The Supervisory Board, which supervises the risk management process and assesses its adequacy and effectiveness as part of its decision-making powers defined in the Company’s By-laws and the Supervisory Board rules and regulations.
The first three are: • The Supervisory Board, which supervises the risk management process and assesses its adequacy and effectiveness; performs duties as part of its decision-making powers defined in a given entity’s Articles of Association and the Supervisory Board bylaws, as well as through the Audit Committee; • The Management Board, which organizes the risk management system and ensures that it is operational, by adopting strategies and policies, setting the level of risk appetite, defining the risk profile as well as tolerance levels for the individual categories of risk; • The committees, which decide about limiting the levels of individual risks to fit the risk appetite framework they have defined, adopt procedures and methodologies for
Risk appetite defines the maximum permissible risk level while setting limits and restrictions for the various partial risks and the level above which remedial actions are taken to curtail further risk expansion
The risk appetite in the PZU Group – the magnitude of risk undertaken to attain its business objectives, where its measure is the level of potential financial losses, the decline in asset value or the growth in the amount of liabilities within one year.
Best practices stability of individual entities or the entire PZU Group. The determination of the appropriate level of risk in each entity is the Management Board’s responsibility, whereas a review of the risk appetite values is conducted once a year by the unit responsible for risk. All these measures are coordinated at the PZU Group level.
The risk appetite is set at least once a year also by the two banks from the PZU Group. They do it in accordance with the supervisory regulations (including those following from recovery plans) and the best practices.
The risk management structure in the PZU Group comprises 4 decisionmaking levels: (i) Supervisory Board, (ii) Management Board, (iii) Committees, (iv) three lines of defense as part of operations
As at the end of Q3 2020, the Solvency II ratio 257%* above the average ratio reported by insurance groups in Europe
170 171MANAGEMENT BOARD’S REPORT ON THE ACTIVITY OF THE PZU GROUP AND PZU SA 2020
Risk management on the Group level includes the introduction of compatible mechanisms, standards and organization of an efficient internal control system (with particular emphasis on the compliance function), the risk management system (especially in the reinsurance area)
In connection with the PZU Group obtaining the status of a financial conglomerate, a risk concentration management system has been implemented. Thanks to that, individual entities execute their business objectives, maintaining their own financial stability and the financial stability of the entire PZU Financial Conglomerate. The system monitors the risk concentration measures and their limits and threshold values. Risk measurement permits identification of the sources of concentration in individual risks at the level of both the PZU Financial Conglomerate and individual
Risk measurement and assessment Risk measurement and assessment are performed depending on the characteristics of the given risk type and the level o its relevance.The risk assessment is performed by specialised units. In every company,the risk unit is responsible for development of risk assessment tools and risk assessment process to the extent which specifies risk appetite, risk profile and risk tolerance.
regulated entities. It also makes it possible to assess the impact of the concentrations on financial stability.
The major risks associated with the operation of Alior Bank and Bank Pekao include the following risks: credit risk (including the risk of loan portfolio concentration), operational risk and market risk (involving interest rate risk, FX
In connection with the COVID-19 pandemic, increased risk was recorded in selected areas, especially mortality risk, interest rate risk, liquidity risk and credit risk.
In 2020, initiatives were undertaken to improve the identification, measurement, assessment and monitoring of the risks associated with sustainable development, in particular with climate changes. The main risks in this area - transformation risk and physical risk, are managed as part of individual risk categories specified below in this Report.
Risk identification commences with a proposal to develop an insurance product and continues until the expiry of the related liabilities. The identification of actuarial risk is performed, among others, as follows: • an analysis of the general terms and conditions of insurance with respect to the accepted risk and compliance with the existing laws; Major risks in the PZU Group
172 173MANAGEMENT BOARD’S REPORT ON THE ACTIVITY OF THE PZU GROUP AND PZU SA 2020
• an analysis of the general/specific terms and conditions of insurance or other model agreements with respect to the relevant actuarial risk being undertaken; • recognizing the potential risks related to a given product to measure and monitor them at a later time; • analyzing the impact exerted by the introduction of new insurance products on capital requirements and risk margin computed using the standard formula; • verifying and validating modifications to insurance products; • an assessment of actuarial risk with reference to similar existing insurance products; • monitoring of existing product; • analyzing the policy of underwriting (assessment of the risk accepted for insurance), tariffs, technical provisions and reinsurance and the claims and benefits handling process.
The management actions contemplated in the actuarial risk management process are performed by doing the following: • defining the level of tolerance for actuarial risk and monitoring it; • business decisions and sales plans; • calculation and monitoring of the adequacy of technical provisions; • tariff strategy, monitoring of current estimates and assessment of the premium adequacy; • the process of assessment, valuation and acceptance of actuarial risk; • application of tools designed to mitigate actuarial risk, including in particular reinsurance and prevention.
As a result of the COVID-19 pandemic, an increase in the mortality risk was recorded. It was taken into account in the regular business processes and the risk is subject to regular monitoring and control.
Numerous documents approved by supervisory boards, management boards and relevant committees govern investment activity in the PZU Group entities.
Market risk identification consists in the identification of actual and potential sources of this type of risk. For assets, the identification of risk begins with the decision to commence transactions in a given type of financial instrument. Units that make a decision to start entering into such transactions draw up a description of the instrument containing, in particular, a description of the risk factors. They convey this description to the unit responsible for risk that identifies and assesses market risk on that basis.
Market risk measurement is divided into stages, in particular: • collection of information on assets and liabilities that generate market risk, • calculating the value of risk.
Reporting involves communicating to the various decisionmaking levels information concerning the level of market risk and the results of monitoring and controlling it. The frequency of each report and the scope of information provided therein are tailored to the information needs at each decision-making level.
Management actions in respect to market risk involve in particular: • execution of transactions serving the purpose of mitigation of market risk, i.e. selling a financial instrument, closing a position on a derivative, purchasing a derivative to hedge a position; • diversification of the assets portfolio, in particular with respect to market risk categories, maturities of instruments, concentration of exposure in one entity, geographical concentration; • setting market risk restrictions and limits.
In connection with the COVID-19 pandemic, the banking sector in Poland recorded a significant decrease in net interest income. This affected
Risk management also the banks from the PZU Group. The reduction of the NBP reference interest rate in total by 140 bp in the first half of 2020 brought down the net interest margin (NIM) in the sector.
The risk identification involves analysis of the possibility of occurrence of unfavorable events, in particular: • shortage of liquid cash to satisfy the current needs of the
PZU Group entity, • lack of liquidity of financial instruments held, • the structural mismatch between the maturity of assets and liabilities.
Liquidity risk 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 following measures aim to reduce financial liquidity risk: • maintaining cash in a separate liquidity portfolio at a level consistent with the limits for the portfolio value; • maintaining sufficient cash in a foreign currency in portfolios of investments earmarked for satisfying insurance liabilities denominated in the given foreign currency; • provisions of the Agreement on managing portfolios of financial instruments entered into between TFI PZU and PZU regarding limitation of the time for withdrawing cash from the portfolios managed by TFI PZU to at most 3 days after a request for cash is filed; • keeping open credit facilities in banks and/or the possibility of performing sell-buy-back transactions on treasury securities, including those held until maturity; • centralization of management of portfolios/funds by TFI PZU; • limits of liquidity ratios in the banks belonging to the PZU Group.
Concentration risk is understood as the possibility of incurring loss stemming either from lack of diversification in the asset portfolio or from large exposure to default risk by a single issuer of securities or a group of related issuers.
Underwriting consists of estimating the probability of risk materialization and the potential impact exerted by risk materialization on a given entity’s financial standing.
In the case of banking entities suitable measures are employed in accordance with the regulations applicable to this sector and best market practices. Credit risk is measured using a set of loan portfolio quality metrics.
The structure of credit risk limits and concentration risk limits for various issuers is established by appointed committees in such a manner that the limits are consistent with the adopted risk tolerance determined by the management boards of the respective subsidiaries and in such a manner that they make it possible to minimize the risk of ‘infection’ between concentrated exposures.
In banking activity the provision of credit products is accomplished in accordance with loan granting methodologies appropriate for a given client segment and type of product. The assessment of a client’s creditworthiness preceding a credit decision is performed using tools devised to support the credit process, including a scoring or rating system, external information and the internal databases of a given PZU Group bank. Credit products are granted in accordance with the binding operational procedures stating the relevant actions performed in the lending process, the units responsible for that and the tools used.
In the PZU Group insurance segment, in the credit risk area, the impact of the COVID-19 pandemic was low; just like in 2019, no indications of impairment were identified in the portfolio, hence no exposure was classified to basket 3 (instruments for which impairment has been recognized). During 2020 the structure of the financial instruments held changed significantly; the share of corporate exposures, which in principle are characterized by higher risk parameters (PD, LGD), was reduced in favor of purchase of Polish treasury bonds or bonds guaranteed by the State Treasury. The value of the impairment losses in the portfolio in 2020 dropped relative to 2019 due to the change of the portfolio structure to a safer one, shift of the rating structure associated with the overall improvement of the financial results of the entities, and improvement of internal macroeconomic forecasts for Poland relative to the negative scenarios associated with the COVID-19 pandemic from Q1. Reduction of the impairment losses in the portfolio resulted from a decrease of the losses in basket 1, partly balanced by an increase of the losses in basket 2 (instruments with identified significant increase in credit risk according to IFRS 9). As a result of the increase of the portfolio value and decrease of cumulative impairment losses, the coverage with impairment losses, understood as the ratio of cumulative credit risk impairment losses to the gross carrying amount of all PZU Group assets exposed to credit risk subject to the IFRS9 regime, decreased.
From April 2020, no impact of COVID-19 on the increase of the loss ratio in the insurance guarantee portfolio was confirmed. The standing of individual clients is monitored on an ongoing basis.
Operational risk is identified in particular by: • accumulation and analysis of information on operational risk incidents and the reasons for their occurrence, • self-assessment of operational risk, • scenario analysis.
Operational risk is assessed and measured by: • calculating the effects of the occurrence of operational risk incidents, • estimating the effects of potential operational risk incidents that may occur in the business.
Council of Ministers’ Regulation imposing specific restrictions, prohibitions and orders in connection with the state of pandemic. A crisis situation was declared at PZU and PZU Życie on this day.
PZU and PZU Życie implemented solutions and processes to minimize the risk of infection and spread of the coronavirus in the organization. Appropriate safety measures were applied:
The sales, contract administration and claims handling processes were adapted in a similar manner to ensure business continuity and, at the same time, safe customer service.
The model risk management process involves: • risk identification, which takes place through regular identification of the models used in the areas covered by the process; identified models are assessed for materiality; • risk measurement, which is based on the results of independent model validations and monitoring; • risk monitoring, which involves ongoing analysis of deviations from the adopted points of reference regarding the model risk (e.g. verification of the recommendation execution method and comparison of the risk level to the adopted tolerance level); • risk reporting, which involves communicating the process results on the appropriate management level, in particular results of risk monitoring, validation and measurement; • management actions, which aim to mitigate the model risk level; they can be active (e.g. recommendations resulting from completed validations) and passive (developing model and model risk management standards).
In 2020the PZU Group entities had compliance systems adapted to the standards designated by PZU.
PZU Group entities are obligated to provide ongoing information on compliance risk to the PZU Compliance Department. The tasks of the Compliance Department include, among others: • analysis of monthly and quarterly reports received from compliance units of each member of the Group, • assessment of the impact of compliance risk on the PZU
Due to the broad spectrum of the PZU Group’s business, reputation risk is also affected by the risk of litigation is predominantly inherent in the Group’s insurance companies and banks.
• intangible risks pertaining to a loss of reputation, including damage to the PZU Group’s image and brand.
Compliance risk is monitored through: • systemic analysis of the regular reports received from the heads of organizational units and cells; • monitoring of regulatory requirements and adaptation of the business to the changing legal environment of PZU Group entities; • participation in the legislative work on amendments to generally prevailing provisions of law; • performing diverse activities in industry organizations; • coordination of external control processes; • monitoring of implementation of recommendations issued following internal audits; • coordination of the fulfillment of reporting duties imposed by the stock exchange (in respect of PZU) and by statute; • popularization of knowledge on competition law and consumer protection among PZU Group employees, according the area of their activities;
The actions in 2020 in the compliance area were also associated with the PZU Group continuing to meet the criteria for treating it as a financial conglomerate, and hence applying supplementary oversight to it under the Act of 15 April 2005 on supplementary oversight over credit institutions and insurance undertakings, reinsurance undertakings and investment firms comprising a financial conglomerate. The compliance area was involved in the work to align the Company to the requirements ensuing from this act, as well as to the requirements stemming chiefly from the following legal acts: • Directive of 15 May 2014 on Markets in Financial
Instruments (MIFID II) (this regulation is material for some PZU Group entities, in particular for TFI); • Act of 1 March 2018 on Combating Money Laundering and Financing of Terrorism; • Act of 16 October 2019 on amending the Act on Public Offerings and the Conditions for Offering Financial Instruments in an Organized Trading System and on Public Companies and some other acts; • International Financial Reporting Standard 17 “Insurance Contracts” (IFRS 17); • draft Act Amending the Mandatory Insurance, Insurance Guarantee Fund and Polish Motor Insurers' Bureau Act and the Insurance and Reinsurance Activity Act; • draft act amending the Commercial Company Code and certain other acts; • Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law; • Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainabilityrelated disclosures in the financial services sector, entered into force; • Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, amending Regulation (EU) 2019/2088; • Act of 16 April 2020 on Special Support Instruments in Connection with the Spread of the SARS-CoV-2 Virus (the so-called Anti-crisis Shield 2.0).
