurobonds issued by PZU Finance AB was lowered to the level of BBB+. It continues to be a so-called „investment rating”.
Report for Q1 2016 20. Wall Street Conference for individual investors
Group’s services, at the same time we take efforts to support local communities. Most PZU branches are located in towns with less than 15 thousand of inhabitants and significantly contribute to the growth of the towns and their communities.
PZU also strongly focuses on establishing good relations with its service providers and vendors. In particular, the
The Group also uses the prevention fund to support the activity of rescue organizations – GOPW and WOPR – by contributing to equipment purchases, raising rescuers’
Davos gathers prime ministers, ministers, European commissioners, and the most important individuals on the political and business scene each year. As a partner of the event, PZU actively contributes to strengthening
PZU Lab we support risk management in industrial companies 4 l/100 km - we are building our hybrid car fleet 100% recycling - we recycle paper, batteries, and ferrous metals water consumption, low waste levels, use of eco-friendly materials and provision of good working conditions; • employee education. Key initiatives include: campaigns raising awareness about use of consumables, recycling, e.g. involving employees in collection of mobile phones and in environmental campaigns.
3. Application of Corporate Governance Principles to supervised institutions 4. Control system applied during preparation of the financial statements 5. Entity authorized to audit financial statements 6. Share capital and shareholders of PZU; stock held by members of its authorities 7. By-laws of PZU
General Shareholders’ Meeting and raise doubts about the effectiveness of the resolutions adopted during the meeting; the occurrence of the above-mentioned risks may affect the correct application of the principle in full; • principle specified in § 21.2: Principles which state that in the composition of the supervisory body there should be a separate function of a chairperson who manages the works of the supervisory body and that the choice of the chairperson of the supervisory body should be
Supervisory Board is made on the basis of their knowledge, experience and skills, which confirm that the chosen person has the competencies necessary for the proper performance of their supervising duties; the application of the criterion of independence in the case of the chairperson in accordance with the PFSA’s explanation of the principle may raise doubts about the potential conflicts of law relating to shareholders’ rights; • in relation to the principle specified in § 49.3 of the
PZU’s Management Board is the only one entitled to and responsible for management of the operations of the company; furthermore, in accordance with the provisions of the labor law, the activities related to the labor law are performed by the governing body; in view of the above,
The scope of the agreement will include: • audit of annual separate financial statements of PZU and of annual consolidated financial statements of PZU Group; • review of interim separate financial statements of PZU and of interim consolidated financial statements of PZU Group.
Meeting; • shareholders co-acting with shareholders defined in the point above based on agreements concerning joint voting rights attached to the shares. For the purposes of voting rights restrictions, the votes of the shareholders being parent companies or subsidiaries will be added up in line with the principles specified in the By-laws.
The General Shareholders’ Meeting is held: • as an Ordinary General Shareholders’ Meeting, which should be held within six months from the end of each financial year; • as an Extraordinary General Shareholders’ Meeting, which is convened in cases specified in the generally applicable law and the By-laws.
General Shareholders’ Meeting is deemed valid regardless of the number of attending shareholders. Ballots are open. The secret ballot is used when appointing and dismissing members of the Issuer’s bodies or liquidators, in cases of their personal responsibility towards the issuer and in personal cases, except when an open ballot is required by the applicable law, upon request of any shareholder present or represented at the
gives the right to a single vote at the General Shareholders’
Rome). From January 2010 to November 2010 he assisted the Committee of Inquiry (so-called gambling committee) in the Parliament of the Republic of Poland, and from July 2008 to March 2012 he worked as a lawyer for the Justice and Human Rights Committee in the Parliament of the Republic of Poland. From January 2009 to November 2012 he worked as a lawyer and advocate trainee in Kancelaria Adwokacka prof. dr. hab. Piotra Kruszyńskiego legal office and from May 2010 to February 2012 he was a lawyer in Kancelaria Adwokacka Adwokata Rafała
Charted Auditors and Accountants in 2002. He is also a co-author and co-editor of a four-volume commentary to the Code of Commercial Companies published by LexisNexis, and a co-author of a commentary „Prawo Ubezpieczeń” („Insurance Law”) consisting of the legal act and a comment to it published by Poltext in Warsaw, 2004. He authored a number of articles published in law periodicals focusing on the topic of company law and law of business insurance.
In accordance with the Regulations of the Supervisory Board, apart from appointing the audit committee and promotion and compensation Committee, provided for in the By-laws to properly perform its supervision, the Supervisory Board may appoint other permanent advisory and consultative committees whose competencies, composition and way of work is specified by regulations adopted by the Supervisory
Management Board constituting the Management Board in 2015 has been presented below: Name and surname (composition of the Management Board in 2015) In PZU Group Scope of responsibility
World Bank in Washington, D.C. He co-decided on the proposals concerning IBRD loans and guarantees, IDA loans and guarantees, IFC, investment guarantees and strategy and policies of the World Bank. Between 2006 and 2008 he was the Undersecretary of State in the Ministry of State Treasury, where he was responsible i.a. for ownership supervision. He supervised the program of energy sector consolidation.
In PZU Group, he is responsible for finance, accounting operations, debt collection and actuary.
Alwernia S.A. and Ciech Polfa Sp. z o.o. From 2007 to 2009, he worked as the Deputy Director of the Foreign Investments Office (Business Development Office) at PZU. Between 2010 and 2012, he worked in Telewizja Polska S.A. At first, as the Deputy Director of the Office of the
In 2003-2007, he worked as a Project Manager in the World Bank where he was responsible for preparing and coordinating the implementation of borrowing programs that were aimed to introduce policies to improve energy efficiency in the CEE countries. He coordinated also the works on a coal industry reform in Poland. In 2009-2016, he has collaborated with The Boston
Resolutions of the Management Board are adopted only in the presence of the CEO or a person designated to administer the work of the Management Board during their absence.
As at 1 January 2015, PZU Group Directors were the following: • Rafał Grodzicki; • Przemysław Henschke; • Sławomir Niemierka; • Tobiasz Bury.
Report of PZU Capital Group (including those concluded after the end of the financial year), which could result in future changes in proportions of shares held by the existing shareholders.
PZU Group companies provide services to each other, as part of their capital and business ties. With the exception of companies of the Tax Capital Group, transactions are concluded at arm’s length.
Office in scope of CIT owed from all companies, while PZU
Report of PZU Capital Group, PZU Group did not take part in any proceedings before court, body competent to hear arbitration proceedings or public authority body concerning liabilities or receivables of PZU or its direct and indirect subsidiaries with the value of at least 10% of the equity of
PZU. The description of court cases and proceedings before the President of the Office of Competition and Consumer
PLN 3,131.1 million of liabilities and PLN 1,767.2 million of receivables of PZU Group companies, which accounted for 25.29% and 14.28% of the equity of PZU calculated in line with PAS, respectively.
The system operating in the European Union from the 1970s to 31 December 2015.
& Poor’s. An A- rating means that issuers of debt instruments have a high capability of servicing their obligations giving consideration to the emergence of factors diminishing that capability.