The implementation of this model served the purpose of defining the risk concentration management principles and supporting the units involved in the process, in particular through: • defining the roles and responsibilities of individual participants of the significant risk concentration management process; • introducing consistent risk definitions; • introducing the principles of identifying, measuring and assessing risk; • defining the risk limits and threshold values; • defining the principles of monitoring significant risk concentrations; • introducing the principles of reporting and management decision-making.
Foreign exchange risk – the possibility of incurring loss as a result of changes in the value of assets, liabilities and financial instruments, caused by changes in the level or in the volatility of currency exchange rates.
Equity price risk – the possibility of incurring loss as a result of changes in the values of assets, liabilities and financial instruments caused by changes in the level or in the volatility of market prices of equitiest.
Interest rate risk decrease by 100 bp 2,224 3,515 increase by 100 bp (2,101) (3,348)
The table below presents the contractual level of sensitivity of net interest income (NII) to a 100 bp change in interest rates and sensitivity of the economic value of equity (EVE) of PZU Group’s banks to a 200 bps change in interest rates.
The table below presents a sensitivity analysis of the net result and equity to changes in the assumptions used to calculate the provision for the capitalized value of annuities. This analysis does not incorporate the impact exerted by changes in the valuation of deposits used to calculate the provision.
Impact of the change in assumptions regarding the provision for the capitalized value of annuities in non-life insurance on the net financial result and equity gross net gross net
Mortality at 90% of the assumed rate (149) (143) (151) (143)
Impact of the change in assumptions in life insurance, excluding provisions in annuity products, on the net financial result and equity
On the base of the reinsurance treaties it has entered into PZU limits its risk related to catastrophic losses among others through a catastrophic non-proportional excess of loss treaty. The risk related to the consequences of large single losses, in turn, is mitigated under non-proportional reinsurance treaties to protect its portfolios of property, technical, marine, air, third party liability and third party liability motor insurance.
PZU’s risk is also mitigated by proportional and nonproportional reinsurance of the financial insurance portfolio (e.g. guarantees, commercial credit). PZU’s reinsurance partners have high S&P ratings. That evidences the reinsurer’s robust financial position and affords the Company security.
Reinsurance treaties in PZU Życie The outward reinsurance treaty entered into by PZU Życie protects the company’s entire portfolio against the accumulation of risk and individual policies with higher sums insured. Reinsurance partners have high S&P ratings. That evidences the reinsurer’s robust financial position and affords the Company security.
standing. Every material insurance portfolio is secured with the appropriate obligatory treaty. Reinsurance cover is provided for the most part by PZU, which transfers a portion of the accepted risk outside the Group.
• ensure sufficient financial means to cover the Group’s liabilities to its clients.
• PZU will not issue any new shares for the duration of this policy.
Alior Bank Group – total capital adequacy ratio *Q3 has not been audited or reviewed by statutory auditor
The PZU Group on the capital and debt markets 8.1 Equity and bond market 2020 was a period of extreme volatility reflecting the market’s reaction to the outbreak of the COVID-19 pandemic. According to the World Health Organization 1 (WHO), the origins of the pandemic have been traced to the city of Wuhan in the Hubei province of central China, where the first cases of this disease were diagnosed on 17 November 2019. The fear of disruptions to international supply chains and of the resulting global recession has translated into a more restrictive approach to risk by global investors. As a result, in 2020, a sell-off wave passed through all key equity markets, which changed direction only at the end of the year.
In early 2020, global equity markets continued their robust gains generated in 2019. Stock market indices kept breaking new all-time peaks, chiefly due to the surge in optimism regarding high-tech companies. Another contributing factor was the improvement in trade relations between the United States and China. However, the outbreak of the COVID pandemic sent a major shock-wave across the financial markets at the beginning of March 2020. On 10 March, an enormously rapid sell-off was triggered on stock exchanges in the United States. The S&P 500, Dow Jones and Nasdaq indices lost more than 7% at the close of the day’s session. Almost all major global stock exchanges were also experiencing declines. In Q1 2020, The aggregate weekly losses reached a whopping 20-30%.
A rebound and strong upward corrections took place already in Q2 2020, triggered largely by stimulation measures taken by governments and central banks. The world’s largest stimulus package worth USD 2 trillion was adopted in the United States (approx. 10% of GDP). The value of aid programs for individual countries in Europe was also impressive. It ranged from several dozen to several hundred billion euros. The largest chunk of activities in this area was focused on the protection of jobs, the provision of support to micro, small and medium-sized enterprises and to self-employed individuals.
Additional interest rate cuts served as another key element intended to stimulate economies across the world. The first central bank to take such a step as early as in 2019 was the central bank of China – the country where the pandemic began. However, global investors set their eyes chiefly on the measures adopted by the Fed2, which already in Q1 2020 cut its interest rates twice, bringing them down almost to zero.
The stimulus measures provided a significant degree of support to the financial markets. In parallel, a number of steps were taken with a view to reducing the rate of dissemination of the infections, which coincided with the earliest reports on the progress of work on the vaccine. Consequently, at the end of Q1 2020, this favorable event prompted investors to take long positions in equities. After the rapid sell-off in mid-March, the rebound took over and continued in the months to follow. In Q3 2020, the S&P 500 and the Nasdaq Composite set new all-time peaks. SECTION 2.3. SITUATION ON THE FINANCIAL MARKETS
The beginning of Q4 2020 brought another sharp spike in COVID-19 cases, which translated into uneasy moods associated with the extent of another upcoming lockdown3. Controversies were also growing around the presidential election in the United States, which lasted until November, when the victory of Joe Biden was announced. Subsequently, a growth trend returned to the markets, additionally supported by new information about the high effectiveness of several vaccines against the coronavirus causing COVID-19. In 2020, the MSCI ACWI – All Country World Index4 grew 14.3% y/y, even though cumulative decreases in Q1 2020 reached as much as 30%.
The development of the pandemic also affected emerging markets. Similarly to the behavior of equities across the world, emerging markets rebounded strongly following their steep decline in Q1 2020 and reached levels that were much higher than those attained before the sell-off wave. The MSCI EM5 index improved 15.8% y/y in 2020. In particular, the jump from the lowest level, recorded on 23 March 2020 (758 points), to the 31 December 2020 listing (1,291 points) was above 70%. These increases were not reflected in the values attained by the WIG20 index, which had historically demonstrated a strong correlation with the MSCI EM index. In 2020, WIG20 3 Lockdown – the term applied to describe the restrictions imposed in connection with the announcement of the COVID-19 pandemic in 2020. It involves a prohibition of unconstrained movement of people and an order to stay at home (with certain exceptions). It also refers to restrictions on the operation of the economy. 4 As at the end of December 2020, the index was composed of stocks from 50 countries, 23 of which were classified as developed markets and the remaining 27 were classified as emerging markets. 5 Index of emerging markets – that is markets in countries with rapid economic growth and high levels of investment. For this reason, they are becoming an attractive place for investing capital, especially on securities markets, usually offering potentially higher rates of return than the markets of highly developed nations. This group of countries includes Poland, but also Turkey and the BRIC countries: Brazil, Russia, India, China.
2020 was a very successful year for investors active on the debt market. Due to concerns about the consequences of the COVID-19 pandemic, a large chunk of capital was shifted towards ‘safe havens’, in particular treasury bonds. Growth in bond prices was largely driven by the expansionary policies pursued by the world’s most influential central banks. Poland also took steps to increase its money supply by cutting down interest rates. As a result of the most recent such cut, which took place on 29 May 2020, the reference rate dropped to 0.1%.
6 The BSP Index is an income-based index that takes into account changes in bond prices, the value of accrued interest and the revenue from reinvested coupons. The index portfolio includes zero-coupon and fixed-interest rate bonds denominated in Polish zloty.
The P/E ratio (price / earnings) for PZU’s stock at the end of 2019 was 14.6x
Percentage of PZU held by openend pension funds (OFE) was while the percentage held by mutual fund management companies (TFI) was
The number of conferences for institutional investors: Number of recommendations issued for PZU shares in 2020 highest target price at the end of December 2020: PLN 39.3 average target price at the end of December 2020: PLN 34.7
Financial strength rating and credit rating for PZU and PZU Życie awarded by S&P Global Ratings: A- (stable)
The percentage of retail investors in PZU’s shareholder structure at the end of 2020 was
PZU’s min/max share price at session closing from May 2010 to 2020
over PLN 27.9 billion at the end of 2020, PZU ranked as the fifth largest domestic company by market cap on the WSE. PZU’s share in WSE’s total trading volume was 5.9% (6th place).
The maximum price per share of PZU stock in 2020 was PLN 41.80 (at closing prices) and the minimum price was PLN 20.55 – the lowest level in the history of PZU’s listing (without taking historical dividends into account). In 2019, these prices were PLN 45.39 and PLN 35.79, respectively.
At the beginning of Q1 2020, the PZU stock prices went hand in hand with the main indices of the Warsaw Stock Exchange. The situation changed dramatically at the beginning of March, when the first individual in Poland was diagnosed with COVID-19. On the day following the announcement of a pandemic by the World Health Organization (WHO) on 11 March, the WIG and WIG20 indices tumbled 12.7% and 13.3%, respectively, while PZU dwindled 11.3%, thus recording the 8 In accordance with the methodology applied by Stooq ( pomoc/?q=9&s=pzu).
1,000 pts 1,250 pts 1,500 pts 1,750 pts 2,000 pts 2,250 pts 2,500 pts 2,750 pts 3,000 pts 0 PLN
PZU’s share price adjusted for dividends paid from May 2010 to 2020
Source: www.stooq.pl largest single-day drops in their history. From 5 to 12 March 2020, the accumulated decline in the price of PZU stock was 30%.
The situation changed very rapidly in Q4 2020. On 9 November 2020, news spread around the world that the US-based pharmaceutical company Pfizer, in collaboration with the German biotechnology company BioNTech SE, confirmed the more than 90% efficacy of their proprietary vaccine against the SARS-CoV-2 coronavirus. Global indices reacted to the news favorably. By the end of 2020, the price of PZU’s stock increased 57.5% compared to its annual low of PLN 20.55. During the last stock exchange session held in 2020, the price per PZU share was PLN 32.36.
194 195MANAGEMENT BOARD’S REPORT ON THE ACTIVITY OF THE PZU GROUP AND PZU SA 2020
Tu rn ov er v ol um e Turnover volume PZU share price (PLN)
The Polish Financial Supervision Authority (KNF) issued a decision prohibiting the disbursement of dividends in 2020, in connection with the COVID-19 pandemic and its impact of economy
Source: Liquidity In 2020, PZU’s shares were highly liquid. The average daily spread of PZU’s stock was 9 bps compared to the average spread of 22 bps for the 20 most liquid companies. The average daily trading volume of PZU’s stock in 2020 was 2.4 million shares (up 43.2% y/y). The total annual trading value was in excess of PLN 17.6 billion.
The largest daily trading volume was recorded during the bullish sessions of 17 December (7.3 million shares, up 4.8%) and 18 December 2020 (7.5 million shares, up 0.5%). These large trading volumes were likely driven by KNF’s publication of a stance on the lifting of the ban on dividend distributions by insurers. Following the 16 December 2020 session, KNF announced that insurers will be permitted to disburse dividends in an amount equal to 100% of the 2019 profit and 50% of the 2020 profit, provided that certain quality and capital criteria have been fulfilled.
Volatility Compared to the broad WIG market, PZU’s systematic risk expressed by the beta coefficient (PZU share price versus the WIG index for daily changes) was 0.99 in 2020 (0.86 in 2019). The annualized standard deviation (calculated on daily changes) in the PZU share price increased by 18.7 percentage points to 38.7%. The corresponding values for WIG and WIG20 also swelled significantly – by 17.1 percentage points to 29.8% and by 15.7 percentage points to 32.7%, respectively. The decline in capitalization which was not accompanied by a corresponding decline in liquidity translated into a material increase in the trading volume.
Nu m be r o f t ra ns ac tio ns
196 197MANAGEMENT BOARD’S REPORT ON THE ACTIVITY OF THE PZU GROUP AND PZU SA 2020
P/BV Share price / book value per share 2.2x 2.6x 2.5x 2.1x 1.5x
P/E Share price / net earnings per share 14.8x 12.6x 11.8x 10.5x 14.6x
Closing price on the last trading session of the year (PLN) 33.21 42.16 43.90 40.03 32.36
Average trading volume per session (shares) 2,225,087 1,795,331 1,681,702 1,649,190 2,362,287
Capitalization at the end of the period (PLN m) 28,677 36,406 37,908 34,567 27,944
Closing price on the last trading session of the year (PLN) 52.59 62.94 67.18 66.11 58.44
Capitalization at the end of the period (PLN m) 45 416 54 354 58 015 57 091 50 468
Source: PZU (2018, 2019, 2020) – reported data; other companies – 2020 annual forecasts (Bloomberg); PZU share prices at year-end 2020
PZU 2020 2018 2019 2020 Linia trendu z wyłączniem PZU (R2 = 0,7685)PZU
198 199MANAGEMENT BOARD’S REPORT ON THE ACTIVITY OF THE PZU GROUP AND PZU SA 2020
Striving to achieve the greatest possible transparency of the PZU Group’s business, the Management Board of PZU takes various investor relations activities aimed at ensuring equal access to information.
PZU’s shareholder structure According to current reports regarding the percentage of share capital and votes held by shareholders at the Shareholder Meeting, as at 31 December 2020, the State Treasury of the Republic of Poland held a 34.2% stake in the share capital and votes, and funds managed by Nationale-Nederlanden PTE held a 5.1% stake (Current Report No. 38/2020 of 30 December 2020). The remaining 60.7% stake was held by shareholders below the 5% threshold each. SECTION 9.6 PZU’S SHARE CAPITAL AND SHAREHOLDERS
In terms of geographic mix, the exposure of Asian investors increased by 1.3 p.p. to 5.9%. At the same time, the exposure of investors from North America and Europe (excluding Poland) declined by 1.5 p.p. y/y to 13.2% and 2 p.p. y/y to 14.2%, respectively.
Composition of PZU’s shareholders by geography * Investors' interest was marked on the basis of the number of investor meetings in 2020 and the country of origin of the investors; shareholding structure (excluding the State Treasury) at the end of 2020 Source: PZU own study
* Polish State Treasury– 295.2 m shares (34.2% share in capital)change 2020/2019
202 203MANAGEMENT BOARD’S REPORT ON THE ACTIVITY OF THE PZU GROUP AND PZU SA 2020
Activities addressed to retail investors In the interests of retail investors, PZU provided them in 2020 with reliable and up-to-date information on the Company’s business and financial results as well as on the insurance and banking industries.
Prizes and distinctions for IR activities PZU’s investor relations activities are highly regarded by investors, analysts and the media. This was confirmed by the awards and distinctions awarded in 2020, including in the Best Annual Report 2019 contest organized by the Institute of Accounting and Taxes (Instytut Rachunkowości i Podatków): • special award “The Best of the Best” (for the second time); • special prize for the best on-line annual report in the Banks and Financial Institutions category; • special prize for the best integrated annual report in the
Analysts’ expectations concerning PZU’s share price in 2021 based on recommendations in effect at the end of December 2020
jan feb mar apr may jun jul aug sep oct nov dec
% s ha re jan feb mar apr may jun jul aug sep oct nov dec
Price variance between the recommendations and the share price at the end of 2020
Institutions issuing recommendations for PZU’s stock (as at 31 December 2020)
In the middle of Q4 2020, in line with improved sentiments on global and local markets, the PZU share price rebounded strongly. At the end of the year, the difference between the recommendation prices and the actual share price shrank to just 7.2%, from 9.8% at the beginning of the year. During the last December session of 2020, the PZU share price stood at PLN 32.36. The minimum and maximum target prices for PZU’s stock in analysts’ forecasts active at the end of December 2020 (7 “buy” and 4 “hold” recommendations) were PLN 26.8 and PLN 39.3, respectively. The average target price was PLN 34.7.
The PZU Group on the capital and debt markets affiliation banks and insurance and reinsurance undertakings in 2020, according to which the possibility of dividend payment up to the entire profit earned depended on the BION assessment, the solvency level in 2019 and the capital needs within 12 months from the moment of approving the financial statements for 2019, while the solvency requirements were set at the same values as in previous years.
Moreover, on 2 April 2020, the European Insurance and Occupational Pensions Authority (EIOPA) recommended a temporary suspension of dividend disbursements by European insurance undertakings.
• 21 April 2020 – Management Board’s recommendation on the distribution of PZU’s net profit
The PZU Management Board issued a recommendation to distribute the 2019 profit in compliance with the recommendations received from the regulatory authority. On 28 April 2020, the PZU Supervisory Board issued a favorable opinion on the PZU Management Board’s motion.
These criteria include a Regulatory Review and Evaluation (BION) assessment (i.e. risk assessment) and the coverage of a specific capital requirement on a standalone (unconsolidated) basis. Moreover, a company intending to disburse a dividend must not have experienced a situation involving a shortage of own funds to cover the capital requirement in any quarter and
• 3 December 2019 – KNF’s recommendation on paying dividends from the profits generated in 2019
KNF permitted a dividend payout equal to the entire profit earned in 2019 (implying that it is not permissible to make distributions from any of the other capital accounts) provided that the capital requirement coverage (after expected dividends are deducted from own funds) as at 31 December 2019 and for the quarter in which the dividend is paid, is at least 175% for insurance undertakings operating in section I (life insurance) and at least 150% for insurance undertakings operating in section II (non-life insurance).
According to KNF’s recommendation, those undertakings that satisfy the above criteria, when deciding on the level of dividends, should take into account their additional capital needs within the period of 12 months from the approval date of the 2019 financial statements, which may result, among others, from changes in the market and legal environment.
By doing so, the Authority changed its position presented in KNF’s Communication of 3 December 2019 concerning the regulatory authority’s position on the objectives for the dividend policy of commercial banks, cooperative banks and 11 The BION assessment is a thorough process involving the utilization of all available information in the regulator’s possession regarding an insurance/ reinsurance undertaking, including information obtained from licensing activities, desktop research and on-site inspection-related activities in an insurance/reinsurance undertaking as well as inquiries/questionnaires addressed to an insurance/reinsurance undertaking must not be covered by a short-term financial plan or remedial plan.
Consolidated profit attributable to the parent company (in PLN m) 1,935 2,895 3,213 3,295 1,912
PZU’s standalone profit (in PLN m) 1,573 2,459 2,712 2,651 1,950
Dividend per share for the year (PLN) 1.40 2.50 2.80 ** ***
Ratio of dividend payout to consolidated profit attributable to the parent company 62.5% 74.2% 75.3% ** ***
PZU’s earnings and dividend per share in 2010-2020 * The payout ratio net of the dividend payout from excess capital (PLN 2 per share) ** Up to the date of preparing this report, the Management Board has not adopted a resolution concerning the proposed distribution of profit for 2019 and 2020 Source: PZU
Earnings per share (EPS) attri. to the parent company for a given year (PLN)
Dividend per share (in PLN) from the profit for a given year (DPS)
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* in 2013 a dividend was paid from excess capital (PLN 2 per share) Source: PZU
Cumulative dividend per share (PLN) Book value per share (PLN) The closing price from the last session (PLN)
Alior Bank Bond issues and redemptions in 2020 In 2020, in respect of its own bonds, Alior Bank did not conduct any issue or early redemption operations. On 11 August 2020, Alior Bank redeemed PLN 250 million worth of its series J bonds at their final maturity date.
Approval of the base prospectus for a bond offering program of up to PLN 1.5 billion On 4 May 2020, KNF approved Alior Bank’s base prospectus prepared in connection with: • the program, to be offered in Poland, of unsecured bearer bonds (with a par value of at least PLN 100 each, up to a total maximum par value of PLN 1.5 billion), established by Alior Bank within the framework of its Multi-Annual Bond Issue Program, up to a total maximum par value of PLN 5 billion,
• its intention to apply for admission and floating of each series of bonds on a regulated market (main or parallel market) for debt securities operated by the Warsaw Stock Exchange or a regulated market for debt securities operated by BondSpot SA.
In accordance with the prospectus, Alior Bank may conduct public offerings of unsubordinated or subordinated bonds constituting Tier II equity instruments.
Republic of Poland, of unsecured bearer bank securities with a par value of at least PLN 100 each and up to a total maximum par value of PLN 5 billion, and
Bank Pekao Covered bonds Under the covered bonds program established in 2019, Pekao, acting through its subsidiary Pekao Bank Hipoteczny, issues long-term debt securities secured on its loan portfolio. The issue is uncapped in value. Pekao Bank Hipoteczny’s covered bonds have been rated by Fitch at A- with a stable outlook (1 notch above the rating for Pekao Bank Hipoteczny whose risk Fitch assesses at BBB+). The total liabilities of Pekao Bank Hipoteczny by virtue of covered bonds as at 31 December 2020 was PLN 1.47 billion. The liabilities by virtue of covered bonds with a maturity of up to 1 year account for 41%, from 1 to 3 years for 26% and from 3 to 5 years for 33% of the total par value.
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Issuer rating Since 2004, PZU and PZU Życie have been subject to regular reviews by the rating agency of S&P Global Ratings (S&P). The rating assigned to PZU and PZU Życie results from an analysis of financial data, competitive position, management and corporate strategy of both companies as well as the sovereign rating. It also includes a ratings outlook, or an assessment of the Company’s future position in the event that specific circumstances occur.
The rating outlook has changed as a result of the deterioration in financial and business conditions in Poland due to the outbreak of the COVID-19 pandemic. According to the agency’s analysts, this may affect the PZU Group’s business; in particular, it may lead to a lower contribution from banking activity. At the same time, S&P issued a forecast that the PZU Group’s position will remain stable. The viewpoint of the agency’s analysts is that the PZU Group will maintain its leading business position in Poland, a strong capital position and a stable result on insurance activity, whereby it will be capable of withstanding any further potential deterioration in the business environment..
Credit rating (long-term in local currency) A /stable/ 12 October 2018 A- /positive/ 13 April 2018
Company name Rating and outlook Last change Rating and outlook Updated on
Financial strength rating A /Stable/ 6 April 2020 A- /positive/ 14 June 2019
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Bank Pekao’s financial creditworthiness ratings Bank Pekao cooperates with three leading rating agencies: Fitch Ratings, S&P Global Ratings and Moody’s Investors Service.
Short-Term Domestic Currency Rating for liabilities A-2 outlooks in the form of “long-term IDR” and “domestic longterm rating” changed from stable to negative. At the same time, the agency upheld all ratings for Pekao at their previous levels.
On 8 April 2020, S&P Global Ratings changed the ratings outlook for the Bank from positive to stable. At the same time, the agency upheld Pekao’s long- and short-term ratings at their previous levels.
On 7 January 2021, Moody’s Investors Service lowered its individual “Baseline Credit Assessment” rating from “baa1” to “baa2” and its long-term counterparty risk rating from “A1” to “A2”. The long-term credit risk assessment was lowered from “A1(cr)” to “A2(cr)”.
Alior Bank’s rating On 14 April 2020, Fitch Ratings lowered Alior Bank’s ratings outlook from stable to negative. On 17 December 2020, the agency confirmed the ratings it had granted previously.
On 27 April 2020, S&P Global Ratings lowered Alior Bank’s ratings outlook from stable to negative. On 21 January 2021, the agency confirmed the ratings it had granted previously.
The PZU Group on the capital and debt markets 8.9 Calendar of PZU’s major corporate events in 2021
PZU applies the Corporate Governance Rules for Regulated Institutions published on 22 July 2014 by the Polish Financial Supervision Authority (KNF). This a collection of rules that define the internal and external relations of regulated institutions, including their relations with shareholders and customers, their organization, the functioning of internal oversight and key internal systems and functions as well as the governing bodies and the rules for their cooperation. The document is available both on the KNF website ( dla_rynku/regulacje_i_praktyka/zasady_ladu_korporacyjnego) and the PZU website ( pzu-sa/zasady-ladu-korporacyjnego).
The set of principles expressed in the Best Insurance Practices adopted on 8 June 2009 by the General Assembly of the Polish Chamber of Insurance (PIU) informs how PZU conducts its business operations and shapes relations with its stakeholders. This document defines the rules of corporate social responsibility in terms of how insurance undertakings interact with customers, insurance intermediaries, the regulatory authority and the Financial Ombudsman, the media and in public securities trading. By applying the Best Insurance Practices, PZU conducts regular efforts to develop insurance awareness in the public at large.
Application of Corporate Governance Rules for Regulated Institutions The PZU Management Board and Supervisory Board have declared in their resolutions the Company’s readiness to apply the standards defined by KNF to the broadest possible extent while giving consideration to the rule of proportionality and the rule “comply or explain” stemming from the wording of the Corporate Governance Rules for Regulated Institutions.
Governance Rules reading as follows: “The implementation of personal rights or other special rights for shareholders of the regulated institution should be justified and serve the accomplishment of the regulated institution’s material operating goals. The possession of such rights by shareholders should be reflected in the wording of the primary governing document of the regulated institution.” – according to the substantiation presented by the shareholder along with the draft resolution of the OSM, the waiving of this rule is due to the unfinished process of the Company’s privatization by the State Treasury; • the rule laid down in § 12 section 1 reading as follows: “Shareholders are responsible for recapitalizing without delay a regulated institution in a situation in which it is necessary to maintain the regulated institution’s equity at the level required by the legal regulations or oversight regulations as well as when the security of the regulated institution so requires.” – according to the substantiation presented by the shareholder along with the draft resolution of the OSM, the waiving of this rule is due to the unfinished process of the Company’s privatization by the State Treasury; • the rule laid down in § 28 section 4 reading as follows: “The decision-making body assesses whether the implemented compensation policy fosters the regulated institution’s development and operating security.” – according to the substantiation presented by the shareholder along with the draft resolution, the waiving of this rule is due to the overly broad scope of the subject matter of the compensation policy subject to assessment by the decision-making body; the compensation policy in respect of persons who discharge key functions but are not members of the supervising body or the managing body should be subject to assessment by such persons’ employer or principal, i.e. the Company represented by the Management Board and supervised by the Supervisory Board.
Furthermore, the following rules are not applicable to PZU:: • the rule laid down in § 11 section 3 reading as follows: “In the event that the decision-making body makes a decision concerning a transaction with a related party, all shareholders should have access to all information required to assess the conditions on which it is implemented and its impact on a regulated institution’s standing.” – in PZU, the Shareholder Meeting does not make decisions on transactions with related parties; • the rule laid down in § 49 section 4 reading as follows: “In a regulated institution in which there is no audit or compliance cell, the rights ensuing from sections 1-3 are vested in the persons responsible for performing these functions.” – audit and compliance cells operate in PZU;
Application of “Best Practices of WSE Listed Companies” In 2020, PZU complied with all recommendations and principles set forth in the Best Practices of WSE Listed Companies 2016, except for recommendation IV.R.2., which provides for a possibility for shareholders to participate in a Shareholder Meeting using means of electronic communication, in particular via the following: • real-time transmission of the Shareholder Meeting; • real-time bilateral communication where shareholders may take the floor during a Shareholder Meeting from a location other than the shareholder meeting; • exercising, in person or by proxy, voting rights during a Shareholder Meeting.
Furthermore, the following rules are not applicable to PZU: • rule I.Z.1.10, providing for posting financial projections on the corporate website, insofar as the company has decided to publish them, published for at least the last 5 years, including information about their execution because, as at the date of publication of this report, PZU has not published any financial projections or estimates; • rule III.Z.6., concerning cases of non-separation of the internal audit function within the company’s organizational structure, because this function has been separated in PZU’s organizational structure,
• recommendation IV.R.3., concerning situations where securities issued by a company are traded in different countries (or in different markets) and in different legal systems, because PZU securities are traded only on the Polish market.
• The Company regularly contacts investors and analysts, enabling them to ask questions and obtain clarification on matters of interest to them, in consideration of the prohibitions arising from the applicable laws. Such contacts take place either using modern electronic communication channels or take the form of direct meetings or telephone conversations.
Endorsement and application of the percentage of the PZU shareholder structure held by the State Treasury
Women constitute 45% of the Management Boards in PZU and PZU Życie
The Best Insurance Practices laying down the principles according to which insurance sector companies as institutions of social trust should conduct themselves
Corporate Governance Rules for Regulated Institutions in accordance with the 2015 declaration
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• Members of the PZU Management Board and Supervisory Board strive to apply the recommendations and rules applicable to them to the fullest possible extent: the Company’s website presents an internal allocation of responsibilities across all business areas among the Management Board Members, in 2020, discharging the function in the PZU Management Board was the main area of professional activity for the PZU Management Board Members,
Members of the PZU Supervisory Board put in the time necessary to perform their duties, the required number of Supervisory Board Members fulfills the independence criteria set forth in rule II.Z.4., the Supervisory Board prepared and presented to the Ordinary Shareholder Meeting its assessments and reports provided for in rule II.Z.10.; • PZU’s organizational structure is commensurate with the scale and nature of its business; separate business units have been established in the Company to perform tasks in the systems and functions set forth in rule III.Z.1., and the efficiency of such systems and functions is properly monitored and evaluated; • PZU makes every effort to ensure that the Company’s Shareholder Meetings are held in compliance with the requirements set forth in Chapter IV of the Best Practices of WSE Listed Companies, except for recommendation IV.R.2 (as previously described); • PZU has internal regulations in place that guarantee compliance with the recommendations and rules contained in Chapter V of the Best Practices of WSE Listed Companies regarding conflicts of interest and transactions with related parties.
• PZU adheres to the recommendations and rules of the Best Practices of WSE Listed Companies in the employee compensation area; information on the employee compensation policy, including the elements specified in rule VI.Z.4., is presented in the PZU Management Board’s activity report for the respective year.
Internal control system PZU has an internal control system (ICS) in place, adjusted to the scale of its operations and its organizational structure, the purpose of which is to ensure the effectiveness and efficiency of operations within the organization, reliability of financial reporting and compliance of the Company’s operations with the applicable laws and internal regulations.
The ICS is built on the basis of the said elements and is based on a model of three independent and complementary levels, i.e. three lines of defense, where: • the first line of defense is comprised of activities of business processes owners, encompassing the operational management of risk associated with the Company’s operations and processes carried out as part of those operations; • the second line of defense is comprised of activities of the Compliance Department and risk management by other specialized business units specified in internal regulations on risk management and dealing with risk identification, measurement, monitoring and reporting and controlling the limits; • the third line of defense is provided by activities of the Internal Audit Department.
Supervision over the internal control system within the Company is exercised by: • oversight exercised by the Supervisory Board; • activities of the Management Board, including the establishment of an adequate and effective internal control system and periodic assessment of the functioning of the ICS; • oversight exercised by the managers of functional divisions, specialist units and organizational cells in their subordinated organizational units/cells; • oversight exercised by the Compliance Department in the area of system solutions aimed at ensuring adequacy and effectiveness of risk control in the business processes covered by the ICS.
The PZU Group’s internal control system has been developed at the leading entity (i.e. PZU) level and is applicable to all members of the Group, in consideration of their distinct nature, proportionality and adequacy. With regard to regulated entities existing within banking groups, the internal control system has been designed at the level of each of these groups, taking into account the applicable sectoral regulations.
• exchange of information on major changes in the legal environment affecting the operations of banking group subsidiaries; • exchange of information on significant correspondence with the regulatory authority; • exchange of information about the identification and assessment of compliance risk; • periodic reporting on the foregoing areas.
Control mechanisms applied during the preparation of the financial statements Financial statements are prepared in the Finance Division and central units operating based on the applicable regulations. The Finance Division is supervised by a Management Board Member, and the financial statements require approval by the Management Board.
The process is conducted in compliance with: • accounting principles (accounting policy) adopted by the
Management Board specifying key rules for recording business events in PZU, the valuation of assets and liabilities and the calculation of the financial result; • method of keeping the accounting ledgers; • dedicated reporting systems.
In the case of consolidation packages forwarded by banks, they are also reconciled with their published stock exchange disclosures.
PZU internal audit periodically reviews the organization and the process of preparing the financial statements.
The timely implementation of audit recommendations by the business units is overseen by the responsible member of the Management Board or PZU Group Director. The Internal Audit Department monitors the progress of implementing the recommendations based on information obtained from the respective business units. After an analysis, it decides whether to consider them completed.
PZU has implemented the Internal Auditor’s Code of Ethics, based on guidelines issued by the Institute of Internal Auditors (IIA). The purpose of the Code is to promote best practices and models for ethical behavior, and to motivate the need for continuous professional improvement and development of the proper image of internal auditors.
The Internal Audit Department provides the Company’s Management Board and Audit Committee with periodic management information from its subordinate area, including, in particular: • information on the progress in implementing the audit plan; • information on the findings of internal audits; • information on recommendation monitoring results.
In order to ensure the proper quality and continuous improvement of the internal audit function, internal (on an annual basis) and external (not less than once every five years) assessments of the Company’s internal audit activities are conducted. A third-party assessment of the internal audit function at PZU conducted by PwC Advisory in 2020 and an analysis of coordination of the Group’s internal audit run by the Internal Audit Department demonstrated general compliance with the International Standards for the Professional Practice of Internal Auditing and the Code of Ethics developed by the IIA.
The Audit Committee presents recommendations regarding the selection of an audit firm to perform the audit and review of the financial statements to the Supervisory Board.
On 23 May 2019 KNF gave a permit to PZU to extend for another two years the maximum period for the engagement for KPMG Audyt to audit the standalone and consolidated financial statements. In this manner, the Supervisory Board made the decision to continue cooperation with the auditor to audit the 2019-2020 financial statements.
In 2020, the audit firm auditing the financial statements rendered permitted non-audit services to PZU, which was approved, following an assessment of the company’s independence, by the Audit Committee.
Fee charged by the entity authorized to audit the PZU Group’s financial statements (PLN 000s)
Fee payable to the audit firm auditing PZU’s financial statements (PLN 000s)
Main assumptions underlying the policy for selecting the audit firm The following are among the main assumptions underlying PZU’s policy for selecting the audit firm: • ensuring that the process of selecting the audit firm is done correctly and determining the responsibility and the duties of the participants in this process,
• analyzing when selecting the audit firm the recommendations given by the Audit Committee,
• giving consideration to the rule of rotating the audit firm and the key statutory auditor in the embraced time horizon.
9.4 PZU’s share capital and its shareholders; shares held by members of its governing bodies
On 3 November 2015 the District Court for the capital city of Warsaw, 12th Commercial Division of the National Court Register registered the pertinent amendment to PZU’s Articles of Association.
Accordingly, PZU’s share capital is divided into 863,523,000 ordinary shares with a par value of PLN 0.10 each carrying the right to 863,523,000 votes at the Shareholder Meeting.
Moreover, according to the same notification, as a result of the transaction executed on 17 December 2020, NationaleNederlanden Otwarty Fundusz Emerytalny exceeded the 5% threshold of votes at the PZU Shareholder Meeting.
All PZU shares are ordinary shares with no preferential rights attached to them, in particular no special control rights. However, certain rights have been granted to some PZU shareholders by the Company’s Articles of Association: • in accordance with § 20 sec. 5 of the Articles of Association, half of Supervisory Board Members appointed by the Shareholder Meeting are elected from among persons proposed by the shareholder specified in § 37 sec. 2 of the Articles of Association, that is the shareholder who, on the date of adoption of the Shareholder Meeting resolution introducing this right holds the largest stake in the Company’s share capital; this right is vested in the shareholder until its stake in the Company’s share capital drops below 20%; in accordance with § 37 sec. 4 of the Articles of Association, upon expiration of the shareholder’s right referred to in § 37 sec. 2 of the Articles of Association, this right is shifted to another shareholder then holding the largest stake in the Company’s share capital, provided that this shareholder holds at least 20% of the share capital; • in accordance with § 20 sec. 7 of the Articles of Association, the State Treasury has the right, in line with Article 354 § 1 of the Commercial Company Code, to appoint and dismiss one Supervisory Board Member by way of a written statement submitted to the Company’s Management Board; such appointment or dismissal is effective upon delivery of the pertinent statement to the Company’s Management Board and does not require a resolution of the Shareholder Meeting; this right of the State Treasury expires when the State Treasury ceases to be a shareholder of the Company; in accordance with § 20 sec. 12 sentence 2 of the Articles of Association, in the event of expiration of the mandate of at least one Supervisory Board Member elected by group voting, the State Treasury regains the individual right referred to in § 20 sec. 7.
Meeting resolution implementing this limitation were entitled to shares representing more than 10% of the total number of votes; PZU’s shareholder structure as at 31 December 2020
Pursuant to PZU’s Articles of Association, these voting restrictions will expire starting from the moment when the equity stake held by the shareholder who held shares giving the right to more than 10% of the total number of votes in PZU when the Shareholder Meeting adopted the resolution drops below 5% of the Company’s share capital.
Shares or rights to shares held by members of management or supervisory bodies and PZU Group Directors As at the date of publication of this Activity Report, only Tomasz Kulik, Member of the PZU Management Board held PZU shares numbering 2,847, which the Company reported in current report 23/2018. No changes transpired from the date of conveying the 2019 consolidated financial statements (i.e. 12 March 2020) with respect to Members of the Management Board and Supervisory Board or Group Directors holding PZU shares or rights to shares.
Amendments to PZU’s Articles of Association in 2020 The PZU Ordinary Shareholder Meeting held on 26 May 2020 made certain amendments to the Company’s Articles of
The amendments to the Articles of Association concerned: • PZU’s line of business – by extending the provision pertaining to the Company’s line of business by adding intermediation on behalf of or for the benefit of financial institutions, as referred to in the Employee Capital Scheme Act of 4 October 2018, other than insurance undertakings, when entering into Employee Capital Scheme management contracts,
Act of 29 September 1994, determined on the basis of the most recent approved financial statements, disposal of shares or ownership interests in another company, with the market value exceeding: PLN 100,000,000, or 10% of total assets within the meaning of the Accounting
Act of 29 September 1994, determined on the basis of the most recent approved financial statements, disposal of non-current assets within the meaning of the Accounting Act of 29 September 1994 classified as intangible assets, property, plant and equipment or longterm investments, including contribution to a company or a cooperative – if the market value of those assets exceeds 5% of total assets within the meaning of the Accounting Act of 29 September 1994, determined on the basis of the most recent approved financial statements; and also handing those assets over for use to another entity for a period longer than 180 days in a calendar year based on a legal act, if the market value of the subject matter of the legal act exceeds 5% of total assets, purchase of non-current assets within the meaning of the Accounting Act of 29 September 1994, with the value exceeding: PLN 100,000,000, or 5% of total assets within the meaning of the Accounting Act of 29 September 1994, determined on the basis of the most recent approved financial statements; • calculation of the value of agreements to provide legal, marketing, public relations and public communication services and management consulting services.
Moreover, the Articles of Association were amended in line with the requirements of the Act of 29 July 2005 on Public Offerings and the Conditions for Offering Financial Instruments in an Organized Trading System and on Public Companies and the recent amendments to the Commercial Company Code.
The Shareholder Meeting is PZU’s highest corporate body. The method of operation and the rights of the Shareholder Meeting are regulated by the Commercial Company Code and PZU’s Articles of Association. The PZU Ordinary Shareholder Meeting adopted its Rules and Regulations under Resolution No. 31/2018 of 28 June 2018.
The Shareholder Meeting is the body authorized to make decisions concerning issues related to the organization and operations of the Issuer. Resolutions of the Shareholder Meeting are adopted by an absolute majority of votes, except in cases provided for in the Commercial Company Code or the Articles of Association.
The Management Board convenes an Extraordinary Shareholder Meeting at its own initiative or in response to a written motion submitted by the Supervisory Board, a shareholder or shareholders representing at least 1/20th of the share capital. A motion can be filed electronically.
• An Ordinary Shareholder Meeting if the Management Board fails to convene an Ordinary Shareholder Meeting by the prescribed deadline; • an Extraordinary Shareholder Meeting if it deems that to be necessary; • An Extraordinary Shareholder Meeting if the Management Board fails to convene an Extraordinary Shareholder Meeting in response to a motion submitted by an eligible shareholder, eligible shareholders or the Supervisory Board within fourteen days after the motion is filed.
Shareholder Meetings are held in Warsaw and convened by placing an announcement on PZU’s website in accordance with the method for providing current information specified in the Act on Public Offerings, Conditions Governing the Introduction of Financial Instruments to Organized Trading and Public Companies of 19 July 2005 in the form of current reports. Such announcement should be made not later than 26 days before the date of the Shareholder Meeting. The announcement and materials presented to shareholders are available on the date of convening the Shareholder Meeting on PZU’s corporate website in the “Investors relations” section under the “Shareholder Meeting” tab. The person convening the Shareholder Meeting may decide on participation in the Shareholder Meeting using means of electronic communication.
A duly convened Shareholder Meeting is deemed valid regardless of the number of attending shareholders.
All the matters submitted by the Management Board to the Shareholder Meeting should be first presented to the Supervisory Board to be examined and get an opinion. The Supervisory Board’s opinions are presented to the Shareholder Meeting no later than prior to the opening of the shareholder meeting along with other documents conveyed to the shareholders participating in the Shareholder Meeting and are available on the company’s website.
Shareholders may attend the Shareholder Meeting and exercise the right to vote in person or through a proxy. A legal proxy document to participate in the Shareholder Meeting and exercise the voting right must be granted in writing or electronically.
During the Shareholder Meeting, each shareholder may provide draft resolutions concerning items on the agenda.
Activity in 2020 In 2020, only an Ordinary Shareholder Meeting was held. In addition to the matters provided for in Article 395 § 2 and 5 of the Commercial Company Code (that is examination and approval of the Management Board’s report on the company’s activity and financial statements for the previous financial year, adoption of a resolution on the distribution of profit, granting of a discharge to members of the Company’s corporate bodies on the performance of their duties, review and approval of the group’s financial statements), the agenda of the Ordinary Shareholder Meeting concerned changes in the composition of the Supervisory Board and the Articles of Association and the adoption by PZU of the “Compensation policy for PZU SA Management Board and Supervisory Board Members”.
The Articles of Association give the State Treasury the right to appoint and dismiss one Supervisory Board Member by way of a written statement submitted to the Management Board. This right will expire if the State Treasury ceases to be a Company shareholder. A candidate to be a Supervisory Board Member named by the State Treasury should meet the requirements set forth in Article 19 of the Act of 16 December 2016 on Rules for Managing State Property. According to this article, the entity eligible to exercise the rights to shares owned by the State Treasury or a state legal person as a candidate to be a member of the supervising body designates a person holding a positive opinion from the Council for companies with State Treasury shareholding and state legal persons who: • holds the pertinent education and experience supported by an academic title or certificate enumerated in a law; • is not employed by the company, does not do work for it, or provide services to it, on the basis of some other legal relationship; • does not hold shares in a subsidiary except for shares permitted to be traded on a regulated market within the meaning of the Financial Instruments Trading Act of 29 July 2005;
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Changes to the PZU Supervisory Board in 2020 As at 1 January 2020, the following persons sat on the PZU Supervisory Board: • Maciej Łopiński - Supervisory Board Chairman • Paweł Górecki - Supervisory Board Deputy Chairman • Alojzy Nowak- Supervisory Board Secretary • Marcin Chludziński - Supervisory Board Member • Agata Górnicka - Supervisory Board Member • Robert Jastrzębski - Supervisory Board Member • Tomasz Kuczur - Supervisory Board Member • Elżbieta Mączyńska-Ziemacka - Supervisory Board Member • Krzysztof Opolski - Supervisory Board Member • Robert Śnitko - Supervisory Board Member • Maciej Zaborowski - Supervisory Board Member
During the meeting held on 28 April 2020, the Supervisory Board elected Robert Śnitko as Secretary of the Supervisory Board.
The current term of office of the PZU Supervisory Board will end after the elapse of three full financial years, i.e. on 31 December 2022. 2020 was the first full financial year. The mandates of Supervisory Board Members will expire no later than on the date of the Shareholder Meeting approving the financial statements for the last full financial year in which they server in their capacity, i.e. for 2022.
Name Period of acting in the capacity of a PZU Supervisory Board Member
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Secretary of State in the Office of President Lech Kaczyński in 2005-2010 and in turn in the Office of President Andrzej
University of Wroclaw. He attended numerous training courses and workshops in the law of evidence, civil and penal law and management of public entities. He has authored several dozen peer-reviewed papers on the subject of law published by Polish and international journals. He specializes in corporate law, the capital market and the application of court and administrative procedures. Member of supervisory boards of several capital companies. Currently, Vice-President of the
KDPW S.A. Management Board and Supervisory Board Deputy Chairman of ARP Leasing Sp. z.o.o..
Studies, University of London, Faculty of Economics at the Radom Technical University. Holder of a Scholarship awarded by the Minister of National Education (Minister of Science and Higher Education), the United Kingdom’s Ministry of
Graduate of the Social Policy Institute at the University of Warsaw. Completed MBA studies at the Institute of Economics of the Polish Academy of Sciences. He worked for the University of Warsaw, Collegium Civitas and the Łazarski University as a lecturer. President of the Management Board of KGHM Polska Miedź S.A. since June 2018. Previously, from January 2016 to June 2018 he served as the President of the Management Board of Agencja Rozwoju Przemysłu S.A. where he was in charge of restructuring processes, mergers and acquisitions. He defined the strategic directions of growth for Agencja
Rozwoju Przemysłu S.A. He was in charge of restructuring projects involving such companies as Przewozy Regionalne,
An experienced manager in the field of strategic consulting and corporate governance. He specializes in developmentoriented restructuring of enterprises and capital investments.
Master’s degree in political science from the Faculty of Journalism and Political Science at the University of Warsaw.
Foundation (2012-2013) and then as the CEO’s Assistant in Bank Zachodni WBK S.A. (2013-2014) and later as the Manager of the Management Board and Supervisory Board Office in Bank Zachodni WBK S.A. (2014-2015). Director of the Political
Office in the Ministry of Development in 2015-2017 and chief advisor in the Office of the Prime Minister in 2017-2018.
Since April 2018 Director of the External Relations Office in PKN ORLEN S.A. and Chairwoman of the ORLEN Foundation’s
Graduate of the Faculty of Law and Administration at the University of Warsaw. In 2001 he was granted a doctorate in juridical science degree and in 2009 a habilitated Ph.D. degree. Affiliated with the Department of Law and Administration at the University of Warsaw since 2001. He became a professor at the university in 2019. Authored about 100 academic publications. Recipients of awards and distinctions, including Awards from the Department of Law and Administration at the University of Warsaw for outstanding scholarly achievements and the Team Award granted by the Rector of the
Warsaw School of Economics. Since 2015, Head of the Laboratory of Polish 20th Century Law and since 2019 Head of the History of Administration Department. Member of the program board of the Review of Economic Legislation journal
Graduate of the Faculty of Law and Administration of the University of Warmia and Mazury and the Bydgoszcz Academy
Graduate of the Faculty of Economics at the University of Warsaw. Professor of economic science. Author of econometric models for predicting bankruptcies in enterprises and of a concept of early warning systems pinpointing threats to business activity. Head of the postgraduate course: Real Estate Valuation held by the Institute of Corporate and Investment Finance at the Business Administration College of the Warsaw School of Economics. A member of the Presidium of the “Poland 2000
studies program “Economy and the Market. Financial Institutions and Corporate Business Strategies” held by the Faculty of Economics at the University of Warsaw. The concept author and head of the post-graduate studies “Strategic audit in public and private institutions”. Head of the Editorial Board of the journal MAZOWSZE – Studia Regionalne and a member of the Editorial Board of the journal Bezpieczny Bank. Head of the Academic Councils of the Central European Economic
Bank of Poland. Chairman of the Business Award Jury of the President of the Republic of Poland, Deputy Chairman of the
“Europol Gaz” S.A. He is the Director of the Corporate Mangement Division in PGNiG Termika S.A.
Graduate of the Law and Administration Department at the University of Warsaw. Completed post-graduate studies in intellectual property law and postgraduate studies in evidentiary law. He also graduated from the Harvard Law School
(ALP), Center for American Law Studies and the Leadership Academy for Poland. Advocate, Ministry of Justice expert and standing mediator at the Court of Arbitration in the General Counsel to the Republic of Poland. Lecturer in the Warsaw
Bar Association. He runs his own legal practice and is the Managing Partner in the law firm Kopeć Zaborowski Adwokaci i Radcowie Prawni sp.p. Member of the State Tribunal since February 2018. He has acquired experience in corporate governance as a member of supervisory boards in various companies.
• disposal of shares or ownership interests in another company, with the market value exceeding: PLN 100,000,000, or 10% of total assets within the meaning of the Accounting
The Supervisory Board adopts its resolutions in an open ballot. A secret ballot should be held at the request of even a single Supervisory Board Member.
The Supervisory Board elects from among its members the Chairperson and Deputy Chairperson and may also elect the Secretary from among its Members.
Members of the Management Board, PZU’s employees relevant to the issue under consideration selected by the Management Board and other persons invited by the Supervisory Board may take part in the meetings of the Supervisory Board without the right to vote. In specific cases, the Supervisory Board may also invite members of the management board or supervisory board of other PZU Group member companies. Moreover, Supervisory Board Members, with the consent of the Supervisory Board, may select no more than one advisor authorized to take part in the meetings of the Supervisory Board devoted to reports and financial statements and give their advice, provided that such a person adheres to the rules of confidentiality and signs a confidentiality undertaking.
Currently, the following committees operate within the Supervisory Board: • Audit Committee; • Nomination and Compensation Committee, • Strategy Committee.
At its meetings held in 2020, the Supervisory Board regularly reviewed and evaluated the performance of both the PZU Group and its distinct business divisions in relation to the financial plan. The Supervisory Board also discussed and accepted other legally-required detailed reports on various areas of the Company’s business, including, among others, regular reports on risk, compliance, audit and IT security. On top of that, the Supervisory Board monitored the execution of the PZU Group Strategy for 2017-2020 on an ongoing basis.
The Supervisory Board was also informed about the actions implemented by the Company in connection with the COVID-19 pandemic.
During regular meetings held in 2020 the Supervisory Board’s committees discussed in detail the most important issues relating to the various areas of the company’s business, which must be approved by the Supervisory Board in accordance with the prevailing regulations.
Audit Committee The Audit Committee was appointed by a Supervisory Board resolution of 3 June 2008.
The Audit Committee includes at least three members. Pursuant to the Act of 21 June 2017 on Statutory Auditors, Audit Firms and Public Supervision, at least one member of the Audit Committee appointed by the Supervisory Board should hold qualifications in accounting or auditing financial statements. Furthermore, the majority of the Audit Committee members, including the chairperson, should meet the statutory independence criteria (independent member) concerning, without limitation, professional or family ties, especially to managers or supervisors of PZU or PZU Group entities. The detailed tasks and terms and conditions of appointing members of the Audit Committee and its operation are specified in a resolution of the Supervisory Board which takes into account the relevant competencies and experience of candidates for members of the Committee.
• monitoring the performance of financial audit activities in the Company, in particular conducting the audit by the audit firm, taking into account the findings and conclusions of the Polish Audit Supervision Agency following from an inspection carried out in the audit firm; • assessing the independence of the statutory auditor and the audit firm; • presenting a recommendation regarding the selection of an audit firm to perform the audit and review of the financial statements to the Supervisory Board; • controlling and monitoring the independence of the statutory auditor and the audit firm, including giving consent to the audit firm conducting the audit, its related entities and by a member of the audit firm’s network to provide permitted services in the Company or entities from the Company group, upon assessing the threats and safeguards of the independence of the statutory auditor and the audit firm and verification of the compensation limit for the provided services; • informing the Supervisory Board of the results of the audit and review and explaining how the audit has contributed to reliability of the financial reporting in the Company and the Company group, and the role of the Committee in the audit process; • developing a policy for the selection of an audit firm to perform the audit; • developing a policy for provision of permitted services by the audit firm conducting the audit, its related entities and by a member of the audit firm’s network; • defining a procedure for the selection of an audit firm; • providing advice and issuing opinions within the scope of the Supervisory Board’s powers relating to the areas of the Company’s operation set forth in items 1-4 and to the extent permitted by the prevailing provisions of law and the Company’s internal regulations; • submitting recommendations aimed at ensuring the reliability of the financial reporting process in the Company; • supervising the compliance function; • monitoring introduction of changes in the Company in connection with the recommendations issued by the key statutory auditor, Internal Audit Department (with regard to preparation of financial statements), Supervisory Board or the Committee; • carrying out other tasks following from generally prevailing provisions of law or entrusted by the Supervisory Board.
Krzysztof Opolski, PZU Supervisory Board Member since 24 May 2019, has the title of professor, Ph.D. Hab., in economic sciences; he is head of the Department of Banking, Finance and Accounting at the Faculty of Economics of the University of Warsaw. In 2009-2010 he was the head of strategic advisors to the president of the National Bank of Poland. He has many
Marcin Chludziński, Member of the PZU Supervisory Board from 7 January 2016, graduated from the Social Policy Institute at the University of Warsaw. Completed MBA studies at the Institute of Economics of the Polish Academy of Sciences. He is the president of the KGHM Polska Miedź SA Management Board. He has many years of experience on managerial and supervisory positions in commercial law companies. In 2016-2018 he was the president of the Management Board of Agencja Rozwoju Przemysłu SA, where he was responsible for restructuring processes, and mergers and acquisitions.
Maciej Zaborowski, PZU Supervisory Board Member since 7 January 2016, advocate and judge of the State Tribunal, graduate from the Faculty of Law and Administration at the University of Warsaw, Center for American Law Studies and Leadership Academy for Poland. He is also an expert of the Ministry of Justice, lecturer of advocate training at the Bar Association in Warsaw and permanent mediator of the
Department’s activity in 2019; • discussion of the findings of external inspections conducted in PZU in 2019; • discussion on the report on the Internal Audit Department’s activity in Q4 2019 and Q1-3 2020; • submission of recommendations to the PZU Supervisory
Group’s consolidated financial statements for the year ended 31 December 2019, and the Management Board report on the activity of the PZU Group and PZU in 2019, with the report on non-financial information; • discussion on the results of PZU and the PZU Group for 2019, the H1 2020 and Q1-3 2020; • assessment of the PZU Management Board’s motion to the Shareholder Meeting to distribute PZU’s net profit for the year ended 31 December 2019; • discussion of the additional report for the Audit Committee; Alojzy Nowak
Nomination and Compensation Committee The Nomination and Compensation Committee was appointed by a Supervisory Board resolution of 12 May 2010.
The Supervisory Board determines the number of Committee members and appoints them from among its own members. The Committee includes at least one independent member.
The Nomination and Compensation Committee is an advisory and consultative body to the Supervisory Board. It is appointed to improve the effectiveness of the Supervisory Board’s supervision related to the development of the management structure, including organizational solutions, the remuneration principles and the selection of properly qualified staff.
The tasks of the Nomination and Compensation Committee include the following in particular issuing opinions and presenting recommendations to the Supervisory Board with regard to its decisions pertaining to: • concluding, terminating and amending agreements with
Management Board members and setting the rules for their compensation; • setting the level of compensation, bonuses and additional benefits for the Management Board; • appointing, suspending and dismissing the President of the Management Board, Management Board Members or the entire Management Board and discontinuing suspension; • seconding Supervisory Board Members to perform temporarily the functions of Management Board Members who have been dismissed, resigned or cannot perform their functions for other reasons.
246 247MANAGEMENT BOARD’S REPORT ON THE ACTIVITY OF THE PZU GROUP AND PZU SA 2020
As of 22 April 2020, the composition of the Nomination and Compensation Committee was as follows
• Robert Jastrzębski – Przewodniczący Komitetu; • Paweł Górecki – Committee Member; • Agata Górnicka – Committee Member; • Tomasz Kuczur – Committee Member; • Maciej Łopiński – Committee Member; • Elżbieta Mączyńska-Ziemacka – Committee Member.
Robert Jastrzębski, Tomasz Kuczur, Maciej Łopiński and Elżbieta Mączyńska-Ziemacka submitted representations that they meet the independence criteria set forth in the “Best Practices of WSE Listed Companies” adopted by the Supervisory Board of Giełda Papierów Wartościowych w Warszawie SA (Warsaw Stock Exchange)
Key issues addressed by the Nomination and Compensation Committee in 2020: • defining the Management Objectives for the Company’s
Management Board and Supervisory Board Members”; • submitting a recommendation to the PZU Supervisory
Changes in the composition of the Strategy Committee in 2020 As at 1 January 2020, the composition of the Strategy Committee was as follows: • Alojzy Nowak – Committee Chairperson; • Marcin Chludziński – Committee Member; • Agata Górnicka – Committee Member; • Robert Jastrzębski – Committee Member; • Robert Śnitko – Committee Member; • Maciej Zaborowski – Committee Member.
On 28 April 2020, the Supervisory Board established the following 5-person composition of the Committee: • Robert Śnitko – Committee Chairperson; • Marcin Chludziński – Committee Member.; • Agata Górnicka – Committee Member.; • Robert Jastrzębski – Committee Member.; • Maciej Zaborowski – Committee Member..
Activity of the Strategy Committee in 2020 In 2020, 5 meetings were held.
Key issues addressed by the Strategy Committee in 2020: • discussing the quarterly reports on the implementation of the PZU Group Strategy “New PZU”, • work on the nee PZU Group Strategy for 2021-2024..
The consent to appointment of two Management Board Members, President and Member responsible for risk management is issued on PZU’s motion by the Polish Financial Supervision Authority, unless the appointment applies to a person who obtained such consent in the previous term of office. If the motion pertains to a Management Board Member discharging a mandate, he/she may discharge the mandate in its existing scope until the regulatory authority issues its decision.
A Management Board Member must fulfill all of the following conditions: • holds a graduate degree received in Poland or a graduate degree received abroad and recognized in the Republic of Poland pursuant to separate regulations; • has at least 5-year employment period based on an employment agreement, appointment, selection, nomination, cooperative employment agreement or provision of services on the basis of another contract or conducting business activity on one’s own account; • has at least 3 years of experience on managerial or independent positions or arising from conducting business activity on one’s own account,
• in addition to the aforementioned requirements, meets other requirements arising from separate regulations, in particular is not in breach of any restrictions or prohibitions for holding an executive position in commercial companies.
• is an elected official of a company trade union or a company trade union in a group company,
Accordingly, from 12 March 2020 the Management Board composition was as follows: • Beata Kozłowska-Chyła – acting President of the
Management Board; • Adam Brzozowski – Management Board Member; • Marcin Eckert – Management Board Member; • Elżbieta Häuser-Schöneich – Management Board Member; • Tomasz Kulik – Management Board Member; • Maciej Rapkiewicz – Management Board Member; • Małgorzata Sadurska – Management Board Member.
Accordingly, from 4 May 2020 the Management Board composition was as follows: • Beata Kozłowska-Chyła – acting President of the
Management Board; • Ernest Bejda – Management Board Member; • Marcin Eckert – Management Board Member; • Małgorzata Kot – Management Board Member; • Tomasz Kulik – Management Board Member; • Maciej Rapkiewicz – Management Board Member; • Małgorzata Sadurska – Management Board Member; • Krzysztof Szypuła – Management Board Member.
On 2 October 2020, the Polish Financial Supervision Authority gave consent to the appointment of Beata Kozłowska-Chyła to the position of President of the Management Board. Accordingly, from 2 October 2020 the Management Board composition was as follows: • Beata Kozłowska-Chyła – President of the Management
As at 31 December 2020 and up to the date of publication of this report, the Management Board composition did not change.
The current term of office of the PZU Management Board spans three full consecutive financial years from 2020 to 2022. The mandates of the Management Board Members will expire no later than on the date of the Shareholder Meeting approving the financial statements for the most recent full financial year of the discharge of their functions.
Group Directors PZU and PZU Życie have in place a joint management model under which the positions of PZU Group Directors exist, the rules governing the establishment of which and the appointment to and dismissal from which are laid down in the organizational rules and regulations of these companies.
According to the adopted model, the persons discharging the functions of Management Board Members at PZU Życie are at the same time employed as PZU Group Directors at PZU and are in charge of the same business structures and areas at PZU and PZU Życie. Similarly, Members of the PZU Management Board may be simultaneously employed as PZU Group Directors in PZU Życie.
Meetings of the Management Board are held at least once a fortnight. The Articles of Association provide that meetings may be held using means of direct remote communication.
In 2020 the PZU Management Board held 54 meetings. Due to the COVID-19 pandemic most meetings were held in the mixed format – on-site and using means of direct remote communication. This resulted from the necessity to maintain high safety standards and, as a consequence, stability of the Management Board’s work, which played a key role in managing the Company.
The President of the Management Board directs the work of the Management Board. The President’s powers include in particular: • defining the scope of responsibility of each Member of the
Management Board; • convening meetings of the Management Board; • setting the agenda of meetings of the Management Board; • applying to the Supervisory Board for appointing or dismissing Members of the Management Board; • designating a person to administer the work of the
PZU and PZU Życie marketing, sponsoring, prevention, client relations, health insurance PZU Życie internal audit, compliance, PZU Group strategy, strategic analyses, corporate communication, reinsurance
PZU and PZU Życie - project management, security, procurement, insurance operations, claims handling, assistance, remote client service, process digitalization, analyses and process efficiency PZU business development in the PZU Group
Member of the PZU Management Board since 10 September 2020 / PZU Group Director at PZU from 16 April to 9 September 2020 / Member of the PZU Życie Management Board since 16 April 2020
PZU and PZU Życie PZU branch network management, retail sales (tied-agent and multi-agent channels), cooperation with brokers in the area of retail sales, retail sales efficiency, insurance portfolio analyses in the sales channels, sales support PZU retail sales (broker and dealer channels) PZU Życie agency sales, corporate sales
Member of the PZU Management Board since 14 October 2016 / Member of the PZU Życie Management Board since 19 October 2016 actuarial, finance and investments
Member of the PZU Management Board since 22 March 2016 / Member of the PZU Życie Management Board since 25 May 2016 risk
Member of the PZU Management Board since 13 June 2017 / Member of the PZU Życie Management Board since 19 June 2017
Member of the PZU Management Board since 10 September 2020 / Member of the PZU Życie Management Board since 10 September 2020
Bartłomiej Litwińczuk Member of the PZU Życie Management Board / PZU Group Director in PZU from 19 August 2016 HR, advisory services and legal services
Management Board; • controlling and enforcing the rules laid down in the Data Governance Policy and Solvency II Data Quality
Policy; • monitoring the data quality level and efficiency of the processes associated with data quality on the basis of annual Data Quality Coordinator’s reports • preparing recommendations regarding implementation of key data quality improvement initiatives on the basis of Data Governance Coordinator’s recommendations and prioritizing them and determining the source of their financing; • resolving major disputes associated with data quality presented by the Data Governance Coordinator; • accepting assignment of the Company’s business units and organizational units to the Data Owner’s role; • making decisions on waiving the rules laid down in the Data Governance Policy and Solvency II Data
Tasks • reviewing and issuing guidelines regarding the PZU Group’s Innovation Strategy; • defining innovation search areas • making decisions recognizing purchased items as innovations and giving consent to purchases in accordance with the internal acts in place in the Company; • approving the rules and regulations of competitions and resolving competitions associated with innovations.
Purpose coordination of actions aimed at reducing the Companies’ costs, in particular fixed costs of insurance activity, in accordance with the PZU Group strategy
Tasks • identification of the Company’s areas of operation in which it is possible to reduce the costs and obtain savings, in particular with regard to fixed costs; • defining the cost strategy through formulation of guidelines for business units and organizational units; • monitoring the level of costs in individual areas of the Company’s operation; • taking a stand on key issues associated with the Company’s cost reduction; • regular monitoring of the effects of implemented cost optimization solutions and evaluation of attainment of the objectives set for the Task Forces; • deciding on submission of requests for special bonuses for Task Force members.
Tasks • issuing opinions on draft internal regulations, rules or decisions presented to the Management Board, including: - credit and concentration risk management policy, - market risk management policy, - recommendations to the Management Board regarding the maximum allocation of capital to risks; • making pertinent decisions, including: - defining the division of the maximum capital allocation to individual risks between the Company’s organizational structures and investment management entities; - approving documents pertaining to risk management policies and methodologies; - approving the investment objectives and guidelines or investment limitations regarding risk limits for the Company’s organizational structures and investment management entities; - defining credit and concentration limits in individual entities or groups of entities above PLN 600,000,000; - setting exposure limits and limitations for individual types of financial insurance.
Purpose ensuring correct execution of the Company’s sponsorship, prevention and corporate social responsibility (CSR) activity and supervision over these areas and ensuring consistency of actions
Tasks • reviewing requests for execution of sponsorship or prevention tasks in accordance with the provisions of PZU’s and PZU Życie’s sponsorship and prevention rules and regulations; • specifying the substantive unit whose budget or limit finances the sponsorship or prevention task; • accepting reports from the sponsorship and prevention tasks executed by the Companies in the given year; • monitoring the execution of sponsorship and prevention tasks, in particular with the gross value of PLN
1,000,000 or more separately for PZU and PZU Życie; • making decisions on waiving the rules laid down in the sponsorship activity rules and regulations and prevention activity rules and regulations; • setting detailed rules and guidelines pertaining to execution of prevention tasks; • defining the model prevention clause used in the insurance offer and accepting the content of clauses that deviate from the model; • supervising the execution of CSR tasks.
Purpose managing assets and liabilities through influencing the shape of the structure of the balance sheet and offbalance sheet items in a manner supporting optimum financial results
Purpose • oversight over the operation of the business continuity management system in the Company; • crisis management in the Company
Tasks pertaining to crisis management: • assessment, analysis and projection of the effects of occurring events, in particular financial and nonfinancial losses and impact on the Company’s operation; • monitoring the Company’s internal and external environment, making decisions to manage crisis situations, and overseeing and coordinating the work associated with implementation of these decisions; • ensuring means and resources, including funding, for implementation of the developed solutions; • cooperation or support in efforts limiting the effect of undesirable events in other PZU Group entities upon prior agreement with their governing bodies; • maintaining current communication within the Company, including with its Management Board, other
Purpose supervising and setting the directions of the actions as part of Initiatives management in the Company
Project Department, in accordance with the project activity rules; • approving the Division of IT Capacity, earmarked for execution of Initiatives for the given financial year for the Company’s project activity and current activity, taking into account dedicated areas and procedures for IT Initiatives management; Other tasks: • accepting rules for prioritizing the initiatives developed by the Project Department and the IT Design and
capacity for them; • making directional decisions on execution of new projects – if their execution influences the adopted division of the IT capacity, initiative execution schedule or adopted division of the budget earmarked for projects; • accepting information about the utilization of the budgets earmarked for projects, prepared by the Project Department on the basis of project activity rules and making directional decisions in this respect; • accepting information on the utilization of the IT capacity earmarked for initiatives in the given financial year, developed by the IT Design and Efficiency Department; • making other decisions on the initiatives, unreserved for the powers of other persons or bodies pursuant to project activity rules or IT initiative management procedure or other internal acts.
Head of the Crisis Management Team Committee Chairperson: Investment Risk Committee,
Aleksandra Agatowska President of the PZU Życie Management Board / PZU Group Director at PZU
Member of the Crisis Management Team for Security Committee Chairperson: Procurement Committee
Committee Member: Data Governance Committee, Investment Committee, PZU Group Risk Committee, Investment Risk Committee, Sponsorship, Prevention and CSR Committee, Property Sales Committee, Asset and Liability Management Committee, Initiatives Management Committee
Member of the Crisis Management Team for IT Committee Chairperson: Initiatives Management Committee
Investment Committee, PZU Group Risk Committee, Investment Risk Committee, Property Sales Committee, Procurement Committee
Małgorzata Kot Member of the PZU Management Board / Member of the PZU Życie Management Board /
Tomasz Kulik Member of the PZU Management Board / Member of the PZU Życie Management Board /
Committee Member: Property Sales Committee, PZU Group Risk Committee, Investment Risk Committee,
Committee Chairperson: PZU Group Risk Committee Committee Deputy Chairperson: Investment Risk Committee
Committee Member: Data Governance Committee, Investment Committee, Asset and Liability Management Committee
Małgorzata Sadurska Member of the PZU Management Board / Member of the PZU Życie Management Board
Krzysztof Szypuła Member of the PZU Management Board / Member of the PZU Życie Management Board
Committee Chairperson: PZU Pricing Committee Committee Deputy Chairperson: Data Governance Committee
Member of the Crisis Management Team for Legal Matters and HR Committee Member: PZU Group Risk Committee
Dorota Macieja Member of the PZU Życie Management Board / PZU Group Director at PZU
Marcin Eckert PZU Management Board Member since 28 March 2019 / PZU Życie Management Board Member since 1 May 2019. Graduate of the Faculty of Law and Administration at the Nicolaus Copernicus University in Toruń, Advanced Management Program at the Harvard Business School and the Leadership Academy for Poland. Associated with the PZU Group since 2017, where he previously served as the Managing Director on Corporate Matters. He has practiced as an attorney-at-law since 2001. He specializes in commercial law, tax law and labor law. Prior to his employment in the PZU Group, he was a Senior Associate at Bird & Bird Szepietowski i wspólnicy (leader of the Benefits & Compensation practice). Also previously associated with TGC Tax Advisers sp. z .o.o. (Director of the Tax Department), Mazars & Guerard Audyt Sp. z o.o. (Director of the Law and Tax Department) and Ernst & Young (Senior Manager). Supervisory Board Member of Alior Bank S.A. in 2018-2020 and Supervisory Board Chairman of PZU Zdrowie SA. Presently, he sits on the Supervisory Board of Bank Pekao S.A. and Develia S.A.
Maciej Rapkiewicz Member of the PZU Management Board since 22 March 2016 / PZU Życie Management Board since 25 May 2016. Graduate of the Faculty of Law and Administration at the University of Łódź and post-graduate studies in business insurance, an MBA in Finance and Insurance and risk management. Associated with the PZU Group intermittently since 1998. From 2006 to 2009 Management Board Member and then VicePresident of the TFI PZU SA Management Board. Since 2015 he has worked for TFI BGK S.A., serving as a Management Board Member. He was also the President of the ŁSSE S.A. Management Board. He sat on the supervisory boards of domestic and foreign companies in the PZU Group. Presently, he serves as the Supervisory Board Chairman of PTE PZU S.A. and Supervisory Board Member of LINK4 TU S.A.
262 263MANAGEMENT BOARD’S REPORT ON THE ACTIVITY OF THE PZU GROUP AND PZU SA 2020
Krzysztof Szypuła Member of the PZU Management Board since 10 September 2020 / PZU Życie Management Board since 10 September 2020. Graduate of the University of Lodz with a specialization in econometrics and statistics and of the Summer School of Actuarial Science at the University of Warsaw. He has worked in the financial services industry for 29 years. He worked for a long time for the Nationale-Nederlanden (ING) Group where he worked from 1994 to 2010 in Poland, the United States and Australia gaining experience in actuarial matters, financial management, IT projects and operations. Before joining the PZU Group he was associated with the Polish Branch of Prudential plc from the United Kingdom where he was responsible for product development and management and then with Allianz Polska. In the management board of Allianz insurance companies he was initially responsible for life and health products and later for sales management. Before taking up the function of Management Board Member in PZU SA and PZU Życie SA he served in the capacity of Managing Director for Product Strategy.
Dorota Macieja PZU Życie SA Management Board Member and PZU Group Director since 15 March 2017. Graduate of Polish philology at the University of Warsaw. Associated with the PZU Group since 2016. As the director she supervised prevention and sponsoring in PZU SA and PZU Życie SA. In 2010-2016, she coordinated and managed publishing and film production projects. In 2008-2010, she served as deputy director and director of Channel 1 of Telewizja Polska SA. Earlier, in 2007, she headed TVP1’s News program. For many years, a journalist working for Tygodnik Solidarność, Wprost and Radio Free Europe. During martial law in Poland, she was associated with the underground publishing house “Wola”.
264 265MANAGEMENT BOARD’S REPORT ON THE ACTIVITY OF THE PZU GROUP AND PZU SA 2020
Rules for compensating Supervisory Board Members The monthly compensation of Supervisory Board Members was set in Resolution No. 5/2017 adopted by PZU’s Extraordinary Shareholder Meeting on 8 February 2017 on the rules for setting the compensation of the Supervisory Board Members, as amended by Resolution No. 37/2019 adopted by PZU’s Ordinary Shareholder Meeting on 24 May 2019. In accordance with the amending resolution, the monthly compensation of Supervisory Board Members was set as the product of the base amount referred to in Article 1 Section 3 Item 11 of the Act on the Rules for Setting the Compensation of Persons Managing Certain Companies of 9 June 2016 and the following multiplier of 2.75.
The monthly compensation set this way is increased for: • The Supervisory Board Chairperson by 10%, • The Supervisory Board Deputy Chairperson by 9%, • The Supervisory Board Secretary by 8%, • The Chairpersons of Supervisory Board committees by 9%, przy czym dodatkowe wynagrodzenia nie sumują się.
Rules for compensating Management Board Members The rules for compensating Management Board members are shaped by the Supervisory Board in accordance with Resolution No. 4 adopted by PZU’s Extraordinary Shareholder Meeting on 8 February 2017 on the rules for setting the compensation of the Management Board members (as amended), Resolution No. 36 adopted by PZU’s Ordinary Shareholder Meeting on 26 May 2020 on the “Compensation policy for the PZU SA Management Board and Supervisory Board Members” and the requirements set forth in the Act of 9 June 2016 on the Rules for Shaping the Compensation of Persons Managing Some Companies.
The aforementioned rules stipulate that the total compensation due to a Management Board member for rendering management services and discharging other obligations ensuing from the Management Services Provision Agreement concluded for the term of serving in the Company’s Management Board consists of the following: • fixed compensation – flat monthly base compensation (for a calendar month) that cannot exceed the reference range established pursuant to Article 4 section 2 of the Act on the Rules for Shaping the Compensation of Persons Managing
Certain Companies without prejudice to the situations outlined in Article 4 section 3 of the aforementioned act; • variable compensation – supplementary compensation for a given financial year depending on the extent to which management objectives from the catalog which, in accordance with the aforementioned act, comprises among others, improvement of economic and financial indicators, are attained; the variable compensation for a given financial year may not exceed 100% of the annual fixed compensation in the previous financial year for which the amount of variable compensation due is to be calculated, a significant portion of the variable compensation is awarded in the form of deferred variable compensation; deferred variable compensation is payable over 3 years; after the elapse of 12, 24 and 36 months from the date of allocation, a Management Board member may acquire the right to 1/3 of the deferred variable compensation for a given year subsequent to satisfying the conditions defined in the Management Services Provision Agreement.
The Management Services Provision Agreements entered into with Management Board members regulate their term of notice and issues related to refraining from engaging in competitive activity to the Company’s during their term of validity after their termination in consideration for damages. They do not provide for damages in the event Management Board Members resign or are dismissed from their position without a valid reason except for severance pay distributed after the fulfillment of contractual prerequisites which include dismissal or release on account of the issuer undergoing a merger by way of acquisition.
In 2020, the PZU Group companies subject to consolidation did not grant any loans or similar benefits to members of their management boards, higher level managers or members of their supervisory boards.
266 267MANAGEMENT BOARD’S REPORT ON THE ACTIVITY OF THE PZU GROUP AND PZU SA 2020
Total estimated value of non-cash benefits granted by PZU and PZU’s subsidiaries 1 January – 31 December 2019 1 January – 31 December 2020
The Company does not have any pension liabilities or similar benefits to former managers and supervisors or former members of its administrative authorities or liabilities taken out in connection with these benefits.
Respecting human rights is assigned special significance in HR policy when it comes to organizational culture. This involves counteracting mobbing and discrimination, offering equal opportunities to all employees regardless of their professional position in the PZU Group, sex, age, disability, race, religion, nationality, political convictions, union membership, ethnic origin, ethnic origin, denomination, sexual orientation, form of employment – for a specified or unspecified term, on a fulltime or part-time basis while simultaneously respecting the right of assembly and the right to strike.
Procedure which contemplates the appointment of an anti-mobbing commission to investigate every report of improper conduct that may involve elements of mobbing; • ensuring equal treatment in employment opportunities and counteracting discrimination – support is given by the “Report an Incident” procedure enabling employees to report breaches through the intranet platform.
In addition, all employees may use the generally accessible e-learning training entitled “Mobbing – legal and psychological aspects”, which additionally covers issues pertaining to discrimination and equal treatment in employment opportunities. Issues pertaining to the psychological working environment are also covered as part of regular occupational safety and health training offered to employees, including managers.
They span all career stages in PZU, starting from the recruitment process, and pertain to employment terms, access to training and development-minded activities, opportunities to be promoted.
Diversity policy pertaining to the management and supervisory staff PZU is a company in which the State Treasury has a shareholding. Accordingly, the persons who sit in its managing bodies are selected in accordance with the statutory regulations applicable to these types of entities.
As regards qualifications and requirements for those occupying positions in management and supervisory bodies, PZU in particular takes into account the statutory criteria for education and professional experience adequate to the functions discharged on such positions in the entity conducting insurance activity. They are defined in the provisions of the Commercial Company Code of 15 September 2000, the Insurance and Reinsurance Activity Act of 11 September 2015 and the State Property Management Act of 16 December 2016.
< 30 years old 30 to 50 years old > 50 years old
PZU Supervisory Board number of persons % number of persons % number of persons %
Shadow of an e-mail. Here is one more sample of the wit and determination of PZU employees in propagating plain Polish. Katarzyna Miłosz of the Łódź Operations Center embellished the hit song of the Łódźbased band Varius Manx: I saw a long e-mail, It terrified me like the wind.
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In 2020, Pekao Leasing launched two long-term loans in the total amount of EUR 200 million, granted by the European Investment Bank under agreements signed in 2019. This financing is a component of the Pekao Group’s long-term strategy of cooperation with small and mediumsized enterprises. Bank Pekao was both the arranger of the transaction and the guarantor of the loan.
Information about significant agreements executed between shareholders The PZU Management Board does not have any information about agreements executed until the date of this Report on the activity of the PZU Group and PZU among shareholders as a result of which changes may transpire in the future in the percentages of shares held by its shareholders to date..
Related party transactions on terms other than an arm’s length basis
In 2020, neither PZU nor its subsidiaries executed any transaction with their related parties which were of material significance individually or collectively and were executed on terms other than an arm’s length basis.
Purchase of treasury shares in the financial year As at 31 December 2020, consolidated funds held 173 thousand PZU shares.
PZU did not hold any treasury shares as at 31 December 2020.
Credits and loans extended and taken out Under their investment activity in 2020 PZU SA, PZU Życie SA and the funds managed by TFI PZU SA executed transactions to extend debt financing in the form of loans and bonds.
Armatura Kraków funds its business using loans totaling PLN 67,6 million. In 2020, its debt was refinanced. The company’s only creditor is Alior Bank.
Granted and received guarantees and sureties In 2020 neither PZU nor its subsidiaries granted any sureties for a loan or borrowing or guarantees to any single entity or any subsidiary of such an entity where the total amount of outstanding sureties or guarantees would be significant, with the exception of the question described below.
Annex no. 1 to the Mandate Agreement to Provide Unfunded Credit Protection from Time to Time defines the rules for PZU to issue insurance guarantees for unfunded credit protection within an exposure limit under instructions from, and in favor of, Alior Bank. The maximum exposure limit for the guarantees issued pursuant to Annex no. 1 to the Mandate Agreement to Provide Unfunded Credit Protection from Time to Time is
The fee for extending the guarantee will depend, among other things, on portfolio amortization and the premium for a counter guarantee. At present, it is not possible to state the amount of the fee for a guarantee since it will depend on the amount of the guaranteed sum and the quality of the portfolio collateralizing the guarantee. The issuance of every guarantee will be preceded by an application from Alior Bank and an evaluation and valuation of the portfolio presented for that guarantee. Alior Bank will present a declaration of voluntary submission to enforcement in the form of a notary deed to collateralize the payment of the fee for a guarantee under the executed Annex no. 1 to the Mandate Agreement to Provide Unfunded Credit Protection from Time to Time.
Annex no. 1 to the Master Agreement to Provide Counter Guarantees from Time to Time defines the rules for the Counterparty to provide counter guarantees under instructions from PZU issued in favor of Alior Bank. The available counter guarantee limit is PLN 2,600 million. The available limit will be reduced each time when each counter-guarantee is extended, by the guaranteed amount specified in the counter-guarantee; the available counter-guarantee limit is renewable, which means that the limit is renewed when a counter-guarantee expires.
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Information regarding the off-balance sheet items as at the end of 2020 is presented in Section 6.6 “Asset and liability structure”.
The PZU Group and the Issuer are in very good financial standing and satisfy all the safety criteria imposed by the legal regulations and the Polish Financial Supervision Authority. The Issuer’s stable rating outlook confirms that PZU has a strong business position, has a high level of equity, and is well-poised to achieve its intentions when it comes to investments.
As at 31 December 2020, the total value of dispute in all 282,352 cases (as at 31 December 2019: 294,687) cases pending before courts, arbitration bodies or public administration authorities in which PZU Group entities take part, was PLN 8,825 million (as at 31 December 2019: PLN 8,363 million). This amount included PLN 4,408 million (as at 31 December 2019: PLN 4,293 million) of liabilities and PLN 4,417 million (as at 31 December 2019: PLN 4,070 million) of accounts receivable of PZU Group companies.
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Share in net profit (loss) of entities measured using the equity method (3) 16 (1) (4) -
Basic and diluted weighted average number of ordinary shares* 863,510,930 863,519,608 863,347,220 863,285,340 863,332,499
Basic and diluted Issuer’s profit per ordinary share (in PLN) 1.82 2.85 3.14 3.07 2.22 *including shares in consolidated funds Data as at 31 December 2016-2019 restated
Actuarial profits and losses related to provisions for employee benefits 3 4 - 1 3
Unearned premium and unexpired risk reserve 7,076 8,008 8,525 8,885 8,834
Provisions for bonuses and discounts for the insured 5 14 7 9 8
Liabilities directly associated with assets qualified as held for sale 33 3 49 29 121
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Impairment loss on intangibles arising from the acquisition of Alior Bank
Provision for the reimbursement of fees on the premature amortization of consumer loans (CJEU)
Revaluation of reserves for claims for compensation for vegetative states - - (148) - -
Gain on acquisition of the spun-off part of Bank BPH 465 - - - -
Update of assumptions concerning future payments applied in the calculation of reserves 1. Gross claims and benefits ratio (simple) (gross claims and benefits/gross written premium) x 100%
Combined ratio in non-life insurance (net claims and benefits + insurance activity expenses) / net premium earned on own share) x 100%
7. Operating profit margin in life insurance (operating profit /gross written premium) x 100%
8. Cost/Income ratio – banking operations 44.4% 48.0% 42.3% 40.8% 43.2%
Acquisition costs ratio (including reinsurance commission)* 20.7% 19.9% 18.8% 19.2% 19.6%
Insurance claims and change in other technical provisions net (4,686) (5,142) (4,931) (5,057) (5,190)
Insurance claims and change in other technical provisions net (1,043) (1,672) (976) (1,640) (1,670)
Data from the profit and loss account – Baltic states segment (PLN million) 2016 2017 2018 2019 2020
P/BV (Price to Book Value) – indicator specifying the ratio of the market price to the book value per share
DPS (Dividend Per Share) – market multiple specifying the dividend per share
IPO (Initial Public Offering) – public offering of specific securities performed for the first time. One of the most important elements of an initial public offering is the preparation of a prospectus and the proceeding before the institution supervising admission to be traded publicly
Commercial Company Code – Act of 15 September 2000 entitled Commercial Company Code
PRIIP – Commission Delegated Regulation (EU) 2017/653 of 8 March 2017 supplementing Regulation (EU) No. 1286/2014 of the European Parliament and of the Council on key information documents for packaged retail and insurancebased investment products reinsurance – transfer to some other insurance undertaking – the reinsurer – of all or part of the insured risk or class of risks along with the pertinent portion of the premiums. As a result of reinsurance, a secondary split of risks transpires to minimize the risks to the insurance market outward reinsurance – reinsurance activity whereby the insurer (cedent) transfers a portion of the concluded insurance to a reinsurer or reinsurers in the form of a reinsurance agreement.
inward reinsurance – reinsurance activity whereby a reinsurer or reinsurers accept a portion of insurance or a class of insurance transferred by a cedent.
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sum insured – amount in cash for which an insured object is insured. In non-life insurance the sum insured ordinarily constitutes the upper limit of the insurer’s liability
Act on Statutory Auditors – Act of 11 May 2017 on Statutory Auditors, Audit Firms and Public Supervision (Journal of Laws of 2017, Item 1089, as amended)
Insurance Activity Act – Act of 11 September 2015 on Insurance and Reinsurance Activity (Journal of Laws of 2015, Item 1844), with most regulations in force as of 1 January 2016. This Act introduced Solvency II requirements to the Polish legal system
Selected Alternative Performance Measures (APM) within the meaning of European Securities and Markets Authority Guidelines (ESMA) no. 2015/1415 are presented below. The profitability and operational efficiency indicators presented herein, constituting standard measures applied generally in financial analysis, provide, in the opinion of the Management Board, significant additional information about the PZU Group’s financial performance. Their usefulness was analyzed in terms of information, delivered to the investors, regarding the Group’s financial standing and financial performance.
Assets of external clients of TFI PZU and PTE PZU (PLN billion) – assets of external clients accumulated in the PZU “Złota Jesień” Open-End Pension Fund and the PZU Voluntary Pension Fund as well as all assets accumulated and managed by TFI PZU, other than those constituting own funds of PZU Group companies. An increase in this indicator means that the inflows of assets into the funds are greater than the outflows from the funds and/or that the funds generated positive rates of return on assets under management.
PZU Zdrowie’s EBITDA margin – ratio of the sum of the operating result plus depreciation costs (for non-insurance activities) and the technical result (for insurance products) of PZU Zdrowie to the value of PZU Zdrowie’s revenues. PZU Zdrowie’s revenues include revenues from medical insurance sold by PZU Życie and other PZU Group companies, revenues from medical services sold by medical centers (including those provided by PZU Zdrowie), revenues from medical subscriptions and PZU Zdrowie’s revenues from medical benefits net of the impact of non-recurring transactions; an increase in the value of this indicator signifies an improvement in efficiency
Net interest margin (NIM) – the difference between a bank’s net interest income earned on income-generating assets and interest expenses incurred on liabilities. It is the ratio of a bank’s earnings generated on interest to average assets net of matured interest on at-risk receivables; an increase in the value of this indicator signifies an improvement in efficiency
Operating margin in life insurance – profitability of life insurance segments, calculated as the ratio of the result on operating activity to gross written premium; an increase in the value of this indicator signifies an improvement in efficiency
ROA (Return on Assets) – return on assets, calculated as the ratio of the annual net profit to the arithmetic mean of total assets at the beginning and end of the reporting period; an increase in the value of this indicator signifies an improvement in efficiency, i.e. a greater ability of the assets to generate profits.
ROE (Return on Equity) attributable to equity holders of the parent – return on equity calculated as the ratio of the annual net profit attributable to owners of the parent company to the arithmetic mean of consolidated equity minus minority interest at the beginning and end of the reporting period; an increase in the value of this indicator signifies an improvement in efficiency and the ability to multiply funds entrusted by the owners (investors).
Consolidated ROE (Return on Equity) – return on equity calculated as the ratio of the annual net profit to the arithmetic mean of consolidated equity at the beginning and end of the reporting period; an increase in the value of this indicator signifies an improvement in efficiency and the ability to multiply funds entrusted by the owners
Administrative expense ratio – the quotient of administrative expenses and net earned premium (for the non-life insurance sector) or gross written premium (for the life insurance sector); this indicator specifies the percentage share of administrative expenses in the premium, and a decrease in its value signifies an improvement in efficiency
Acquisition expense ratio – the quotient of acquisition expenses (net of reinsurance commissions) and net earned premium (for the non-life insurance sector) or gross written premium (for the life insurance sector); this indicator specifies the percentage share of acquisition expenses in the premium, and a decrease in its value signifies an improvement in efficiency
Insurance activity expense ratio – the quotient of insurance activity expenses (administrative expenses plus acquisition expenses net of reinsurance commissions) and net earned premium (for the non-life insurance sector) or gross written premium (for the life insurance sector); this indicator specifies the percentage share of insurance activity expenses in the premium, and a decrease in its value signifies an improvement in efficiency
PZU Group’s solvency ratio – the level of coverage of the solvency capital requirement with the PZU Group’s own funds within the meaning 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 and supplemented with related documents; an increase in the value of this indicator signifies an increase in the capital surplus
These Financial Statements contain forward-looking statements concerning the strategic operations. Such forward-looking statements are exposed to both known and unknown types of risks, involve uncertainties and are subject to other significant factors which may cause that the actual results, operations, or achievements of PZU Group considerably differ from future results, operations, or achievements expressed or implied in the forwards-looking statements. The statements are based on a number of assumptions concerning the current and future business strategy of PZU Group and the external environment in which the Group will operate in the future. PZU expressly waives any and all obligations or commitments concerning distribution of any updates or adjustments to any of the assumptions contained in these Management Board’s report on the activity of the PZU Group and PZU, which shall aim to reflect the changes in PZU expectations or changes in events, conditions, or circumstances on which a given assumption has been made, unless provisions of the law provided otherwise. PZU stipulates that the forwardlooking statements do not constitute a guarantee as to the future results, and the company’s actual financial standing, business strategy, management plans and objectives concerning the future operations may considerably differ from those presented or implied in such statements contained in these Management Board’s report on the activity of the PZU Group and PZU. Moreover, even if the PZU Group’s financial standing, business strategy, management plans and objectives concerning the future operations comply with the forward-looking statements contained in these Management Board’s report on the activity of the PZU Group and PZU, such results or events may not be treated as a guideline as to the results or events in the subsequent periods.
PZU Group is not liable for the effects of decisions made following the reading of the Management Board’s report on the activity of the PZU Group and PZU.